What Is the Glass-Steagall Act? by Reem Heakal

TL;DR - The Glass-Steagall Act prohibited the synergy of investment and commercial banking.

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Tags - Glass-Steagall Act, investment bank, commercial bank, JP Morgan, risk, speculative, Great Depression,

Questions answered:

  • What is the Glass-Steagall Act?

Summary:

  • The Glass-Steagall Act (1933) separated investment and commercial banking activities because of the belief that commercial banks took on too much risk with consumer deposits.
  • The mixing of investment and commercial banking was considered too risky and speculative, and a likely cause of the Great Depression.
  • Only ten percent of commercial banks' total income could stem from securities, eliminating a major source of income for many banks.
  • Financial giants like JP Morgan were directly targeted by this act.
  • Congress repealed the Glass-Steagall Act in November 1999.

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