The Glass-Steagall Act of 1932 permitted the use of government securities to back Federal Reserve notes. It also separated personal and investment banking. During The Great Depression, many banks were involved in personal and investment banking. Investment banking is much riskier than personal banking so problems in the investment banking business effected the personal banking business. However, Glass-Steagall had much less impact than Hoover originally thought because it was too late.
“The House of Representatives shall be composed of Members chosen. by the People of the Several States,” which is clearly stated in the Constitution of the United States (U.S. Constitution art. 1 sec. 2). The adage of the adage. Senators are similarly elected by the people of the United States.
The Glass-Stegall Act was meant to be a terminal solution to commercial bank failure as well as the Great Depression. It was instituted by Senator Carter Glass Carter who served as the Treasury and Secretary at the time and was backed by Bascom Steagall (CONGRESS.GOV). GSA was an essential move towards separation of investment and activities of commercial banks. The involvement of commercial banks in investments was deemed as the main reason leading to the financial crash since before the occurrence of the Great Depression; commercial banks took excessive risk with depositors. However, GSA caused many controversies; people considered it as an impediment to the formation of competing financial institutions in the US.
Other examples of this use of power are the Glass-Steagall Act of 1933, which then created the Federal Deposit Insurance Corporation and the Securities and Exchange Commission
The Glass-Steagall Act, also known as the US Banking Act of 1933 was which was passed by the US Congress in 1933. The act was sponsored by Senator Carter Glass of Virginia and Representative Henry B. Steagall of Alabama who was the chairman of the House Banking and Currency Committee. The Act separates commercial and investment banking. Commercial banks took in deposits and made loans were no longer allowed to underwrite or deal in securities. Investment banks underwrote and dealt with securities were no longer allowed to work with commercial banks, however there was an exceptions that allowed commercial banks to underwrite government issued bonds.
In the time of 1929 to 1939 the U.S. was in a consistent condition of financial melancholy that began with money markets accident in 1929. The general population of the U.S. was in a surge not to lose their reserved funds, individuals would settle on flurry choices to pull back their cash before the banks would close. The inquiry that people in general more than once tended to Roosevelt was the way to take the economy back to a viable monetary state. President Roosevelt requested the Securities Act of 1933 “to bring order out of chaos” as Roosevelt expressed in a presidential location. (Hamen 34 - 41) (“Franklin Roosevelt”)
The Emergency Banking Relief Act (EBRA) stated that if a bank failed, the government guaranteed the people would get their money back. The Securities and Exchange Commission (SEC) reformed the stock market by creating rules to make it safer to invest money. The Commission became like the police to protect people and their investments. During the Depression, there was overproduction of food. , so food was cheap and the farmers did not have enough money to keep their farms.
The Glass-Steagall Act effectively separated commercial banking from investment banking and created the Federal Deposit Insurance Corporation, among other things. It was one of the most widely debated legislative initiatives before being signed into law by President Franklin D. Roosevelt in June
Investors poured money into equities, convinced that the market would climb endlessly, “...most of America waited for supply to create its own demand, waited for the business cycle to run its natural course, waited for the stock market to get back on its upward course”
As an example, the Securities and Exchange Commission (SEC) was created to help regulate the stock market and make sure not to have any corrupt leaders of any industry or any business in general. The Federal Deposit Insurance Corporation (FDIC) was forced to help stop banks from failing again. Many lost faith in their banks due to the crash of the stock market. Those who deposited their savings into any bank lost the money, and were devastated. All in all, the New Deal was very successful, giving credit to the three
A fall in the stock market was inevitable, but no one expected it to come with much force. It was so severe that it “destroyed many of the investment companies,” and wiped out thousands of investors. And it “greatly reduced business and consumer confidence”. The global financial system at the time was in no condition to fix the downturn because it had grown used to the “Golden Standard”. The world was used to America being a large, successful industrial force, and so were Americans.
The Securities Act of 1933 and the creation of the Securities and Exchange Commission (SEC) helped regulate the stock market and prevent fraudulent activities. The Glass-Steagall Act set up the Federal Deposit Insurance Corporation (FDIC) to insure bank deposits, restoring public confidence in the banking system. These reforms have played a critical role in maintaining financial stability and protecting
In March 1929, the Dow (Dow Jones Industrial Average) dropped a significant amount which made investors skeptical to sell their stocks, but bankers encouraged them to stay and wait for it to bounce back. Investors listened and kept in on their investments. Discount rates began to rise from the the Federal Reserve Bank, so the Bank of England became intimidated and raised their rate to protect their worth. It became a battle of a country’s worth. Many cases of deceit, fraud, and vigilance occurred in this time due to the imbalance of the nation’s economic progress and caused tension in the trust of investors.
Policymakers should worry about the stock market. There is a problem when irrational exuberance, which make a bubble in stock, market prices. Stock market bubble happens when the stock market price of a company increase more than their fundamental prices. When there is a case of stock market bubble, stock market price will affect people’s investing decision, and bubbles can misinform people into investing when it is not profitable. Recession may occur due to a period of low investment which causes by over investment.
No one could have predicted what was about to happen next: 9/11. After this attach, the US market went into limbo. The massive shock caused by 9/11 shifted the aggregate demand to the left and exposed the US economy to a very hard landing. On the day of 9/11, the fed, began a series of cuts to the interest rates. This was to shore up confidence and flood the economy with liquidity.
