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The Great Depression Of 1930 Essay

1606 Words7 Pages

The Savings and Loans institutions were made in United States during the period of great depression to construct and sell the houses to save it from another disaster like that of 1930. During that time banks went through huge losses nationwide. The Great Depression of 1930 changed the attitude of financial markets and also the way they were regulated. After that experience government took some measures and passed some acts. First was the Glass–Steagall Act 1933. It was designed to separate the banking (which provides credit for lending money to the borrowers) and non-banking activities (such as trading in money market). There were some provisions under this act such as Regulation Q, which provided the ceiling to the interest rates that could be offered to the depositors by the bank. It also established Federal deposit insurance corporation (FDIC) which provides an insurance cover to the …show more content…

As William Black coined the term “control fraud” which denotes that this savings and loan debacle was due to the fraud done by the people in power, who run those large corporations. The savings and loans institutions or thrifts were built to provide the housing facilities to the local communities. Basically they were built for single house families. Keeping this goal in mind it provided individuals with low interest loans. But by 1970s this model began to change when the interest rates started rising. Depositors started withdrawing their money from thrifts which led to outflow of money from these thrifts. The structure of savings and loans were built to provide low interest on savings and low interest loans for a short period of time but after 1930s they were encouraged to make loans for long term because government had already increased the deposit rates which made savings and loans institutions less attractive. This mismatch led the thrift industry into the

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