Gramm-Leach-Bliley Act: The Cause Of The Great Depression

592 Words3 Pages

Second Paper
The cause of The Great Depression was attributed to the sloppy, careless behavior of banks, who were being too speculative in the way that they were investing their assets while simultaneously buying new issues with the intention of reselling them to the public. Companies were being given questionable loans in order to stay afloat by the same banks who held a stock interest in them! The banks, in turn, would then advise their clients to invest in the same companies that were being propped up by the banks. Eventually, this cycle blurred the lines of what banking was truly intended to do, and when compounded with the amount of risk involved with this type of behavior, the marked crashed. In response to this development, congress began investigating what could be done in order to fix the current economic situation. The Banking Act of 1933 is often referred to as the Glass-Steagall Act, after the politicians whose combined efforts championed its creation. The act was passed on June 16th, 1933 and it …show more content…

In 1999, there were 5,000 less Member banks than in 1984, however the average size of a bank still managed to grow. Congress decided to act in response to these developments which led to the Financial Services Modernization Act of 1999, often referred to as the Gramm-Leach-Bliley Act. Signed into law on November 12th, 1999 by President Clinton, The GLBA repealed parts of The Banking Act of 1933 and expanded certain powers of the Federal Reserve. In regards to a repealed portion of The Banking Act, The GLBA allowed banks to create umbrella organizations called Financial Holding Companies that could branch off into subsidiaries involved in any combination of investment, insurance, and commercial banking services. The expanded power of the FED was related to regulating these new Financial Holding Companies moving

More about Gramm-Leach-Bliley Act: The Cause Of The Great Depression