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The Glass-Steagall Banking Reform Act Of 1933

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The year is 1929. The Stock Exchange is failing and panic rises in the American people. Left and right people are pulling every dollar and cent out of their bank accounts, as the banks begin to close one by one. Commercial and investment banks, whose affairs were intertwined with one another, collapse sending the economy into a downward spiral. This economic crisis needed to be reformed, and the Glass-Steagall Banking Reform Act was the light at the end of the tunnel. The Glass-Steagall Banking Reform Act of 1933 was successful because of its ability to separate commercial banks and investment banks, its creation of the FDIC, and its ability to keep the economy from crashing again despite its 1999 repeal.
The Glass-Steagall Banking Reform Act …show more content…

In the peak of the Great Depression, millions of Americans lost all of their money due to bank runs that used up all of the money in the reserves. Prior to the Depression, there was nothing to insure that your money was truly protected in your bank account. The provision to create an organization that insures all deposits in national banks kept our economy stable. Frontrunner of the Act, Henry Steagall, was insistent upon putting the provision into the act despite its controversial nature. Steagall advocated for this provision with small, rural banks in mind but was opposed by large banks because they believed that they would “end up subsidizing small banks” (Maues). The public began to agree with Steagall because the People wanted to oppose the big banks “partly in the hope of recovering some of the losses and partly because many blamed Wall Street and big bankers for the Depression” (Maues). The response from the public swayed a doubtful FDR from vetoing and the provision for the FDIC was put into effect. The purpose of the FDIC was to give deposit insurance to bank customers which helped the public trust the banking system again. The FDIC uses a “pool of money collected from banks” in order to protect the deposits of their constituents (Maues). In 1933 the FDIC protected all deposits with a sum of $150 million (Mullens) which …show more content…

Throughout the twentieth century this act has kept the American economy above water and has averted potential crises like in the 1980s economic scare, but in 1999, despite its success, most of the Act was repealed by the Clinton Administration (What Was Wrong with the Glass-Steagall Act,

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