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Glass-Steagall Act
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The Glass-Steagall Act was a federal law passed in 1933. According to the Congressional Research Service, the Glass-Steagall Act, also known as the Banking Act of 1933, was enacted to limit the interaction between investment and commercial banks.[1][2]
The Glass-Steagall Act separated commercial and investment banking by prohibiting member banks of the Federal Reserve from dealing in non-governmental securities for customers, investing in non-investment-grade securities for themselves, underwriting and distributing non-governmental securities, or affiliating with any company involved in these activities. This separation also prohibited investment banks from accepting deposits from customers.[1][3]
Background
Legislative history
In the wake of the Great Depression, a worldwide economic depression in the 1930s, Senator Carter Glass (D) introduced several versions of a bill to separate commercial banking and securities activities. The first bill was introduced in June 1930. The bill that passed, the Banking Act of 1933, was introduced in 1933. On May 16, 1933, Representative Harry Steagall (D) introduced HR 5661 in the United States House of Representatives, a bill which incorporated several provisions of bills Glass had introduced to the United States Senate. The bill passed the House 262-19 on May 23. The Senate approved the bill in a voice vote on May 25 after amending the bill to incorporate language from Glass's bills and requested that a conference committee be convened to reconcile the differences between the House and Senate bills. The conference committee filed its final report on the bill on June 12, and President Franklin D. Roosevelt signed the act into law on June 16.[4]
Components
The Glass-Steagall Act separated commercial and investment banking. The act prohibited member banks of the Federal Reserve from dealing in non-governmental securities for customers, investing in non-investment-grade securities for themselves, underwriting and distributing non-governmental securities, or affiliating with any company involved in these activities. Investment banks were also prohibited from accepting deposits from customers. An exception was made to allow commercial banks to underwrite government-issued bonds.[1][3]
Repeal
- See also: Gramm-Leach-Bliley Act
In the 1960s, bank regulators and the Office of the Comptroller of the Currency issued interpretations of the act that allowed banks and affiliates to engage in increasing amounts of securities activities. In the 1970s and 80s, banks and other institutions argued that the restrictions put in place by Glass-Steagall were rendering American banks noncompetitive on the international market. In 1987, the Congressional Research Service, responding to debate over the Glass-Steagall Act, published a report that presented cases for and against repealing Glass-Steagall.[1][3]
In 1987, Senator Phil Gramm (R) and Representative Jim Leach (R) introduced versions of the Financial Services Act in their respective chambers. The resulting bill, a repeal of the Glass-Steagall Act known as the Gramm-Leach-Bliley Act, was signed into law by President Bill Clinton on November 12, 1999.[5][6]
See also
External links
Full text of the Glass-Steagall Act
Footnotes
- ↑ 1.0 1.1 1.2 1.3 The New York Times, "What Is Glass-Steagall? The 82-Year-Old Banking Law That Stirred the Debate," October 14, 2015
- ↑ Congressional Research Service, "The Glass-Steagall Act: A Legal and Policy Analysis," January 19, 2016
- ↑ 3.0 3.1 3.2 Investopedia, "Glass-Steagall Act," accessed September 29, 2016
- ↑ Federal Reserve History, "Banking Act of 1933, commonly called Glass-Steagall," accessed March 1, 2017
- ↑ GovTrack, "S. 900 (106th): Gramm-Leach-Bliley Act," accessed January 10, 2016
- ↑ Office of the Clerk, "Final Vote Results for Roll Call 570," accessed January 10, 2016
