Glass Steagall Act

Glass Steagall Act - Minimize speculation E.G: crash of...

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GLASS – STEAGALL ACT MITCH AUSTIN
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Background Much speculation among financial institutions in the 20’s Bank Failures Result: The Banking Act of 1933 (aka:
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Recommendation
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History Glass-Steagall Acts of 1932 and 1933 Carter Glass Henry Steagall Act of 1932 Enacted to stop deflation Rediscounts Act of 1933 Separation between Commercial and Investment Banks
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Repeal: Gramm-Leach-Bliley Act 1999 Banks had been seeking repeal since 1980s + = Violation of Glass-Steagall Received temp. wavier in Sept. 1998 from the Fed Signed into law Nov. 12, 1999 Allowed banks, securities firms, and insurance companies to consolidate
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Arguments for Glass-Seagall No conflict of interest Commercial bank power limited Won’t become too big Minimize consequences should a commercial bank collapse
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Unformatted text preview: Minimize speculation E.G: crash of real estate investment trusts sponsored by bank holding companies in the 1970s and 1980s Arguments against Glass-Steagall Unfair competition Depositors are leaving commercial banks to capture the more attractive rates with investment banks Opportunity for conflict of interest Can be prevented by enforcing legislation Reduce bank risk through diversification Ability to offer both securities and deposits Several other countries allow investment banks and commercial banks to be Summary The repeal did contribute to the Great Recession of 2008 Reenacting the Glass-Steagall Act is recommended We realize this would be difficult Questions...
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This note was uploaded on 12/29/2011 for the course BUS 453 taught by Professor Jerrynelson during the Fall '11 term at BYU.

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Glass Steagall Act - Minimize speculation E.G: crash of...

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