BANKING ACT OF 1933 JUNE1933 BANKING ACT OF 1933 BANKING/FINANCE NEW DEAL U.S GOV'T LEGISLATIVE U.S GOVERNMENT AND CONSTITUTION ECONOMY AND LABOR CONGRESS PASSED THE BANKING ACT OF 1933 BETTER KNOWN AS THE GLASS STEAGALL ACT IN JUNE 1933 THE ACT WAS PART OF PRESIDENT FRANKLIN D ROOSEVELT'S NEW DEAL THE GLASS STEAGALL ACT HAD THREE COMPONENTS TO REFORM THE BANKING INDUSTRY WHICH HAD BEEN DEVASTATED BY THE GREAT DEPRESSION FIRST THE ACT CREATED THE FEDERAL DEPOSIT INSURANCE CORPORATION FDIC WHICH GUARANTEED INDIVIDUAL DEPOSITS UP TO 2500 SECOND THE ACT INCREASED THE POWER OF THE FEDERAL RESERVE BOARD BY GIVING IT GREATER CONTROL OVER CREDIT TO PREVENT BANKS FROM SPECULATING OR MAKING RISKY INVESTMENTS IN THE STOCK MARKET THIRD THE ACT SEPARATED COMMERCIAL AND INVESTMENT BANKING COMMERCIAL BANKS ARE INSTITUTIONS THAT TAKE DEPOSITS FROM AND MAKE LOANS TO INDIVIDUALS AND BUSINESSES INVESTMENT BANKS TYPICALLY DEAL WITH SECURITIES OR STOCK WHICH ARE TRADED ON A STOCK MARKET LIKE THE NEW YORK STOCK EXCHANGE FOLLOWING THE STOCK MARKET CRASH OF 1929 MANY COMMERCIAL BANKS WHICH HAD SPECULATED IN THE STOCK MARKET WENT OUT OF BUSINESS THIS MEANT THAT MANY AMERICANS LOST ALL OF THEIR SAVINGS THE SEPARATION OF BANKING FUNCTIONS AND THE FDIC INSURANCE HELPED RESTORE CONFIDENCE IN THE U.S BANKING SYSTEM
