Glass-Steagall Act
About Glass-Steagall Act
The Banking Act of 1933, known as Glass-Steagall, separated commercial banking from investment banking. It was passed in response to the 1929 crash and thousands of bank failures. The act created the FDIC to insure bank deposits. It prevented banks from using depositor money for risky investments. In 1999, the Gramm-Leach-Bliley Act repealed Glass-Steagall, allowing banks to combine commercial and investment banking. The repeal enabled the creation of mega banks like Citigroup. Many argue that the repeal of Glass-Steagall contributed to the 2008 financial crisis. The Volcker Rule attempted to restore some of the original restrictions.
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