The Countdown to Financial Meltdown

“The Countdown to a Financial Meltdown”

Name Omitted

Pol. 201

Prof. Keith Carr

January 16, 2012

“The Countdown to a Financial Meltdown”

Our economy was a ticking time bomb and its fuse was lit in nineteen ninety-eight with the merger of Citigroup with Travelers Insurance. The Merger was a violation under the Glass-Steagall Act of nineteen thirty-three. The New York Times Explains “It was enacted as an emergency response to the failure of nearly five thousand banks during the Great Depression.” The article goes on to explain that the Act was meant to be part of Franklin D. Roosevelt’s New Deal. The Act became permanent in nineteen forty-five. The main reason for the Act was to separate Commercial Banks from Investment Banks. The reason most people saw for the stock market crash of nineteen twenty-nine and the Great Depression that followed was due to “Bank of United States” Securities Division that made the Stock market artificially high and when it finally collapsed the people ran to the commercial banks to withdraw their money causing the collapse of five thousand different banks in the united states. It was brought to the public’s attention that the risk commercial banks were making with the money of their customers was devastating to the people if the bank took a loss. The separation made it safer for people to once again trust their money was safe in commercial banks and if they wanted to go to an investment bank with other money it wasn’t tied to the money in the commercial bank.

The nineteen ninety-nine Gramm-Leach-Bliley Act was enacted in the eyes of many in response to the merger of Citigroup and Travelers Insurance to make it legal and to catch up with many other countries who allow there commercial banks to offer investment and securities services that were, until that time, forbidden under the Glass-Steagall Act. The act was also referred to as “Financial Services Modernization Act of nineteen ninety-nene” largely because of the...