Glass-Steagall Act

Craig Henry

4/2/14

1. The main objective of the Glass-Steagall Act of 1933, was to separate deposit-taking commercial banks from securities-trading investment banks in the United States. It prevents commercial banks from partaking in risky trading activities. It is relevant today because repealing the act, in some people’s opinions, has a strong correlation with the current recession America is facing right now. An effort that drove deregulation was more about facilitating mergers than creating an efficient regulatory framework. Instead of making a 21st century regulatory framework, we have dismantled the old one. This has created a winner take all environment that helped foster devastating dislocations in our economy.

2. A) This act could be good for todays financial crisis because it can help simplify the financial institutions and make them easier to regulate. Today, financial institutions are too complicated and harder to regulate which can be rooted from the creation of The Glass-Steagall Act. One positive outlook on the repeal is that it provides a one-stop shop for consumers.

3. The Volcker Rule a mini-Glass-Steagall, aiming to bar deposit-taking commercial banks from derivatives trading. It is very similar to Glass-Steagall but it has more to do with preventing banks from making speculative investments that are not in favor of their customers. It prohibits insured commercial banks and their affiliates from engaging in "proprietary trading.”  It goes further than Glass-Steagall because it prohibits proprietary trading of all securities, except U.S. government debt securities, by all "bank-related entities."

4. A) The Dodd-Frank is supposed to lower risk in various parts of the U.S. financial system. Dodd-Frank established new government agencies such as the Financial Stability Oversight Council and Orderly Liquidation Authority, which monitors the performance of companies deemed “too big to fail” in order to prevent a widespread...