Log in Sign Up. Banking Act of Law. Save Word. Legal Definition of Banking Act of The Glass-Steagall Act created the Federal Deposit Insurance Corporation, which backs deposits using federal dollars, and required the separation of investment banking and commercial banking, thus allowing different interest rates for long-term and short-term financing.
It also authorized the president to take the United States off the gold standard, ending a foreign drain on gold and reassuring depositors. Finally, the Banking Act of gave the Federal Reserve Board the power to determine the cash reserves of commercial banks, a move that came to be recognized as an appropriate technique for controlling the money supply.
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Measure content performance. Develop and improve products. List of Partners vendors. The Emergency Banking Act of was a bill passed in the midst of the Great Depression that took steps to stabilize and restore confidence in the U. It came in the wake of a series of bank runs following the stock market crash of Additionally, the presidency was given executive power to operate independently of the Federal Reserve during times of financial crisis.
The Act was conceived after other measures failed to fully remedy how the Depression strained the U. By early , the Depression had been ravaging the American economy and its banks for nearly four years. Mistrust in financial institutions grew, prompting a rising flood of Americans to withdraw their money from the system rather than risk it to a bank.
Despite attempts in many states to limit the amount of money any individual could take out of a bank, withdrawals surged as continuing bank failures heightened anxiety and, in a vicious cycle, spurred still more withdrawals and failures. While the Act originated during the administration of Herbert Hoover, it passed on March 9, , shortly after Franklin D.
Roosevelt was inaugurated. I do not hesitate to assure you that I shall ask the Congress to indemnify any of the 12 Federal Reserve banks for such losses. Was the Emergency Banking Act a success? For the most part, it was. When banks reopened on March 13, it was common to see long lines of customers returning their stashed cash to their bank accounts. By the end of March, though, the public had redeposited about two-thirds of this cash. Wall Street registered its approval, as well.
On March 15, the first day of stock trading after the extended closure of Wall Street, the New York Stock Exchange recorded the largest one-day percentage price increase ever, with the Dow Jones Industrial Average gaining 8.
Other legislation also helped make the financial landscape more solid, such as the Banking Act of and the Reconstruction Finance Corporation Act of The capital injections by the RFC were similar to those under the TARP program in , but they were not a model of the actions taken by the Fed in In neither episode did the Fed inject capital into banks; it only made loans. Federal Reserve Bank of St. Investment and commercial bank mergers became commonplace, credit creation soared especially mortgages and stock markets shot up.
After the financial meltdown of , a vigorous debate broke out over the role of the repeal of Glass-Steagall in the disaster [7]. Ironically, some of the key players behind the repeal of Glass-Steagall have changed their position in the wake of the recession.
There have been attempts to renew Glass-Steagall, but none has gained traction.
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