{"id":98362,"date":"2022-10-30T19:16:51","date_gmt":"2022-10-30T19:16:51","guid":{"rendered":"https:\/\/yogaesoteric.net\/?p=98362"},"modified":"2022-10-30T19:16:51","modified_gmt":"2022-10-30T19:16:51","slug":"glass-steagall-act","status":"publish","type":"post","link":"https:\/\/yogaesoteric.net\/en\/glass-steagall-act\/","title":{"rendered":"Glass-Steagall Act"},"content":{"rendered":"

The Glass-Steagall Act<\/em>, part of the Banking Act<\/em> of 1933, was landmark banking legislation that separated Wall Street from Main Street by offering protection to people who entrust their savings to commercial banks.<\/p>\n

\"\"<\/p>\n

Millions of Americans lost their jobs in the Great Depression, and one in four lost their life savings after more than 4,000 U.S. banks shut down between 1929 and 1933, leaving depositors with nearly $400 million in losses.<\/p>\n

The Glass-Steagall Act<\/em> prohibited bankers from using depositors\u2019 money to pursue high-risk investments, but the act was effectively undercut by looser restrictions in the deregulatory environment of the 1980s and 1990s.<\/p>\n

As the Great Depression of the 1930s devastated the U.S. economy, many blamed the economic meltdown in part on financial-industry shenanigans and loose banking regulations. U.S. Senator Carter Glass, a Democrat from Virginia, first introduced the legislation in January 1932, and the bill was co-sponsored by Democratic Alabama Representative Henry Steagall.<\/p>\n

By June 16, 1933, President Franklin D. Roosevelt signed the Glass-Steagall Act<\/em> into law as part of a series of measures adopted during his first 100 days to restore the country\u2019s economy and trust in its banking systems.<\/p>\n

FDIC Created<\/strong><\/p>\n

The Glass-Steagall Act<\/em> set up a firewall between commercial banks, which accept deposits and issue loans, and investment banks that negotiate the sale of bonds and stocks.<\/p>\n

The Banking Act<\/em> of 1933 also created the Federal Deposit Insurance Corporation (FDIC), which protected bank deposits up to $2,500 at the time (now up to $250,000 as a result of the Dodd-Frank Act of 2010).<\/p>\n

As the bill stated, it was designed \u201cto provide for the safer and more effective use of the assets of banks, to regulate interbank control, to prevent the undue diversion of funds into speculative operations, and for other purposes<\/em>.\u201d<\/p>\n

Ferdinand Pecora<\/strong><\/p>\n

Some of those \u201cundue diversions<\/em>\u201d and \u201cspeculative operations<\/em>\u201d had been revealed in congressional investigations led by a firebrand prosecutor named Ferdinand Pecora. As chief counsel to the U.S. Senate\u2019s Committee on Banking and Currency, Pecora \u2013 an Italian immigrant who rose through the ranks of Tammany Hall, despite his reputation for honesty \u2013 dug into the actions of top bank executives and found rampant reckless behavior, corruption and cronyism.<\/p>\n

Part of the problem, as Pecora and his investigative team revealed, was that banks could lend money to a company and then issue stock in that same company without revealing to shareholders the bank\u2019s underlying conflict of interest. If that company then failed, the bank suffered no losses while its investors were left holding the bag.<\/p>\n

\u2018Banksters\u2019 profit while Americans suffer<\/strong><\/p>\n

In a series of sensational hearings, Pecora exposed the deeds of people like Charles Mitchell, head of the largest bank in America, National City Bank (now Citibank), who made more than $1 million in bonuses in 1929 but paid zero taxes. National City Bank, testimony uncovered, had taken on bundles of bad loans, packaged them as securities and unloaded them on unsuspecting customers.<\/p>\n

Meanwhile, a top executive of Chase National Bank (a precursor of today\u2019s JPMorgan Chase) had gotten rich by short-selling his company\u2019s shares during the 1929 stock market crash. In testimony from financier J.P. Morgan, the public learned that Morgan had issued stocks at discounted rates to a small circle of privileged clients, including former President Calvin Coolidge.<\/p>\n

Pecora\u2019s hearings captivated an increasingly disgusted American public, which began to refer to these men as \u201cbanksters<\/em>,\u201d a term coined to refer to financial leaders who had put the nation\u2019s economy at risk while pocketing profits.<\/p>\n

A Chicago Tribune<\/em> editor wrote on February 24, 1933, that \u201cthe only difference between a bank burglar and a bank president is that one works at night<\/em>.\u201d President Roosevelt and lawmakers harnessed this wave of anger for the financial industry to push through the Glass-Steagall Act<\/em>, which Roosevelt signed into law on June 16, 1933.<\/p>\n

Under the act, bankers could take deposits and issue loans and brokers at investment banks could raise capital and sell securities, but no banker at a single firm could do both. Over time, however, barriers set up by Glass-Steagall were gradually chipped away.<\/p>\n

Alan Greenspan and bank deregulation<\/strong><\/p>\n

Starting in the 1970s, large banks began to push back on the Glass-Steagall Act<\/em>\u2019s regulations, claiming they were rendering them less competitive against foreign securities firms.<\/p>\n

The argument, embraced by Federal Reserve Chairman Alan Greenspan, who was appointed by President Ronald Reagan in 1987, was that if banks were permitted to engage in investment strategies, they could increase the return for their banking customers while avoiding risk by diversifying their businesses.<\/p>\n

Soon, several banks began crossing the line once established by the Glass-Steagall Act<\/em> through loopholes in the act. For example, the act stipulated that while a Federal Reserve member bank could not deal in securities, a bank could affiliate with a company that did as long as that company that was not \u201cengaged principally<\/em>\u201d in such activities.<\/p>\n

Gramm-Leach-Bliley Act<\/strong><\/p>\n

One of the most prominent deals that exploited this loophole was the 1998 merger of banking giant Citicorp with Travelers Insurance, which owned the now-defunct investment bank Salomon Smith Barney.<\/p>\n

One year later, President Bill Clinton signed the Financial Services Modernization Act<\/em>, commonly known as Gramm-Leach-Bliley<\/em>, which effectively neutralized Glass-Steagall<\/em> by repealing key components of the act.<\/p>\n

President Clinton said the legislation would \u201cenhance the stability of our financial services system<\/em>\u201d by permitting financial firms to \u201cdiversify their product offerings and thus their sources of revenue<\/em>\u201d and make financial firms \u201cbetter equipped to compete in global financial markets<\/em>.\u201d<\/p>\n

Great Recession strikes<\/strong><\/p>\n

Some economists point to the repeal of the Glass-Steagall Act<\/em> as a key factor leading to the housing market bubble and subsequent Great Recession, the financial crisis of 2007-2008.<\/p>\n

Joseph E. Stiglitz, a Nobel laureate in economics and a professor at Columbia University, wrote in a 2009 opinion piece that by bringing \u201cinvestment and commercial banks together, the investment bank culture came out on top. There was a demand for the kind of high returns that could be obtained only through high leverage and big risk-taking<\/em>.\u201d<\/p>\n

But other economists, including former Treasury Secretary Tim Geithner, argued that a boom in sub-prime mortgage lending, inflated scores by credit-rating agencies and an out-of-control securitization market were more significant factors than any dismantling of federal regulation.<\/p>\n

In any case, less than 10 years following the dismantling of the Glass-Steagall Act<\/em>, the nation suffered through the Great Recession, the largest financial meltdown since the 1929 stock market crash that had originally inspired the act.<\/p>\n

 <\/p>\n

yogaesoteric
\nOctober 30, 2022<\/strong><\/p>\n

\u00a0<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

The Glass-Steagall Act, part of the Banking Act of 1933, was landmark banking legislation that separated Wall Street from Main Street by offering protection to people who entrust their savings to commercial banks. Millions of Americans lost their jobs in the Great Depression, and one in four lost their life savings after more than 4,000 […]<\/p>\n","protected":false},"author":4,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_uf_show_specific_survey":0,"_uf_disable_surveys":false,"footnotes":""},"categories":[973],"tags":[],"class_list":["post-98362","post","type-post","status-publish","format-standard","hentry","category-uncovering-freemasonsrys-manipulations-3480-en"],"_links":{"self":[{"href":"https:\/\/yogaesoteric.net\/en\/wp-json\/wp\/v2\/posts\/98362","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/yogaesoteric.net\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/yogaesoteric.net\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/yogaesoteric.net\/en\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/yogaesoteric.net\/en\/wp-json\/wp\/v2\/comments?post=98362"}],"version-history":[{"count":1,"href":"https:\/\/yogaesoteric.net\/en\/wp-json\/wp\/v2\/posts\/98362\/revisions"}],"predecessor-version":[{"id":98369,"href":"https:\/\/yogaesoteric.net\/en\/wp-json\/wp\/v2\/posts\/98362\/revisions\/98369"}],"wp:attachment":[{"href":"https:\/\/yogaesoteric.net\/en\/wp-json\/wp\/v2\/media?parent=98362"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/yogaesoteric.net\/en\/wp-json\/wp\/v2\/categories?post=98362"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/yogaesoteric.net\/en\/wp-json\/wp\/v2\/tags?post=98362"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}