Glass-Steagall Act

1933

It was passed as an emergency measure to counter the failure of banks during the Great Depression.

It prohibited commercial banks from participating in the investment banking business.

The Glass-Steagall lost its potency in subsequent decades and was partially repealed in 1999.

1. Separated commercial and investment banking. 2. Created FDIC, which guaranteed bank deposits up to a specified limit. 3. Created FOMC (Federal Open Market Committee) 4. Introduced Regulation Q, which prohibited banks from paying interest on demand deposits and capped interest rates on other deposit products (repealed later in 2011).

1. To stop "run on banks" and to restore the public confidence in the US banking system. 2. TO sever the linkages between commercial and investment banking that were believed to have been responsible for the 1929 market crash.