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Regulations enforced to protect investors after the Crash
Before the 1929 Crash, few regulations were enforced. Investors were not protected from fraud,
hype and shoddy stocks. Individuals did not know whether companies were doing as well as they
claimed to be doing and whether companies' financial reports were reliable. It was after the Crash
that an agency known as the Securities and Exchange Commission (SEC) was established to lay
down the law and punish the violators.
This did not change much we did establish a commission that forgot why it was set up and that wasn't for Enron to send them flowers.
During the stock market crash of 1929, 4,000 banks failed because depositors fought to reach teller
windows before the money ran out and their savings disappeared forever. Four years later, Congress
passed the Glass-Steagall Act, which banned any connection between commercial banks and
investment banking, to ensure that such a tragedy would never be repeated in the belief that the banks'
collapse was due to their stock market speculation. However, over the past decade, the Federal
Reserve and other banking regulators have softened some of Glass-Steagall's separations of securities
and banking functions by letting banks sell certain securities through affiliated companies. Commercial
banks have made inroads into both investment banking and insurance during the last five years.
Good news is we can print more money if there is a run on Banks our is a never ending faucet. I wonder do more dollars create less value for the dollar? Gosh no I am kidding myself it is interest rates that do.
Very good news because we no longer have the Glass-Steagall Act. We now have unlimited opportunity in the banking industry to add to earnings. This could not possibly resemble deregulation of Utilities and Telecoms. Those were a bunch of greedy kids that took on a debt loads that were way above what they could afford. Heck no we just did the paper work on the IPO's.
Glass-Steagall's main provisions
The Glass-Steagall Act consists of four sections of the Banking Act of 1933:
Section 16 limits national banks to purchasing and selling securities as an agent, prohibits them from underwriting or dealing in securities (other than obligations of the U.S. government and U.S. government agencies and general obligations of state and local governments), and bars them from investing in shares of stock. (Another provision of the Banking Act applies these restrictions to state-chartered banks that are members of the Federal Reserve System.)
Section 20 prohibits Federal Reserve member banks from being affiliated with (owning, being owned by, or being under common ownership with) any organization that is "engaged principally" in underwriting or dealing in certain securities.
Section 21 makes it unlawful for securities firms to accept deposits.
Section 32 adds to Section 20 by prohibiting officer, director, or employee interlocks between a Federal Reserve member bank and any organization "primarily engaged" in underwriting or dealing in certain securities.
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