The Glass-Steagall Act, also known as the Banking Act of 1933, was a U.S. federal law designed to restore public confidence in the banking system and prevent another financial crisis like [[The Great Depression]]. The act was sponsored by Senator Carter Glass and Representative Henry B. Steagall, and it introduced significant reforms to the financial industry. The key provisions of the Glass-Steagall Act are: 1. **Separation of commercial and investment banking**: This is perhaps the most well-known feature of the Glass-Steagall Act. It prohibited commercial banks from engaging in investment banking activities, such as underwriting securities, and required investment banks to avoid taking deposits. The rationale was that commercial banks, which deal with deposits and loans, should not engage in risky investment activities, as it could jeopardize depositors' funds. 2. **Creation of the Federal Deposit Insurance Corporation (FDIC)**: The Glass-Steagall Act established the FDIC to insure bank deposits. By providing deposit insurance, the act aimed to prevent bank runs and restore public confidence in the banking system. The FDIC continues to function today, insuring deposits up to a specified limit (as of 2021, $250,000 per depositor, per insured bank, for each account ownership category). 3. **Regulation of interest rates on deposits**: The act also introduced Regulation Q, which imposed restrictions on the interest rates that banks could offer on deposits. The purpose of this regulation was to curb excessive competition among banks and maintain their financial stability. ## Glass-Steagall 1999 repeal The Glass-Steagall Act remained in effect for several decades, but over time, its provisions were weakened or repealed. The most significant change came with the Gramm-Leach-Bliley Act of 1999, which effectively repealed the separation of commercial and investment banking. This allowed financial institutions to engage in a broader range of activities, but it has also been cited as a contributing factor to the 2008 financial crisis.