Case Scenario: The End of Glass-Steagall
In 1933 President Roosevelt signed the groundbreaking Glass-Steagall act which legally separated the banking industry into commercial banking and investment banking. This law was passed in reaction the Great Depression and big wave of bank failures. Nearly 70 years later, legislation was passed doing away with most key clauses in the Glass-Steagall act.
Read the information in the background material, look for more information, and then write a 2 to 3 pages paper answering the following questions:
Q1. Does the repeal of Glass-Steagall have a positive or negative effect on the banking industry? In the course of preparing your paper, be sure to consider the benefits to banks as well as to bank customers in your analysis.
Q2. There has been a lot of criticism on the repeal of Glass-Steagall Act and people have started asking the U.S. government to bring back the Glass-Steagall Act. According to the FDIC (Federal Deposit Insurance Corporation), more than 120 banks have failed in the past two years (from 2007 to 2009), in large part due to the risky investments they have been making, such as mortgage backed securities.
Q3. Should the U.S. government bring back the Glass-Steagall Act? Please explain your reasoning in brief.