The Glass-Steagall Act of 1933 established the Federal Deposit Insurance Corporation (FDIC) in the United States and included banking reforms, some of which were designed to control speculation.
While many economic historians attribute the collapse to the economic problems which followed the Stock Market Crash of 1929, some economists attribute the collapse to gold-backed currency withdrawals by foreigners who had lost confidence in the dollar and by domestic depositors who feared that the United States would go off the Gold Standard, which it did when President Roosevelt (FDR) signed Executive Order 6102, The Gold Confiscation Act of April 5, 1933.
The second Glass-Steagall Act, passed on 16 June 1933, and officially named the Banking Act of 1933, introduced the separation of bank types according to their business (commercial and investment banking), and it founded the Federal Deposit Insurance Corporation for insuring bank deposits. Literature in economics usually refers to this simply as the Glass-Steagall Act, since it had a stronger impact on US banking regulation.
The bill that ultimately repealed the Act was introduced in the Senate by Phil Gramm (Republican of Texas) and in the House of Representatives by Jim Leach (R-Iowa) in 1999. The bills were passed by Republican majorities on party lines by a 54-44 vote in the Senate and by a 343-86 vote in the House of Representatives.
- meatier page. JanKregel agrees that “multifunction” banks are a source for financial crises, but he argues the “basic principles” of Glass–Steagall “were eviscerated even before” the GLBA. Kregel describes Glass–Steagall as creating a “monopoly that was doomed to fail” because after World War II nonbanks were permitted to use “capital market activities” to duplicate more cheaply the deposit and commercial loan products for which Glass–Steagall had sought to provide a bank monopoly.