Post by unlawflcombatnt on Apr 1, 2012 11:08:10 GMT -6
After researching the Glass Steagall Act, the best explanation I found of the main points came from several pages in Wikipedia.
It revolves mainly around 4 sections of the Banking Act of 1933, which is often referred to as THE Glass Steagall Act:
from Wikipedia:
"....
The Glass-Steagall provisions separating commercial and investment banking
The Glass-Steagall separation of commercial and investment banking was in four sections of the 1933 Banking Act (sections 16, 20, 21, and 32).[2]....
Section 16 prohibited national banks from purchasing or selling securities except for a customer’s account (i.e., as a customer’s agent) unless the securities were purchased for the bank’s account as “investment securities” identified by the Comptroller of the Currency as permitted national bank investments. Section 16 also prohibited national banks from underwriting or distributing securities.[142]
Section 16, however, permitted national banks to buy, sell, underwrite, and distribute US government and general obligation state and local government securities. Such securities became known as “bank-eligible securities.”[142]
Section 5(c) of the 1933 Banking Act (sometimes referred to as the fifth Glass-Steagall provision) applied Section 16’s rules to Federal Reserve System member state chartered banks.[143]....
Section 20 prohibited any member bank of the Federal Reserve System (whether a state chartered or national bank) from being affiliated with a company that “engaged principally” in “the issue, flotation, underwriting, public sale, or distribution” of securities.[144]....
Section 21 prohibited any company or person from taking deposits if it was in the business of “issuing, underwriting, selling, or distributing” securities.[145]....
Section 32 prohibited any Federal Reserve System member bank from having any officer or director in common with a company “engaged primarily” in the business of “purchasing, selling, or negotiating” securities, unless the Federal Reserve Board granted an exemption.[146]....
1935 clarifying amendments
Sections 16 and 21 contradicted each other. The Banking Act of 1935 “clarified” that Section 21 would not prevent a deposit taking company from engaging in any of the securities underwriting and dealing activities permitted by Section 16. It also amended Section 16 to permit a bank to purchase stocks, not only debt securities, for a customer’s account.[147]
The Banking Act of 1935 amended Section 32 to make it consistent with Section 20 and to prevent a securities company and bank from having any employee (not only any officer) in common. With the amendment, both Sections 20 and 32 applied to companies engaged in the “issue, flotation, underwriting, public sale, or distribution” of securities.[148]....
Prohibitions apply to dealing in and underwriting or distributing securities
The Glass-Steagall Act was primarily directed at restricting banks and their affiliates underwriting or distributing securities. Senator Glass, Representative Steagall, Ferdinand Pecora, and others claimed banks had abused this activity to sell customers (including correspondent banks) high risk securities.[149]As particular “conflicts of interest,” they alleged bank affiliates had underwritten corporate and foreign government bonds to repay loans made by their affiliated bank or, in the opposite direction, banks had lent to or otherwise supported corporations that used the bank’s affiliate to underwrite their bonds.[150]
Sections 16 and 5(c) meant no member bank of the Federal Reserve System could underwrite or distribute corporate or other non-governmental bonds.[142]Sections 20 and 32 meant such a bank could not own (directly or through the same bank holding company) a company “engaged primarily in” such underwriting or other securities activities nor have any director or employee that was also a director or employee of such a company.[151]...."
It revolves mainly around 4 sections of the Banking Act of 1933, which is often referred to as THE Glass Steagall Act:
from Wikipedia:
"....
The Glass-Steagall provisions separating commercial and investment banking
The Glass-Steagall separation of commercial and investment banking was in four sections of the 1933 Banking Act (sections 16, 20, 21, and 32).[2]....
Section 16 prohibited national banks from purchasing or selling securities except for a customer’s account (i.e., as a customer’s agent) unless the securities were purchased for the bank’s account as “investment securities” identified by the Comptroller of the Currency as permitted national bank investments. Section 16 also prohibited national banks from underwriting or distributing securities.[142]
Section 16, however, permitted national banks to buy, sell, underwrite, and distribute US government and general obligation state and local government securities. Such securities became known as “bank-eligible securities.”[142]
Section 5(c) of the 1933 Banking Act (sometimes referred to as the fifth Glass-Steagall provision) applied Section 16’s rules to Federal Reserve System member state chartered banks.[143]....
Section 20 prohibited any member bank of the Federal Reserve System (whether a state chartered or national bank) from being affiliated with a company that “engaged principally” in “the issue, flotation, underwriting, public sale, or distribution” of securities.[144]....
Section 21 prohibited any company or person from taking deposits if it was in the business of “issuing, underwriting, selling, or distributing” securities.[145]....
Section 32 prohibited any Federal Reserve System member bank from having any officer or director in common with a company “engaged primarily” in the business of “purchasing, selling, or negotiating” securities, unless the Federal Reserve Board granted an exemption.[146]....
1935 clarifying amendments
Sections 16 and 21 contradicted each other. The Banking Act of 1935 “clarified” that Section 21 would not prevent a deposit taking company from engaging in any of the securities underwriting and dealing activities permitted by Section 16. It also amended Section 16 to permit a bank to purchase stocks, not only debt securities, for a customer’s account.[147]
The Banking Act of 1935 amended Section 32 to make it consistent with Section 20 and to prevent a securities company and bank from having any employee (not only any officer) in common. With the amendment, both Sections 20 and 32 applied to companies engaged in the “issue, flotation, underwriting, public sale, or distribution” of securities.[148]....
Prohibitions apply to dealing in and underwriting or distributing securities
The Glass-Steagall Act was primarily directed at restricting banks and their affiliates underwriting or distributing securities. Senator Glass, Representative Steagall, Ferdinand Pecora, and others claimed banks had abused this activity to sell customers (including correspondent banks) high risk securities.[149]As particular “conflicts of interest,” they alleged bank affiliates had underwritten corporate and foreign government bonds to repay loans made by their affiliated bank or, in the opposite direction, banks had lent to or otherwise supported corporations that used the bank’s affiliate to underwrite their bonds.[150]
Sections 16 and 5(c) meant no member bank of the Federal Reserve System could underwrite or distribute corporate or other non-governmental bonds.[142]Sections 20 and 32 meant such a bank could not own (directly or through the same bank holding company) a company “engaged primarily in” such underwriting or other securities activities nor have any director or employee that was also a director or employee of such a company.[151]...."