Glass–Steagall Act (Banking Act of 1933)

1) Link to the Text of the Act
Read the statute (12 U.S.C. §§ 24, 78, 377, 378)

2) Why It Was Done
Enacted during the Great Depression, the Act aimed to restore trust in the financial system by separating commercial and investment banking and creating the Federal Deposit Insurance Corporation (FDIC).

3) Pre-existing Law or Constitutional Rights
Before this Act, banks could engage in both deposit-taking and speculative investment, contributing to the 1929 stock market crash. The Act imposed structural restrictions on banks but did not directly override constitutional rights.

4) Overreach or Proper Role?
Supporters saw it as a necessary reform to prevent conflicts of interest and reckless speculation. Critics argued it was an overregulation that stifled banking innovation and credit growth.

5) Who or What It Controls

Commercial banks (barred from securities trading and investment banking)
Investment banks (barred from commercial deposit-taking)
FDIC (created to insure bank deposits up to a set limit)
Federal Reserve (gained oversight over member banks)

6) Key Sections / Citations

Section 16 (12 U.S.C. § 24): Prohibited national banks from securities dealing
Section 20 (12 U.S.C. § 377): Barred affiliations between commercial and investment banks
Section 21 (12 U.S.C. § 378): Separated deposit-taking from securities activities
Section 8 (12 U.S.C. § 1811): Created the FDIC

7) Recent Changes or Live Controversies

Core separation provisions were repealed by the Gramm–Leach–Bliley Act of 1999, allowing megabanks to re-form.
Many blame the repeal for contributing to the 2008 financial crisis, reigniting debates about reinstating Glass–Steagall.
Proposals continue in Congress to restore separation of banking functions.

8) Official Sources