Investment Banks and Commercial Banks

As a result of more than 9,000 banks failing during the neat Depression years of 1930-1933, bank regulation was greatly tightened in the United States. The legislature felt the unethical actions from the integration of commercial and investment banking aided in these failures for three main reasons: banks invested their let assets in risky securities, unsound loans were made to boost the legal injury of securities of companies whom the bank had invested in, and the commercial banks interests in the price of securities tempted bank managers to tweet customers to purchase risky securities that the bank was trying to sell. As a result, President Roosevelt felt that the best remedy to the situation was to thoroughfare the Banking Act of 1933, which established two new provisions to pecuniary regulation: deposit insurance and the separation of commercial and investment banking activities. Sections 16, 20, 21, and 32 of the act are referred to as the Glass-Steagall Act. These sections forbid deposit-taking institutions from savoury in the issuing, underwriting, selling, or distributing of securities. Since the provisions of the Glass-Steagall Act did not chip in to foreign banks operating in the United States, they could engage in insurance and securities activities. This put the American banks at a disadvantage.

As a result of the pressure on the legislature and the uninterrupted talks of overturning the act, it was finally repealed. On November 12, 1999, President Clinton signed the Gramm-Leach-Bliley fiscal Services Modernization Act, which repealed the Glass-Steagall Act. This allowed securities firms and insurance companies to purchase banks and commercial banks to shroud insurance and securities. From this repeal, the financial services industry has undergone a consolidating mannequin of commercial banks and investment banks becoming one. However, this has not always turn up beneficial for these companies. My hypothesis is that the culture clash stemming from the different... If you want to becharm a full essay, order it on our website: Orderessay

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