This week in 1933, Congress passed The Glass-Steagall Act, also known as the Banking Act of 1933 (48 Stat. 162) prohibiting commercial banks from engaging in the investment business (ie., underwriting, trading, speculating and selling risk products while calling it “financial advice” and having the assurance of tax-payer bailouts when players implode.)
The Banking Act of 1933 was enacted in response to the reckless practices that led to the financial bubble and crash of 1929, the failure of nearly 5,000 banks, and the Great Depression that followed. Similar legislation was then replicated in most developed countries around the world. The legal separation between risk selling, lending and financial advice, set the world on a path toward greater stability that lasted for over 60 years, until relentless lobbying from the banks finally overturned the legislation in 1999. The global economy has paid the price ever since with increasing, cumulative costs in a series of financial bubbles and collapse.
We will be cleaning up the financial mess from these decisions for years to come. But if we are to make lasting progress and actually heal, we must first stop the bleeding and re-break up the banking cartel once more plaguing the world. A new bipartisan 21st Century Glass Steagall Act has already been proposed and must be passed in all civilized nations. You can read it here. Spread the word.
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