Notes on Roosevelt’s ground breaking financial reform

“President Franklin D. Roosevelt set the standard for the first 100 days in office with an unprecedented whirlwind of legislative activity that sought to make good on his pledge for ‘action and action now’ to combat the Great Depression,” Michael Perino wrote for Bloomberg online late last week. Perino continued, “June 16 marks the 80th anniversary of that era, which came to a close when Roosevelt signed the Banking Act of 1933. That groundbreaking financial reform is more commonly known for its Democratic co-sponsors, Senator Carter Glass of Virginia and Representative Henry Steagall of Alabama. These days, it is mostly remembered for just one of its provisions, the separation of commercial and investment banking, designed to wall off customer deposits from the risk-taking inherent in securities underwriting. The debate over the 1999 repeal of that reform still rages. Yet in 1933, the most controversial feature of Glass-Steagall was the creation of federal deposit insurance, which has been wildly successful and has virtually eliminated the repeated bank runs that swept the country in the decades before the bill’s passage. Even the ardent free-marketeer Milton Friedman called it ‘the most important structural change in the banking system’ of the New Deal. Read the full article here. | Raymond Matt, CFP, CLU, TEP, CHS

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