Why did Glass-Steagall prevent Wall Street from crashing the US Economy for 60 years? There are those that scream Glass Stegall wouldn't have prevented the crash of 2008 and current Depression we are in ... they are most assuredly wrong.
The Glass-Steagall Act of 1933 dropped a firewall between Commercial Banks, Investment Banks, and Insurance Companies. This prevented the commingling of resources among industries that resulted in the crash of 1929. When the GLBA removed the firewall in 1999, it allowed these industries to commingle funds once more. So bank depositors, unbeknownst to them, became passive investors in the stock market ... in essence, their bank accounts were now accessible by the investment wing of their bank. This dynamic meant that if the Investment wings of the banks blew it the federal government would have to come to the rescue to prevent the depositors from being wiped out. No, the FDIC is incapable of covering all bank depositors in the event of a crash of the banking system. No.
It doesn't take advanced mathematical computation to explain why Glass-Steagall was an effective guardian of the US Economy for decades it comes down to simply this:
With a fire wall between Commercial Banks. Investment Banks and Insurance Companies, investors on Wall Street were on their own. If they screwed up they would be wiped out, but the rest of the banking sector would be sound. There would be no bailout ... so Wall Street behaved.
Read the Article at HuffingtonPost
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