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Article: Glass-Steagall Banking Act
- Article from:
- Gale Encyclopedia of U.S. Economic History
CopyrightCOPYRIGHT 1999 The Gale Group Inc. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. (Hide copyright information)
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GLASS-STEAGALL BANKING ACT
In the early 1900s, commercial banks established security affiliates to underwrite securities, such as stocks and bonds. A commercial bank is an institution that accepts demand deposits, such as a check, and makes commercial loans. Underwriting is the bank's guarantee to furnish a definite sum of money by a certain date to a business or government entity in return for the entity's issue of bond or stock. Commercial banks were heavily involved in securities underwriting until the 1929 stock market crash.
In 1930 the Bank of the United States failed, allegedly because of the activities of its security affiliates. In 1933 all banks nationwide closed for four days ...