Question

What regulations were put on banks in the 1930’s…and why?

Answer 1

In the wake of 1929, stock market crashed and the subsequent Great depression congress was concerned that commercial banking operations and payment system were incurring losses from volatile equity market .To tackle this problem, banking act 1933 was formed.

Regulations of the banking act 1933 were-:

1)The act seperated commercial bank from investment banking.

2) A federal Deposit Insurance corporation was created.

3) The act also give higher regulation of national bank to federal Reserve system, requiring holding companies and other affiliates of state member banks to make three reports anually to their Federal Reserve bond.

4) Banking holding companies that owned a majority of shares of any federal reserve member bank had to register with fed and obtain its permit to vote their shares in selection of directors of any member bank subsidiary.