The political lessons of Depression-era banking reform
AbstractThe banking legislation of the 1930s took very little time to pass, was unusually comprehensive, and unusually responsive to public opinion. Ironically, the primary motivations for the main bank regulatory reforms in the 1930s (Regulation Q, the separation of investment banking from commercial banking, and the creation of federal deposit insurance) were to preserve and enhance two of the most disastrous policies that contributed to the severity and depth of the Great Depression--unit banking and the real bills doctrine. Other regulatory changes, affecting the allocation of power between the Federal Reserve System (Fed) and the Treasury, were intended to reduce the independence of the Fed, while giving the opposite impression. Banking reforms in the 1930s had significant negative consequences for the future of US banking, and took a long time to disappear. The overarching lesson is that the aftermath of crises are moments of high risk in public policy. Copyright 2010, Oxford University Press.
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Bibliographic InfoArticle provided by Oxford University Press in its journal Oxford Review of Economic Policy.
Volume (Year): 26 (2010)
Issue (Month): 3 (Autumn)
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- Crafts, Nicholas; Fearon, Peter, 2010.
"Lessons from the 1930s' Great Depression,"
CAGE Online Working Paper Series
23, Competitive Advantage in the Global Economy (CAGE).
- Nicholas Crafts, 2013. "Long-Term Growth in Europe: What Difference does the Crisis Make?," National Institute Economic Review, National Institute of Economic and Social Research, vol. 224(1), pages R14-R28, May.
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