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The Glass–Steagall Act in historical perspective

  • Neal, Larry
  • White, Eugene N.

Implementation of Volcker's Rule requires a historical perspective on the original Glass–Steagall Act of 1933 that separated commercial banking from investment banks in the United States. Like the Dodd-Frank legislation, the Banking Act of 1933 was passed before full analysis of the financial crisis was possible. The intended consequences of Glass–Steagall made Federal deposit insurance feasible by limiting entry of new banks while preserving unit banking. The unintended consequences, however, cut off access by small- and medium-size enterprises to external finance and also reduced the capital base for investment banks. Despite these harmful effects, the American economy did recover eventually.

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Article provided by Elsevier in its journal The Quarterly Review of Economics and Finance.

Volume (Year): 52 (2012)
Issue (Month): 2 ()
Pages: 104-113

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Handle: RePEc:eee:quaeco:v:52:y:2012:i:2:p:104-113
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/620167

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  1. Barry Eichengreen & Michael D. Bordo, 2003. "Crises now and then: what lessons from the last era of financial globalization?," Chapters, in: Monetary History, Exchange Rates and Financial Markets, chapter 3 Edward Elgar.
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  8. Jarrell, Gregg A, 1981. "The Economic Effects of Federal Regulation of the Market for New Security Issues," Journal of Law and Economics, University of Chicago Press, vol. 24(3), pages 613-75, December.
  9. Kroszner, Randall S & Rajan, Raghuram G, 1994. "Is the Glass-Steagall Act Justified? A Study of the U.S. Experience with Universal Banking before 1933," American Economic Review, American Economic Association, vol. 84(4), pages 810-32, September.
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  12. White, Eugene Nelson, 1986. "Before the Glass-Steagall Act: An analysis of the investment banking activities of national banks," Explorations in Economic History, Elsevier, vol. 23(1), pages 33-55, January.
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