The United States: Boom and Depression

It may sound paradoxical that the United States, seen as the apotheosis of market capitalism, was the one that introduced in the 1930s a very pervasive banking and financial regulatory framework.1 But it is much less so if we consider the structure and legislation which, until then, had characterized its financial system, and if we take into account that in the interwar period almost everywhere prevailed louder claims for greater State intervention in the economy. A further paradox is that, while the Glass–Steagall legislation of 1933 is today sometimes invoked as a beneficial alternative to the current regulatory arrangements, in the 1980s and 1990s it was the target of violent attacks. At that time, pressure by commercial banks – often supported by the academia – strongly aimed at abolishing that law, which had barred commercial banks from investment banking. The literature on the Great Depression – economics rather than economic history writings – emphasizes the macroeconomic factors behind the crisis – in particular, the monetary component – and barely mentions the Glass–Steagall of 1933 as a meaningful event (much more relevance is given to another law, the Glass–Steagall Act of 1932, concerning monetary policy).