By the U.S. presidential election of 1932, millions of Americans were without jobs, and over 4,000 banks had closed their doors amidst a financial panic with nearly $400 million in deposit account losses.

The economic catastrophe that resulted in so many bank failures can be attributed to loose banking regulations of the time, and Sen. Carter Glass and Rep. Henry Steagall responded. What was desperately needed in the 1930s was legislation that would create a firewall between commercial banks and investment banks.

The lines had been blurred somewhat, without a buffer between two types of banking activity, as investment bankers were able to pursue risky investments with depositor funds.

In addition to taking the U.S. off of the gold standard to inflate the supply of money and declaring a moratorium on the banks, President Franklin D. Roosevelt signed the Glass-Steagall Act in 1933, establishing that much-needed firewall, as well as the Federal Deposit Insurance Corp.

Speculative operations, in addition to on-margin stock purchases, had inundated the market throughout most of the 1920s, and by the late 1920s, the Federal Reserve Bank raised interest rates. When a record number of stock shares were dumped on Black Tuesday in 1929, there were those that "kept their shirts," and one executive at Chase National Bank filled his coffers by selling his company's shares during the 1929 crash. J.P. Morgan admitted he had issued stock shares to an elite ring of people who benefited from discounted rates.

Former President Calvin Coolidge was among the people in that particular ring.

Congressional investigations revealed actions that had been taken by Morgan and other executives who profited while putting the nation's economy at risk.

The American people, at that time, really understood what a Chicago Tribune editor wrote on the difference between a bank robber and a bank president. Yes, the bank robber only works at night. The Glass-Steagall Act restricted bankers from engaging in selling securities and issuing loans. According to the act, investment bankers and commercial bankers were required to stay in their own lane.

By the 1970s, millions of Americans were fed up with what they saw as a bloated, regulatory-filled federal government tied to the liberal policies of former presidents such as Roosevelt, Harry S. Truman, John F. Kennedy, Lyndon B. Johnson, and Jimmy Carter. The big banks had viewed Glass-Steagall as a hindrance in the realm of foreign competition. President Ronald Reagan, who promised to reduce the size of the federal government, appointed Alan Greenspan to be director of the Federal Reserve Bank. Greenspan supported the idea that banking investment strategies would benefit customers, and if there was diversification, less risk would ensue.

There were cracks in the Glass-Steagall Act that allowed Federal Reserve member banks to dabble in securities with a company that did, providing that securities was not the principle activity of that particular company.

President Bill Clinton effectively eliminated protections under the Glass-Steagall Act, and he remarked that it was important to stabilize the banks by allowing firms to diversify in the arena of global markets.

Ten years after Clinton had killed the act, the U.S. was in the midst of the worst financial crisis since the 1929 crash.

Sen. Elizabeth Warren has a plan to introduce the 21st Century Glass-Steagall Act, which means re-establishing that wall between commercial banks and investment banks. More cops on the Wall Street beat are a necessity, as opposed to government bailouts of institutions that are too big to fail.

Brent Been is a Tahlequah educator with a special emphasis on civics and history.

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