The idea of the original Glass Steagall was to create two completely distinct types of banks. On the one hand there would be the standard commercial banks with which most of us are familiar. These are the banks where people have checking and savings accounts and where they might go to take out a mortgage or small business loan. The ending of Glass-Steagall removed the separation between investment banks and commercial banks, raising the possibility that banks would make risky investments with government-guaranteed deposits. In principle, even after the ending of Glass Steagall banks were supposed to keep a strict separation between their commercial banking and the risky bets taken by their investment banking divisions, but this depends on the ability of regulators to enforce this restriction.
Posted on: Fri, 09 Aug 2013 16:59:20 +0000
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