The Glass-Steagall Act was initially step up in the 1930’s after the great depression

The Glass-Steagall Act was initially step up in the 1930’s after the great depression, but it was thought it was out-dated and didn’t help the progression of the profitability of the banking industry. This can be argued that this act would actually have been any help in preventing the financial crisis. “Glass-Steagall could not have prevented the bank failures of the 1920s and early 1930s had it been in force earlier and wouldn’t have averted the 2008 financial crisis had it stayed in force after 1999.” (McDonald, 2016). This is compelling that the act would have been not fit-for-purpose in the eyes of the author. There are a quite number of critiques of the act,

but it is also seen that the act had been tampered with previously before the Gramm-Leach-Bliley Act of 1999 was signed to into law by President Clinton. The tampering was occurring over a 30-year period if the act was so manhandled there were too many cracks in it and the true meaning of the act slipped through the cracks (Sitaraman, 2018). This act was lobbied until its death in 1999, (Goldstein, 2017). The belief of this is that this act was not as crucial as some see it
“Look at all the grief I got for signing the bill that ended Glass-Steagall. There’s not a single, solitary example that it had anything to do with the financial crash.” (Clinton, 2015).
The attention surrounding this bill is perhaps peoples first reaction to point a finger at one specific event. The Gramm-Leach-Bliley Act (GLBA) allowed banks to undertake more business activities but had to be within the financial services sector, also this act helped protect the customer as the customer had a right to ‘opt-in/out’. This act gave the financial sector the boost it needed with industrial loans growing significantly which was helping the economy to grow until 2007. (Angelides, et al., 2011). This act allowed mergers and conglomerates to form which is good for the sector as it allowed US banks to compete with the international rivals, it evolved the banking sector from a professional perspective, but the public perhaps looks at it as a pay-out to politicians. (Macey, 2000)
These two acts were not the fundamentals to the financial crisis in 2008 the Glass-Stegall Act was out-dated and was unfit for its purpose for the new generation of the banking sector while the GLBA was enacted to develop the banking sector. De-regulation of the Glass-Steagall Act had the finance behind it to be repelled lobbying groups had a lot of funds at their disposal to influence the decision makers.

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2.2 Monetary Control Act & Garn-St Germain Depository Institutions Deregulatory Act
This is a two-title act which was signed into law by Jimmy Carter in 1980. This act perhaps was a golden ticket to the banks. This act abolished interest rates and made the banking industry more competitive. It allowed for depository institutions to allow for the use of the negotiated order of withdrawal accounts which are interest-bearing accounts, this also allowed banks to approve automatic transfers from checking accounts to interest accounts.

When the banks were allowed to the decide the interest rates it allowed for savings and loans to be treated with sheer ignorance and this is when wreckless banking started to flourish. Which made the bigger banks more powerful and profitable and pushed the smaller banks to the wayside. (Cornett & Tehranian, 1990) Interest rates became volatile, so the banks could win over consumers, eventually using savings and loans for high-risk activities “real estate”. This deregulation is fundamental for the bailout by the United States of the savings and loans sector in the 2008 financial crisis. This de-regulation being a major factor as to why the crisis was volatile as the banks had free reign on the savings and loan market.

2.3 Commodity Futures Modernization Act begins in 1998
The then chairman of the Commodity Futures Trade Commission (CFTC) Brooksley Born raised the issue that instruments such as credit default swaps and derivatives should be regulated but due to her stance on the matter had to resign, once again sheer ignorance prevails. This act exempt credit default swaps and derivatives to be regulated by the CFTC. The swaps had made the investments high risks and when the bubble burst in 2008 the major banks noticed. When Bear Stearns, Lehman Brothers and AIG all collapsed the major problem being down to unregulated credit default swap market. (Blumenthal, 2011) This not being a mistake or an error this being down to greed allowing a very risky sector to be de-regulated. Leading to the major banks to grow and develop into these powerhouses of high-risk investments with one falling each following suit.

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