Glass–Steagall Act - Glass–Steagall Developments From 1935 To 1991

Glass–Steagall Developments From 1935 To 1991

Commercial banks withdrew from the depressed securities markets of the early 1930s even before the Glass–Steagall prohibitions on securities underwriting and dealing became effective. Those prohibitions, however were controversial. A 1934 study of commercial bank affiliate underwriting of securities in the 1920s found such underwriting was not better than the underwriting by firms that were not affiliated with banks. That study disputed Glass–Steagall critics who suggested securities markets had been harmed by prohibiting commercial bank involvement. A 1942 study also found that commercial bank affiliate underwriting was not better (or worse) than nonbank affiliate underwriting, but concluded this meant it was a “myth” commercial bank securities affiliates had taken advantage of bank customers to sell “worthless securities.”