Editor, OBSERVER:
The Banking Act of 1933 created the FDIC and instituted various banking reforms. Some good, some not so good.
Actually, two different laws - one enacted in '32, the other in '33, with the former aimed at expanding federal powers to provide further capital to banking institutions (mostly via rediscounting) and halting inflation while the latter being enacted to combat the Great Depression while at the same time avoiding further calamity. I'll focus only on the one from '33.
The Federal Deposit Insurance Corp. arose out of the Banking Act of '33. Many benefits came about, as well as financial interests protected and insured, via the creation of the FDIC. Since Jan. 1, 1934, no depositor has ever lost funds that were insured as a result of a specific financial institution's failure.
Another important facet of the Banking Act of '33 was the introduction of separation of financial institutions based on the type of business they conduct - mainly investment banking and commercial banking). The issue at hand at that time (eerily enough deja vu is felt 75 years later) was the indistinguishable climate between bankers & brokers. Congressional hearings of the time revealed strong conflicts of interest, as well as fraud, in different banking institutions.
In late 1999 one provision of the Banking Act of 1933 was repealed. It made its way through the Republican controlled Congress and was signed into law by a Democratic President Bill Clinton. Essentially the rescinded portion allowed the same holding company to control an investment bank as well as a commercial bank, thereby reestablishing conflict of interest and allowing gigantic financial institutions to bet against their own customers.
Is it time to consider a re-enactment of the Glass-Steagall Act, or the Banking Act of 1933? Doesn't the answer seem obvious?
PHIL OGNIBENE,
Jamestown
