Glass–Steagall Act

The Banking Act of 1933 established the Federal Deposit Insurance Corporation (FDIC) in the United States and introduced banking reforms, some designed to control speculation.^[1] It is most commonly known as the Glass–Steagall Act, after its legislative sponsors, Carter Glass and Henry B. Steagall.

Some provisions of the Act, such as Regulation Q, which allowed the Federal Reserve to regulate interest rates in savings accounts, were repealed by the Depository Institutions Deregulation and Monetary Control Act of 1980. Provisions that prohibit a bank holding company from owning other financial companies were repealed on November 12, 1999, by the Gramm–Leach–Bliley Act. ^[2][3]

President Clinton signed the Gramm-Leach-Bliley Act into law, and it broke the back of the financial system.

The repeal of the Glass–Steagall Act of 1933 effectively removed the separation that previously existed between Wall Street investment banks and depository banks and has been blamed by some for exacerbating the damage caused by the collapse of the subprime mortgage market that led to the Financial Crisis of 2007–2010.^[4]

In the past, we had deposit banks and loan banks. If you put your money in a deposit bank, the money was there to pay your rent and food expenses. It was safe. Loan banking was risky. You gave money to a loan bank, knowing the funds would be tied up for a period of time and that you might never see the money again. For this, you received interest to compensate for the risk taken and the time value of money. Back then, bankers who took a deposit and turned it into a loan risked hanging from the town’s large oak tree. In the early nineteenth century, the deposit and loan functions merged into a new entity called a commercial bank. Of course, these new commercial banks quickly realized they could dip into deposits, essentially committing fraud to fund loans. Governments soon realized this fraudulent activity was a great way to finance government expenditures and passed laws making it legal.

Similar regulations were put in place in Europe during the 1980s and early 1990s. As a result, banks became Hedge funds and could gamble with their depositors' funds. Profits disappeared into bankers' pockets; losses were paid by taxpayers and/or large depositors. 

After the hyperinflation and economic and financial crisis in Chile, a similar Banking Act of 1933 was enacted to protect depositors. Such a law is A KEY LAW FOR ANY STABLE AND SANE FINANCIAL SYSTEM. Banks should not be allowed to speculate with their customers' deposits in any way.

There are two kinds of contracts a depositor can have with his bank. Only one allows the Bank to use the deposit for other means. Today, the line between these two contracts has been erased, leaving an extremely dangerous situation. 

The reality today is that as soon as somebody deposits funds into a bank account, he becomes a CREDITOR to the bank...not at all what most Savers have in mind!

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