Glass-Steagall Act

The chances are that most people would never come across the glass-steagall act or want this explained, except for the fact that in recent years it has been mentioned a lot more after the financial sector crashed and burned through sub-prime debts and overexposure to lending that turned bad without sufficient capital to cover those losses.

Glass-Steagall was an act in 1933 that ensured a separatino between investment banks and ordinary banking activities (commercial banks).

However during the late 80s and 90s significant relaxation of the barrier between the two occurred, and it is this relaxation that many (perhaps in hindsight) are now citing as one of the important causes of 'ordinary' banks also being dragged into the mire in the current financial crisis.

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