What did the Glass-Steagall Act of 1933 accomplish, and what two sectors did it separate?

What did the Glass-Steagall Act of 1933 accomplish, and what two sectors did it separate?

• A. Merged banks with insurance companies to diversify risk.
• B. Separated commercial and investment banking; established the FDIC.
• C. Nationalized the banking system.
• D. Abolished the FDIC.

Answer: (B)

The Glass-Steagall Act aimed to reduce the risk-taking that helped cause the Great Depression by restructuring how banks operated and by protecting depositors. It did two key things: it separated commercial banking, which handles deposits and loans for everyday customers, from investment banking, which deals with underwriting and trading securities; and it established the Federal Deposit Insurance Corporation to insure bank deposits, restoring public confidence in the banking system. This combination meant that ordinary savers wouldn’t be exposed to the big risks of securities markets tied to their banks. So, the two sectors it separated were commercial banking and investment banking.

The Glass-Steagall Act aimed to reduce the risk-taking that helped cause the Great Depression by restructuring how banks operated and by protecting depositors. It did two key things: it separated commercial banking, which handles deposits and loans for everyday customers, from investment banking, which deals with underwriting and trading securities; and it established the Federal Deposit Insurance Corporation to insure bank deposits, restoring public confidence in the banking system. This combination meant that ordinary savers wouldn’t be exposed to the big risks of securities markets tied to their banks. So, the two sectors it separated were commercial banking and investment banking.