Light

Glass-Steagall Act

Definition

The Glass-Steagall Act, also known as the Banking Act of 1933, was a law passed in response to the Great Depression. It aimed to prevent commercial banks from engaging in investment banking activities and created a separation between commercial and investment banking.

Analogy

Think of the Glass-Steagall Act as a protective wall between two different types of financial institutions. It's like having a sturdy barrier that prevents your school cafeteria from turning into a nightclub.

Related terms

Great Depression: A severe economic downturn that lasted from 1929 to the late 1930s, characterized by high unemployment rates, bank failures, and widespread poverty.

Commercial Bank: A financial institution that accepts deposits from individuals and businesses and provides services such as loans, checking accounts, and savings accounts.

Investment Bank: A financial institution that assists companies in raising capital through underwriting securities (like stocks or bonds) and providing advisory services for mergers, acquisitions, and other financial transactions.