Glass-Steagall Act

Definition

The Glass-Steagall Act was a law passed in 1933 during the Great Depression that separated commercial banking from investment banking to protect people's savings from risky investments.

Analogy

Think of the Glass-Steagall Act like a school dividing students into different classrooms based on their subjects. Just as you wouldn't want your math class mixed up with your art class, this act kept commercial and investment banks separate to avoid confusion and risk.

Related terms

Commercial Banking: This is like your basic school subject (like English or Math), where banks take deposits and make loans.

Investment Banking: This is more like an advanced placement class, where banks help companies and governments raise money through issuing stocks and bonds.

Great Depression: This was a severe worldwide economic depression that took place mostly during the 1930s, beginning in the United States. It's like when summer vacation ends and everyone has to go back to school - but much worse.