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Journal Article

The Banking Act of 1933

Howard H. Preston
The American Economic Review
Vol. 23, No. 4 (Dec., 1933), pp. 585-607
Stable URL: http://www.jstor.org/stable/1807513
Page Count: 23
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The Banking Act of 1933
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Abstract

The special session of Congress in the spring of 1933 enacted two banking measures, the Emergency Bank act and the Banking act of 1933. I. The chief provisions of the Emergency Bank act are authorization of national bank conservators, legalization of the issue of preferred stock by national banks, greater latitude in the issue of federal reserve bank notes, and granting more liberal loaning powers to federal reserve banks. II. The Banking act of 1933 is the result of several years of intensive study. Senator Glass had greatest influence upon legislation. Representative Steagall sponsored deposit insurance. III. Important features of the new law are: the separation of investment and commercial banking, restriction upon the use of bank credit for speculation, deposit insurance, authorization of state-wide branch banking, federal supervision of group banking, modification of double liability, regulation of interest on deposits, increased power to supervising officers. IV. Deposit insurance is the most controversial feature of the law. Rigid supervision is an essential concomitant. Federal insurance is stronger than state. Deposit insurance will increase federal reserve membership. Branch and group banking provisions are desirable. Double liability placed in an indefinite and unsatisfactory condition. Unified banking is partially achieved. The powers of the Federal Reserve Board are materially increased. V. The new law makes banking more of a social enterprise and increases the responsibility of the federal government for banking stability.

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