In the 1930s over 11,000 banks failed.
By Daniel at 10 November, 2009, 10:13 am
Many depositors lost all of their funds. Back then most of those banks were state chartered and were quite small, so the number sounds much bigger than the problem actually was in dollar terms. Today we have seen a consolidation in the number of banks from around 11,000 ten years ago to around 8,300 in the summer of 2009. The amounts of funds, however, involved in the crisis today absolutely dwarfs the bank problems of the 1930s. The current credit bubble inflated as the LARGEST CREDIT BUBBLE EVER SEEN IN THE WORLD AND IS A GLOBAL ISSUE OF MASSIVE PROPORTIONS - but the US is at the epicenter.
The Glass Steagall Act was the biggest force to maintain reasonable and sound retail banking practices in the US for almost 60 years. It separated financial institutions into 1) banks, 2) investment banks and brokerages, and 3) other financial concerns including insurance companies - and required that they be kept separate. Yes, we had the S&L debacle of the early 1980s, but other than that there was tremendous stability and health in the US financial sector for that 60 year period.
When the “Financial Modernization Act of 1999″ came into play, it blew away the separations of Glass Steagall. People warned that very day in 1999 that we would see the exact problems we are seeing today. And it all came to pass in spades.
What we need to do is entirely repeal the Gramm Leach Bliley Act and re-institute the Glass Steagall Act in its entirety. This will stop the looting and restore a sound and stable banking and financial system for the next 60 years. If we as a country fail to do this, there will be no viable solution to our current financial problems.
Without REASONABLE ENFORCED REGULATION WITH CLEAR RULES we’ll never be able to get the financial players to play fairly. That was exactly the conclusion of the Pecora Commission which led to the creation of the Glass Steagall Act in 1933-34. They concluded that the intermingling of funds from banks, investment banks, and other financial concerns (mostly insurance companies at that time) directly led to the creation of a HUGE CREDIT BUBBLE IN STOCKS AND REAL ESTATE and that the collapse of that bubble was the key cause of the collapse of banks and the Great Depression.
- American Patriot
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