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What is the Taft-Hartley Act?

What is Glass Steagall act? What have been the pros and cons of passing the act? What have been the pros and cons of repealing the act?

  • Please provide some explanation in layman terms as some of the answers that are already present in Quora use complex language. Will it be better to have such an act in the current economic situation and going forward?

  • Answer:

    Well this act came up in US to separate the two major activities of the banks I.e. accepting and granting short term loans AND granting longer terms loans I.e. industrial investments...in a sense commercial banks were not allowed to make loans for longer duration. Cons: Low profitability of banks Less availability of finance for industries Low return to depositors Pros: Lesser risk to deposits in the bank Shield against bank run Lesser economic crisis Ultimately the act was repealed with the growing nationalisation of the commercial banks-spreading the risk of bank run over larger geographical area -thus banks were not prone to crisis as it was prior to 1930s.... Also this act became incompatible with the globalised world where German and Japanese banks were fast flourishing. Thus US needed to repeal the act to remain competitive. Pros and cobs are just opposite Hope that answers the question.

Mohammad Rizwan at Quora Visit the source

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The very simple answer to your question is ' this act says that investment banking and commercial banking can not operate under the same umbrella. ' because of this rule in 1930 jp morgan broke into two parts one jp morgan and other one is morgan stanley. Hope this will answer your query.

Indrajit Singh

When the stock market crashed in 1929 and the world was thrown into depression, the US Congress held hearings to find out why this happened and what to do about it. From these hearings a number of major reforms were imposed upon the capital markets in the US. These reforms basically were designed to clean up Wall Street and the US Banking system.One of the reforms was the Glass-Steagall Act. This law separated investment banking from commercial banking. Investment banking is speculative financing provided by Walls Street to companies that need to raise capital for business. Commercial Banking is also known as retail banking and it is the making of loans and the acceptance of deposits from retail customers. It is also offering checking accounts and credit cards to retail customers.Commercial banks take the deposits from their customers and lend them to other customers as loans. The deposits are guaranteed by the Federal Deposit Insurance Corporations, so this is risk free money to the banks that are making the loans.The reason why investment banking and commercial banking were separated by Glass-Steagall was to create a stable and reliable banking system. The regulation of banking and the guarantee of deposits was supposed to create this stability and reliability. And it worked!It is improper for commercial banks to be engaged in investment banking because the banks are using guaranteed funds from depositors to make speculative investments in private companies. This puts the risk of their investments on US taxpayers. Also, banks that engage in speculative investments destabilize the banking system because they often times experience large losses from their speculation.There is nothing wrong with being in the investment banking business. But the risk takers should put their own money at risk, not the money of depositors with government guarantees against losses.We need to restore Glass-Steagell so that we once again have a reliable and stable banking system in the US.

John Kontrabecki

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