By Red Jahncke
GREENWICH, CONN. -- The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 is over 2,300 pages long.
The Glass-Steagall Act, the landmark bank-reform bill of 1933, was about 100 pages long.
Less is more.
Glass-Steagall gained strength from its simplicity. The 1933 Congress concluded that the combination of investment banking and commercial banking (and other businesses) had led to the stock-market crash and the failure of thousands of banks. Therefore, it separated the two forms of banking. It severely restricted the activities of commercial bank-holding companies by banning any cross-ownership with any other industry, financial or otherwise.
To re-establish public confidence in banks, it created the Federal Deposit Insurance Corporation to insure bank deposits, and said that only commercial banks, with their less-risky activities, could hold such deposits.
Finally, it limited the size of banks by mandating that national banks operate within state limits on branching in their headquarters state. That’s the whole Glass-Steagall Act.
Simple, straightforward and powerful: It broke up the House of Morgan, the banking combine founded by the early 20th Century’s most powerful banker, John Pierpont Morgan