Frank Dodd Essay

2669 WordsOct 30, 201311 Pages
Dodd-Frank Restores Confidence The economic crisis that began in 2008 has been described as the worst crisis since the Great Depression of the 1930s. During the depression of the 1930s, one-fifth of all banks in America collapsed. Congress held hearings for three years, in order to determine the cause of the crisis. Eventually, it was determined that risky practices by U.S. banks had caused the crisis. The banks had used depositors’ funds to speculate in stock and bond trading on Wall Street. In 1933, Senator Carter Glass and Congressman Henry Steagall proposed legislation that would limit the risks that could occur when banks used depositor’s funds to underwrite stocks and bonds (New York Times). The legislation, called the Glass-Steagall, placed an impermeable barrier between banks that were entrusted with depositor’s funds, and the brokerage firms that traded stocks and bonds on Wall Street (New York Times). From the point that the legislation was put into place, the difference between banks and brokerages was clear, and enforced by law. Yet in 1999, Glass-Steagall was repealed as a result of the argument that the world financial system had advanced to a point of such sophistication that another economic crisis like 1929 could never occur again. Bank lobbyists also went to Washington D.C. and argued that bank customers would appreciate having the convenience of receiving brokerage offerings at the same bank that held their funds. Dodd-Frank Legislation Enacted to Protect American Public Less than ten years later, the U.S. economy came close to collapse, due to corrupt practices of the real estate industry, supported by Wall Street financial entities. The removal of Glass-Steagall was thought by some to have contributed to the 2008 crisis. Once again, Congress decided to restore restrictions on U.S. banks and other financial

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