By instituting government oversight over banks and investments, Franklin Roosevelt reformed America’s economy and political system. In doing so, he reshaped the role of the federal government and the role of the private sector. His policies ensured that the country was protected from the pitfalls of speculative activity. These regulations are a good example of how to strengthen government control over the financial industry.
The stock market in the United States experienced a massive boom in the 1920s, reaching its climax in 1929. However, the rate of production and unemployment soared, making the stock market crash even more disastrous. The Great Depression accelerated this trend, and Franklin Roosevelt responded by instituting government oversight on banks and investment firms. To regain the trust of the public, he enacted laws limiting the activities of financial institutions.
In 1933, the US stock market experienced a massive expansion, reaching a high in 1929. The stock market crash was accompanied by a sharp decline in the rate of production and the rate of unemployment. In the aftermath of the stock market crash, the economy deteriorated and led to the Great Depression. To restore confidence in the financial system, Franklin Roosevelt instituted government oversight over banks and investments.
The crisis prompted the Federal Reserve to enact emergency banking legislation just days after FDR took office. The new law, known as the Glass-Steagall Act, was aimed at regulating interbank control, providing safe use of bank assets, and preventing the diversion of funds into speculative operations. The legislation was sponsored by Rep. Carter Glass (VA) and Rep. Henry Steagall (AL).
In the aftermath of the crash, the stock market had experienced a massive expansion. The price of gold increased. This caused many problems, and the US stock market had to be deregulated. In response, the President imposed government-run oversight on banks and investments. The result of these actions was the creation of the Federal Deposit Insurance Corporation, the Securities and Exchange Commission, and the Federal Reserve. By enacting these laws, the federal government was able to re-establish public confidence in the financial system.
In his inaugural address on March 4, 1933, FDR announced the introduction of deposit insurance. The public wanted to recover its losses. Many blamed Wall Street for the Depression, Glass had been opposed to the idea for years. The temporary fund insured deposits up to $5,000, while the permanent fund insured deposits up to $250,000. In subsequent years, the limit was raised several times and now stands at $250,000.
The stock market’s collapse was also exacerbated by the Depression. The stock market’s rapid rise was accompanied by a collapse in wages and prices. The crash led to the Great Depression and accelerated the economic decline. The President also urged the local governments to create jobs. By implementing these policies, he hoped to restore public confidence in banks and investments.
The Federal Reserve was forced to intervene after the collapse of the US stock market. The Federal Reserve Board stepped in and instituted government oversight on banks and investments. The Glass-Steagall Act helped restore public confidence in financial institutions. In 1938, FDR also created the Securities Exchange Commission to regulate investment and bank assets. The FDR’s policies continued to shape the economy.
In addition to restoring public confidence in the economy, the President urged the local governments to make national public works projects, reduce taxes on imported goods, and increase the number of jobs in the US. The FDR’s policies sparked a wave of social reforms in the financial industry. These included: (1) tightening the regulations on national banks, regulating the capital market, ensuring that funds are more safely invested, and (2) implementing government oversight of banks and investments.
In 1929, the stock market crash led to the Great Depression. Congress became concerned with losses in the volatile equity market and passed the Glass Act. This act aimed to restrict the use of bank credit for speculation and to direct funds to more productive uses. It is still unclear how the government plans to fund these initiatives. This legislation does not provide guidance on how these policies should be implemented.