Post #2049769

When the banks were combined prior to the Great Depression they would use deposits from the retail side to fund investments. When investments lose money, and customers come to withdraw funds, the bank is unable to cover its obligations and can fail. When you combine that with banks lending money to each other, a single bank (if it’s big enough) can start a cascading failure. Glass-Steagall was passed in 1933. Prior to that the US had had a financial crisis every decade or so. 1933-2000 was an incredibly stable period financially speaking, there were a number of small banking scandals but nothing that threatened the whole economy. In 1999 congress repealed it and Clinton signed the repeal, and 9 years later was the 2008 financial crisis. And we’re back on track for one every decade again.