The New Deal and Glass-Steagall: the rules written after the 1929 crash

What were the New Deal and Glass-Steagall reforms after the crash?

The New Deal was the set of reforms under the Roosevelt administration that followed the banking collapse of March 1933. Glass-Steagall is the nickname of its banking chapter: the Banking Act of 1933, which Roosevelt signed on 16 June 1933. Senator Carter Glass of Virginia and Representative Henry Steagall of Alabama sponsored it.

Steagall introduced the bill in the House as H.R. 5661 on 16 May 1933, so it became law within 31 days, a span this page calculates. The speed reflects the urgency of the banking crisis. The Federal Reserve History essay lists the Banking Act of 1933 among the reforms of 1933 to 1935, with the Emergency Banking Act, the Gold Reserve Act, and the Banking Act of 1935.

Which Glass-Steagall provisions separated commercial and investment banking?

The nickname most often refers to 4 provisions, in Sections 16, 20, 21, and 32 of the Banking Act of 1933. Together they separated commercial banking from investment banking, so that commercial banks could no longer underwrite or deal in securities, according to the Federal Reserve History essay.

Section 21 barred securities firms from taking deposits, and Section 32 barred common directors or employees between securities firms and banks. Many accounts credit the Pecora Investigation with helping the separation provisions become law, while critics argue that its evidence did not support separation.

How did the Glass-Steagall Act create deposit insurance?

The Act established the Federal Deposit Insurance Corporation. Temporary insurance of $2,500 per accountholder began in January 1934 and ran through 30 June 1934, and permanent insurance of $5,000 per accountholder was scheduled to start on 1 July 1934. The Banking Act of 1935 later set coverage at $5,000 and none above it.

Deposit insurance was controversial. Wikipedia reports veto threats from Roosevelt, while Steagall wanted to protect small banks. The limit was raised many times afterwards and reached $250,000. The change answered the runs of 1930 to 1933: a depositor with insurance has less reason to join a run.

What did the interest limits of Glass-Steagall add to the New Deal?

The Act also outlawed interest on checking accounts and capped interest on other deposits, to reduce competition among banks and discourage risky investment. Section 11(b) barred interest on demand deposits. Savers and banks therefore faced a fixed price of deposits for decades, and that design explains why the cap appears in the history of banking competition.

The interest limits lasted longer than many expected. Time-deposit rate limits were phased out by the Depository Institutions Deregulation and Monetary Control Act of 1980, by 1986, and Dodd-Frank repealed the ban on interest on demand deposits, allowing interest-bearing accounts from 21 July 2011. The rule thus stayed in force for 78 years.

Which securities laws joined Glass-Steagall in the New Deal?

The Securities Act of 1933 regulates original issues of securities, while the Securities Exchange Act regulates their later trading, according to Wikipedia. Roosevelt signed the Exchange Act on 6 June 1934, and it established the Securities and Exchange Commission as the agency responsible for enforcing federal securities law.

Together the 3 laws gave 3 layers of protection to investors: banks kept out of securities dealing, new securities regulated at issue, and trading supervised by a regulator. Wikipedia describes the 1934 Act as providing for the regulation of securities exchanges and of over-the-counter markets.

Which other New Deal banking and gold rules followed the crash?

The Emergency Banking Act of 9 March 1933 provided a system for reopening sound banks under Treasury supervision. On 5 April 1933 Executive Order 6102 made private ownership of gold certificates, coins, and bullion illegal, and holders were ordered to turn gold in by 1 May at $20.67 per ounce.

The Gold Reserve Act followed in 1934, and the gold price was raised to $35 per ounce that year. The Agricultural Adjustment Act was signed on 12 May 1933, and the Second New Deal of 1935 added Social Security. The banking rules were therefore 1 strand of a wider set of reforms.

When did Congress repeal parts of the Glass-Steagall Act?

The Gramm-Leach-Bliley Act of 1999 repealed the 2 provisions that restricted affiliations between banks and securities firms, Sections 20 and 32. Clinton signed it 8 days after Congress passed it, and his signing statement of 12 November 1999 said that the Glass-Steagall law was no longer appropriate.

The repeal remains debated. Joseph Stiglitz argued that the investment-bank culture came out on top afterwards. Paul Krugman called the repeal a mistake but not the cause of the 2008 crisis. Lawrence White argued that commercial banks’ investment banking activities did not cause their failures. A reader can weigh these views against the numbers.

What do the New Deal and Glass-Steagall rules teach a reader today?

Three design ideas from the 1933 rules still guide bank analysis: separate risky activities from deposit-taking, insure small deposits, and supervise trading. As of October 2026 a reader can check where a bank or a market sits on each idea. This page is general information, not investment advice.

The EQOS Asia method scores a system on its structure, and a 30-minute pre-diagnostic applies it to your exposure in Singapore, ASEAN, or Hong Kong. The score shows where leverage, transparency, and backstops sit in a system, so two readers can trace a disagreement to a specific input.

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About the author

Stéphane Jambu

President, EQOS Forecast Asia

Stéphane Jambu leads EQOS Forecast Asia and works as a consultant in e-commerce, search visibility, and AI. LinkedIn profile