Financial and Banking Reforms
THE Emergency Banking Act 7as followed, in three months, by the Banking Act of 1933, signed June 16. This statute owed its character in only minor part to the New Deal. It developed from investigations of the Senate Committee on Banking and Currency, beginning in 1931, under Senator Carter Glass, into defects of the Federal Reserve System as they had contributed to the depression, and of the House Banking Committee, beginning in 1930, under Representative Henry B. Steagall, into the pros and cons of group banking. The Glass Bill, which formed the groundwork, passed the Senate in January, 1933, after a year of opposition which changed it for the worse. Senator Glass, after the stock crash of 1929 and the accumulating bank failures, had set about the mournful task of overhauling the Federal Reserve System. No thoroughgoing revision was attempted, but even so the additional controls introduced and the limitations placed on the member banks aroused the antagonism of the American Bankers Association, the New York Federal Reserve Bank, and the Hoover-dominated Federal Reserve Board itself. Valuable time was lost in the interval of passage of the Glass- Steagall Act of February, 1932, which permitted substitution of government securities for surplus gold in the backing of federal reserve notes. Glass himself, thinking he had a better plan for indemnifying depositors in closed banks, long fought off the deposit insurance scheme of Steagall.As it was, the general bank freeze had to intervene before differences were reconciled.