The Glass-Steagall Act Separates Banking and Creates the FDIC
Congress splits commercial from investment banking and insures ordinary deposits
Quick facts
- Signed
- June 16, 1933
- Sponsors
- Sen. Carter Glass, Rep. Henry Steagall
- Key reform 1
- Separated commercial and investment banking
- Key reform 2
- Created the Federal Deposit Insurance Corporation
What happened
On June 16, 1933, Roosevelt signed the Banking Act of 1933, commonly called the Glass-Steagall Act after Senator Carter Glass and Representative Henry Steagall. It separated commercial banking from investment banking, aiming to keep deposits from being used for stock speculation, and it created the Federal Deposit Insurance Corporation to insure ordinary bank deposits. Glass, a former Treasury secretary, was the driving force; Steagall agreed to back the bill once an amendment added deposit insurance. The measure was written to provide for the safer and more effective use of the assets of banks and to prevent the undue diversion of funds into speculative operations.
Why it matters
Deposit insurance, created by this act, ended the era of banking panics in which frightened depositors could bring down solvent banks by rushing to withdraw cash. The separation of commercial and investment banking shaped the American financial system for more than sixty years until its repeal in 1999. Together the two provisions were among the most durable reforms to come out of the Depression.
How we know
The act's provisions, sponsors, and signing date are documented in the Federal Reserve History essay on the Banking Act of 1933, which quotes the text of the legislation and its legislative history.
Sources
- Federal Reserve History (Julia Maues). Banking Act of 1933 (Glass-Steagall) · Reputable sourcefederalreservehistory.org · The domain "federalreservehistory.org" is on our Reputable source registry. · Link is live and its text matches the event's key terms (Jul 2026)
- Federal Reserve History (Julia Maues). Banking Act of 1933 (Glass-Steagall) (signing) · Reputable sourcefederalreservehistory.org · The domain "federalreservehistory.org" is on our Reputable source registry. · Link is live and its text matches the event's key terms (Jul 2026)
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