Reining In Unbridled Prosperity: Life After The Glass-Steagall Act Repeal

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We live in a society driven by the desire to reach beyond our status quo, or at least appear that we are doing so. But can unbridled prosperity ever be financed into payments without eventually collapsing upon itself?

Looking at the economic rise and fall preceding the Glass-Steagall Act, compared with the Ghram-Leach Bliley Act that repealed it, a pattern emerges that may hold the answers along with the help of new innovations in technology. And it’s worth our attention.


What Is the Glass-Steagall Act?

The Glass-Steagall Act refers to the provisions set forth in the Banking Act of 1933 to balance the powers between commercial and investment banking. The intent was to provide for a healthier, safer financial environment by separating the two, so the risk for consumers was minimized and conflicting interests within large financial institutions were eliminated.


History of the Glass-Steagall Act

The 1920s were marked by a period of great innovation and economic flourish commonly referred to as The Roaring ‘20s. During this prosperous time, many things became available for everyday consumers to purchase. Things such as cars and radios were in reach for the everyday man—but he had to have a loan to finance such a large purchase, so the role of banks began to change rapidly.

It was only a matter of time before the overlap of investments and traditional banking began resulting in fraud and swindle for misled consumers. Then came The Crash. As legendary as it was devastating, the 1929 stock market crash, and the ensuing Great Depression, left the state of the economy depleted but still hungry for hope and change. It was during this time that President Roosevelt ushered in much-needed banking reform through The Glass-Steagall Act. This legislation was put forth to restore balance and order to the unruly financial state at the time. It called for a separation of investment banking and commercial banking.

This balancing act was put in place to ensure that no one institution could offer all these services and reign supreme. And it worked for 66 years, until it was repealed by President Clinton in 1999 with the Gramm-Leach-Bliley Act.


Impact of the Glass-Steagall Act Today

With the repeal of the Glass-Steagall Act by President Clinton in 1999, we’ve seen history repeat itself not only in ripples echoing the 1930s, but typhoon waves of devastation and distrust in an economy bursting with more wealth in fewer hands than ever.

Following this repeal, the country saw another period of great prosperity. And once more, the lines were blurred as banks created and sold loans framed as securities, defrauding customers. The bubble popped in 2008 and swept the country into a time of sheer financial panic as even the big banks were going belly up.

Despite this seemingly obvious historic replay, no legislation has yet come about to put the limits and separation between commercial and investment banking.


Financial Industry Secure Record Keeping

One thing that has also fortunately repeated itself over history is the need to innovate. It has brought us the internet, beautiful digital interfaces, and it provides mobile capabilities on almost any technology.

And now, eFileCabinet has progressed a step further by creating user-friendly software that offers compliant document storage and financial industry secure record-keeping.

Now that software like this exists, it certainly raises the question as to whether some of the fraudulent, bank-initiated loans leading up to both economic crashes were simply due to poor accountancy and document organization. There is undoubtedly blame to spread among many parties in any time of fraud and economic decline, but what if some of the problem in the past was simply paperwork mistakes, errors, or losses?

There is always a substantial amount of paperwork processed and retained by banks and credit unions, and all of it is sensitive and valuable. A rattling tin file cabinet is simply no longer a secure storage option for recordkeeping and organization. So, it is a positive sign to see that many banks and accountancy professionals are implementing the software offered by eFileCabinet.


Could the Glass-Steagall Act Return?

Is the Glass-Steagall Act still in force today? No. Should it be? Many experts think so and have been crying out for its reinstatement for years.

However, digital documents, online loan applications, and e-signatures make it such that the paper trails are no longer paper. They’re digital, and they are held to compliance standards that mimic what Glass-Steagall sought to do on paper. Manipulation and fraud are still doable, but they’re much harder now than in the past.

Without such legislation as the Glass-Steagall Act in place, secure digital storage and accounting innovation may just be what helps banks and accountancy firms give their customers peace of mind. It can help them to know that their money is safe, and their loans fraud-free, in another rebuilding era. It also will help them keep banking, accounting, investing, and loan processing activities secure and separate.

The Glass-Steagall Act was what kept banks, brokers, and investors in line in the past. Perhaps with the security and compliance eFileCabinet provides, innovation can help us safely move forward once more, regardless of what happens in law.