The U.S. Securities and Exchange Commission (SEC) is an independent agency of the United States federal government, created in the aftermath of the Wall Street Crash of 1929. The primary purpose of the SEC is to enforce the law against market manipulation.
Investment banking pertains to certain activities of a financial services company or a corporate division that engages in providing advisory-based services on financial transactions for clients, such as institutional investors, corporations, and governments. Traditionally associated with corporate finance, such a bank might assist in raising financial capital by underwriting or acting as the client's agent in the issuance of debt or equity securities. An investment bank may also assist companies involved in mergers and acquisitions (M&A) and provide ancillary services such as market making, trading of derivatives and equity securities, FICC services or research. Most investment banks maintain prime brokerage and asset management departments in conjunction with their investment research businesses. As an industry, it is broken up into the Bulge Bracket, Middle Market, and boutique market.
The Gramm–Leach–Bliley Act (GLBA), also known as the Financial Services Modernization Act of 1999, is an act of the 106th United States Congress (1999–2001). It repealed part of the Glass–Steagall Act of 1933, removing barriers in the market among banking companies, securities companies, and insurance companies that prohibited any one institution from acting as any combination of an investment bank, a commercial bank, and an insurance company. With the passage of the Gramm–Leach–Bliley Act, commercial banks, investment banks, securities firms, and insurance companies were allowed to consolidate. Furthermore, it failed to give to the SEC or any other financial regulatory agency the authority to regulate large investment bank holding companies. The legislation was signed into law by President Bill Clinton.
The Glass–Steagall legislation describes four provisions of the United States Banking Act of 1933 separating commercial and investment banking. The article 1933 Banking Act describes the entire law, including the legislative history of the provisions covered.
The Banking Act of 1933 was a statute enacted by the United States Congress that established the Federal Deposit Insurance Corporation (FDIC) and imposed various other banking reforms. The entire law is often referred to as the Glass–Steagall Act, after its Congressional sponsors, Senator Carter Glass (D) of Virginia, and Representative Henry B. Steagall (D) of Alabama. The term "Glass–Steagall Act", however, is most often used to refer to four provisions of the Banking Act of 1933 that limited commercial bank securities activities and affiliations between commercial banks and securities firms. That limited meaning of the term is described in the article on Glass–Steagall Legislation.
J.P. Morgan & Co. is an American financial institution specialized in investment banking, asset management and private banking founded by financier J. P. Morgan in 1871. Through a series of mergers and acquisitions, the company is now a subsidiary of JPMorgan Chase, one of the largest banking institutions in the world. The company has been historically referred to as the "House of Morgan" or simply Morgan. For 146 years, until 2000, J.P. Morgan specialized in commercial banking, before a merger with Chase Manhattan Bank led to the business line spinning off under the Chase brand.
Securities regulation in the United States is the field of U.S. law that covers transactions and other dealings with securities. The term is usually understood to include both federal and state-level regulation by governmental regulatory agencies, but sometimes may also encompass listing requirements of exchanges like the New York Stock Exchange and rules of self-regulatory organizations like the Financial Industry Regulatory Authority (FINRA).
Albert Henry Wiggin was an American banker. General Electric's Owen D. Young once described him as "the most colorful and attractive figure in the commercial banking world" of his time. Wiggin was the Director of privately owned Federal Reserve Bank of New York 1932–33. Wiggin was also the only member of the Federal Reserve Bank to have a law written precisely against his actions, the “Wiggin Provision”, when Albert was forced to “resign in disgrace after it was revealed that he had been short-selling his own bank’s stock”
Ferdinand Pecora was an American lawyer and New York State Supreme Court judge who became famous in the 1930s as Chief Counsel to the United States Senate Committee on Banking and Currency during its investigation of Wall Street banking and stock brokerage practices.
The Pujo Committee was a United States congressional subcommittee in 1912–1913 that was formed to investigate the so-called "money trust", a community of Wall Street bankers and financiers that exerted powerful control over the nation's finances. After a resolution introduced by congressman Charles Lindbergh Sr. for a probe on Wall Street power, congressman Arsène Pujo of Louisiana was authorized to form a subcommittee of the House Committee on Banking and Currency. In 1913–1914, the findings inspired public support for ratification of the Sixteenth Amendment that authorized a federal income tax, passage of the Federal Reserve Act, and passage of the Clayton Antitrust Act.
Charles Edwin Mitchell was an American banker whose incautious securities policies facilitated the speculation which led to the Crash of 1929. First National City Bank's controversial activities under his leadership were a major contributing factor in the passage of the Glass-Steagall Act.
The first "Glass–Steagall Act" was a law passed by the United States Congress on February 27, 1932, prior to the inclusion of more comprehensive measures in the Banking Act of 1933, which is now more commonly known as the Glass-Steagall Act. It was the first time that currency was permitted to be allocated for the Federal Reserve System. It was passed in an effort to stop deflation and expanded the Federal Reserve's ability to offer loans to member banks (rediscounts) on more types of assets such as government bonds as well as commercial paper.
John Carpenter Hull served the state of Massachusetts for twenty years between 1916 and 1936 at the Statehouse in Boston chairing the committees of Education, Judiciary, Elections and Public Institutions. He was also the Speaker of the House of Massachusetts from 1925 to 1928, educator, lawyer, and the first Securities Director of Massachusetts.
Wall Street reforms are reforms or regulations of the financial industry in the United States.
Philadelphia financier Jay Cooke established the first modern American investment bank during the Civil War era. However, private banks had been providing investment banking functions since the beginning of the 19th century and many of these evolved into investment banks in the post-bellum era. However, the evolution of firms into investment banks did not follow a single trajectory. For example, some currency brokers such as Prime, Ward & King and John E. Thayer and Brother moved from foreign exchange operations to become private banks, taking on some investment bank functions. Other investment banks evolved from mercantile firms such as Thomas Biddle and Co. and Alexander Brothers.
This article details the history of banking in the United States. Banking in the United States is regulated by both the federal and state governments.
The Glass–Steagall Act was a part of the 1933 Banking Act. It placed restrictions on activities that commercial banks and investment banks could do. It effectively separated those activities, so the two types of business could not mix, in order to protect consumer's money from speculative use. The Banking Act of 1935 clarified and otherwise amended Glass–Steagall.
The Glass–Steagall legislation was enacted by the United States Congress in 1933 as part of the 1933 Banking Act, amended as part of the 1935 Banking Act, and most of it was repealed in 1999 by the Gramm–Leach–Bliley Act (GLBA). Its protections and restrictions had also been chipped away during most of its existence by lenient regulatory interpretations and use of loopholes. After Glass–Steagall's 1999 repeal, there was a great deal of discussion in the banking and securities industries, and among policymakers and economists, about the practical positive and negative changes to the business and consumer environment. Later, as financial crises and other issues played out in the United States and even worldwide, arguments have broken out about whether Glass–Steagall, as originally intended, would have prevented these issues.
There have been several efforts or appeals in the United States to reinstate repealed sections of the Glass–Steagall Act following the financial crisis of 2007-08, as well as elsewhere to adopt similar financial reforms.
The separation of investment and retail banking aims to protect the "utility" aspects of day-to-day banking from being endangered by losses sustained by higher-risk investment activities. This can take the form of a two-tier structure in which a company is banned from doing both activities, or enforcing a legal ring-fence between two divisions of a company. Banks have resisted this separation saying that it increases costs for consumers.
