After the crash of 1929, there was a need for an act that would limit the use of bank credit for speculation and to direct bank credit into what more fruitful uses, such as industry, commerce, and agriculture. In response to these concerns, the main requirement of the Banking Act of 1933 was to separate commercial banking from investment banking. Basically, commercial banks, which took in deposits and made loans, were no longer allowed to finance or deal in securities , while investment banks, which financed and dealt in securities, were no longer allowed to have close connections to commercial banks. After the act passed, banks were given a year to decide if they would dedicate all their attention to commercial or investment banking. Only
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Most of the people in Clintons’ cabinet as well as congress believed that this repel was a good idea. When the bill was brought to the floor 155 Democrats and 207 Republicans voted for it, while 51 Democrats, 5 Republicans and 1 independent opposed it. Fifteen members of congress did not vote. . Larry summer , a member Clintons’ cabinet was quoted saying that the Glass-Steagall act of 1933 was out dated, he went on to say “Today, Congress voted to update the rules that have governed financial services since the Great Depression and replace them with a system for the 21st century, This historic legislation will better enable American companies to compete in the new …show more content…
Through this repeal banks created a mortgage called a subprime mortgages. Subprime mortgages are mortgages for borrowers with less than perfect credit and low savings. Directly after the repeal went through, there was a dramatic increase in subprime borrowing. In 1999 as the FNMA began a firm effort to make home loans more accessible to American with low credit and savings than lenders typically required. This effort was created with a notion that every American could one day own their dream house, even if you had bad credit. Since the people that were borrowing from these banks were considered high-risk client, their mortgages had different terms the typical borrower. The terms of these mortgages would be higher interest rates and flexible payments. The two types of mortgages offered in a subprime loan were interest only adjustable rate mortgages and the payment option adjustable-rate mortgages. Both of these mortgages have the borrower making much lower initial payments than would be due under a fixed-rate mortgage. After about two or three years, these adjustable-rate mortgages would then reset. The payments would now vary as frequently as monthly, often becoming much larger than the payment during the first two to three years. As the payment became overwhelming and unplayable, homeowners began defaulting at high rates as all of the original peculiarities of subprime mortgages were resetting to higher payments while
Most of the people in Clintons’ cabinet as well as congress believed that this repel was a good idea. When the bill was brought to the floor 155 Democrats and 207 Republicans voted for it, while 51 Democrats, 5 Republicans and 1 independent opposed it. Fifteen members of congress did not vote. . Larry summer , a member Clintons’ cabinet was quoted saying that the Glass-Steagall act of 1933 was out dated, he went on to say “Today, Congress voted to update the rules that have governed financial services since the Great Depression and replace them with a system for the 21st century, This historic legislation will better enable American companies to compete in the new …show more content…
Through this repeal banks created a mortgage called a subprime mortgages. Subprime mortgages are mortgages for borrowers with less than perfect credit and low savings. Directly after the repeal went through, there was a dramatic increase in subprime borrowing. In 1999 as the FNMA began a firm effort to make home loans more accessible to American with low credit and savings than lenders typically required. This effort was created with a notion that every American could one day own their dream house, even if you had bad credit. Since the people that were borrowing from these banks were considered high-risk client, their mortgages had different terms the typical borrower. The terms of these mortgages would be higher interest rates and flexible payments. The two types of mortgages offered in a subprime loan were interest only adjustable rate mortgages and the payment option adjustable-rate mortgages. Both of these mortgages have the borrower making much lower initial payments than would be due under a fixed-rate mortgage. After about two or three years, these adjustable-rate mortgages would then reset. The payments would now vary as frequently as monthly, often becoming much larger than the payment during the first two to three years. As the payment became overwhelming and unplayable, homeowners began defaulting at high rates as all of the original peculiarities of subprime mortgages were resetting to higher payments while