What did the Banking Act of 1933, also known as the Glass-Steagall Act, achieve?

The Banking Act of 1933, commonly referred to as the Glass-Steagall Act, primarily aimed to create a separation between commercial banking and investment banking activities. This was a response to the banking crises of the early 20th century and the Great Depression, which highlighted the risks posed by banks engaging in both types of activities. By implementing this separation, the Act sought to reduce the risk of financial speculation and protect depositors' savings from the potential instability caused by banks investing in high-risk securities.

The legislation effectively prohibited commercial banks from underwriting or dealing in securities, which helped to stabilize the banking sector and restore public confidence in financial institutions. This isolation of banking functions aimed to ensure that banks could focus on their essential role of accepting deposits and making loans, rather than engaging in potentially volatile investment activities.