Reference no: EM132684163

Question - The stock market crash from 1929 to 1933 caused many banks and individuals to go bankrupt since before 1933 most banks could invest in the stock market. Partially as a result of the stock market crash, in 1933 the Glass-Steagall law was passed in the United States separating investment banking from commercial banking. For example J.P Morgan and Co. was forced to spin off Morgan Stanley as an investment bank and remain only a commercial bank. Commercial banks deal with loans but are forbidden from dealing with stocks. Investment banks generate income from activities such as mergers and acquisitions and Initial Public Offerings (IPOs). Partially as a result of Glass-Steagall the ownership of companies in the USA is widely distributed into different investment vehicles such as mutual funds. In Europe many large companies such as Daimler Benz are largely owned by banks. The oversight of large owners such as banks has limited CEO salaries in Europe and Japan. In the USA, CEOs make much more than they do in Europe. Should Glass-Steagall be a law or not?