There were two Glass-Stegall Acts, the first in 1932 that primarily widened the Fed’s discount window by relaxing the requirements. The second, in 1933 which caused the creation of the Federal Deposit Insurance Corp. – an early form of socialization required to offset the other,earlier intervention that prohibited inter-state banking and or multi-unit or branch banking, both of which substantially increased the vulnerability of banks due to less diversified portfolios – Regulation Q and , most importantly, prohibited commercial and investment banking under one roof.
Regulation Q was repealed in 1980, not too long before the S&L 1/2 trillion dollar debacle. Req. Q essentially prohibited the payment of interest above a certain level and consequently was a great tool for the Fed. to effectively shut down the S&Ls. without it they could not be regulated as before with the predictable results.
Glass-Stegall (1933) was repealed not too long ago by the Gramm-Leach-Bliley Act of 1999, also. euphemistically known as the “Financial Services Modernization Act”. The real purpose was to sanction the “fait accompli” presented by Citigroup in 1995 by putting commercial banking, investment banking and insurance, all under one roof and in doing so violating every rule in the book. Paradoxically this bank suffered more than most as a result.
At around the same time as Glass-Stegall there was Executive Order 6102, appropriately named the “Gold Confiscation Act of 1933”. Private individuals were not allowed to own gold under penalty of ten years in jail or a fine, expressed in today’s money, of about $160.000.
Of course today all you hear is about the reintroduction of GS, in fact president Obama made it clear that he wants to do just that, resulting in Goldman Sachs (by coincidence also GS!) losing $7 so far today. We recommended the purchase of GS at about $50 for a target of $165 where it was sold. Today , after reporting a $5 bln profit for the quarter,(incidentally at an obscene net profit margin of about 50%, something the good old robber barons were not even able to do. Evidently they were not masters of the universe doing “God’s work”.
So if history does not repeat itself at least it rhymes, so before you buy your waver of gold in the hope of paying your baby-sitter a few years from now, chances are that the government will own it by that time. Sell GS if you forgot to do so and do not buy gold.