President Roosevelt had his work cut out for him when he
took office in 1933, as the economy was collapsing, and the banking industry was
bleeding to death. So his approach was twofold--stop the bleeding and then restore
people's confidence in the system over the long term. His "Bank Holiday" closed all
banks in the US until such time as they could prove their solvency to federal
regulators, who then would proclaim the bank safe for business. Then later, with the
FDIC, he created an insurance system the banks could buy into that guaranteed investor's
accounts were covered even if the bank closed. The Glass-Steagall Act did this and put
new regulations on the kinds of banking that could be
done.
Another problem during the Depression was deflation,
as supplies rose and prices for many goods and services went down. This put downward
pressure on tax revenue, sales, and wages. So FDR increased the monetary supply to try
and create some inflation.
The Securities and Exchange
Commission was created as part of FDR's reform program to regulate stock market trades,
put new restrictions on who could buy stock on margin, and keep an eye out for insider
trading or other risky behavior that might crash the stock
market.
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