The Effect of the 1999 Derogation of the U. S. Glass Steagall Law on International Financial Markets

Abstract

Currently, the profound crisis in the international financial system similar to the one the United States lived in the 1930s is the most important point of discussion throughout the world. Therefore, we believe it is important to analyze the Glass Steagall Act promulgated in 1933 as a way out of the U. S. financial crisis and point out its main characteristics and, above all, the effects its derogation (in 1999) brought about in the global financial system since as we shall see for many the current crisis is a product of the inappropriate combination of regulation and freedom produced by the promulgation of the Gramm Leach Bliley Act in which commercial banks started to enter stock market operations. In the past, these activities were not allowed and, therefore, there were sufficient guaranties for depositors.