56.The Banking Act of 1933, known as the Glass-Steagall
Act (葛斯法案), separated commercial banking and investment banking, where the
latter refers specifically to issuing, underwriting, selling, or distributing
stock or bond offerings of corporations. Commercial banks
had become deeply involved in the sale and distribution of new stock and bond
offerings in the 1920s, not always with happy results. 57.
There were suspicions that banks on occasion dumped new offerings into trust
funds that they managed because they couldn’t sell them to anyone
else. 58. To avoid such conflicts of interest, the
Banking Act of 1933 divorced commercial from investment banking. Banks involved
in both areas were forced to choose one or the other.
Commercial banks were allowed to distribute new offerings of federal
government securities and "full faith and credit" general obligations of state
and local governments. 59. But Glass-Steagall provided that banks could
not get involved in new offerings of corporate stocks or bonds or municipal
revenue bonds. Revenue bonds differ from general
municipal obligations in that they are not backed by the full taxing power of
the state or local government; bondholders have a claim only on the revenues of
a specific project being financed, such as a toll road or a state university
dormitory. 60. The Act was also interpreted as meaning that commercial banks
could not offer mutual funds, including money market mutual funds. Commercial
banks believe they are being discriminated against by the provisions of the
Glass-Steagall Act.