1. Read the article â€œglass steagall reading.pdfâ€. Note that this was written in 1995, but it provides a good discussion of the Glass-Steagall Act and explains the concerns that people had (which ultimately led to the act being repealed in 1999). Answer the questions below (please be concise):
a. Leading up to the stock market crash in 1929, what factors led some commercial banks to begin investment banking activities (i.e. lending money to risky projects)?
b. What were the original arguments for and against the Glass-Steagall Act?
c. In your own words, what does the article say were the regulations implemented by the Banking Act of 1933 (the Glass-Steagall Act)?
d. The article discusses the gradual weakening of the Glass-Steagall Act. Discuss a few of the activities that banks did that seemed to show a weakening of the act.
e. What are the modern arguments for and against repeal of the Glass-Steagall Act?
2. Read â€œtarp bailout and bbt.pdfâ€, also on NYU classes. This Wall Street Journal article discusses the Trouble Asset Relief Program (TARP) and BB&T (a commericial bank based in North Carolina). The TARP program was the name for the recapitalization (bailout) of the financial industry during the financial crisis. Banks were given money from the federal government to be used to provide additional capital to their balance sheets. The federal government required all banks (even healthy ones) to take money.
Explain why would the federal government not just provide money to banks that they deem have a high potential for going bankrupt, and not provide any relief to the healthy banks.