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.