Do you think that before the National Bank Act of 1863 the prevailing conditions in the banking industry fostered or hindered trade across states in the United States?

In the US, the prevalence of state chartered banks had various abuses and they led to obstructions in trade between states. Generally, the National Bank Act of 1863 served to eliminate these abuses. The state chartered banks were actually controlled by the states and they regulated the bank note issuance and reserve requirements. Diversity of bank notes were led by it and frauds and confusion were caused by it. Therefore, the banks were not capable of controlling the losses and frauds. The banking system among different states was unstable. The abuses and laxity of banking system resulted in the development of National Bank Act of 1863. Thus, it can be said that trade was hindered significantly by the banking industry in the US before this act was created (Million, 1894).

Which regulatory agency has the primary responsibility for supervising the following categories of banks?

a. National banks
b. Bank holding companies
c. Non-Federal-Reserve-member state banks
d. Federal-Reserve-member state banks

            In general, for the supervision of national banks, the Office of the Controller of Currency is responsible. It is actually a department of the United States. Meanwhile, bank holding companies are supervised by the federal government or Fed. For the supervision of non-federal reserve member state banks, state banking authorities and FDIC or Federal Deposit Insurance Corporation are responsible. Lastly, for the supervision of federal-reserve member state banks, state banking authorities and the Federal Reserve are responsible. Overall, these are the authorities which are responsible for the supervision of given categories of bank.

In light of the recent financial crisis of 2007–2009, do you think that the firewall created by the Glass-Steagall Act of 1933 between commercial banking and the securities industry proved to be a good thing or not?

Actually, Glass Steagall Act was implemented in response to the 2007-9 financial crisis in the US. The firewall created by the act proved to be ineffective because Glass Steagall Act implied restrictions and limitations only on banks. However, the recession was because of the investment banks’ speculative activities. The majority of banks were associated with credit default swaps. They were issued by different investment banks for protecting purchasers against defaults. It was attempted by the investment banks to pass the risk to different insurance firms but since default was quite large, insurance organisations could not cover the losses suffered by investment banks.

            Another important reason is that the glass steagall did not cover the housing loan regulation. Subprime borrowers were provided with loans for housing loan. This served to create a housing bubble as there was an increase in housing loans. In addition to it, loans required down payment. The risk was further increased by them. The Glass Steagall Act did not prevent the housing bubble (Kroszner & Rajan, 1994).

How does the Dodd-Frank Act of 2010 compare to the Glass-Steagall Act of 1933?

            The Dodd-Frank Act of 2010 is enacted by the federal law of the US that places regulations of financial industry under the government. It developed financial regulatory processes for limiting risk. It aimed to eliminate the necessity of bailouts funded by taxpayers by supervising the Banking System. It included a whistleblowing provision for the encouragement of reporting those with original information about violations of security to the government. A number of financial bills were followed by the Dodd-Frank Act including the Gramm-Leach-Bliley Act and the Sarbanes-Oxley Act. Supporters of this act believe that it prevents the US economy from facing a financial crisis similar to the 2008 recession. Meanwhile, the Glass Steagall Act served to facilitate the confidence in the system of commercial banking by developing FDIC as it guaranteed the protection of depositor’s funds (Jr, 2010).