ABC Insurance Company would like to purchase a bank. For many years, ABC was not
ID: 1195062 • Letter: A
Question
ABC Insurance Company would like to purchase a bank. For many years, ABC was not permitted under federal law to enter into banking operations. Which of the following legislative acts eliminated the prohibition that prevented banks, insurers, and investment firms from entering into one another's markets?
The Tax Reform Act
The McCarran-Ferguson Act
The Consolidated Omnibus Budget Reconciliation Act
The Financial Modernization Act (Gramm-Leach-Bliley Act)
The Tax Reform Act
The McCarran-Ferguson Act
The Consolidated Omnibus Budget Reconciliation Act
The Financial Modernization Act (Gramm-Leach-Bliley Act)
Explanation / Answer
The Financial Services Modernization Act of 1999 (Gramm–Leach–Bliley Act (GLBA)) and commonly pronounced glibba , eliminated the prohibition that prevented banks, insurers, and investment firms from entering into one another's markets.
The Banking Act of 1933 (Glass-Steagall) that constructed up a wall of separation between certain sectors of the financial services industry. These restrictions were a response to the perception that commercial and investment banking had become too intertwined leading up to the 1929 stock market crash, assuming that the banks had taken undue risk with depositors’ savings in the financial markets or were promoting the securities they underwrote to their customers, leading to conflicts of interest..
The Gramm-Leach-Bliley Act (1999) addressed these changes in the financial sector. It was intended to promote the benefits of financial integration for consumers and investors while safeguarding the soundness of the banking and financial systems.The law also repealed Glass–Steagall's conflict of interest prohibitions "against simultaneous service by any officer, director, or employee of a securities firm as an officer, director, or employee of any member bank"