Henry Bascom Steagall (1873-1943), long-serving Democratic chairman of the House Banking Committee, played a key role in crafting several Depression-era banking and housing reforms, including the 1933 law known as the Glass-Steagall Act.
Born in Clopton, Alabama, Steagall represented the state’s third congressional district from 1915 until his death in 1943. In 1931, he ascended to chair the House Banking Committee, which placed him in a key position in subsequent years during the passage of New Deal reforms. He was a consistent backer of Southern agriculture as well as the region’s small banks, many of which came under strain even before the Depression, in part due to slumping cotton prices. This legacy was one reason why Steagall became an early supporter of bank deposit insurance, which some states were experimenting with.
The start of Steagall’s chairmanship coincided with a rapid spike in banking failures, as a series of regional banking panics spread throughout the country by fall 1931. The Great Depression worsened further in 1932. Once Franklin Delano Roosevelt assumed the presidency in March 1933, Democrats used their unified control over the government to pass a series of sweeping reforms intended to address the causes of the banking crisis. One of those was the Banking Act of 1933, which Steagall coauthored with his Senate counterpart, Democratic Sen. Carter Glass of Virginia.
Following a long congressional debate in 1932, the two reworked the bill so that it included Glass’s top priority -- separating commercial from investment banking – as well as Steagall’s proposal for federal bank deposit insurance. The bill also strengthened the Fed’s oversight over banks and set limits on interest rates on demand deposits, known as Regulation Q. These measures were generally popular at the time but not all have survived. The 1999 law known as Gramm-Leach-Bliley formally ended the separation of commercial and investment banking, while Regulation Q was phased out in the 1980s. Federal deposit insurance has survived and expanded, however, from $2,500 per deposit in 1934 to $250,000 today.
As committee chairman, Steagall also had an active hand in other major legislation in the 1930s, including the 1935 restructuring of the Federal Reserve and the Housing Act of 1937, which established the US Housing Authority to oversee low-income housing. That agency was merged with several others to form the Department of Housing and Urban Development in 1965. In his final years, Steagall focused his efforts on supporting agriculture and Alabama farmers, in particular. He died in his Washington, DC, office in 1943 and was succeeded by George Andrews.
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Kroszner, Randall S., and Raghuram G. Rajan. “Is the Glass-Steagall Act Justified? A Study of the U.S. Experience with Universal Banking Before 1933.” American Economic Review vol. 84, no. 4 (September 1994): pp. 810-32.
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Written by the Federal Reserve Bank of Richmond. See disclaimer.