The Reason Why the Banking Act of 1933 Prohibited Commercial

question 96

Multiple Choice

The reason why the Banking Act of 1933 prohibited commercial banks from buying and selling corporate stocks and bonds was that

• A)there was concern that banks would be able to "take over" and monopolize these companies
• B)they would earn so much profit that they would stop lending to home buyers and small borrowers
• C)the instability inherent in the asset value of such a corporation would destabilize the banking system
• D)this would give large banks an unfair advantage over smaller banks
• E)the statement is incorrect; banks have always been allowed to purchase these stocks and bonds

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Definitions:

Warren G. Harding

The 29th President of the United States, serving from 1921 until his death in 1923, known for his return-to-normalcy post-World War I policy.

Fraud and Bribery

Illegal practices involving deception for personal gain or influencing someone through corrupt means, often encountered in politics, business, and other fields.

Calvin Coolidge

The 30th President of the United States (1923–1929), known for his conservative economic policies and for overseeing a period of peace and prosperity in the 1920s.

Government-backed Price Supports

Financial mechanisms provided by governments to maintain the market price of specific goods or commodities at a predetermined level.