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Regulation Q

Tags: finance

Regulation Q, and the Banking Act of 1933, allowed the Federal Reserve to control flows of deposits within the banking system. It controlled how much interest could be paid by banks on deposits, and therefore stopped money from competing with each other and therefore centralizing1.

  • The speculation an crash of the later 20s, was caused by money centralizing and being loaned out for speculation the more “hot money” you could acquire the more loans you could make. Regulation Q inverted the power dynamic, money center banks couldn’t buy from small country and regional banks, so they needed to gather deposits from local areas and from corporate customers.

References

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