ABSTRACT
The 1929 crash and the subsequent Great Depression was a turning point in economic policy and theory. New federal agencies and the reconstituted Federal Reserve System imposed and enforced rules and regulations on private financial institutions to ensure the stable functioning of the banking system. Within the system there was tension between the Federal Reserve Board (FRB) in Washington and the Federal Reserve Bank of New York (FRBNY), the leader of the regional reserves. According to Austrian-school economist Murray Rothbard, the FRBNY had kept discount rates low with the complicity of the legislative and executive branches of the government. The Federal Deposit Insurance Corporation (FDIC) turned out to be controversial because many lawmakers initially questioned the wisdom of the federal government getting involved in the insurance 'business' and the possibility that this innovation would induce banks to engage in high-risk activities. The Securities and Exchange Act of 1934 created the Securities and Exchange Commission (SEC) to enforce the 1933 act.
