3. Which of the following was the main result of the McFadden Act of 1927?
Answer: C
The main result of the McFadden Act of 1927 was a fragmented banking system.
The McFadden Act of 1927 primarily aimed to restrict the branching of banks across state lines, which ultimately led to a fragmented banking system. This fragmentation occurred as banks were limited to operating within their home states, preventing consolidation and resulting in numerous smaller banks rather than a few large entities.
A) Created a monopoly in banking system
This option is incorrect because the McFadden Act did not create a monopoly; instead, it imposed restrictions that prevented banks from expanding their operations across state lines. Consequently, this regulation facilitated competition among many smaller banks rather than fostering a monopoly.
B) Reduced the number of credit unions
This choice is also incorrect as the McFadden Act did not specifically address credit unions or aim to reduce their number. Credit unions operate under different regulations and were not directly impacted by the provisions of the McFadden Act.
C) Produced a fragmented banking system
This option is correct as the McFadden Act's restrictions on interstate banking led to a proliferation of smaller, localized banks. By limiting banks to operate only within their respective states, the Act contributed to a fragmented banking landscape rather than allowing for larger, unified banking institutions.
D) Created vast numbers of large banks
This option is incorrect because the McFadden Act did not create large banks; it instead led to the existence of many smaller banks due to the limitations on interstate branching. The Act's intention was to preserve local banking, which did not support the formation of vast banking entities.
Conclusion
The McFadden Act of 1927 significantly contributed to a fragmented banking system by restricting banks' ability to branch across state lines. This led to a greater number of smaller banks operating in isolation rather than the development of large banking institutions. All other options fail to accurately reflect the primary outcome of the Act, reinforcing the conclusion that fragmentation was indeed the main result.