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National Banking Acts
The government Enacted reforms towards restoring confidence in paper currency. The acts gave the federal government 3 impt powers 1. The power to charter banks 2. The power to require banks to hold adequate gold and silver reserves to cover their banks notes. 3. The power to issue a single issue of currency. -
Informal banks in the 1700-
Informal Banks were before the revolutionary war. Banks were informal businesses that merchants managed for trade. a merchant who sold cloth, grain, or other goods that might allow customers to deposit money along with a small fee for taking out a loan. This was risky though, because if someone went out of trade, they could lose all the invested money. -
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federalists and anti federalists
Thought the country needed a stronger government to establish economic and social order. So they believed that centralized banking was necessary to develop health industries and good trade. however, the anti federalists thought leaving the powers into the hands of the states was the better option. they supported decentralized banking. -
Second bank of the United States
A second bank was created by congress in order to prevent financial problems. there was a limit of a 20 year charter and it helped rebuild the public's confidence. -
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free banking era
there wasn't enough gold and silver to back up all the paper money so this lead to fraud and cheating -
The Gold Standard
The monetary system in which paper and coins are equal to the value to a certain amount of gold. There were 2 advantages, 1. It set a definite value for the dollar 2. The government could issue currency only if it had gold in the treasury to back the notes. -
Federal Reserve System
Nation's first true central bank that could lend other banks in time of need. -
Federal Reserve Notes
National currency used today and Allowed Federal reserve's to increase and decrease amount of money in circulation according to business needs. -
The Great Depression
severe economic decline that lasted more than a decade. Banks loaned large sums of money and a lot of people could not pay back their loans. -
Bank Runs
Due to a stock market crash thebank runs as nervous depositors rushed to withdraw their money. Combination of unpaid loans and bank runs resulted in failure in thousands of banks around the country. -
Federal Deposit Insurance Corporation
Congress passed the act of the FDIC and insured customers deposits if a bank fails. The insurance covered the losses of thousands and thousands of dollars. -
The First Bank of the United States
congress set up the bank so they could hold and collect more government taxes and to help borrow money in public interest and regulate interstate. -
savings and loan crisis
Deregulation caused the savings and loan crisis. Deregulation had previously been protected by government regulations. High interest rates during the 1970’s had made long term loans at low rates. By 1980s interest rates skyrocket. Bad loans and frauds were also the cause of the S&L crisis. -
Bank Mergers
After mergers, many banks have increased fees for services or tightened credit restrictions. Many customers are unhappy about the impersonal nature of some larger banks. -
Pros of Bank Merging
When there are multiple players in the market they fight for the same client base. Integrating some of them will increase their negotiating power, which means better capital and better lending facility.. For a $2 trillion economy it is essential the banks must have a global footprint. Merger will increase the asset size,Human Resource: On integration a cadre of professional bankers can be made which share same values and culture -
Cons of bank merging
All is not good: Many big banks like, Bank of Baroda and PNB has reported poor performance. Merging of small & weak banks will only add to their woes and result in further erosion of their market share.Penetration: Some regional rural banks have deep penetration in hinterland and doing tremendously well in furthering financial inclusion. Once they get merged with big banks, the priority to unbankable areas may wither away
