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Hamilton proposes national bank
Hamilton proposed a national bank that could issue a single currency for the entire nation, manage the federal government's funds, and monitor the other banks throughout the country. -
First Bank of the United States
Congress set up the Bank of the United States to hold the money that the government collected in taxes, to help the government carry out its powers to tax, borrow money in the public interest, and regulate interstate and foreign commerce, to issue representative money in the form of bank notes, which were backed by gold and silver, and to ensure that state-chartered banks held sufficient gold and silver to exchange for bank notes should the demand arise. -
Second Bank of the United States
Congress chartered the Second Bank of America after the first one's charter expired. The Second Bank slowly managed to rebuild the public's confidence in national banking systems, although many people still opposed the idea. -
Free Banking Era
President Jackson distrusted the Second Bank so much, that he vetoed the renewal of the bank in 1832. This triggered a period dominated by state-chartered banks. The number of state-chartered banks nearly tripled. There were many wildcat banks; banks that opened on the edge of settled areas. There was a lot of fraud by stealing the gold and silver from customers. Having so many state-chartered banks meant that there were many different currencies that had different values. -
Demand Notes
Demand notes were bank notes made by the Union during the Civil War because they needed funding for war supplies. They were also called "greenbacks" because they were printed with green ink. -
National Banking Acts
The National Banking Acts of 1863 and 1864 gave the federal government power to charter banks, power to require banks to hold adequate gold and silver reserves to cover their bank notes, and the power to issue a single national currency. -
Gold Standard
The gold standard was a system in which paper money and coins were made equal to the value of a certain amount of gold. This set a definite value for the dollar, and the government could only issue money if they had gold in treasury to back up these notes. -
Panic of 1907
Because many banks lacked adequate reserves, they had to stop exchanging gold for paper money. Many people lost their jobs because big banks were failing and businesses had no acess to money for future projects. -
Federal Reserve System
The Federal Reserve System served as the nation's first true central bank. The federal banking system was organized into:
Member banks - Twelve regional Federal Reserve Banks throughout the country.
Federal Reserve Board - All Federal Reserve Banks were supervised by a board appointed by the President if the United States.
Short-term loans - Each of the regional Federal Reserve Banks allowed member banks to borrow money.
Federal Reserve notes - The system created national currency we use today. -
Great Depression
The sever economic decline that began in 1929. Banks loaned large amounts of money to many businesses that could not pay back these loans. With the addition of the stock market crash, people rushed to withdraw their money. This caused the failure of thousands of banks. -
FDIC
Congress passed the act that established the Federal Deposit Insurance Corporation which insures customer deposits if a bank fails. -
Savings and Loan Crisis
In the 1980s, Congress passed laws to deregulate several industries. This deregulation led to the Savings and Loans crisis.
Dereulation - S&Ls been protected by government regulation and were unprepared for competiton.
High Interest Rates - During the 1970s, S&Ls had made long-term loans at low rates. By the 1980s, interest rates became much higher.
Bad Loans - Risky loans made in the early 1980s hit the S&L industryespecially hard, forcing them out if business. -
Financial Institutions Reform, Recovery, and Enforcement Act
In 1989, Congress passed the FIRREA. This was an act that abolished the independence of the savings and loan industry and transferred insurance responsibilities to the FDIC. -
Glass-Steagall Act
This action paved the way for banks to sell financial assets such as stocks and bonds while establishing new privacy rules for customer data.
