-
The First Bank of the US
On February 25th, 1791, Congress granted a charter to the first national bank of the US that would last for 20 years. This bank is known as the First Bank of the United States. Alexander Hamilton proposed the idea of a national bank to help garner revenue for the Federal government, assume and pay off Revolutionary War debts for states, and create a common currency that could be used anywhere in the US. When the bank's charter expired it was not renewed, but, a second national bank came in 1816. -
Second Bank of the US
The Second Bank of the US was chartered by President James Madison. This bank was proposed because the War of 1812 had given the US a significant amount of debt, and inflation increased due to private banks issuing enormous amounts of currency. After the bank was established, citizens were divided in opinions about the bank because some (including President Andrew Jackson) felt that the bank had too much economic power. When Jackson became President he vetoed renewing the bank's federal charter. -
Period: to
The Civil War
A war between the North (the Union) and the South (the Confederacy) of the US broke out over state's rights and slavery. The South wanted to continue slavery and expand the practice while the North wanted to abolish slavery, so the South temporarily
seceded from the Union, and called itself the Confedaracy. -
Period: to
The Civil War: Printing Currency
The Civil War was the debut of paper money because most metal was being used to make guns, so there was less used to make coins. The Union avoided inflation caused by the increased money printing by raising taxes. The Confederacy was unable to produce a lot of currency, because at that time, notes were made out of linen, so it had to be smuggled from England and the North. The currency shortages in Confederate states caused increased inflation. At the end of the War, Southern currency was void. -
The Civil War: Printing Currency
-
The National Banking Act of 1863
The Act allowed dual banking which meant that states could still supervise the banks within their borders, but the government would support and oversee them. In addition, this Act generated money for the US Treasury to fund the Civil War by requiring all national banks to purchase government bonds. The Act also created the National Banking system and established the Office of the Comptroller of the Currency. This bureau charters and regulates all foreign and national banks in the US. -
The Federal Reserve Act of 1913
The Act made the Federal Reserve System (a.k.a. the Fed.) the central bank of the US, and it's still in place today. The purpose of the Act was to devise a national currency and a secure, flexible financial system. The Act also created the FOMC (Federal Open Market Committee) and the Board of Governors. The FOMC sets the monetary policy by regulating the money supply and the cost of borrowing money according to the needs of the economy. The Board of Governors is the governing body of the Fed. -
Period: to
The Great Depression
A severe economic depression that affected the world in the 1930s. In most countries, it began in 1929 and ended in 1941. It ended in 1939 in the US. -
Period: to
Banking During the Great Depression
During the Great Depression, large numbers of people withdrew their money in cash (called a bank run), forcing banks to liquidate loans and often led to bank failure (History.com). In 1933, President FDR declared a banking holiday, where banks were only allowed to reopen if they proved their financial stability. The Fed contributed money to the reopened banks which Americans flocked to and redeposited over half the amount they had put in before which helped bolster the stock market (Wikipedia). -
Banking During the Great Depression
-
The Glass-Steagall Banking Act
The Glass-Steagall Banking Act created the FDIC (Federal Deposit Insurance Corporation) and separated investment banking from commercial banking. The FDIC insures bank deposits in order to prevent another economic ordeal like the Great Depression. Senator Carter Glass is the creator and primary force behind the Act and Representative Henry Steagall agreed to support Glass' Act. -
Banking in the 70s
The Federal Home Loan Mortgage Corporation, known as Freddie Mac was created by the Emergency Home Finance Act of 1970 to make taking out mortgages easier. The easy-money policies of the Fed, designed to generate full employment, caused high inflation in the early 70s to the early 80s. In the mid-70s, US banks lost vast amounts of money because of the collapse of the real estate investment trust (REIT). Economic growth was weak which resulted in increased unemployment. -
Period: to
The Recession of the Early 80s
-
Banking in 1982
The recession in the early 80s was brought on by the closing of one-third of savings and loan associations in the US due to spiraling interest rates, rising inflation, and high unemployment rates. The Depository Institutions Deregulation and Monetary Control Act of 1980 eliminated several restrictions on banks, widened their lending powers, and raised the deposit insurance limit which led to banks giving a lot of large loans. By mid-1982, the number of bank closures was steadily increasing. -
The Gramm-Leach-Bliley Act of 1999
This Act repealed part of the Glass-Steagall Act that separated commercial and investment banks. The Act allowed individuals to invest and utilize savings accounts at the same bank. This allows bank customers to invest in a prosperous economy, but also have access to a savings account when the economy declines. The Act was first called the Financial Services Act and introduced to the Senate by Phil Gramm and in the House of Representatives by Jim Leach and Thomas J. Bliley Jr.
