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Period of Major Changes in the US Banking System
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First Bank of the US's Charter Signed By President Washington
The First US Bank, endorsed by Alexander Hamilton, was created to handle the issue of the still problematic American Revolutionary War debt. The charter was set to last for 20 years. The First Bank of the US was in charge of regulating state banks, circulating currency, serving as the federal government's bank (collecting taxes, making loans, etc), and serving as the people's bank (accepting deposits, making loans, etc). There were several branches of the First Bank throughout the country. -
First Bank of the US Closes
The renewal of the First US Bank charter was a hotly debated topic for a couple years before its expiration date. However, in the end, Congress voted for the bank to close and the bank shut it's doors one day before it's charter was supposed to expire. -
Second Bank of the US's Charter is Signed by President Monroe
Like the First Bank of the US, the Second Bank of the US was created to handle post-war debt (this time as a result of the War of 1812) and was given the same powers as the First Bank. -
Second Bank of the US Closes
The charter for the Second Bank of the US expired despite renewal efforts by Henry Clay, the bank's largest supporter. The bank lost its federal powers, but reverted to a state bank. In 1841, it went bankrupt. -
The Federal Government Starts to Print and Circulate National Currency
The Federal Government started by printing and circulating $10 million dollars in demand notes (commonly known as "greenbacks" because they were colored green) with face values of $5, $10, and $20. A year later, the use of demand notes was stopped and the government started to print and circulate legal tender notes with denominations of $1-$1,000. These notes included some of the first design measures to ensure validity and test against counterfeit bills. Confederates printed their own money. -
Congress Passes the National Bank Act of 1863
This act established a system of national banks, which would operate under the Federal Government's control unlike state-chartered banks. It also set forth a plan for developing a set national currency. However, banks had to purchase securities from the Federal Government as a back-up for their new National Notes. -
The 1913 Fedeal Reserve Act is Signed by President Wilson
This act established a much needed, strong, central, federal banking system. It called for 12 regional banks to be over certain areas of the nation collectively referred to as the Fed. The Fed has several responsibilities including: monitoring commercial banks, enforcing laws regarding consumer borrowing and other banking aspects, and acting as the bank for government. All actions of the banks are to be under control of a presidentially appointed Board of Governors. -
FDR's Announced Bank Holiday Begins
This holiday was used to come up with a plan on how to restore the crumbling bank industry in America. -
The Emergency Banking Act of 1933 is passed by Congress and Signed by President Franklin. D. Roosevelt
This act called for inspections of the nation's banks to be conducted over the next 4 days to determine their stability and whether or not they were fit to open again.Two-thirds of the banks opened a little while later, and faith was resotred in America's banking system. Even more, this act gave the President the authortiy to declare a national banking emergency and take control of all the country's finances. -
Glass-Steagall Banking Act
This act separated investing banking from commercial banking and initiated the Federal Deposit Insurance Corporation, providing security for bank deposits. -
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Banking Deregulation
Included eliminating interest rate ceilings, increasing deposit insurance, allowing interstate branching of banks, and changing and exporting usury laws throughout the nation. -
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Savings and Loan Crisis
High risk investments caused many Savings and Loan Associations to become unprofitable and fail. According to about.com, "Between 1986-1995, over 1,000 banks with total assets of over $500 billion failed. By 1999, the Crisis cost $153 billion, with taxpayers footing the bill for $124 billion, and the S&L industry paying the rest."
http://useconomy.about.com/od/grossdomesticproduct/p/89_Bank_Crisis.htm -
Financial Institutions Reform, Recovery, and Enforcement Act is Passed
This act was intended to respond to the Savings and Loan Crisis. It provided around $50 billion to help pay for the damages of the bankrupt banks involved in the crisis and to put a stop to more losses. Without this act, those who had deposited money in the failed banks would have lost all of their money. -
Gramm-Leach-Bliley Act is Passed
This act repealed the part of the Glass-Stegall Act which prohibted commercial banks from offering investment services. This act also required banks to protect their clients' information, explain to their clients what their personal information is used for, and gives clients the option to abstain from giving certain personal information.
