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Two Views of Banking
After the American Revolution, the leaders of the new nation agreed that one of their goals must be to estable a safe, stable banking system. Debated on it during 1780s and 1790s. In 1789 proposed a national bank, a bank charactered, or licensed, by the national governent. -
The First Bamk of the United States
Congress set up the Bank of the United States, granting it a 20 year charter, or licene to operate. -
Chaos in American Banking
Once the Nank's charter expired, state banks began issuing bank notes that they could not back with specie, or gold and silver coins. Without any kind of supervision or regulation, financial confusion resulted. Different banks used different currency and bankers printed more money than they had. -
The Second Bank of the United States
Congress chartered the Second Bank of the United States. Like the first Bank, the Second Bank was limited 20 year charter. -
The Free Banking Era
The fall of the Second Bank triggered a period dominated by state chartered banks. Between 1837 and 1863 in known as the Free banking or wildcat era. State chartered banks tripled.... Problems; Bank runs and panics, wildcat banks, fraud, and many different currencies. -
Currency in the North and South
During civil war, both North and South needed to raise money to finance military. US Treasury issued first paper currency called greenback. The South issued currency backed by cotton, hoping that a Confed victory would ensure the value. -
Unifying American Banks
National Banking Act of 1863 and 1864. 1.the power to charter banks 2.the power to require banks to hold adequate gold and silver reserves to cover their bank notes 3.the power to issure a single national currency -
The Gold Standard
Gold Standard; a monetary system in which paper money and coins are equal to the value of a certain amount of gold -
The Federal Reserve System
Federal Reserve System; the nation's central banking system
Central bank; bank that can lend to other banks in times of need
Member bank; bank that belongs to the Federal Reserve System
Federal Reserve note; the national curency we use today in the United States -
Banking and the Great Depression
Great Depression; the severe economic decline that began in 1929 and lasted for more than a decade
Banks loaned large amounts of money, businesses and farmers couldn't pay back loans, stock market crashed, and then depositers came and withdrew their money -
Banking Reforms
Federal Deposit Insurance Corporation (FDIC); the government agency that insures customer deposits if bank fails -
The Savings and Loan Crisis
Deregulation, high interest rates, bad loans, and fraud. -
Recent Trends
In 1999 Congress repealed the 1933 glass steagal 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.
