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The Impact of the Revolutionary War
After the Revolutionary War, the new government decided they wanted a stable banking system so the country could grow. The Federalists believed that a stong centralized system would be necessary for the United States. The Antifederalist supported a de-centralized banking system. -
1971 - Bank of the United States
The first bank was created. It was granted a 20 year charter. The bank was created to do a number of things. 1. Hold the money that the government collect taxes. 2. Helped the government collect taxes. 3. Issue Representative money in the form of bank notes. 4. To make sure that state chartered banks hold enough gold and silver to exchange for bank notes. -
Chaos in Banking in 1811
The Bank of the United States' charter expired. This left state banks insecure. This sense of insecurity made prices rise as money lost its value. -
1816 - Second Bank of the United States
The Second Bank of the United States was chartered a 20 year contract. This bank gave the public a little bit of faith in the banking system but the public officials did not like the second bank. They did not renew the banks' charter in 1832. -
The Free Banking Era
Between 1830 and 1837, state chartered banks grew in numbers. More and more banks started which created problems. Bank failures, fruad, and different currencies were the effect of the growing number of banks. -
Currency between the North and the South
The United States Treasury issied "demand notes", or greenbacks. The South also issued a currency backed up by cotton, but the system failed. -
Unifying American Banks
The National Banking Acts were introduced in 1863 and 1864. They were given 3 powers:
1. The power to charter banks.
2. The power to require banks to hold sufficent reserves.
3. The power to issue a single currency.
These powers were given to restore confidence in the banking system. -
The Gold Standard
People started going crazy for gold in 1870. The nation adopted a gold standard. They used a conversion rate of 1 oz of gold = $20. The government could also only issue enough notes to equal the amount of gold they had. -
The Federal Reserve System
The Fed. Reserve Bank was created in 1913 to be a bank for all of the banks. Other banks could use the federal reserve for loans and other issues with money they have. -
Banking and the Great Depression
Banks lended out a lot of money. People were unable to pay back that money. Other people wanted their money out of the bank but the bank couldn't pay them back, leading to bank failures and the stock market crash. -
Banking Reforms
FDR created programs to prevent another depression. He created the FDIC that insures a certain portion of your money if the banks go belly up again. -
Savings and Loans Crisis
Once again, loans were made that could not be paid off. There were other problems such as fraud, and high interest rates that also compounded the problem. In reaction, congress transferred the savings and loans responsibilities to the FDIC. -
Recent Trends
Congress repealed the 1933 Glass-Steagall Act. That led to banks selling off assets and merging with other banks.
