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Two View 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. Federalists wanted a centralized banking system and Alexander Hamilton proposed a national bank in 1789. Antifederalists, like Thomas Jefferson, opposed this plan -
First Bank of the United State
Federalist won the first debate in 1791, Congress established the Bank of the United States. The bank function until 1811, when its charter ran out -
Second Bank of the United States
Stability was restored but many were still wary of the Bank’s powers -
The free banking era
As state-charted banks flourished once again from 1837 to 1863, the sheer number of banks gave rise to a variety of problems such as bank runs and panics, wildcat banks that were inadequately financed and had a high rate of failure, different in currencies, etc. -
National banking Act
The national banking act gave the federal government the power to charter banks, require that banks hold an adequate amount of gold and silver reserves, and issue a national currency -
The Gold Standard
In the 1870s, the nation adopted the gold standard, which set a definite value for the dollar -
Federal Reserve System
The Federal Reverse Act established the Federal Reserve System, which reorganized the federal banking system to include 12 Federal Reserve Banks, The federal Reserved Board, short-term loans, and Federal Reserve notes -
Banking and the Great Depression
The economic decline began in 1929 and lasted for more than a decade Banks loaned large amounts of money, businesses and farmers couldn't pay back loans, the stock market crashed, and then depositors came and withdrew their money -
Restore Banking system
President FDR acted to restore the banking system in the 1930s by establishing the FDIC ( Federal Deposit Insurance Corporation), which insured customer deposits if a bank failed -
Savings and Loan crisis
Congress passed laws to deregulate several industries, high-interest rate and risky loans added to the crisis -
Savings and Loan crisis cont.
Congress passed legislation that abolished the independence of the Savings and Loan industry -
Sub-prime mortgage collapse
Mortgage companies and banks began to loan people money who could not afford to pay these loans back When interest rates rose, many people couldn’t afford to pay their mortgages, which led to foreclosures The ripple effect of the mortgage crisis hit banks and creditors hard and many economists worried that the crisis would send the U.S economy into a recession
