Module 13 Lesson 2
1791 Bank of the US:
The First Bank of the United States was a central bank, chartered for a term of 20 years by the US Congress on February 25, 1791. The First BUS included a three-part expansion of federal fiscal and monetary power (along with a federal mint and excise taxes) championed by Alexander Hamilton. Hamilton, the first Secretary of the Treasury, believed a central bank was necessary to stabilize and improve the nation’s credit after the Revolutionary War. The 1791 Bank of the US was also intended to improve handling of the financial business of the United States government under the newly enacted Constitution.
1816 Second Bank of the US
The Second Bank of the US was chartered in 1816-- five years after the first BUS lost its charter. Like the First Bank, the Second Bank of the US was chartered for 20 years, and also failed to have its charter renewed. The Second BUS was closely modeled after the First Bank of the US. It held federal tax receipts and regulated the amount of money circulating in the economy. The Bank proved to be very unpopular among western land speculators and farmers, especially after the Panic of 1819.
Civil War (printing currency)
During the Civil War, greenbacks were used. Greenbacks were Union paper money not backed by gold or silver. The value fluctuated depending on the status of the war.
1863 National Banking Act
The banking system was used to create the sale of government bonds and to establish a uniform bank note currency. The system could purchase government savings bonds and money to back the bonds. The National Banking Act was made during the Civil War, and was the first real step taken toward a singular, unified banking system since Jackson killed the Second BUS.
1913 Federal Reserve Act
It created 12 district banks that would lend money at discount rates (could increase/decrease amount of money in circulation), and loosened/tightened credit with the nation’s needs. It was the first central banking system since 1836.
1930’s Great Depression (regarding banking)
The economic crisis began with the stock market crash in 1929 and continued through the 1930’s. The Great Depression caused banks to collapse. FDR declared a bank holiday where banks closed and were only allowed to reopen if they proved they were financially stable. There were several acts put in place to manage banks. The Emergency Banking Relief Act of 1933 gave the President power over the banking system and set up a system by which banks would be reorganized or reopened, and started the hundred days congress. The Federal Home Loan Bank Act of 1933 lowered mortgage rates for homeowners and allowed farmers to refinance their farm loans and avoid foreclosure. The Federal Emergency Relief Act of 1933 was the first direct-relief operation under the New Deal, and was headed by Harry L. Hopkins, a New York social worker who was one of FDR’s most influential advisers. Law provided money for food and other necessities for the unemployed.
Glass-Steagall Banking Act
In 1933, this act forbade commercial banks from engaging in excessive speculation, added $1 billion to gold to the economy and established to the Federal Deposit Insurance Corporation (FDIC).
1970’s (regarding banking)
Restrictions were relaxed on banks. The US position as an unchallenged colossus of the capitalist world was threatened from multiple directions: rising international competition, spiking energy prices, declining productivity and profitability, and soaring inflation and unemployment. The economy was trapped by stagflation—combined low economic growth and high unemployment (stagnation) with high rates of inflation. The 1973-75 recession was a period of economic stagnation in much of the western world, putting an end to the post-World War II economic boom.
1982 (regarding banking)
Congress allows Savings and Loans banks to make high risk loans and investments. Investments went bad and banks failed. The federal government had to give investors their money back and were indebted by $200 billion. After this, the FDIC took over the S&L.
The worst economic downturn since the Great Depression.
1999 Gramm-Leach Bliley Act
Ensures that financial institutions, including mortgage brokers and lenders, protect nonpublic personal information of consumers
Restricts when and under what circumstances personal financial information may be disclosed to non-affiliated third parties. Allows consumers to opt out of allowing information to be shared
Requires all financial institutions to design, implement, and maintain safeguards to protect customer information while it is in the custody and control of the institution and its agents and in the transfer of such information. Protects customers from those who obtain personal information under false, fictitious, or fraudulent pretenses.