HISTORY OF BANKS IN THE US

EUNMYUNG SONG

1791 Bank of the US

  • The Bank of the US received a charter in Carpenters' Hall on February 25, 1791 from 1791 to 1795.

  • from Congress; signed by President George Washington.

  • This bank collected fees and made payments on behalf of the federal government.

  • Bank went away because state banks opposed it; thought it gave too much power to national government.

  • In 1811, the bank failed because people thought it gave to much power to the central government.

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1816 Second Bank of the US

  • Second Bank of the US was chartered in 1816 in Carpenter's Hall, Philadelphia.

  • Due to the War of 1812, the states were suffering from inflation and couldn't pay for the military procedures.

  • The banks failed because it didn’t regulate state banks or charter any other banks.

  • State banks were issuing their own currency.

  • Federal government didn’t print paper currency until the Civil War.

1861-1865 Civil War (printing currency)

  • During the Civil War, banking houses were syndicated to meet the federal government's need for money to fund its war efforts.

  • In 1862, the U.S. created the Lender Tender Act, issuing $150 million in national notes called greenbacks.
  • The paper money was able to have value because it was changed by the gold in the treasury.
  • Paper currency issued by the north during the Civil War.
  • Once the war began, debt grew quickly. The financial cost of the war was significant, totaling an estimated $5.2 billion.

1863 National Banking Act

  • The National Bank Act of 1863 was built to create a national banking system.

  • Banks could have a state or federal charter (duel banking).

  • A nationwide banking system that loaned money to the Government to pay for the war

  • A national system of paper money and coins

  • By the end of the war in 1865, Government debt had exploded, reaching $2.6 billion. That was more than 40 times what it was only five years earlier at $65 million.

1913 Federal Reserve Act

  • National Bank
  • Established in december 1913.
  • It is the act that created the federal reserve system, the central banking system of the united states, which was signed into law by President Woodrow Wilson.
  • It regulated banking to help smaller banks stay in business.

1930’s Great Depression (regarding banking)

  • 1930s: Great Depression caused banks to collapse.

  • FDR declared a “bank holiday” where banks closed.

  • Only allowed to reopen if they proved they were financially stable.
  • The severe econmic decline that began in 1929 and lasted more than a decade.

1933 Glass-Steagall Banking Act

  • Established the Federal Deposit Insurance Corporation.

  • Banned commercial banks from engaging in the investment business.

  • Ensures that if a bank goes under, you still have your money.

1970’s (regarding banking)

  • The Bank Secrecy Act of 1970 was passed by the United States Congress in 1970 to prevent financial institutions from being used as tools by criminals to hide or launder their ill-gotten gains.

  • Congress relaxes restrictions on banks.

1982 (regarding banking)

  • 1982: Congress allows S&L(saving and loan) banks to make high risk loans and investments.

  • Investments went bad.

  • Banks failed.

  • Federal government had to give investors their money back.

  • Federal government debt: $200 billion

  • The FDIC(federal deposit insurance corporation) took over the S&L.

1999 Gramm-Leach-Bliley Act

  • Allows banks to have more control over banking, insurance and securities.

  • Cons: less competition, may form a universal bank; may lead to more sharing of information (reduction of privacy).