Banking Industry

By: McKenzie Gray

1791 Bank of the US

The Bank of the US received a charter in 1791 from Congress. The charter was signed by President Washington. This bank collected fees and made payments on behalf of the federal government. The bank went away because the state banks thought it gave too much power to national government.

1816 Second Bank of the US

The second Bank of the US was chartered in 1816. It failed because it didn't regulate state banks or charter any other bank. The Bank was supposed to maintain a "currency principle" to keep its deposit ratio stable at about 20 percent. Instead the ratio bounced around between 12% and 65 percent.

CIvil War

State banks were issuing their own currency. Federal government didn't print paper currency until the Civil War. The Civil War created a coin shortage, so the first official paper currency of the United States entered circulation. They were called Demand Notes and came in $5, $10, and $20 increments printed in 1861.

1863 National Banking Act

Banks could have a state or federal charter ( duel banking). The National Banking Act of 1863 was an attempt to assert some degree of federal control over the banking system without the formation of another central bank. The Act had three primary purposes first to create a system of national banks, second to create a uniform national currency, and third to create an active secondary market for Treasury securities to help finance the Civil War.

1913 Federal Reserve Act

The Federal Reserve Act intended to establish a form of economic stability through the introduction of the Central Bank, which would be in charge of monetary policy, into the United States. The Federal Reserve Act is perhaps one of the most influential laws concerning the U.S. financial system.

1930's Great Depression

The Great Depression Act caused banks to collapse . President Roosevelt declared a "bank holiday " where banks closed. Only allowed to reopen if they proved they were financially stable. It's estimated that 4,000 banks failed during the one year of 1933 alone. By 1933, depositors saw $140 billion disappear through bank failures.

Glass-Steagall Banking Act

The Glass-Steagall Banking Act established the Federal Deposit Insurance Corporation. It ensures that If a bank goes under, you still have your money. In the United States, an effort was made to expand credit under the leadership of Senator Carter Glass, Democrat of Virginia, and Representative Henry B. Steagall, Democrat of Alabama. The result of their collaboration was what should be labeled the first Glass-Steagall Act.


Congress relaxes restrictions on banks. By the 1970s the first payment systems started to develop that would lead to electronic payment systems for both international and domestic payments. The international SWIFT payment network was established in 1973 and domestic payment systems were developed around the world by banks working together with governments.


Congress allows S&L banks to make high risk loans and investment. Investments went bad, banks failed, and the federal government had to give investors their money back. The federal government debt is $200 billion. The FDIC took over S&L.

1999 Gramm-Leach-Bliley Act

Allows banks to have more control over banking, insurance and securities. The cons of this is that less competition may form a universal bank, which may lead to more sharing of information.