The History of the Banking Industry
In the United States
1816 Second Bank of the US
-Failed due to the fact it didn't regulate the state banks or charter any other bank
-State banks began to issue their own currency
1863 National Banking Act
1913 Federal Reserve Act
-Created a system of private and public entities
-After the act was passed, Congress required that all nationally chartered banks become members of the Federal Reserve System.
-Provided other functions and financial services for the economy such as a check clearing and collection for all members of the Federal Reserve.
1930's Great Depression
-Caused banks to collapse
-FDR declared a "bank holiday" where banks were closed until they proved they were financially stable.
Glass-Steagall Banking Act
-Established the Federal Deposit Insurance Corporation
-Ensured that if a bank goes under, the people still have their money.
-Congress allowed S&L banks to make high risk loans and investments.
-The investments went bad and the banks failed.
-The federal government had to repay the investors.
-The federal government debt was amounted to $200 billion.
-The FDIC overtook the S&L.
1999 Gramm-Leach-Bliley Act
-Allowed banks to have more control over banking, insurance, and securities
-The negative effects: less competition, may form a universal bank, and also may lead to more information sharing (reduction of privacy).