The banking industry of America
The first bank.
First bank of the United States was started in 1971 because the revolutionary war left us in a crazy kind of debt and each state was using a different currency than the other, so we created the First Bank to create a standard form of currency to handle to massive debt the war left us. It failed in 1811, when Congress voted to abandon the bank and its charter.
The second bank
A worse failure than the first, the second bank was chartered in 1816 with the same powers as the first. However, due to poor management and fraud, it was unsuccessful. It was supposed to maintain a currency principle, which was supposed to keep its specie/deposit ratio stable at about 20%t. Instead the ratio bounced around between 12% and 65%. Only after Nicholas Biddle became the bank president did it begin to function like it was supposed to. Andrew Jackson, after becoming president, let the Banks Charter expire. There would not be another one until the Federal Reserve System
Civil war Printing currency
This was ridiculous, The Confederate states of America issued seventy different currencies for an amount totaling to 1.5 billion dollars. On top of that, states issued their own currencies. None of it could be traded for gold or silver. The Confederation issued these notes as a sort of promise to repay with gold when the war was over. As time went on, while the Confederation was losing the war, the value of the money was decreasing so much it got to the point where a pair of shoes cost $600.
National Banking Act of 1863
This act was used to raise money for the Federal government to fund the war effort against the Confederation. It was aimed to entice banks to buy federal bonds and taxing state issued currency out of existence. But it was defective, and was replaced a year later. It succeeded the second time.
Federal Reserve Act
It took them almost 100 years to get a successful national banking system after the last one failed. The Federal Reserve Act established the system as the central banking authority of the U.S. and created 12 central banks located in major cities. The act made it to where the member banks must maintain minimal levels of reserves with one of the Federal Reserve Banks and must deposit a percentage of their customers saving and checking account deposits into a Federal Reserve bank.
Great Depression Bank Failures
During the 1930s there was a ratio of people to banks equaling 1000:1. There were too many banks. It became so bad a few bankers took to suicide. When Franklin Roosevelt became President He declared a Bank Holiday, closing banks for 3 days to cool off.
The Glass-Steagall act originally started in 1933 as an effort to limit the conflicts between interest created when commercial banks are permitted to underwrite stocks or bonds. This law banned banks from underwriting securities, forcing banks to choose between being a simple lender or an underwriter. The act also established the Federal Deposit Insurance Corporation (FDIC), insuring bank deposits, and strengthens the Federal Reserve's control over credit.
The Bank Secrecy Act requires financial institutions in the United States to assist U.S. government agencies to detect and prevent money laundering. It required financial institutions to keep track of cash purchases of negotiable instruments and file reports of cash purchases of these negotiable instruments of more than ten grand, and report suspicious activity that might suggest money laundering.
1982 experienced a recession that affected the world. The U.S. experienced an unemployment rate peak of 10.8%. Inflation also increased to a high of 21.5%. Banks had it hard, they had a lot of their restrictions removed, their loan limit was changed from 40k to 100k, they rushed into real estate lending, speculative lending, and other ventures as the economy started to go bad. By the end of the year the FDIC had spent $870 million buying bad loans in an effort to keep various banks from failing.
1999 Gramm-Leach-Bliley Act.
The 1999 Gramm-Leach-Biley Act is a regulation passed by congress on Nov. 12 1999 which attempted to update and modernize the financial industry. It's main function was to repeal the Glass-Steagall Act that said banks and other financial institutions were not allowed to offer financial services.