Banking Industry

By: Dani Yates

1791 Bank of the US

The President, Directors and Company, of the Bank of the United States, commonly known as the First Bank of the United States, was a national bank, chartered for a term of twenty years, by the US Congress on February 25, 1791. It followed the Bank of North America, the nation's first central bank. Hamilton believed a national bank was necessary to stabilize and improve the nation's credit, and to improve handling of the financial business of the United States government under the newly enacted Constitution.

“First Bank of the United States.” Wikipedia, Wikimedia Foundation, 17 Nov. 2017, <https://en.wikipedia.org/wiki/First_Bank_of_the_United_States>.

1816 Second Bank of the US

The Second Bank of the United States, located in Philadelphia, Pennsylvania. It was modeled after Alexander Hamilton's First Bank. The Second Bank was chartered by President James Madison. An important function of the bank was to regulate the public credit issued by private banking institutions through the fiscal duties it performed for the U.S. Treasury, and to establish a stable national currency.

“Second Bank of the United States.” Wikipedia, Wikimedia Foundation, 14 Nov. 2017, <https://en.wikipedia.org/wiki/Second_Bank_of_the_United_States>.

Civil War 1861 (printing currency)

Greenbacks were paper currency that were printed in green on the back. They were issued by the United States during the American Civil War. They were in two forms: Demand Notes which were issued in (1861–1862), and US Notes which were issued in (1862–1865). Before the Civil War, the only money issued by the United States was gold and silver coins, and only such coins were the acceptable form of payment.

“Greenback (1860s Money).” Wikipedia, Wikimedia Foundation, 22 Nov. 2017, <https://en.wikipedia.org/wiki/Greenback_(1860s_money)>.

1863 National Banking Act

The National Banking Acts of 1863 and 1864 were two United States federal banking acts that established a system of national banks, and created the United States National Banking System. They encouraged development of a national currency backed by bank holdings of U.S. Treasury securities and established the Office of the Comptroller of the Currency as part of the United States Department of the Treasury and a system of nationally chartered banks. The Act shaped today's national banking system and its support of a uniform U.S. banking policy. The National Bank Act was designed to create a national banking system, float federal war loans, and establish a national currency. Congress passed the act to help resolve the financial crisis that emerged during the early days of the American Civil War.

“National Bank Act.” Wikipedia, Wikimedia Foundation, 7 Nov. 2017, <https://en.wikipedia.org/wiki/National_Bank_Act>.

1913 Federal Reserve Act

The Federal Reserve Act is an Act of Congress that created and established the Federal Reserve System, the central banking system of the United States, and which created the authority to use Federal Reserve Notes. Today they are known as the US dollar. The Act was signed into law by President Woodrow Wilson. It gave the twelve Federal Reserve banks the ability to print money to ensure economic stability. It was mainly created to give the twelve Federal Reserve Banks the ability to print money in order to ensure economic stability. More specifically, the Federal Reserve System maximize employment and kept inflation low.

"Federal Reserve Act - Wikipedia." Wikipedia, the free encyclopedia. 20 Nov 2017. Web. 1 Dec 2017. <http://en.wikipedia.org/wiki/Federal_Reserve_Act>.

1930’s Great Depression (regarding banking)

In the 1920s, Nebraska and the nation as a whole had a lot of banks. At the beginning of the 20s, Nebraska had 1.3 million people and there was one bank for every 1,000 people. Every small town had a bank or two struggling to take in deposits and loan out money to farmers and businesses. However, as the economic depression deepened in the early 30s, and as farmers had less and less money to spend in town, banks began to fail at alarming rates. During the 20s, there was an average of 70 banks failing each year nationally. After the crash during the first 10 months of 1930, 744 banks failed – 10 times as many. In all, 9,000 banks failed during the decade of the 30s. 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.

"Great Depression Bank Stock Photos & Great Depression Bank Stock Images - Alamy." Alamy – Stock Photos, Stock Images & Vectors. Web. 1 Dec 2017. <http://www.alamy.com/stock-photo/great-depression-bank.html>.

Glass-Steagall Banking Act 1933

The Glass-Steagall Act effectively separated commercial banking from investment banking. This created the Federal Deposit Insurance Corporation. It was one of the most widely debated legislative initiatives before it was signed into law by President Franklin D. Roosevelt in June 1933. The bill was designed "to provide for the safer and more effective use of the assets of banks, to regulate interbank control, to prevent the undue diversion of funds into speculative operations, and for other purposes." The Act created the Federal Deposit Insurance Corporation (FDIC), which guaranteed bank deposits up to a specified limit. It also created the Federal Open Market Committee (FOMC) and introduced Regulation Q, which prohibited banks from paying interest on demand deposits and capped interest rates on other deposit products. It was later repealed in July of 2011.

"Glass-steagall act | The History Lizard." The History Lizard | Current, recent and just, darned old!. Web. <http://hxlizard.wordpress.com/tag/glass-steagall-act/>.

1970’s (regarding banking)

In the 1970's the stock market was a mess. It lost 40% in just 18 months and for almost a decade not many people wanted to buy stocks. The economic growth was weak which resulted in rising unemployment. The easy-money policies of the American central bank, which were designed to generate full employment caused high inflation. The central bank, under different leadership would later reverse its policies, raising interest rates to 20%. Congress relaxed banking restrictions.

Rose, Christopher. "Episode 38: The International Energy Crisis of the 1970s | 15 Minute History." 15 Minute History | A podcast for educators, students, and history buffs. 15 Jan 2014. Web. 1 Dec 2017. <http://15minutehistory.org/2014/01/15/episode-38-the-energy-crisis-of-the-1970s/>.

1982 (regarding banking)

In 1982, banks were making high risk investments and loans. When the investments failed, the banks went under and the federal government ended up in debt to the people. They owed about $200 billion dollars. The federal requirements of interest rates on savings accounts lost their importance, and checking accounts were then offered at any bank. The deregulation of the banks eroded the distinction between commercial banks and savings banks. Congress allowed S&L (saving and loans) banks to make high risk loans and investments. Many S&L banks took advantage of the lowered regulations and gave out more money and loans than they were financially able to. The investments went bad, banks failed, the federal government had to give investors their money back, the federal government debt rose to $200 billion, and the FDIC took over the S&L. Steps taken to resolve the crisis included abolishing the independence of S&L banks and getting rid of the Federal Home Loan Bank Board that had been in charge of supervising the S&L.

Perry, Mark . "81 Banks Have Failed So Far Out of 8,195 FDIC-Insured Institutions: It's All Relative." Wall Street Pit - Stock Market, Technology, Science. 28 Aug 2009. Web. 1 Dec 217. <http://wallstreetpit.com/9899-81-bank-failures-out-of-8195-fdic-insured-institutions/>.

1999 Gramm-Leach-Bliley Act

The 1999 Gramm-Leach-Bliley Act ensures that financial institutions, including mortgage brokers and lenders, protect nonpublic personal information of consumers. The Act was passed November 12th, 1999. It removed barriers in the market in banking, insurance, and security companies and allowed them to have more control. While this was a good thing, the cons included less competition, possible formation of a universal bank, and a reduction of privacy. It repealed part of the Glass-Steagall Act of 1933, removing the barriers in the market among banking companies, securities companies, and insurance companies. The legislation was signed into law by President Bill Clinton.

"From Glass-Steagall to Gramm-Leach-Bliley - Understanding the Glass-Steagall Act." Understanding the Glass-Steagall Act - Prefacing the Depression. Web. 1 Dec 2017. <http://glass-steagall.weebly.com/from-glass-steagall-to-gramm-leach-bliley.html>.