BANKING INDUSTRY IN AMERICA
HOW THE BANKING INDUSTRY CHANGED
1791 BANK OF THE UNITED STATES
Bank of the U.S. received a charter from Congress; signed by President Washington. The bank collected fees and made payments on behalf of the Federal Government. The bank failed because state banks opposed it; although it gave too much power to the national government.
1816 SECOND BANK OF THE U.S.
The Second Bank of the U.S. was chartered in 1816. It failed because it didn't regulate state banks or charter any other banks.
PRINT CURRENCY DURING THE CIVIL WAR
The Civil War created a coinage 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).
1913 FEDERAL RESERVE ACT
In 1913, the U.S. legislation created the current Federal Reserve System. 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.
1930s GREAT DEPRESSION
The Great Depression caused banks to collapse. Franklin D. Roosevelt declared "bank holiday" where banks closed. Only the banks that were financially stable were allowed to open.
GLASS-STEAGALL BANKING ACT
Established Federal Deposit Insurance Corporation (FDIC). It ensures that if a bank goes under, you still have your money.
Congress relaxes restriction on banks.
Congress allows S&L banks to make high risk loans and investments. The investments went bad, banks failed, and federal government had to give investors their money back. The Federal Government debt was $200 billion. The FDIC took over S&L banks.
1999 GRAMM-LEACH-BILEY ACT
This allowed banks to have more control over banking, insurance and securities. The disadvantage to this was less competition, may form universal bank and may lead to more sharing of information for a reduction of privacy.