Coarse of Banking Industry

By: Lauren Pressley

1791 Bank of the U.S

The bank of the U.S received a charter in 1791 from congress, which was signed by President George Washington. This bank collected fees and made payments on behalf of the federal government. The bank went away because the state banks or charter any other bank. State banks were issuing their own currency.

1816 Second Bank of the U.S

The second bank was founded after the War of 1812 when it was realized that without a national bank it would be impossible to fund another war. It was founded in 1816 and disbanded in 1832 during the crusade against the national banking system. A key Supreme Court decision came in the case of McCulloch vs. Maryland in 1819. The court ruled in two parts, first that chartering the Second band of the U.S was within the power of the federal government. The Second Bank of the U.S was a private concern, but acted to control the currency of the U.S.

Civil War (Printing Currency)

Before the civil war, state banks were issuing their own currency. To pay for the war, the Confederate government issued a vast array of paper currencies. This made things very complicated, state governments issued their own money, as did banks, insurance companies, and businesses. None of the paper money could be redeemed, or traded for, gold or silver. The Confederate government had no gold or silver to make coins, but instead Confederate paper was like a loan. At the start of the war when the South thought they would win, they trusted that the paper dollar would continue to hold it's value. The government even struggled to meet expenses by printing more money, paper money had accumulated fr beyond the value of the goods available to be bought.

1863 National Banking Act

Banks could have a state or dual banking. This act was passed by Congress during the Civil War. It established a system of nationally chartered banks, and required the currency issued by them to be backed by government securities. The act was amended to also require the taxation of state currencies, but not of national bank notes. This produced the intended effect of creating a uniform national currency. State banks and respective currency, it still continued to expand. This act also established the U.S dollar as the national currency, and established national banks based on a federal charter, thereby creating the dual banking system with national and state chartered banks.

1913 Federal Reserve Act

This was also know as the Currency Bill, or the Owen-Glass Act. The bill called for a system of eight to twelve Reserve Banks that would be owned by commercial banks and whose actions would be coordinated by a committee appointed by the President. The Federal Reserve System would then become a privately owned banking system that was operated in the public interest. Bankers would run the twelve banks, but those banks would be supervised and by the Federal Reserve Board whose members included the Secretary of the Treasury, the Comptroller of the Currency, and other officials appointed by the President to represent public interests.

1930's Great Depression (Regarding Banking)

The Great Depression caused banks to collapse. Franklin Roosevelt closed banks, and they were only allowed to reopen in they were financially stable. After this break, about 1,000 banks were saved. After the crash during the first ten months of 1930, 744 banks failed. In all, 9,000 banks failed during the 1930's. On January 1st, 1934, the Federal Deposit Insurance Corporation (FDIC) was stablished, and since that time, not one depositor has lost insured funds.

Glass-Steagall Banking Act

Congress passed this act in 1933, it prohibited commercial banks from participating in the investment banking business. This act was sponsored by Senator Carter Glass, a former Treasury secretary, and Senator Henry Steagall, a member of the House of Representatives and chairman of the House Banking and Currency Committee. The act was passed as an emergency measure to counter the failure of almost 5,000 banks during the Great Depression. The Glass-Steagall lost its potency in subsequent decades and was repealed in 1999.

1970's (Regarded Banking)

Congress starts relaxing the restrictions on banks. In 1975 Congress holds hearings and expresses there concern about the concentration of Third World loans and the threat to the capital position of banks. The home mortgage disclosure act encouraged banks and S&L to lend mortgage money in low-income areas. The community Reinvestment act of 1977 directs banks and S&L's to meet the credit needs of their communities, including low-income areas.

1982 (Regarding Banking)

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

1999 Gramm-Leach-Billey Act

This allows banks to have more control over banking, insurance, and securities. The cons are that there is less competition, which can form a universal bank. This can also lead to more sharing of information which is a reduction of privacy. This act also tries to update and modernize the financial industry. The main function of this act was to repeal the Glass-Steagall Act that said banks and other financial institutions were not allowed to offer financial services, such as investments and insurance related services.