Changes in the Banking System
From 1791-1999
1791 Bank of the United States
The First Bank of the United States was needed because the government had a debt from the Revolutionary War, and each state had a different form of currency.The First Bank's charter was drafted in 1791 by the Congress and signed by George Washington. But, in 1811 Congress voted to abandon the bank and its charter. The bank was originally housed in Carpenters' Hall from 1791 to 1795.
1816 Second Bank of the United States
The Second Bank of the U.S. was chartered in 1816 with the same responsibilities and powers as the First Bank.The Bank was supposed to maintain a "currency principle" -- to keep its specie/deposit ratio stable at about 20 percent. Instead the ratio bounced around between 12% and 65 percent. It also quickly alienated state banks by returning to the sudden banknote redemption practices of the First Bank. Various elements were so enraged with the Second Bank that there were two attempts to have it struck down as unconstitutional.
Civil War Printing Currency
Prior to the Civil War, banks printed paper money. For America's first 70 years, private entities, and not the federal government, issued paper money. Notes printed by state-chartered banks, which could be exchanged for gold and silver, were the most common form of paper currency in circulation.
1863 National Banking Act
The National Bank Act of 1863 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 (1861–1865).
1913 Federal Reserve Act
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. The Federal Reserve Act is one of the most influential laws concerning the U.S. financial system.
1930’s Great Depression (regarding banking)
One of the most significant aspects of the Great Depression in the United States was the erosion of confidence in the banking system. Weaknesses were apparent by 1930 and a growing wave of failures followed. As banks closed their doors, a chain reaction occurred that spread misery throughout the country.
Glass-Steagall Banking Act
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."
1970’s (regarding banking)
The Glass-Steagall Banking Act grew controversial when the banks complained that they would lose their costumers to other companies unless they provided more services.
1982 (regarding banking)
In 1982, the federal requirements of interest rates on savings accounts slipped out of focus, and checking accounts were then offered at the banks.
1999 Gramm-Leach-Bliley Act.
The Gramm-Leach-Bliley Act was passed in November 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.