Banking in the US: A Brief History

The 1700's

The 1791 Bank of the US

  • Chartered by Congress, signed by George Washington
  • Made payments for the Federal Government
  • Strongly opposed by state banks, which lead to its downfall

The 1800's

The 1816 Second Bank of the US

  • Chartered by James Madison
  • Made payments for the Federal Government, who only held 20% of the capital
  • Didn't get rechartered in 1836, causing it to become private
  • Dissolved in 1841

The Civil War (1861-65)

  • Coin shortages occurred
  • Government created paper money to compensate
  • Notes closely resembled dollars of today

The 1863 National Banking Act

  • Occurred during the Civil War
  • Designed for a national banking system
  • Connected state banks to national banks

The 1900's

The 1913 Federal Reserve Act
  • Signed by President Woodrow Wilson
  • Created the Federal Reserve
  • Gave Federal Reserve authority to issue dollars

Great Depression (30's)

  • Four waves of bank crashes
  • 1/5 of banks shut down by 1933
  • Waves ceased with Bank Holidays

Glass-Steagall Banking Act (1933)

  • Created in emergency response to the banks crashing
  • Created the FDIC (Federal Deposit Insurance Corporation)
  • Created the FOMC (Federal Open Market Committee)
  • Separated commercial and investment banks

The 1970's

  • Prices inflated extremely
  • Few people cared about stocks, which caused little economic growth
  • Interest rates increased extremely, causing many to not be able to afford houses or cars


  • Greatest recession since the Great Depression
  • Unemployment peaked at 10.8% average
  • Interest rates rose to 21.5%

The Gramm-Leach-Bliley Act (1999)

  • Designed to overturn some of the Glass-Steagal Act
  • Allowed backs to act as a combination of investment banks, commercial banks, and insurance companies
  • Improved competition between banks