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
1982
- 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