Changes in the Banking Industry
1791 Bank of the US
This was the first national bank and was charted for twenty years. Hamilton believed that a national bank needed to be established to improve the stability of the nations finances under its new Constitution. This bank failed as the states thought it gave too much power to the federal government.
1816 Second Bank of the US
This bank, the 2nd federal bank of the US, was established in Pennsylvania. This bank was also authorized by Hamilton. Its main purpose was to regulate citizen's credit obtained through private banks, however this bank failed due to states producing their own currency.
The federal government did not print its own currency until the Civil War.
National Banking Act of 1862
This was passed to establish a national banking system, in addition to establishing a national currency.
Federal Reserve Act of 1913
This act created the Federal Reserve System that we still use today. The Federal Reserve System is a central banking system used by the nation to stabilize and regulate all banks within the nation and to promote and influence the economy.
The Great Depression caused banks to collapse. During this time, the Glass-Steagall Banking Act was passed, the FDIC was established commercial and investment banking was separated. Only the stronger banks were able to reopen after the Great Depression.
Glass-Steagall Banking Act
This act created the FDIC, gave more regulation of national banks to the Federal Reserve and allowed them to set limits on how much interest could be placed on deposits. It also separated commercial and investment banking.
In the 1970's, Congress relaxes restrictions on banking.
Congress allows Savings and Loan banks to make high risk loans and investments. The banks failed and the federal government had to reimburse investors 200 billion dollars. The FDIC then takes of Savings and Loan banks.
1999 Gramm-Leach-Bliley Act
This allowed banks more control over banking and insurance. It also allowed commercial banks to act as investment banks by significantly reducing the regulations set by the Glass-Steagall Act and the Great Depression.