The History of Banks
Mimi Walker
1791 Bank of the US
The Bank of the US received a charter in 1791 from Congress; signed by President Washington
Collected fees and made payments on for the federal government
- State banks opposed it because they thought it gave too much power to the national government
- The First Bank of the U.S. was dissolved
1816 Second Bank of the US
Second Bank of the U.S. was chartered in 1816
- Didn't regulate state banks
- Didn't charter any other bank
- Consequently, the Second Bank of the U.S. failed
Civil War
During the Civil War, state banks were issuing their own currency
- The Civil War marks the beginning of the Federal government printing paper currency
1913 Federal Reserve Act
- Created the Federal Reserve System as the national bank
- Granted the legal authority to use federal reserve notes
1930’s Great Depression
Great Depression during the 1930's caused banks to collapse
FDR declared a “bank holiday” where banks closed
- Banks were only allowed to reopen after proving they were financially stable
Glass-Steagall Banking Act
Glass-Steagall Banking Act
Established the Federal Deposit Insurance Corporation (FDIC)
- Protects citizens from bank failure
- Ensures that if a bank goes under, you still have your money
1982
Congress allows the Savings and Loans Association (S&L) banks to make high risk loans and investments
Investments went bad
Banks failed in effect
Federal Government had to return money to investors
Federal Government debt: $200 billion
- The FDIC took over S&L
1999 Gramm-Leach-Bliley Act
1999: Gramm-Leach-Bliley Act
Gives banks the power to have more control over banking, insurance and securities
However, it may create:
- less competition
- formation of a universal bank
- more sharing of information (reduction of privacy)