Module 13 Lesson 2

Civics & Economics

1791 Bank of the US

The First Bank of the US was chartered in 1791 and ran until it's failure to get it's charter renewed by Congress in 1811. The bank had great liquidity, in comparison to many banks. It also provided approximately 20% of the US currency ($5 Million) when it was operating.

1816 Second Bank of the US

The Second Bank of the US was chartered with the same responsibilities and powers as the First Bank of the US. This second attempt was plagued with problems including fraud and poor management. There were event attempts to have it shutdown as being unconstitutional.

Civil War (printing currency)

During the civil war everybody was printing currency. The Confederate and Union governments, banks, state governments, banks, insurance companies, and businesses. This created confusion and problems, as many paper currencies could not be redeemed for gold, or silver but was more of a promissory note that you could get your money back in the future. Governments kept printing monies because they were struggling to pay expenses.

1863 National Banking Act

Created to assert control over the banking systems without creating another central bank. The goals were to create a system of national banks, create a uniform national currency, and create a market for Treasury securities to help finance the Union in the Civil War.Created to assert control over the banking systems without creating another central bank. The goals were to create a system of national banks, create a uniform national currency, and create a market for Treasury securities to help finance the Union in the Civil War.

1913 Federal Reserve Act

This act was signed by President Wilson on December 23, 1913. The act created the Federal Reserve Bank system comprising of twelve commercial banks in large regional areas. The banks would be coordinated by the Federal Reserve Board who was comprised of government appointments and bank appointments. This act was also known as the Currency Bill, or Owen-Glass Act. The system has changed during major financial events: the Great Depression and mini-crisis of late 1970's.

1930’s Great Depression (regarding banking)

The decrease in available money due to the depression triggered an alarming number of banks to fail. It is estimated that four-thousand banks failed in 1933. Things were so bad that President Franklin Delano Roosevelt declared a national “bank holiday”. This holiday allowed the banks to close for 3 days, to let things settle.

Glass-Steagall Banking Act

Also known as the Banking Act of 1933, was signed into law on June 16, 1933 to strengthen the banking systems. It separated commercial banks from securities (investment) banks. Rep. Steagall agreed to support the Act after an amendment was added to allow bank deposit insurance.

1970’s (regarding banking)

On August 15, 1971, President Nixon made three economic changes that was called the “Nixon Shock”. He suspended, with a few exceptions the convertibility of the dollar into gold, and foreign governments could not exchange their dollars for gold. A 90-day wage and price freeze was issued by Executive Order 11615. A surcharge was set at 10% on imports to ensure that American products would not be affected by the expected fluctuation in exchange rates.

1982 (regarding banking)

The economy was going through a recession and banks were going through deregulation. This was allowing banks to increase their lending, and the deposit insurance limits were also increased from $40,000 to $100,000 during this period. In July 1982, congress enacted the Garn-St. Germain Depository Institutions Act of 1982. This act allowed banks to begin offering money market accounts, and provided adjustable-rate mortgage loans.

1999 Gramm-Leach-Bliley Act

This act repealed the provisions of the Glass-Stegall Banking act of 1933,that restricted affiliations between banks and securities firms.