VIDEO

CHAPTER

10

SEC

TI O

N 2

– HI S

TO

RY

OF

AM

ER

I CA

N B

AN

KI N

G

OBJECTIVES

1. Describe the shifts between centralized and decentralized banking before the Civil War.

2. Explain how the banking system was stabilized in the later 1800s.

3. Describe developments in banking during the twentieth century.

TWO VIEWS OF BANKING

FederalistsCentralized Bank

Alexander Hamilton

AntifederalistsState Banks

FIRST BANK OF THE UNITED STATES

1791

20 year charter

Antifederalists argued that its creation was unconstitutional

Charter ran out in 1811

SECOND BANK OF THE UNITED STATES

Financial Chaos until 1816

Chartered for 20 years

Andrew JacksonQuest to kill the bank. Succeeded

THE FREE BANKING ERA

1837-1863

“Wildcat” Era1. Bank Runs and Panics2. Wildcat Banks

Middle of nowhere3. Fraud

Banks collected money then disappeared

4. Different Currencies

BANK REFORMS

“Greenbacks”

National Banking Acts of 1863 and 18641. Power to Charter Banks2. Require banks to hold enough specie to

back bank notes3. Power to issue national currency

THE GOLD STANDARD

Even with the reforms the country still had money and banking problems

1870s the Gold Standard adoptedSet a definite value for the dollarGov’t could only issue currency for the amount of gold in the treasury

FEDERAL RESERVE SYSTEM

Federal Reserve act of 1913

Member Banks – 12 regional

Federal Reserve Board

Short-term loans to member banks to prevent bank failure

Federal Reserve Notes

FORT KNOX

5,046 tons of Gold Bullion

BANKING REFORM

F.D.R.

March 5, 1933 – “Bank Holiday”

Federal Deposit Insurance Corporation(FDIC) 1933

Insures deposits up to $100,000

Permanent switch to Fiat money

THE SAVINGS AND LOANS CRISIS

After The Great Depression there was strong regulation of banks until 1970s

S & L Crisis1. Deregulation2. High Interest Rates

Paid large sums to depositors and earned little from lending

3. Bad Loans Risky

4. Fraud Made loans to businesses that had little chance of

succeeding

(FIRREA) Financial Institutions Reform, Recovery, and Enforcement Act 1989

AMADEO P. GIANNINI

Pg. 257