History of U.S. Banking

Confidence Deposit money in a bank Before American Revolution, British government discouraged the establishment of banks Merchants ran unofficial banks Not secure 3 main periods of development Power has shifted

Before the Civil War 1 st period 1780s to 1860s Experimentation and debate Role of government

Conflicting views Hamilton Strong central Federalists Bank Necessary to develop industry Jefferson Strong states Antifederalists No bank Too much power

First bank st bank established 20 year charter 1792 national coinage Representative money issued Backed by silver and gold Voted down in 1811 States issued too much money

2 nd bank Chaos ensues 1816 new bank charter Restored confidence Concentration of wealth gave too much power Restricted economic growth not enough credit offered for all

Dismantling the bank Jackson critic State chartered banks tripled States have different rules NY nothing less than a 10 Own bank notes Fewer reserves Difficult to exchange

Civil war to WWI 2 nd main period of development Dual banking system Uniformity and stability Greenbacks issued, more problems Greenbacks fiat money Confederacy money, no good National banking acts of 1863 and 1864 officially give federal government right to charter

Unifying Single currency Require reserves Backed by government bonds Coinage act of 1873 reducing reliance of silver Gold Standard

WWI to present 3 rd period 1913 to present Federal Reserve Act of 1913 established a federal reserve system, Federal reserve nations central bank, and required all nationally chartered banks to join Fed Major success in the early years was to provide the government with enough credit to finance the US military effort in WWI

FDR New Deal reforms Declared a bank holiday in 1933 Banking Act of 1933 protected deposits by separating investments by creating the FDIC Banking act of 1935 FDIC is permanent

Gold Reserve Act of 1934 Removed the gold standard All gold purchased back from the banks Prohibited the use of gold coins Ended practice of backing Fed notes with gold