American Banking  Bank  An institution for receiving, keeping, and lending money-near your home

Two Views of Banking  Federalist: believed in a centralized banking system, that could issue a single currency, manage federal funds, and monitor other banks

Two Views of Banking  Anti-Federalist: believed in decentralization, where states would establish and regulate all banks within their borders

The 1st Bank of the U.S. (1791)  Hold tax money  Issued bank notes  Ensured state- chartered banks held sufficient reserves  Help government carry out its powers to tax

The Free Banking Era ( )  Wildcat banks  banks located on the edge of settled lands  Fraud  Banks would issue bank notes, collect gold for customers and then disappear  Many different currencies  state banks, cities, private banks, railroads, churches, and individuals all issued currencies

The Free Banking Era ( )  Bank runs and panics  wide spread panic in great numbers of people would try to redeem their paper money

The Later 1800s  The Gold Standard  a monetary system in which paper money and coins are equal to the value of certain amount of gold  Advantages  set definite value for the dollar  government could issue currency only if it had gold

Banking in the Early 20th Century  The Federal Reserve System Federal Reserve SystemFederal Reserve System  Served as the nation’s first true central bank, or bank that can lend to others in time of need  Member banks; banks that belong to the Fed

Banking in the Early 20th Century  Federal Reserve Board  supervising board  Short-term loans  borrow money in times of demand  Federal Reserve notes  national currency

Banking in the Great Depression  Severe economic decline that began in 1929 and lasted more than a decade  Loaned large sums to high risk ventures  Most were unable to pay back loans

Reforms after the Great Depression  Federal Deposit Insurance Corporation (FDIC)  government agency that insures customers deposits if a bank fails  restricted redemption for gold

Banking in the Later 20th Century  The Savings and Loan Crisis  Deregulation  resulted in competition  High Interest Rates  too many long term loans at low rates  Bad Loans  Fraudulent loans

Banking in the 1990s  Banks allowed to sell financial assets  Growing number of Bank mergers

RecessionsRecessions of the 2000’s Recessions  Housing Bubble Burst  Fraudulent Loans  Bail outs