1. VIDEO

2. CHAPTER 10 SECTION 2 – HISTORY OF AMERICAN BANKING

3. 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.

4. TWO VIEWS OF BANKING Federalists  Centralized Bank  Alexander Hamilton Antifederalists  State Banks

5. FIRST BANK OF THE UNITED STATES 1791 20 year charter Antifederalists argued that its creation was unconstitutional Charter ran out in 1811

6. SECOND BANK OF THE UNITED STATES Financial Chaos until 1816 Chartered for 20 years Andrew Jackson  Quest to kill the bank. Succeeded

7. THE FREE BANKING ERA 1837-1863 “Wildcat” Era 1.Bank Runs and Panics 2.Wildcat Banks  Middle of nowhere 3.Fraud  Banks collected money then disappeared 4.Different Currencies

8. BANK REFORMS “Greenbacks” National Banking Acts of 1863 and 1864 1.Power to Charter Banks 2.Require banks to hold enough specie to back bank notes 3.Power to issue national currency

9. THE GOLD STANDARD Even with the reforms the country still had money and banking problems 1870s the Gold Standard adopted  Set a definite value for the dollar  Gov’t could only issue currency for the amount of gold in the treasury

10. 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

11. FORT KNOX 5,046 tons of Gold Bullion

12. 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

13. THE SAVINGS AND LOANS CRISIS After The Great Depression there was strong regulation of banks until 1970s S & L Crisis 1.Deregulation 2.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

14. AMADEO P. GIANNINI Pg. 257