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Informal Banks
It was managed by merchants on top of their regular trade. They would hold onto money or give out loans for free. It was very flimsy, it could go out of business, and potentially untrustworthy. It was pre civil war -
Federalists vs Anti-Federalists
Alexander Hamilton was a Federalist, and he believed in a centralized banking system, also known as a National Bank. Thomas Jefferson was an anti-federalist and he believed a decentralized banking system, so that states would create and regulate banks -
The First Bank of the United States
The first bank of the united states was created by the federalists. The 20 years charter ran out in 1811. President Andrew Jackson had removed all federal funds. The first bank was always skillfully managed. The companies net income improved by 7% -
The Second Bank of the United States
Nicholas Biddle (president of the bank) monitored and kept stability in the banks. They limited the amount of notes they gave out. The bank eventually went out of business because there was lots of bad management and fraud. -
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Free Banking Era
The amount of state chartered banks nearly tripled. Also large amount of banks/currencies caused issues. The bank would run and panic. There was not enough gold and silver to back paper money. The bank runs panics where a lot of people try to redeem paper money at once. This lowered public self confidence. There were wildcat banks involved and it failed there were frauds -
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National Banking Acts
The government could now charter banks. They required banks to hold adequate gold and silver reserves to cover their bank notes. The national banking act had issued a single national currency which led to the elimination of the many different state currencies which help stabilize a country's money supply -
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The Gold Standard
Paper money and coins would be equivalent to some amounts of gold. Dollars also had a definite value. It also created a more stable currency. -
Federal Reserve System
It was established by the Federal Reserve Act. It was the nations first true central bank. Some of these banks included Central bank which was a bank that could lend to other banks in times of need. Member banks belonging to the fed had some of their cash reserves at the federal reserve bank in their district. Also federal reserve notes created national currency used in the present day. The fed could also increase or decrease the amount of money in circulation. -
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The Great Depression
Banks loaned large amounts of money to many high-risk businesses. It resulted in widespread bank runs because many people wanted to withdraw their money. Also a combination of unpaid loans and bank runs resulted in failure for thousands of banks across the country. -
Federal Deposit Insurance Corporation
This was a government agency established in 1933. It insured customer deposits if the bank were to fail. It was also used to cover about $2,500 in losses, which in present day can equal $100,000. -
Saving and Loan Crisis
This was the greatest bank collapse since the Great Depression. It was caused by high interest rates, inadequate capital, and fraud. Another part of this was deregulation, or the removal of restrictions and rules in industries -
Bank Mergers
This happened when some of the biggest banks in the country would join together with the belief that with a bigger bank, they would make more profit. They also believed in things like customer convenience. This also created many bank branches
