Transcript BANKING SYSTEMS, 2e - Andress High School

2
2.1
2.2
2.3
Slide 1
DEVELOPMENT OF THE
U.S. BANKING SYSTEM
Creation of a National Currency
Banking Before 1913
Modern Banking
Banking Systems, 2e
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WHAT IS CURRENCY?
Medium of exchange
Something people use to trade things of value
Anything from grain to metal to money
Currency
All media of exchange circulating in a country
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Banking Systems, 2e
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CLASSIFYING CURRENCY
Metallic currency
Paper currency
Government currency
Bank currency
Deposit currency
Slide 3
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SHIFTING MEANINGS
Before World War I
Many countries had governments that did not issue
paper money.
Paper currency meant only notes issued by large banks.
In the United States, currency meant the money that
the government printed.
After the war
The idea of currency took on the broader sense used
today.
Slide 4
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THE GROWTH OF AMERICAN
CURRENCY
Colonial cash
English pounds and shillings
Real
A Spanish dollar
Paper money
English or foreign bank notes
Paper money issued by the Continental Congress
Slide 5
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CURRENCY IN THE UNITED STATES
 1792
 Mint Act authorizes coins
 1794
 U.S. mint begins operation
 1864 National Banking Act
 Established standards
 Taxed state bank notes
 1913
 Federal Reserve Act establishes banking system of today
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Slide 7
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MORE THAN A MEDIUM OF
EXCHANGE
Currency does more than serve as a medium of
exchange.
Can provide recognition for individuals or events that
are of national historical significance
Quarters commemorating each of the 50 states were
issued between 1998 and 2008.
Slide 8
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2.2
BANKING BEFORE
1913
GOALS
Identify the reasons for the establishment
and expiration of both the First and Second
Banks of the United States.
Describe the continuing problems that led
to the Federal Reserve Act.
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BANKS IN THE YOUNG UNITED
STATES
The First Bank of the United States
 Duration of charter
1791-1811
Ownership
80% held by private investors and foreign governments
20% held by U.S. government
The Second Bank of the United States
 Duration of charter
1816-1836
U.S. government owned
Slide 10
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STEPS TOWARD CENTRAL
BANKING
The National Banking Act of 1864
Comptroller of the Currency
Issued charters to national banks
 Issued national bank notes
Federal Reserve Act
In 1913, created a system to stabilize the banking
system
Slide 11
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2.3
MODERN BANKING
GOALS
Explain why Congress established the
Federal Reserve System.
Identify recent challenges faced by the
banking system.
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A TRUE NATIONAL BANKING
SYSTEM
Reserves
Percentage of deposits that are set aside to help
with liquidity drops
Reserve liquidity
Ways to convert the reserves readily into cash
Slide 13
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THE FEDERAL RESERVE ACT OF
1913
Central banking system
Flexible and adaptable
Board of directors
Controlled district reserve banks
Member banks could borrow money to meet demand
Monitored and protected entire banking system
Slide 14
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BANKS IN CRISIS
Great Depression (1929-1939)
Worst economic crisis of Western industrialized nations
through the end of the twentieth century
Margin
Buying a stock for a fraction of its price and then
reselling it for a profit
Full purchase price of stock is not paid
Bank run
When many people try to withdraw their money at once
Slide 15
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THE BANKING ACTS OF 1933 AND
1935
Glass-Steagall Act
Separated commercial banking from investment
banking
Required bank holding companies to be examined
by the Federal Reserve Board
Federal Deposit Insurance Corporation (FDIC)
Guarantees deposits against bank failures
Banking Act of 1935
Expanded the monetary controls of the Federal
Reserve Board
Slide 16
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RECENT BANKING
Inflation and Banking
Inflation
A rise in general prices
Stagflation
A combination of a stagnant economy, high inflation, and
high unemployment
Recession
A decline in total production lasting a minimum of two
consecutive quarters
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DEREGULATION
Early 1980s
Laws passed to let banks compete with other
financial firms
Mid 1980s
Government intervention to assist failed S&Ls
Mid 2007
Mortgage crisis
Emergency Economic Stabilization Act of 2008
Slide 18
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THE REVOLUTION CONTINUES
The Federal Reserve dropped interest rates
multiple times
To stimulate the economy
Check21
Mortgage crisis
Credit crisis
Federal intervention to rescue large financial
institutions on the brink of failure
Slide 19
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