Transcript Chapter 10 - mrcierniakoski

VIDEO
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.
TWO VIEWS OF BANKING
Federalists
 Centralized Bank
Alexander Hamilton
Antifederalists
 State Banks
FIRST BANK OF THE UNITED STATES
1791
20 year charter
Antifederalists argued that its creation was
unconstitutional
Charter ran out in 1811
SECOND BANK OF THE UNITED STATES
Financial Chaos until 1816
Chartered for 20 years
Andrew Jackson
 Quest to kill the bank. Succeeded
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
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
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
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
FORT KNOX
5,046 tons of Gold Bullion
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
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
AMADEO P. GIANNINI
Pg. 257