History of Banking by Julie Flanders

The First bank of the United States 1791-1811

jflanders6 — 2025-05-29 17:03:58 UTC

The constitution prohibited state governments from making their own currency. The bank had a start-up capital of 10 million dollars. The federal government would own 2 million of that. The bank can be judged as a success because it helped pay of war debt.

"Free" Banks 1837-1863

jflanders6 — 2025-06-02 16:32:54 UTC

During the period of the civil war states passed the "free banks laws" which allowed banks to operate under less charter. As a result of the free banking laws hundreds more banks were able to open. In response to a rising volume of note and check transactions beginning in the late 1840's the New York Clearinghouse Association was made in 1853 to provide a way for the city banks to transfer notes and checks and settle accounts.

National Banks 1863-1913

jflanders6 — 2025-06-02 16:38:24 UTC

The outbreak of the Civil War and the need to finance it led again to a renewed interest in a national bank. In 1863 they established the “national banking system.”. The new system allowed banks to choose between a national charter and a state charter. While the national banking system served its role in financing the war and establishing a uniform currency, it was fraught with at least one bank panic in every decade after the Civil War.

The Federal Reserve 1913-present

jflanders6 — 2025-06-02 16:43:51 UTC

Their preferred status as the government’s banker caused others to view them as more secure, which led to their holding deposits and serving as a “banker’s bank". In designing the new Bank, Glass and Willis took lessons from the First and Second banks. They removed the private role of the bank in commercial lending, so that the new bank would be a largely public institution.Today, the Federal Reserve is best known for making monetary policy. But that wasn’t one of its main roles originally. At its founding, the Fed’s main role was to prevent future bank panics by providing liquidity in the form of loans to member banks and by supervising those banks.

The Banking Act of 1933

jflanders6 — 2025-06-02 20:51:16 UTC

For the Federal Reserve, the Act reined in the New York Federal Reserve Bank. The Banking Act created the FDIC and separated deposit and investment banks. The Banking Act also created the Federal Open Market Committee (FOMC).

The Accord 1951

jflanders6 — 2025-06-02 20:52:58 UTC

The culmination of the battle that started with McCabe’s 1949 announcement, the Accord solidified the Federal Reserve’s independence from the Treasury, allowing the central bank to conduct monetary policy independently and without Treasury approval for the first time since 1934.

Inflation 1970's

jflanders6 — 2025-06-02 20:53:37 UTC

Various legislative efforts attempted to control and influence the Federal Reserve as the nation faced economic turmoil. Among the ideas finding varying degrees of congressional support were a proposal that would “request” a specific money supply growth target and an effort to give the president greater control over the Federal Reserve.

Crisis and Aftermath 2008-2012

jflanders6 — 2025-06-02 20:54:14 UTC

Criticism has increased during the recent financial turmoil and its aftermath. The passage of Dodd-Frank resulted in congressionally mandated audits of the Fed’s emergency programs and governance structure in 2011. In 2012, Rep. Ron Paul held a hearing in which proposals to change the makeup of the FOMC and alter the Federal Reserve’s mandate were discussed.

War of 1812

jflanders6 — 2025-06-02 20:55:31 UTC

Fighting the War of 1812 caused the United States to incur a large debt. At the close of the war in 1815, it appeared that the Government might not be able to make payments on the loans, causing the value of the American dollar to plummet and the government to halt exchanging gold and silver for bank notes.

Panic of 1837

jflanders6 — 2025-06-02 20:56:30 UTC

A lack of gold and silver currency caused the Panic of 1837. Many factors caused this shortage of hard money, but most of these were the result of President Jackson’s actions both in closing the Second Bank of the United States, and in restricting the deposit of federal funds to western and southern banks. The panic resulted in a recession that lasted for almost seven years.

World War 1

jflanders6 — 2025-06-02 20:57:54 UTC

The Federal Reserve opened in November of 1914, four months after the war began. Wile the United States did not enter the war until 1917, the Federal Reserve was able to aid the war effort by helping businessmen sell war goods to U.S. allies in Europe. When the United States entered the war, the Federal Reserve was responsible for selling “Liberty Bonds,” savings bonds sold by the government to fund the American war effort. Fighting ended at 11:00 AM on November 11, 1918 and the war ended the next year with the signing of the Treaty of Paris.

Penn Square Bank and the Oil Market Crash 1982

jflanders6 — 2025-06-02 20:59:22 UTC

The Iranian Revolution was in 1979 and the Iran-Iraq War began in 1980. This caused the price of oil to increase, due to lower production in Middle Eastern countries. Banks in the United States saw this as an opportunity to invest in oil companies, and the largest purveyor of these investment opportunities was the Penn Square Bank. Penn Square Bank was located inside the Penn Square Mall in Oklahoma City, and began as a small bank