-
Federalists believed that the U.S. needed a single currency for the entire nation. The Antifederalists believed each state should be in charge of their own currency.
-
Congress set up the Bank of the U.S. It was useful in bringing order and stability to the banking system, but people feared to would not work with the ordinary people who were not wealthy. The bank closed in 1811.
-
State banks began making their own money. Prices rose quickly and different banks printed their own currency. Banks were tempted to print more money than they had gold and silver to back.
-
The idea of a national bank began to rise up, but some people still opposed the idea. Nicholas Bank, the 2nd Bank's president, went to state banks and surprised them to see if they had enough gold and silver to back their money. Some banks went out of business.
-
The Second Bank failed and between 1837 and 1863 was known as the Free Banking Era. Many states created their own banks and printed their own money. It became hard to exchange the different currencies, banks had a high rate of failure, and fraud.
-
The U.S. Treasury issued the first paper currencies which were called "greenbacks." The South printed their own dollar made from cotton to support their side of the war. It soon became worhtless as the Confederate economy suffered.
-
To strengthen the paper currency, the federal government created reforms called the National Banking Acts of 1863 and 1864. The federal government could charter banks, require banks to hold enough gold and silver to their bank notes, and to issue a single national currency.
-
The gold standard was that paper money and coins were equal to a certain value of gold. First, it set a defintie value for the dollar. Second, it created a limited supply since they could only print as much paper as they had gold.
-
The first Federal Reserve System was created that served as the nations first central bank. It could lend money to other banks and created the national currceny known as the Federal Reserve notes.
-
Banks loaned large amounts of money to high-risk businesses. The businesses could not pay back their loans. Then the stock market crashes and banks did not have the money to give back to their customers.
-
The Federal Desposit Insurance Corpoations (FDIC) was formed which insures customers desposits if the bank fails. Paper currency became fiat money to support tha growing economy.
-
Deregulation - S&L was not protected by the government and unprepared for competiton.
High Interest Rates - In the 1970s, low rates were given to long-term laons. When the crisis started in the 1980s, the rates skyrocketed but banks were still recieving low rates from the 70s.
Bad Loans - Risky loans were given out which ruined the S&L industry. Some businesses were forced out of business.
Fraud - Lage businesses committed fraud which didn't succeed causing them to fail. -
The 1933 Glass Steagall Act was repealed which allowed banks to sell finanical assets like bonds and trusts. Privacy rulers were created and banks began to merge together.
