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The First Bank of the U.S. received a charter from Congress in 1791. The bank collected fees and made payments to the Federal Government. The first bank was created to improve the handling of the financial business of the United States government. The bank ended because state banks opposed it and believed it gave the Federal Government too much power.
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The second bank of the U.S. was chartered in 1816, but failed because it did not regulate state banks and did not charter other banks. In addition states were printing their own currency and the Federal government did not until the Civil War
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The paper currency issued during the American Civil War were called Demand Notes and United States Notes. Paper currency was created due to coin shortage in the Civil War. In 1862, they started producing United States Notes which was similar to our modern paper money.
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The National Bank Act of 1863 was passed to create a national banking system and help resolve the financial crisis that rose during the American Civil War. Banks could have a state or federal charter, also known as duel banking.
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The Federal Reserve Act established the Federal Reserve as the central bank of the United States and was created to stabilize the economy in the United States. The act also set the monetary policy of the United States.
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The Great Depression caused many banks to collapse and FDR declared a "banking holiday" where banks were only allowed to open if they proved they were financially stable. During the Great Depression there were many bank runs and Americans tried to withdraw all of their money from banks.
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The Glass-Steagall Banking Act established the FDIC which protects your money. The Glass-Steagall Act was created to separate commercial banking from investment banking.
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During the 1970s Congress begins to relax restrictions on banks which allowed banks to take advantage of people and become likely to collapse. This created many issues in the economy.
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Congress allows S&L banks to make high risk loans and investments. Investments went down and many banks failed. Across the United States, more than 1,000 S&L banks failed by 1989. The Federal Government had to reimburse investors 200B. Eventually FDIC takes over the S&L.
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The Gramm-Leach-Bliley Act allowed banks to control over banking, insurance and securities. It also reduced the regulations put in place during the Glass-Steagall Act and allowed commercial banks to act like investment banks.
