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We think you have liked this presentation. If you wish to download it, please recommend it to your friends in any social system. Share buttons are a little bit lower. Thank you! Published by Logan Lambert Modified over 5 years ago. A merchant who sold cloth, grain, or other goods may allow customers to deposit money — he would charge a small fee to hold the money for the customer. His job was to keep the money safe. This system was important for increasing trade with other countries and ensuing the economic growth of the new United States.
The new leaders did not decide how to accomplish this task. Federalists — wanted a strong central government to establish social and economic order within this country. Anti-federalists — favored leaving most power in the hands of the states. He felt that it was important to develop healthy industries and trade. As Secretary of Treasury — Hamilton proposed a National Bank — a bank chartered or d by the national government.
Anti-federalists led by Thomas Jefferson supported a decentralized banking system in our country. States would establish and regulate all the banks within their borders. Gave the bank a 20 year charter.
Purpose… 1. Hold the money that the government collected in taxes. Anti-federalists argued that the Constitution does not give Congress the power to establish a national bank. They argued that this act was unconstitutional. The bank ended when the chartered ended in Hamilton had died in the famous duel with Aaron Burr. He was the main backer of the national bank idea.
The states also chartered many banks without considering whether these banks would be stable or creditworthy. Without any kind of supervision or regulation, financial confusion resulted. Prices rapidly rose Merchants not customers had confidence in the value of the paper money in circulation. Merchants had to keep a list of which notes were redeemable by gold and silver and which were not. It was limited to a 20 year charter as well. Nicholas Biddle was the president of the Second Bank starting in He had a unique way of keeping state banks in check.
Most banks could not meet the demand for gold or silver and had to shut its doors. The fall of the Second Bank of the US intriggered a period of state-chartered banks. Problems arose again 1. Bank Runs and Panics Not enough gold or silver on hand to back the state notes. Customers found it difficult to exchange their bank notes for gold or silver.
Set off bank runs — widespread panics in which a great of people tried to redeem their paper money all at once. Wildcat Banks 3. Fraud Some banks were located on the edges of settled areas. Called Wildcat Banks because people joked that only wildcats lived in such remote areas. These banks had a high failure rate. Fraud A few banks engaged in out and out fraud or cheating.
They issued bank notes collected gold and silver money from customers and then disappeared.
Most notes were counterfeits or worthless. The federal government played no role in providing paper currency or regulating reserves of gold or silver. With the eruption of the Civil War inthings got worse. Both the Union and Confederacy needed to raise money to fight the war.
They sold paper currency to support their cause. South had currency backed by cotton.
National Banking Act of and The federal government had three powers 1. The power to require banks to hold adequate gold and silver reserves on hand to cover their bank notes. In the s, the nation adopted a gold standard — a monetary system in which paper money and coins are equal to the value of a certain amount of gold.
Panic of — many banks lacked adequate reserves and could not exchange gold for currency. These banks would store some of their reserves at the Fed. Local banks could get short term loans from the Fed System created the Federal Reserve Note — our currency today.
Chapter 10 section 2 the history of american banking
Crash of the Stock Market helped make things worse. Many people made runs on the banks to get their money out.
Roosevelt — declared a bank holiday on March 5, All banks were closed for the day. Within a matter of a few days, sound banks began to reopen. Trying to gain the trust of the public that the banks were sound and a safe place to keep your money.
In the s, banks were given a little relief.
Government relaxed some of the rules. High interest rates on loans, inadequate capital, and fraud were the other three factors.
High Interest Rates in the s and early s, led many long term loans to default not be able to pay back the money. Bad Loans to businesses and people who could not or would not repay the loan. Fraud — many institutions made large loans to businesses that had little chance of succeeding. We also saw a great deal of bank mergers come about because of these changes in the rules. Economists think of it for 3 uses: —Anything.
Money and Banking Evolution of Money. How Banks Operate Chapter 24 Section 3. Words to Know Checking : An in which deposited money can be withdrawn at any time by writing a. Chapter Banking Services Banks are started by investors, who pool their financial assets to provide banking services to people. Similar presentations. Log in. My presentations Profile Feedback Log out.
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