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Chapter 10: Section 2

Bell Ringer!!!!

...Using 100 dollar bills, how much would 1 million dollars weigh??.

Answer:

20.4 lbs

...what about all 1 dollar bills?

Answer:

1.1 tons!

Banking...

Vocabulary

Early 20th Century

Before the Civil War

Later 20th Century Banking

The Great Depression

The Later 1800s

Recently...

Panic of 1907

1929

  • severe economic decline that lasted more than a decade
  • banks closely regulated from 1933-1960s due to G.D.

by 1860...

2 views of Banking:

Second Bank

Free Banking Era

First Bank of the U.S.

of the U.S.

did succeed in bringing order & stability

1837-1863

1791, Federalists

"Wildcat" Era

  • repeal of the 1933 Glass Steagall Act

1816, issued by Congress

BUT

only lended to the wealthy and big businesses

The Bank was used for...

State chartered banks sky-rocketed

& led to many problems...

Anti-Federalists

argued Congress didn't have the power to create

a national bank--- it was unconsitutional

  • Many people still opposed the idea
  • holding money collected for taxes
  • carrying out the government's power to tax,
  • to issue representative money in the form of bank notes (gold & silver)
  • 1811 national bank is gone

1. Bank runs & Panics

2. Wildcat Banks

3. Fraud

4. Different Currencies

  • State banks start issuing bank notes without supervision or regulations
  • although chaos rose from decentralized banking (different currencies), people still distrusted the federal bank (national bank)
  • different banks issued different currencies and money was printed with no gold or silver to back it

Financial Chaos

8,000 different currencies

  • Many banks didn't have reserves to back paper money with gold so they couldn't fund projects. As a result, the government made plans to reinstate a central bank

1920s: banks would loan a lot of money to big businesses,

they were unable to pay it back

  • restrictions
  • 1990s & 2000s- growing trend toward bank mergers
  • centralized banking system national bank ---> First Bank of the United States
  • bank
  • national bank
  • bank run
  • greenback
  • gold standard
  • Federal Resreve System
  • central bank
  • member bank
  • Federal Reserve note
  • Great Depression
  • Federal Deposit Insurance Corporation (FDIC)

Federalists:

1929: stock market crash

  • the federal government played no role in providing paper currency or regulating reserves of gold or silver
  • 1970s/1980s- deregulation

Savings & Loan Crisis

1980's Caused by...

  • deregulation-unprepared for competition
  • high interest rates-charged high interest by lenders but gave low interest loans
  • bad loans-loans to businesses that were going to fail

...leads to crisis in S&Ls

1913

Federal Reserve System

  • served as nation's first true central bank, a bank that can lend to other banks in time of need

How it reorganized the federal banking system:

  • Member banks
  • Federal Reserve Board
  • Short-term loans
  • Federal Reserve notes
  • The Fed helped restore confidence in banking system, but couldn't prevent Great Depression

Anti-Federalists

  • leave power in hands of the states
  • decentralized banking

* Who was the President that helped put confidence back into the banking system? *

National Banking Acts

of 1863 & 1864

Currency in North and South

The Gold Standard

1861

1870s

  • a monetary system (Gold Standard) in which paper money & coins are equal to value of a certain amount of gold
  • both North and South needed currency to support military

These Acts gave the federal government 3 powers:

the power to...

2 advantages of the gold standard:

  • In Union, U.S Treasury issues greenbacks, paper currency issued during Civil War

1. set a definite value for the dollar

1. Charter banks

2. Require banks to hold enough gold & silver

reserves to cover bank notes

3. Issue a single national currency

  • In Confederacy, currency was backed by cotton but notes eventually became worthless

2. government could only issue currency if it had gold to back it up

Franklin D. Roosevelt

  • becomes President in 1933
  • 1933- establishment of the Federal Deposit Insurance Corporation (FDIC)

$2,500 to $100,000

The History of American Banking

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