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The history of the american bank

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  • 1. The History of the American Bank Economics 2
  • 2. Before the Civil War
    • Banks were informal businesses that merchants managed
      • Not always safe if the merchant went out of business
    • After the Revolution
      • Leaders agreed that a main goal must be to establish a safe and stable banking system
      • Needed for trade with other nations
  • 3. Two Views of Banks
    • Federalists
      • Believed that the country needed a strong central government to establish economic and social order
      • Centralized banking system was necessary for the U.S. to develop industry and trade
    • Antifederalists
      • Wanted to leave power in the hands of the states
      • Decentralized banking system, regulated individually by the states
  • 4. Hamilton vs. Jefferson
    • Hamilton=Federalist
      • Washington appointed him Sec. of Treasury
      • Proposed a National Bank (a bank licensed by the national government)
      • Would issue a single currency; monitor banks; manage federal funds
    • Jefferson=Antifederalist
      • Wanted it to be left to the states
      • States rights
  • 5. First Bank of the U.S.
    • Federalists successful=strong central bank
      • Hold tax money
      • Help government carry out power to tax, borrow money, regulate commerce
      • Issue bank notes
      • Make sure bank notes were backed by gold or silver
    • Opponents argued that a national bank was unconstitutional
    • First Bank only functioned until 1811, when it’s 20 year charter ran out (Hamilton’s death)
  • 6. Chaos…
    • When the charter expired, state banks began issuing bank notes that they could not back with gold or silver
    • Banks were not stable
    • Prices rose rapidly
    • Bankers printed more money than they could back
  • 7. Second Bank of the U.S.
    • President Andrew Jackson opposed the national bank
    • Failed and led to the Free Banking Era
      • States created and ran their own currencies
      • Bank runs and panics
      • Fraud
      • Wildcat banks-wilderness
  • 8. Later 1800’s
    • Civil War
      • Union produced “greenbacks”
      • Confederate issued money backed by cotton
    • National Banking Acts of 1863 and 1864
      • Gave the federal government power
      • Power to charter banks
      • Power to require banks to hold adequate gold and silver reserves to cover bank notes
      • Power to issue a single national currency
        • Ended state currencies
  • 9. Gold Standard
    • A monetary system in which paper money and coins are equal to the value of a certain amount of gold
      • Definite value for the dollar
      • Gov’t could issue currency only if it had gold in the treasury to back notes
      • We do not use this anymore! (1. No gold 2. Our economy/dollar is self sustainable)
  • 10. Comparing Early U.S. to the Euro!
    • After watching “The formation of the Euro,” create a list of comparisons and contrasts between the struggles described in the video and the currency problems that occurred in the early United States!
    • Use your notes, text Ch. 10 Sec. 2, Euro video clip