The history of the american bank

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The history of the american bank

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

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