The history of banking is quite complex. Before banks people entrusted their silver and gold to be deposited with a Goldsmith, who in return gave the depositor a receipt for return payment on demand.
The first actual bank was “The Bank of England”, in 1694. The bank did not hold cash as we know it today. They used government stock, then switched to bank notes which were used to purchase items and pay for their land.
As the practice of banking became more popular, private banks began to open. They offered the same pay on demand bank notes as the larger institution, just on a much lower scale.
Before long banks could be found in other countries, such as Italy, China and Scotland. In 1727 “The Royal Bank of Scotland” opened for business.
A man named, John Law, born in 1671 in Scotland, played a large role in early banking practices. He studied economics and wrote a book titled, “Money and Trade Considered, with a Proposal for Supplying the Nation with Money” written in 1705. Law, was best known for his schemes especially the famous “Mississippi Scheme.” despite his trails and tribulations to improve banking he died a broke and disappointed man.
In 1791, the first US bank opened, “The First Bank of the United States” it was in business for 20 years.
The second US bank was “The Second Bank of the United States”, in 1836 President, Andrew Jackson was against the power that the bank seemed to hold so he closed it.
1836 to 1865 was known as the “FREE BANKING ERA”, during this era banks issued their own currency. This practice was not good for the economy, having no backing for the currency, many people lost their money. This action brought about the “Banking Act of 1863.”
The National “Banking ACT of 1863”
Congress passed this act to secure banks the crashing economy. Currency was now backed by the government, which created a national currency. Private banks were still in operation and pushed for people to deposit their currency in their (bank,what is known as today as a checking account.)
Despite the “Banking Act of 1863” the economy still crashed.
“THE FEDERAL RESERVE ACT”
This act has 25 sections and many sub-sections of rules and regulations to govern how banks are operated. This act was signed in to effect on December 23, 1913 by President, Woodrow Wilson.
In June of 1933, The Federal Reserve, put in to place the insurance act, which insures each individual’s money up to $25,000. Today that insurance is $100,000.
In recent decades the OCC (Comptroller of Currency) have taken over the supervising of all federal banking laws.
The banking industry has seen many up and downs over the past few centuries. On the brighter side it has come a long way since the early days of banking. Banking is a crucial part of most individuals lives. Without banks we wouldn’t have homes, cars or businesses.
I personally feel my money is safer at the bank than under my mattress. Despite the economy’s ups and downs and the huge debt that lingers over the United States.
Sources
www.fdic.gov
www.fdrs.org
www.ushistory.org