Banks And Banking Essay

3293 words - 13 pages

IntroductionBanks have begun to use assetbuilding plans to stimulate assetbased development in areas of the United States such as lowincome and minority urban spaces. These plans have focused on creating more real estate development and removing urban "blight" (real estate based asset building). Banks' efforts have also encouraged communitybased financial and business enterprises.There are two main types of banks in the United States: regional (and thrift) banks and major (mega) banks. The first type includes smaller financial institutions that primarily focus on one geographical area. In the U.S., there are six such geographical areas: the Northeast, Southeast, Central or Midwest, Northwest, Southwest, and Far West. Providing depository and lending services is the regional banks' primary line of business. The second type of bank includes banks that operate local or regional branches but whose main line of business is in financial centers; an example is New York City, where banks get involved with international transactions, underwriting, and so on.The United States government is very involved in the banking industry, as it sets restrictions on borrowing limits and the amount of deposits that banks must hold in their vault. Also, the Federal Reserve Bank has a major influence on the bank's profitability, as it sets the interest rates which influence the credit market (loans).A Short History of U.S. Banks and BankingThe history of the United States banking system has been largely influenced by the decisions of the American government. Initially, the banking industry was operated and regulated by the specific state where it resided and the banks required special authorization from the specific state government to open and operate.The history of banking in the United States did not begin with the Federal Reserve Bank. Originally, an additional layer of oversight was provided by the Bank of the United States, a central bank that received its charter in 1791 from the United States Congress. When the congressional charter expired in 1811, the Second Bank of the United States was created in 1816 and operated until 1832. However, this Second Bank met with considerable controversy. Those with agrarian interests were opposed to the bank because they feared it would benefit commercial and industrial interests over their own. In those days, city bankers tended to be extremely cautious about to whom they lent money and for how long, as they wanted to make sure they had enough cash available to meet unexpected demands from depositors. The typical banker of the time generally made shortterm loans. Typically, manufacturers and shopkeepers would use their own funds to pay their suppliers and workers until they could sell the goods to customers. After selling their goods they would pay off the bank loan.A National Banking System: 1832 to 1864Because of the unpredictability of weather and market conditions, loan losses tended to be higher in less settled parts of...

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