History Of Banks Essay

2389 words - 10 pages

Not banks but merchants were the sources of money and credit in the colonial period of American history (1607-1783). It was only after independence that the first commercial bank received a charter of incorporation - the Bank of North America, in 1781. British merchant banking houses stood at one end of a long chain of credit that stretched to the American frontier. They gave short-term (less than a year) credits to American merchants who then extended them to wholesalers of their imports, and the wholesalers passed them on to both urban and rural retailers - country stores and wandering peddlers.

When the Constitution went into effect in 1789 the nation boasted three commercial banks, the Bank of North America, chartered by Congress at the behest of Robert Morris, the superintendent of finance, and two state banks, those of Massachusetts and New York. The primary function of these and later commercial banks was the making of short-term loans, which they did either by issuing their own bank notes or by creating a deposit in the name of the borrower (opening an account to the person's credit) and dispersing checks to draw against it. Since the bank notes were promises to pay specie to the bearer on demand, banks had to maintain adequate reserves in order to do so. Defining adequacy, however, was no easy task, and numerous banks were forced into bankruptcy because they had overexpanded their loans and discounts.

Conservatism was the hallmark of the earliest commercial banks. The thinking of the time favored the establishment of a single quasi-governmental bank in each state that would operate in the public interest under private management. The overriding fear of political leaders was that excessive numbers of banks or loans too much in excess of specie reserves would hobble the taxing and spending functions of government by swamping the economy in depreciated paper. Political leaders also recalled very well the wild inflation resulting from unrestrained governmental issues of continental and state bills of credit (paper money) during the Revolution, and in the Constitution they barred the states from issuing them.

The management of the first Bank of the United States bus, chartered by Congress in 1791, reflected these concerns. Although the bus was a large commercial bank providing loans to the private sector as well as to government, its board of directors managed the institution in a highly conservative manner. Balance sheets for the years 1792-1800 reveal a generally high degree of success in maintaining the Bank's specie reserves. The ratio between bank notes in circulation and specie holdings was quite small.

Growing population and trade, however, created a need for comparable growth in the volume of money and credit - for a policy of accommodation rather than restraint. Sharp increases in the number of state banks and in their authorized capital stock represented a response to this need. During the life of the first bus (1791-1811)...

Find Another Essay On History of Banks

Multinational Banks Essay

1928 words - 8 pages People in the modern world keep their funds stored in some type of financial institution, whether it’s a small local bank that only operates in a small town or a large multinational bank that has offices in every major city around the world and caters to millions of people. With the responsibility of handling the assets of millions of people banks are sometimes accused for activities that may be illegal, such as money laundering: the method of

The Issue of Inflation Control as an Objectice of Central Banks

4521 words - 18 pages The Issue of Inflation Control as an Objectice of Central Banks This paper looks at the issue of inflation control as an objective of central banks. Viewing the British Commonwealth and Continental European models of ‘zero inflation’ in contrast with the moderate inflation policy of the US provides a case against zero inflation as a policy objective. A variety of issues that surround inflation; e.g., the inflation/unemployment

Authority of Banks

1154 words - 5 pages There is a wonderful passage in john Steinbeck’s epic novel The Grapes of Wrath that describes a scene of dialogue between a landowner and a ‘squatter’ where the landowner tells his tenant, “If a bank or a finance company owned the land, the owner man said, The Bank-or the Company-needs-wants-insists-must have-as though the Bank or the Company were a monster, with thought and feeling, which had ensnared them.” Banks are indeed monstrous

Islamic Banks in Malaysia

1149 words - 5 pages financial stability in their financial system. Reflecting the impact of the crises and excessive capital particularly in petrodollar country including the Gulf Cooperation Council (GCC) , therefore it provides an opportunity for Islamic financial institutions (IFS) globally including Islamic banks to grow significantly in recent years. For example, shariah -compliant assets rose by 28.6 percent in 2009, to $822 billion dollar from $639 billion

Information Technology & Banks

800 words - 3 pages going into a branch. However, with all of the benefits that technology brings to the banking industry, it also brings increased risks and threats. Many banks are faced with a growing concern over the impact of dissatisfied employees, unauthorized users, industrial spies and hackers exploiting and compromising their information systems and networks. As technology becomes more sophisticated, so do those who would like to enter the world of information

Financial English: Banks.

789 words - 3 pages * Functions of a central bank:- To implement monetary policy- To influence exchange rates by intervening in foreign exchange markets- To supervise the banking system- To act as a lender of last resort for commercial banks- Ways of implementing monetary policy:* Setting minimum and maximum interest rates to control the credit system* Controlling the amount of banknotes in circulation (issuing and withdrawing banknotes and coins)* Open market

How Can Chinese Shareholding Commercial Banks Create Competitive Advantage and Build Core Competence? A Case Study: Shanghai Pudong Development Bank.

9098 words - 36 pages customer-oriented and market-driven philosophy of SPDB.Due to the special history, background and policy of Chinese state-owned banks, four state-owned banks (Bank of China, The Industrial and Commercial Bank of China, China Construction Bank, China Agricultural Bank) are excluded to investigate in this project.1.2 The Aims and Objectives of The ProjectIn this project, Shanghai Pudong Developing Bank (SPDB) is used as a case study. Relying on this

Foreign Banks vs. U.S. Banks: Impact on small business loans

815 words - 3 pages Associated with the potential growth of small businesses, Stanley, Roger and Mc Manis (1993) examined the effects of foreign ownership of U.S. banks on the availability of loanable funds for small businesses. The study indicates a bias towards the portfolios by foreign-owned full service banks when compared to domestically-owned counterparts. The study also indicates that although there was decrease among business lending among all banks, the

Banks¡¦ Relationships With Their Publics.

975 words - 4 pages The issue to be tracked over the course of the semester is that of banks・ relationships with their publics. Banks have obligations to their shareholders, employees, and customers. Balancing these obligations has become increasingly difficult with all publics becoming more demanding. Banks have been trying to dispel the widely held impression of them being large, money hungry companies that do not care about their consumers. The large

AN EVALUATION OF COMMERCIAL BANKS LENDING METHODOLOGIES IN THE PROVISION OF MICROFINANCE SERVICES TO THE INFORMAL SECTOR A CASE STUDY OF ACCESS BANK (LIBERIA) LIMITED (2008-2009)

8962 words - 36 pages , Westerfield and Jordan, 1998).Credit reports on the customer's payment history with other firms. Information obtained from firms that sell information on the strength and credit history of business firms.Banks. Banks will generally provide some assistance to their business customers in acquiring information on the creditworthiness of other firms.The customer's payment history with the firm. The most obvious way to obtain an estimate of a customer's

The Sweet Hereafter by Russell Banks

997 words - 4 pages The Sweet Hereafter by Russell Banks Through our life experiences, we all have a different story or perception of an event that we envision to be the truth. The question is, how do we know what is the truth? In the novel by Russell Banks, "The Sweet Hereafter" tells a handful of stories from different points of view providing contrasting angles and meanings to the same event. As these stories interlock with each other and intertwine

Similar Essays

Banks And Banking Essay

3293 words - 13 pages 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

Marketing Environment For Banks Essay

1340 words - 5 pages reality marketing as a management process is in essence a simple concept, which holds that the orientation of a bank should be towards the customer's point of view, which in the past may have been neglected by many banks world over.Marketing environmentCompetition represents only a single force that operates in the marketing environment. The environment in which the marketer operates consists of the task environment and the broad environment. The task

Banks Essay

1004 words - 4 pages 8. Australian Financial Review, May 26, 1998 Tuesday, Supplement; Pg.44, 908 words, Focus Moves From Debt To Corporate Governance, Ian Crofts And Stephen Cheesewright,* Ian Crofts Is The Technical Manager of The Australian Society of Corporate Treasurers. stephen cheesewright is an executive consultant at advisory & risk management services, anz investment bank.... In that time the role of the treasury professional has significantly evolved

Regulatory Intervention Within Major Uk Banks

1011 words - 4 pages Justice and the New York District Attorney’s Office. It was agreed that the Federal Reserve will receive $100 million in fines and other enforcement agencies $227 million. HSBC’s fine was the biggest money laundering settlement with US authorities in history, followed by Standard Chartered penalty of $667m in total. Table taken from http://www.economist.com/news/finance-and-economics/21568403-two-big-british-banks-reach-controversial