3. What is a bank?
An institution for receiving,
keeping, and lending money
4. Pre-Civil War Banking
The first banks were informal
businesses run by local merchants with
other specialties (banking on the side)
The first and second national banks
provided a safe and stable banking
system
Stable banking helped ensure the
economic growth of the United States
However….
5. Banking Debate
Federalists
Followers of Alexander
Hamilton
Strong central
government to establish
order
Centralized banking
was key to promoting
industry
National bank: a bank
chartered by the federal
government and has the
power to issue a
national currency and
manage funds
Anti-Federalists
Followers of Thomas
Jefferson
Leaving power in the
hands of the states
Feared that the wealthy
would gain control of
the bank
Decentralized banking
system: states regulate
their of banks
7. The First Bank of the United
States
Federalists won the
battle
Established in 1791
Granted a 20-year
charter
Functions:
Hold tax collections
Issue representative
money
Supervised state
banks
The good:
Stability to American
banking
The bad:
Difficult for “ordinary”
people to secure
loans for property of
businesses
Does the constitution
grant Congress the
power to create a
national bank?
8. After the First American Bank
The Bank’s charter expired in
1811 – not renewed
Lack of regulation from a national
bank caused great confusion:
State banks inconsistent
Printing more money that they
could not back with specie
Chartered banks that were not
viable or stable
No uniform currency lost
confidence in paper money
9. The Second Bank of the United
States
Chartered in 1816
Still limited to a 20-
year deal
Charged with
rebuilding confidence
in banking
Key figure in
reestablishing
stability: Nicholas
Biddle
Was it enough to
please Americans?
10.
11. The Free Banking Era (1837-63)
The fall of the second bank allowed state banks
to dominate once again
Between 1830 and 1837, state banks tripled
“Wildcat” banks on the frontier – doomed to fail
Fraud – banks taking money and running
Too many different currencies
Bank runs: widespread panics in which many
people try to redeem their money at the same
time
These banks often did not have enough specie on
hand
Banks failed public confidence waned
12. Stability in the 1800s?
By 1860, something needed to change… over
8,000 banks were issuing different currencies
For many years, the federal government did not
have a role in providing currency or regulating
specie reserves
Economic woes were worsened by the onset of
the Civil War in 1861
13. Civil War Currency
Both sides needed
to issue currency to
fund the war effort
Greenbacks:
issued by the
United States
Treasury (“demand
notes”)
Confederacy used
currency backed by
cotton
representative
money = success?
14. National Banking Acts of 1863 and
1864
Reforms to restore
confidence in paper
currency
Gave the federal
government the power to
charter banks and to issue
a national currency
Also restored the ability to
require banks to store
enough specie reserves to
cover their notes
Success?
15. The Gold Standard
Banking issues still affected the
country after the reform acts
Gold standard: a monetary
system in which paper money
and coins had the value of
certain amounts of gold
Set a definitive value for the
dollar
Banks could only issue
currency if they had enough
currency to back the notes
helped promote a stable
currency by preventing the
Editor's Notes
The American Army was only a fraction of the size of European Armies, so Woodrow Wilson had to encourage Americans to volunteer for service overseas. Wilson accomplished this feat with the help of Congress by passing the Selective Service Act in May, 1917.
On the first day of the SSA’s enactment in June, 1917, more than 9.6 million Americans registered for the draft and assigned a number. The first “great national lottery” was held in July.
Over the course of WWI, more than 24 million Americans registered for the draft. 2.4 million of those were actually drafted into service, out of 4.8 million total men in uniform. The vast majority of these volunteers and draftees were sent to assist the Allies in France.
The WIB determined what products industries made, where those products were sent, and how much they cost. Free enterprise made way for this new system which fulfilled the nation’s need for wartime materials.
Because of this shift in production, American citizens were asked to conserve food as a patriotic gesture. Herbert Hoover promoted special days where Americans were to not consume a certain type of food in order to ensure enough was being sent overseas to the men in France.
-Wheatless Mondays
-Meatless Tuesdays
-Porkless Thursdays and Saturdays
It wasn’t until the Spring of 1918 when the United States could sent substantial numbers of troops to the Western Front. By this time, Germany was beginning to wear down and the Central Powers began to lose their advantages over the Allies.
The combined efforts of the American soldiers in addition to those from France, Britain, and Italy gave the Allies a significant military advantage. By the fall of 1918, the Central Powers had all but given up. German and Austrian lines were ravaged by desertion, mutinies, and plain refusals to continue the fight.
On November 11, 1918 Germany has no choice but to surrender in a railway car in Compiegne, France.
