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When it comes to businesses in American history, banks are supposed to be some of the oldest ones in this category to consider. Let’s take one example. The Bank of New York happens to be one of the oldest financial institutions with its inception in 1784 and it had its 225th anniversary in the year 2009. The banking system can always be defined as the oldest, largest and important one of the industries. Most of the adults deal with banks on a regular basis. Moreover, for some of them, banks are really mysterious even to this date. 

Noted for two major functions:

Banks are mainly noted for two major functions. At first, they are here to operate a proficient payment system with a modernized economy, which cannot function well without any efficient form of the payment system. Most of the payments take place by writing checks, swiping the credit cards or paying bills through online banking. Most of the stock money is, in fact, that of the banks or financial institutions. The rest is under legal tender, as issued by the government under Federal Reserve noted and coins.

The second major economic function of banks is to work as financial intermediation, investing or even lending money that you deposit with them or just credit to create the business households, enterprises, and governments. This is one business side of banking. Most of these banks are profit-seeking arenas with stockholders to provide equity capital used for starting and maintaining banking business. You will learn more about that from

Profits and covering expenses:

Banks are noted to make profits and then cover expenses by charging borrowers more for the loans than they can pay depositors for keeping the money in the bank. The intermediate function is major as it helped finance so many generations of entrepreneurs building the American economy and ordinary businesses from going from one year to another. However, this inherent can be one risky business.

A brief history of the USA banking:

Over the past couple of years, the banking area has changed to a great extent. Right now, banks are offering wider ranges of services and products than before and deliver them in an efficient and faster rate. But the central function of the bank remains the same. Banks are here to provide community surplus funds by lending people to purchase cars and homes, and to start and even expand businesses. Banks are always vital to the health of the nation’s economy. Banks can always be the first choice for borrowing, saving and investing. So, learning a brief history is always a noted factor.

First banks starting from 1791 to 1832:

In most of the states of an earlier federal union, organizers of banks needed special permission from the state government to operate and open. For quite a whole, added layer of the oversight was provided by the Banks of the USA, which is a centralized bank found in 1791 at the initiative of the primary Secretary of the Treasury of this nation, Alexander Hamilton. The congressional charter then expired in 1811. Then you had the second Bank of the USA as created in 1816 and operating till 1832.

  • During those times, the city bankers were to be quite cautious about whom they are planning to lend and for how much of time. To ensure that they had enough cash available for matching unexpected demands from depositors, bankers will make some of the short term loans.
  • Around 30 to 60 days were associated with the norms during that time. Most of the time, the shopkeepers and manufacturers will use funds for paying the workers and suppliers, until they get the chance to sell goods to consumers. After selling, their second task was to repay the bank the amount of money taken as loan.
  • In some of the less settled areas of the country, the lending standards were noted to be quite liberal. The farmers over here might obtain bank loans for buying land and equipment, and then finance a shipment of the farm items to market. Mainly because of the unpredictability of the market conditions and weather, loan losses might prove to be a lot higher than usual.

The financial kinds from 1832 to 1864:

Whenever the second bank of the USA when just out of business in 1832, the state governments were the ones to took over the job of just supervising the banks now. This supervision, most of the time, proved to be not that adequate in nature. During that time, banks used to make loans by just issuing their own currency. These notes were mainly supposed to be convertible to cash on demand that is to silver or gold.

  • It was, during that time, the job of bank examiner to just visit the bank and certify if there is enough cash on hand for redeeming the outstanding currency.
  • As this is not always done, most of the banknote holders will find themselves stuck with the worthless paper.
  • It is sometimes, proven to be rather difficult or even not that possible to detect the notes, which were sound and which were fake mainly because of staggering variety.
  • By the time of 1860, over 10,000 various bank notes started to circulate throughout the country and a result, commerce has suffered quite a bit. Counterfeiting was quite epidemic and hundreds of banks failed.
  • Throughout the entire country, there was insistent demand for the uniform based national currency, as acceptable anywhere without any risk.
  • In response to that, Congress wasted no time further and passed the National Currency Act in the year 1863 under the rule of President Lincoln after he signed the revision of the law, also called the National bank Act.
  • These laws mainly established a new system for the national banks and a new government based agency as headed by Comptroller of Currency. The main work of comptroller was to organize and supervise new banking systems through periodic examinations and regulations.

The American Banking System of the 18th century has a great history of its own. You will come to learn more about it if you delve right deeper into the historical values now.