The National Banking System National Bank Requirements Set up in 1863 Use National or N.A. in its name Pass stiff inspections by the Comptroller of the Currency  Treasury Department Official Banks had to purchase government bonds  Used to back the national currency Dual Banking Some banks did not want to join National System  Had to pay a 10% tax on privately issued bank notes many started checking accounts  Could not be taxed Led to a dual banking system

The National Banking System Need for Further Reform Banking system was not designed for checks  Take too long for checks to clear from bank to bank Currency backed by bonds was difficult to maintain Banks had no place to go for help in times of need The Federal Reserve System Passed in 1913 Nation’s first central bank Member banks own the Fed Issue Federal Reserve notes  Replaced all other forms of currency

Banking During the Great Depression Banks grew rapidly until 1921 Bank Failures No banks had insurance, so people pulled their money March 5, 1933 FDR called for a bank holiday Federal Deposit Insurance Banking Act of 1933 (Glass-Steagall Act)  Created the FDIC  Now insured up to $250,000 Helped people feel safe about putting money in banks

Other Depository Institutions Commercial Banks Chartered by states or the National Banking System 2 characteristics  Catered to commercial and business interests  Issued demand deposit accounts Thrift Institutions Mutual savings bank  Depositor-owned financial institution MSBs sold stock to raise additional funds  Became savings banks  Introduced the first Negotiable Order of Withdrawal (NOW) accounts

Other Depository Institutions Savings and Loan Associations Invest majority of funds in home mortgages Credit Unions Owned and operated for their members Sponsor provides management Contributions are generally deducted from paychecks Also offer share drafts  Similar to NOW accounts Assets of credit unions are loans they make to members