1. CHAPTER - MONEY AND THE BANKING SYSTEM Characteristics of Money Money and Banking in History Deregulation Click to play

2. Money FUNCTIONS - medium of exchange - standard of value - store of value Click to play

3. Money New Necessary Characteristics of Money Security Anonymous Portable Infinite duration Two-way Off line capable Divisible Wide acceptability User friendly

4. Money Commodity money Click to play

5. Money Representative money EARLY BILL OF CREDIT CHECKS BONDS

6. MONEY Fiat money

7. Money Currency

8. Counterfeit Cash By the end of the Civil War, between one-third and one-half of all U.S. paper currency in circulation was counterfeit. On July 5, 1865, the Secret Service was created under the U.S. Treasury Department. In less than a decade, counterfeiting was sharply reduced. In the past ten years the breakdown of denominations counterfeited has changed dramatically. The total of known $50 and $100 notes counterfeited has increased by sixty percent.

9. Money and the Banking System Section 2 US vs. States Rights Federalists Anti-Federalists Alexander Hamilton Thomas Jefferson

10. History of Banking First Bank of the United States 1791-1811 - 20 year charter -Regulation of state banks -- Dollar as official US unit of currency (McCulloch v. Maryland, 17 U.S. 316 (1819) (USSC+) IMPLIED CONGRESSIONAL POWERS The US Supreme Court would be the umpire in the federal system, and states couldn't tax the national government and Congress has implied powers.) Lost charter in 1811 = (+) state banks (x3) - chaos b/c insufficient reserves

11. History of Banking Second Bank of the United States Restored order but distrusted and not popular w/ state banks 1816-1836 - 20 year charter

12. First Historical Period of Banking 1780-1860 Second Bank of the United States 1816-1836 - 20 year charter (1811-1816 - x3 increase in state banks) First Bank of the United States - 1791 - 1811 (By 1837 - x2 increase in state banks) Banking Crisis of 1837 - economic recession

13. History of Banking Andrew Jackson - vetoed the bill extending the National Bank - one year later - Banking Crisis of 1837 (due to the absence of federal regulation provided by Bank of US)

14. Second Historical Period of Banking 1860-1913 Dual banking system State Banks - chartered by states National Banks - chartered by Federal government Banking Acts of 1863 and 1864 - to bring uniformity and stability back to the banking system Supreme national currency eliminated 1600 state bank currencies Gold Standard Act of 1900 - paper money backed by gold - (repealed in 1934)

15. Third Historical Period of Banking 1913 - Present To establish reform and regulation The Federal Reserve System - 1913 - to act as the nations central bank All national banks required to join 12 Fed Reserve banks across the country Independent of President - exercise monetary policy - Prime lending rate

16. Modern Banking Reforms New Deal - during Great Depression, FDR ordered nations banks closed and audited to discourage runs Banking Act of 1933 est. Federal Deposit Insurance Corp (FDIC) insures deposits up to $100,000 (also FSLIC for Savings and Loans) FDRBank Run Click to play

17. Modern Banking Types of Banks Commercial - the most number of financial services and accounts Savings and Loan - mostly home mortgages but many financial services Mutual Savings - small farmers and seamen’s banks in rural areas Credit Union - large businesses and labor unions, owned by depositors

18. Deregulation Section 3 Depository Institutions Deregulation and Monetary Control Act 1980 - regional and national banks - flexibility in interest rates (+ competition) - SandLs get checking accounts - ATMs, Achs, POS terminals, debit cards, electronic home banking, digital cash Occurs when the government lifts some of its restrictions on an industry

19. Deregulation Section 3 Varied interest rates Open checking accounts, CD’s, card services, etc… by all institutions Allowed Internet Banking Increased reserves by all - No reserves are required on the first $6.6 million. Between $6.6 million and $45.4 million, deposits are subject to a 3% reserve. Above $45.4 million they are subject to a 10% reserve. Depository Institutions Deregulation and Monetary Control Act (1980)

20. Fun Fact The largest note ever printed by the Bureau of Engraving and Printing was the $100,000 Gold Certificate, Series 1934. These notes were printed from December 18, 1934 through January 9, 1935 and were issued by the Treasurer of the United States to Federal Reserve Banks only against an equal amount of gold bullion held by the Treasury. These notes were used for transactions between FRBs and were not circulated among the general public.