Use precise geolocation data. Select personalised content. Create a personalised content profile. Measure ad performance. Select basic ads. Create a personalised ads profile. Select personalised ads. Apply market research to generate audience insights.
Measure content performance. Develop and improve products. List of Partners vendors. Banking has been around since the first currencies were minted—perhaps even before that, in some form or another. Currency, in particular coins, grew out of taxation. As empires expanded, functional systems were needed to collect taxes and distribute wealth.
The history of banking began when empires needed a way to pay for foreign goods and services with something that could be exchanged easily. Coins of varying sizes and metals eventually replaced fragile, impermanent paper bills.
Coins, however, needed to be kept in a safe place, and ancient homes did not have steel safes. According to World History Encyclopedia, wealthy people in ancient Rome kept their coins and jewels in the basements of temples.
The presence of priests or temple workers, who were assumed devout and honest, and armed guards added a sense of security. Historical records from Greece, Rome, Egypt, and Ancient Babylon have suggested that temples loaned money out in addition to keeping it safe. The fact that most temples also functioned as the financial centers of their cities is a major reason why they were ransacked during wars. Coins could be hoarded more easily than other commodities, such as pound pigs for example, so a class of wealthy merchants took to lending coins, with interest , to people in need.
Temples typically handled large loans and loans to various sovereigns, and wealthy merchant money lenders handled the rest. The Romans, who were expert builders and administrators, extricated banking from the temples and formalized it within distinct buildings. During this time, moneylenders still profited, as loan sharks do today, but most legitimate commerce—and almost all government spending—involved the use of an institutional bank.
According to World History Encyclopedia, Julius Caesar, in one of the edicts changing Roman law after his takeover, gives the first example of allowing bankers to confiscate land in lieu of loan payments. This was a monumental shift of power in the relationship of creditor and debtor , as landed noblemen were untouchable through most of history, passing debts off to descendants until either the creditor or debtor's lineage died out.
The Roman Empire eventually crumbled, but some of its banking institutions lived on in the form of the papal bankers that emerged in the Holy Roman Empire and the Knights Templar during the Crusades. Small-time moneylenders that competed with the church were often denounced for usury.
Eventually, the various monarchs that reigned over Europe noted the strengths of banking institutions. As banks existed by the grace, and occasionally explicit charters and contracts, of the ruling sovereignty, the royal powers began to take loans to make up for hard times at the royal treasury, often on the king's terms. This easy financing led kings into unnecessary extravagances, costly wars, and arms races with neighboring kingdoms that would often lead to crushing debt.
In , Philip II of Spain managed to burden his kingdom with so much debt as the result of several pointless wars that he caused the world's first national bankruptcy —as well as the world's second, third, and fourth, in rapid succession. The trend of turning a blind eye to the creditworthiness of big customers continues to haunt banks today.
Banking was already well-established in the British Empire when Adam Smith introduced the " invisible hand " theory in Empowered by his views of a self-regulated economy, moneylenders and bankers managed to limit the state's involvement in the banking sector and the economy as a whole. When World War I broke out in mid, U. Through this mechanism, the United States aided the flow of trade goods to Europe, indirectly helping to finance the war until , when the United States officially declared war on Germany and financing our own war effort became paramount.
Following World War I, Benjamin Strong, head of the New York Fed from to his death in , recognized that gold no longer served as the central factor in controlling credit. During the s, the Fed began using open market operations as a monetary policy tool. During his tenure, Strong also elevated the stature of the Fed by promoting relations with other central banks, especially the Bank of England. During the s, Virginia Representative Carter Glass warned that stock market speculation would lead to dire consequences.
In October , his predictions seemed to be realized when the stock market crashed, and the nation fell into the worst depression in its history. Many people blamed the Fed for failing to stem speculative lending that led to the crash, and some also argued that inadequate understanding of monetary economics kept the Fed from pursuing policies that could have lessened the depth of the Depression.
In reaction to the Great Depression, Congress passed the Banking Act of , better known as the Glass-Steagall Act, calling for the separation of commercial and investment banking and requiring use of government securities as collateral for Federal Reserve notes. The Act also established the Federal Deposit Insurance Corporation FDIC , placed open market operations under the Fed and required bank holding companies to be examined by the Fed, a practice that was to have profound future implications, as holding companies became a prevalent structure for banks over time.
Also, as part of the massive reforms taking place, Roosevelt recalled all gold and silver certificates, effectively ending the gold and any other metallic standard. In the Bank Holding Company Act named the Fed as the regulator of bank holding companies owning more than one bank, and in the Humphrey-Hawkins Act required the Fed chairman to report to Congress twice annually on monetary policy goals and objectives.
It did so at the request of the Treasury to allow the federal government to engage in cheaper debt financing of the war. To maintain the pegged rate, the Fed was forced to give up control of the size of its portfolio as well as the money stock. Conflict between the Treasury and the Fed came to the fore when the Treasury directed the central bank to maintain the peg after the start of the Korean War in President Harry Truman and Secretary of the Treasury John Snyder were both strong supporters of the low interest rate peg.
The President felt that it was his duty to protect patriotic citizens by not lowering the value of the bonds that they had purchased during the war. But it is inherently a risky business.
Will the borrower pay back the loan with interest? And what happens if, in the pursuit of profit, banks do not maintain levels of reserves and capital consistent with their own stability?
There were no modern banks in colonial America. Colonial Americans gave credit to each other, or relied on credit from merchants and banks in Great Britain. Money consisted of foreign coins and paper money issued by the governments of each colony. When George Washington became our first president under the Constitution in , these were the only three banks in the United States.
Washington tapped Hamilton to be our first secretary of the treasury. In his first two years in office Hamilton moved quickly, and often controversially, to give the United States a modern financial system. He implemented the federal revenue system, using its proceeds to restructure and fund the national debt into Treasury securities paying interest quarterly. He defined the US dollar in terms of gold and silver coins; these would serve as reserves backing bank money as banks proliferated.
The BUS prompted state legislatures to charter more banks—there were about thirty of these by , more than by , — by the s, and — on the eve of the Civil War. These banks were corporations, and the states also chartered many non-bank business corporations.
A distinctly modern US financial system did not exist in the s but was firmly in place by the mids, after which it expanded rapidly to serve, even foster, the rapid growth of the US economy. The banking system was a key component of it.
Since most banks were business enterprises chartered by state legislatures, banking became highly politicized. A party in control of the legislature would grant bank charters to its backers and not those of the other parties. Banks also became sources of revenue: state governments invested in banks and earned dividends from them, they charged banks fees for granting charters of incorporation, and they taxed them.
Individual legislators accepted bribes to help some banks get charters and to prevent other banks from getting them. These general incorporation laws made the granting of bank charters an administrative rather than a legislative function of government. This increased the access of Americans to banking. The BUS, the national or central bank, also proved to be politically controversial. That weakened the ability of the government to finance the War of In Congress therefore chartered a second BUS, an even larger corporation than the first.
History repeated itself in the early s when, after both houses of Congress voted to re-charter the BUS, President Andrew Jackson vetoed the bill and his veto could not be overridden.
The second BUS, like the first, did a good job of regulating American banking and promoting financial stability. But Jackson thought it had too many privileges and was too friendly to his political opponents.
The BUS federal charter expired in The United States would not again have a central bank until when the Federal Reserve Act went into effect. Without a central bank to provide oversight of banking and finance, the expanding banking system of the s, s, and s suffered from some major problems, even as it supplied the country with ample loans to finance economic growth.
One problem was financial instability. Banking crises occurred in , —, and , years when many banks had to suspend convertibility of their bank notes and deposits into coin because their coin reserves were insufficient. Now you have one regular visitor to your site for new topics. Read more…. Search for:. Conclusion Banks have come a long way from the Temples of the ancient world, but their basic business practices and reasons for existence have not changed, namely safety and security via trust and accountability.
Related Articles. Notify of. Inline Feedbacks. Think Easy Money. Darina Confidus. Justin Bra. God's mercy Aiyedona.
Recent Posts. Coming soon - the Coming soon - the detailed Coming soon The Republic Coming soon — the The fight against financial crime remains a hot topic with current levels of effectiveness questioned To download the To download Privacy Policy Terms and Conditions.
0コメント