Question

Central Bank (US Federal Reserve Bank): Please explain in mircrosoft word/ typing format

1.Explain US Banking History from 1776 to 2017.

Answer 1

History of banking system in USA:

• Initially after independence, many founding fathers were against creating central banking system fearing it would act like Bank of London. Bank of London played critical role in spreading colonialism. Other section of founding fathers was in favor creating strong central banking system to manage whole country. Ultimately, R. Morris regarded as father credit and money circulation assisted in creating Bank of America. First bank of American was created based on Model of Bank of London. But it was responsible for only 20 % of money supply. It was relatively less powerful.
• Further, second bank was created based on model of first bank and its branches were replicated across the country. Such banking system continued up to 1836.
• Free banking system remained in vogue between 1837 to 1862. Government significantly reduced supervision over banks. Banks in this period were short lived. It was most unstable banking system.
• National banks were created through the National Bank Act of 1863. High standard reserves and practices were maintained by the banks. Uniform currency was created through this period.
• Bank system was severely affected by the bank run which was reported in 1907.
• Federal Reserve system: it developed gradually. Federal Reserve was created to supervise regional Reserve banking system. Wilson insisted that regional Fed should be controlled Federal Reserve.
• Functions and powers of Fed evolved over a period of time. Federal reserve has been mandated to maximize employment and stabilize inflation.