The history of banks in the United States is a both a complex story and an interesting one. Although they are now common in the United States, this wasn't always the case. In fact, when the United States first became an independent nation, there were no financial institutions at all. Instead, colonists used bartering and commodities, such as tobacco or livestock for trade. They would also use coins from the France, Portugal, and Spain. |
As you might expect, there was a lot of chaos because of this and America's new leaders quickly realized that unless all of the states participated in one type of financial system, there was a good chance that the newly created government would fail. To overcome this, Alexander Hamilton would establish the first of several banks that were to open in the United States. This first financial institution opened in 1791.
Unlike the financial institutions today that provide loans to both businesses and individuals, early banking catered more to commercial accounts and would only offer loans to shopkeepers and manufacturers. These loans were considered short-term and generally had to be repaid in as little as thirty to sixty days. This short length of time was not as much about lessening the risk that the business wouldn't be able to repay the loan as it was about making sure there was enough of a cash flow available in case someone who had deposited money with them, suddenly wanted to get it back out.
Unfortunately, Congress was unhappy with the ownership of this first institution, which was 20-percent owned by the government with the rest being owned by private investors. To prevent this financial institution from moving forward, politicians refused to renew the Charter when it came up for vote in 1811. Soon after, the states began opening their own financial institutions and each state issued its own currency. When the War of 1812 started, however, trade was disrupted and the government went back into debt. To offset this, the government then opened another institution in 1816 called The Second Bank of the United States. This time, however, it was President Andrew Jackson that did not like this "all-powerful" institution. This institution would close in 1836 after its Charter expired as well.
Once again, the States returned to opening their own banks. Since there were no regulations in place, many of these institutions would fail since there wasn't enough business in place to keep them open. Despite these issues, this type of banking would have continued if it were not for the Civil War. Since the government was in debt once again because of the war, there was renewed interest in national banking and another government-backed institution opened in 1863. Interestingly, all financial institutions in the United States have used the same type of currency ever since.
As time passed, Americans became more relaxed about the idea of the government determining what private institutions could do. This paved the way for The Federal Reserve, which was created in 1913 and remains the supervisor for all banks scattered across the United States today.
Looking for banks? Kalamazoo, MI has plenty to choose from. Kalsee Credit Union has a variety of options available. To learn more, visit: http://www.kalsee.com.
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