Timeline Description: In the colonial era, most American colonists depended on their local governments to provide money, and used credit from local merchants or from Britain. There was no federal banking system until 1791, when Alexander Hamilton pushed for the Bank of the United States to be chartered. Public and government opinion on a federal banking system fluctuated wildly, and for much of the 19th century the BUS was closed. Finally, in 1913, the Federal Reserve Act re-opened a federal banking system, which weathered several financial crises in the 20th and 21st centuries.
|July 17, 1790||The Bank of Pennsylvania opens.
Philadelphia merchants open the Bank of Pennsylvania on July 17, 1790, in order to provide funds for the Continental Army in the fight against Britain. Prior to this opening, the colonies had no established banking system, instead depending on each colonial government to issue money and coins. Colonists relied on credit from local merchants or merchants and banks in Britain.
|January 4, 1782||The Bank of North America opens.
The Continental Congress, which rules the fledgling nation while it continues to fight for independence from Britain, approves the Bank of North America. The BNA, which opens in Philadelphia on January 4, 1782, is the nation's first commercial bank. It loans money to federal and state governments as well as to Philadelphia businesses, and these actions encourage commerce between the colonies as well as between the U.S. and other countries.
|February 25, 1791||Congress creates the Bank of the United States.
Secretary of the Treasury Alexander Hamilton asks Congress to set up a national bank for the new nation, and the Bank of the United States (BUS) is created on February 25, 1791. The government deposits tax money in the Bank. The Bank, in turn, issues paper money to pay the government's bills and make loans to farmers and businesses. The new Bank thus encourages economic growth.
|1811||The charter for the BUS runs out.
Despite the Bank's help in developing the economy, Republicans oppose a national bank, and in 1811 the charter for the Bank of the United States runs out. Without a national bank, state banks must make loans and issue money, but with so much money in circulation, prices rise rapidly. As a result, the economy suffers.
|April 10, 1816||A second national bank is chartered.
By 1816, Republicans realize that the nation needs a central bank to regulate the money supply, and they support a law to charter the second national bank. The second BUS restores order to the nation's money and helps American businesses grow.
|March 6, 1819||The federal government prevents Maryland from taxing the Bank.
After the second Bank is chartered, Maryland attempts to tax the Bank in order to drive it out of the state. James McCulloch, the Bank cashier, refuses to pay the tax, and the conflict is resolved in the Supreme Court. In McCulloch v. Maryland (1819), the Court rules that states have no right to interfere with federal institutions within their borders. This ruling strengthens federal power and encourages the Bank to continue to grow.
|1832||President Andrew Jackson forces the Bank to close.
Although the charter for the BUS is not up for renewal until 1836, President Andrew Jackson, who sees the Bank as undemocratic, vetoes a bill to renew the charter four years early. As a result, the Bank becomes a major issue in the 1832 election, and the popular vote rejects the Bank's renewal. To further cripple the bank, Jackson demands that federal money be deposited in state banks rather than the BUS.
|1836||The BUS closes, leading to an economic depression.
Without a new charter or federal money, the BUS is forced to close in 1836. As state banks can now lend money without limit, they begin printing paper money that is not backed by gold or silver, and speculation runs wild. When speculators cannot exchange their paper money for gold and silver, many banks are forced to close. The nation plunges into an economic depression.
|January 1, 1861||Jay Cooke launches an investment banking firm.
On January 1, 1861, the wealthy banker Jay Cooke launches the first investment banking firm in the U.S. Borrowing three million dollars from the Pennsylvania government, he sets up Jay Cooke & Company, which helps finance Northern efforts during the Civil War. The company negotiates loans for the government and sells government bonds.
|February 25, 1863||Congress approves the National Bank Act.
As the Union battles the Confederacy in the Civil War, the war grows increasingly expensive, with no clear tax program in place to finance it. On February 25, 1863 Congress approves the National Bank Act, which is meant to establish a national banking system, make federal war loans, and create a national currency. Additional legislation converts state banks to national ones, but the currency supply remains precarious until 1913.
|December 23, 1913||The Federal Reserve Act sets up a new system of federal banks.
Under President Woodrow Wilson, who hopes to restore the national economy, Congress passes the Federal Reserve Act in 1913. The Act sets up a new system of federal banks, the first since the BUS closed in 1836. The Act also gives the government the power to raise or lower interest rates and control the money supply.
|October 24, 1929||The Great Depression begins in the U.S.
After years of prosperity, the American economy begins to decline as consumer spending drops, although stock market prices continue to climb. On October 24, 1929, the stock market bubble finally bursts, and investors sell off millions of shares in panic. In the wake of the stock market crash, consumer confidence plummets, and Americans withdraw their deposits from banks, creating the Great Depression.
|March 6, 1933||The Bank Holiday closes all of the nation's banks.
In response to the Great Depression, President Franklin Delano Roosevelt launches his "New Deal" to attempt to fix the nation's economic problems. In his first major act, Roosevelt closes all of the nation's banks for four days beginning on March 6 1933, known as the Bank Holiday. When the banks re-open, he assures the public that they can return their money to the banks. This helps begin to restore balance to the economy.
|June 16, 1933||The Glass-Steagall Act separates commercial and investment banking.
Roosevelt introduces further legislation with the Banking Act of June 16, 1933, also known as the Glass-Steagall Act, which separates commercial banking from investment banking. It also introduces federal deposit insurance and regulation of interest rates on deposits. The act is not repealed until 1999, when deregulation encourages banks to make bigger loans than they previously could.
|August 9, 2007||The Global Financial Crisis leads to increased regulations.
After the repeal of the Glass-Steagall Act, banks overextend their abilities to make loans and assume significant debt. The burst of the housing bubble directly leads to the Global Financial Crisis on August 9, 2007, which causes the worst financial crisis since the Great Depression. As the nation recovers, a series of reforms are put into place to increase banking regulation, which will hopefully prevent future crises.