Bank of America Tower, New York City
Focus Question: What are banks and financial institutions and how do they operate?
Topics on the Page
History of American Banks and Banking
Banking in the United States Today
Federal Deposit Insurance Corporation
Credit Unions
Federal Reserve Banking
- Discrimination in Banking Practices
Teaching Students about Banking
History of American Banks and Banking
Purpose of Banks:
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The main role of a bank is to keep money safe
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Offers interest on a deposit to entice deposits
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Lends money to people and businesses, with interest
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Offer financial services and advice
History of Banking and basic idea of banks and other financial institutions
Background information on What Is A Bank? from ThinkQuest.
Click here for a Crash Course on Banks.
Timeline of the US Banking System
Check this link out: History of American Banks
Origin and regulation
- Alexander Hamilton wanted a Federal Banking system, which all states would use, instead of creating an individual system for each state.
- Prior to this, only States were allowed to create and charter banks.
- In 1791 the US government charted the First Bank of the United States, which replaced the bank established in 1781.
- After the end of the Revolutionary War, a number of state banks were chartered.
- The First Bank of the United States expired in 1811 when Congress failed to renew the charter.
- The Second Bank of the United States was chartered in 1816, and shut down in 1836. This started the rise of commercial banking, which is the banking that we are familiar with today.
The Stock Market Crash of 1929
The Stock Market Crash
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Causes
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Wild Speculation
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Credit raised by the Federal Reserve, harder to borrow money
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Rapid growth of holding companies and investment trusts, these tended to create debt
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Many bank loans that could not be liquidated and a recession that had began that summer
Game simulating Speculation in the 1920’s!
Black Tuesday: The Stock Market Crash, from Reading Through History
An essay on the Crash from the website of the Federal Reserve
After the Great Depression, banks were required to keep a certain percentage of assets to protect from a rush.
African Americans in the Great Depression:
- Did not qualify for many New Deal Programs
- In several African Americans could be fired and replace with white workers
- Roosevelt refused to pass anti-lynching legislation because he feared it would make Southern politicians vote against other New Deal legislation
- There are also great works of children's literature on the subject such as Bud, Not Buddy by Christopher Paul Curtis
Banking Today in the United States
For information about how banks affected the American economy, see the 2008 Financial Crisis.
Role of Banking system:
1) operate payment systems: checks, bank cards, credit cards
2) Financial Intermediation: lending or investing money into the economy, housing or investments.
Financial Crisis of 2008:
Crash Course Economics video on the Financial Crisis
US Banking Today
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Largest Bank in the United States with $2.39 trillion in assets. |
Top 10 Biggest Banks in America, Forbes
FDIC: Federal Deposit Insurance Corporation
Click here for a Crash Course on the Great Depression and why the FDIC is important.
A FDIC protects a portion of your money so that if a bank run would happen, part of your money would be protected, attempting to keep from a depression.
Credit Unions
The first Credit Union was founded in 1908 in New Hampshire.
Define Credit Union: Credit unions worldwide offer members much more than financial services. They provide members the opportunity to own their own financial institution and help them create opportunities such as starting small businesses, building family homes and educating their children. Credit unions are democratic, member-owned financial cooperatives. Credit unions exist to serve their members and communities. Credit unions are safe, convenient places to access affordable financial services. (Definition from the WOCCU)
The Three Agencies with the Power to Make or Break Economies is a TED Talk about the power of private credit rating agencies.
Credit Cards
Multimedia Resources
Watch here to learn about the history of Credit Cards.
Watch here to learn about how Credit Cards works.
Watch here to learn about how Race and Credit in America.
Some rules to follow with Credit Cards
- Never spend more than you can pay back in a month
- Credit Cars are Not free money
- Don't fall for advertisements
- Try and find a credit card with a low interest-rate
Home Owners' Loan Corporation Philadelphia redlining map, 1936
Redlining
- Redlining: Redlining is an unethical practice that puts services (financial and otherwise) out of reach for residents of certain areas based on race or ethnicity.
It can be seen in the systematic denial of mortgages, insurance, loans, and other financial services based on location (and that area’s default history) rather than an individual’s qualifications and creditworthiness.
Notably, the policy of redlining is felt the most by residents of minority neighborhoods. (Investopedia)
Redlining, Still a Thing, 2015
Red Lining Syracuse, NY, 1930s
Home Owners' Loan Corporation
Chicago's Racial Restrictive Covenants
How A Long-Ago Map Created Racial Boundaries That Still Define Boston
Minority Banking Milestone Timeline When minorities were underserved by American banks, they took matters into their own hands and created banks to serve themselves.
Federal Reserve Banking
Check this link out: Federal Reserve Bank.
- In short: the Federal Reserve Bank is the bank for banks and the US.
- US Treasury collects taxes, and the taxes are deposited in the FRB.
- It plays a key role in the economy, and has the ability to spur the economy by adjusting the interest rates. The interest rates affect how much the banks pay and ultimately their customers
Discrimination in Banking Practices
Bank to Pay 10.6 million over Loan Discrimination
Future of Banking
This TED Talk discusses about the future of banking and financial technology. Chris Skinner assesses the nature of banking from the 80s to today, fueled by greed and individualism. He talks about how kids will turn this around and how new companies are implementing positive changes.
“Little ideas can make massive changes. Those ideas can come from technology doing good for the planet and good for society and good for financial services rather than keeping it as greed is good.”
Teaching Students about Banks and Banking
Graph shows delinquencies on US mortgages, totals of 30 days+, 60 days+ and 90 days+ delinquencies, but without loans in any stage of foreclosure process, seasonally adjusted figures
Lesson Plan on banking in the 20th and 21st centuries.
Teaching students how credit cards work
Learn about individual borrowing, mortgages and the role of consumers from Inside the Meltdown from PBS.
Reality Check is an interactive game that shows how much money you need to make to do the things you want to do
The FDIC's learning page for educators provides teaching resources on banking for any age
Alexander Hamilton vs. today's banking system
Click here for The Most Powerful Women in Banking from The American Banker.
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