ECON 2200 Lecture Notes - Lecture 9: National Monetary Commission, National Bank Act, Reserve Requirement

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ECON 2200
Lecture 9
Banking
In 1912, Congress appointed National Monetary Commission. NMC's
report:
o denounced entire U.S. banking system
o listed 17 points of “gross deficiency
o called for establishment of a central bank
Why was the banking system in such a disarray?
o Creation of Federal Reserve as a response to the NMC’s report
II. The Dual Banking System
A. Banks chartered by both states & federal government
(NB = national bank; SB = state bank)
At this time, there was NO interstate branch banking
1. Means that whether you were a national or state bank,
your charter only allowed you to operate in a given state.
Typically, the further you were from where the money was issued, the
less it was worth.
Once, chartered, banks could print and issue bank notes.
B. National Bank Act (1863) (p. 370-372)
Goals of the Act:
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