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