The Development of Modern Banking

1
The Development of Modern Banking

• Chapter 11 Section 3

2
I. Revising the Banking System

• The National Banking Act (1863) strengthened the
  nations financial system by creating a system of
  national banks.

3
II. The Federal Reserve System

• The Fed was set up as a corporation and any bank
  that joined the system had to purchase shares of
  stock in the system
• privately owned banks own the Fed, not the
  government.
• The Fed is publicly controlled.

4

• The president appoints and Congress approves the
  Feds Board of Governors.

5

• Banks were overextended during the 1920s, and
  many failed after the Great Depression hit in
  1929.
• The Federal Deposit Insurance Corporation insured
  customer deposits in the event of a bank failure.

6
Question

• What are the advantages of the Federal Reserve
  System being a privately owned institution that
  is publicly controlled? What are the
  disadvantages?

7

• A credit union is a nonprofit service
  cooperative that is owned by and operated for the
  benefit of its members.

8
Question

• Why do you suppose credit unions are able to
  offer lower interest rates on loans than
  commercial banks?
• Commercial banks are for-profit, so the interest
  rates include a profit margin credit unions are
  nonprofit, and keep costs to members as low as
  possible