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Banking Deregulation Essay

4247 words - 17 pages

Bank Deregulation:
The Real Effects to Our Country and the Implications within Global Economy?

The purpose for this research paper is to identify the effects of banking deregulation on the US economy and try to tie in the global economy as well. Information being used for the positions taken was made using resources online and books that have been collected. The question that I am attempting to answer regarding deregulation are; what was the driving reasons behind the decisions made supporting deregulation and what were the effects of deregulation on the US economy. In order to answer these questions it is imperative that we understand the historical aspect ...view middle of the document...

The third aspect we will investigate will be the real effects of the deregulation on both the micro and macro economy. We will attempt to answer the fundamental question, “Are we economically healthy?” Finally we will attempt to peer in to the future and make predictions of what might occur after covering the previous topics.
We start our journey by stepping through history and uncovering the banking regulatory legislation that was created starting at the founding of our country. The goal of doing this is to better understand why the regulations were put into place, to help us understand the backdrop, and to give more meaning for the reasons of such actions. We will then highlight the beginnings of banking deregulation covering the new legislation in the same detail. We begin with the National Banking Act which was the first major step in banking regulation.
The National Banking Act of 1863/1864 established a system of national banks for banks and created the United States Banking System. Under this act, the Office of the Comptroller of the Currency and Department of the Treasury was created. The intent of the act was to create a single national currency that the Unites States would operate under. This prevented the problem of notes from being circulated by several different banks. It also established that banks could issue notes however they would be backed by the US Government provided that banks met capital deposit requirements held in the Office of the Comptroller of the Currency. At this point in time, the US Government’s efforts were to push a standardized currency and allowed taxation of bank issued notes in order to obsolete this activity.
Just one year later the National Banking Act of 1863 was superseded. Under the new Act, bank charters would be issued federally which eliminated state run banks. The intention for the new act was to eliminate the potential of bribes accepted by state legislatures to issue charters for local banks. During this time the Act created 1500 new national banks while surrendering them at the state level. During the period from 1864 to 1913 national banking grew rapidly. The number of national banks had grown to 7,473 by the year 1913. The state run banking was nearly eliminated and allowed the emergence of smaller, local banks. These smaller local banks were not held to the same capital adequacy requirements like state or national banks and grew to 15,526 by 1913. The National Banking Act of 1863/1864 stands today as the pillar of our banking system in the United States and is directly responsible for creating the two offices mentioned as well as the dual structure that we know today.
In 1927 Congress approved the McFadden Act and it became a Federal law. This Act gave individual states the authority to govern branches located within the state. The act was intended to provide competitive equality to national banks allowing them to compete with state banks by permitting them to create and...

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