Essay On Banking System

Banking Systems

Most countries have a central banking system and in the United States the central banking system is the Federal Reserve. The Federal Reserve is lead by a board of Governors, which consist of seven governors, appointed by the President and confirmed by the Senate. The Federal Reserve Act was signed into law in 1913. In the 1700’s, before the Federal Reserve Act was signed into law, The Bank of the United States was started by President George Washington to assist with the debt that incurred due to war, funding the government, and to issue currency notes. However, the Bank of the Untied States closed in the early 1800’s because congress did not vote to renew its charter.

The next year after the closure of the Bank of the United States, a second Bank of the United States was started due to the war of 1812 and the federal debt began to climb again. Congress chartered the Second Bank to have uniform currency, and to act as a clearinghouse of other banks. The second bank faced the closing of its doors in 1836 when congress, again, did not vote to renew the charter. The National Bank started after the Civil War due to a need to finance the war. Under the National Bank, banks could choose between a national charter and a state charter. Once the civil war ended the National Bank struggled to stay in existence due to bank runs and in 1907 bankers and Congress laid the groundwork for centralized banking.

In 1908 The Aldrich-Vreeland Act was introduced to provide emergency currency, it also established the National Monetary Commission. President Woodrow Wilson replaced The Aldrich-Vreeland Act plan in 1912 when presented with the Glass-Willis proposal. The Glass-Willis proposal proposed the creation of twenty or more ...

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...to create a plan to insure deposits.

Conclusion

There are some similarities to the banking systems in the United States and China, but there are more differences than similarities. Both banking systems emerged due to economic turmoil from war. Both countries have a central banking system, for the United States, it’s the Federal Reserve and for China it’s the Peoples Bank of China. The structures of the banks are different, in the United States, the structure is private banks and public trade, in China, the structure is through the Peoples Bank of China. Both countries have regulatory agencies in place to oversee the banking systems operations, although China also allows the Peoples Bank of China to oversee some of the regulations and it is the central bank. Lastly, banking deposits are insured in the United States and banking deposits are not insured in China.