Timeline of American Banking

– The Intolerable Acts are passed and the First Continental Congress is formed in response

1775 – The Second Continental Congress meets, the American Revolutionary War begins

1776 – The Second Continental Congress approves and signs the Declaration of Independence

1777 – The Second Continental Congress adopts the Articles of Confederation

1781 – Bank of North America
Robert Morris, the Financier of the Continental Congress, created the Bank of North America with two purposes in mind: creating a strong currency and funding the war against Great Britain with loans from France and the Netherlands. While the Bank of North America would become a private bank, it would remain a powerful source of finance throughout the 1800s, providing the Federal government loans in support of the War of 1812 and the Civil War.

Continental Currency—1776
Image Courtesy the Museum of the American Revolution:link

1787 – The Constitutional Convention takes place in Philadelphia

1791 – First Bank of the United States
Inspired by Mr. Morris, Treasury Secretary Alexander Hamilton would call for a central Bank in 1791 to regulate the nation’s currency and help finance the government. As a compromise to those who feared the power a central bank might have over the nation, Hamilton proposed the bank have a 20-year charter, and the nation’s capital be moved from New York to a location on the Potomac River between Maryland and Virginia. The First Bank existed as the United States’ central bank until 1811 when Congress failed to renew its charter by one vote in the Senate and one vote in the House.

First Bank of the United States—1800
Image courtesy of the Library of Congress: link

1812 – War of 1812
Fighting the War of 1812 caused the United States to incur a large debt. At the close of the war in 1815, it appeared that the Government might not be able to make payments on the loans, causing the value of the American dollar to plummet and the government to halt exchanging gold and silver for bank notes.

A View of the Bombardment of Fort McHenry—1819
Image courtesy of the Library of Congress: link

1817 – Second Bank of the United States
The crisis at the end of the War of 1812 prompted President Madison and members of Congress to propose a second central bank. This bank would be larger than the first, with regional branches and a 25 year charter. The Second Bank of the United States was chartered in 1817.

Second Bank of the United States—1827
Image courtesy of the American Antiquarian Society: link

1828 – Andrew Jackson becomes President

1832 – Andrew Jackson vs. Nicholas Biddle
Andrew Jackson was a devout opponent to the central bank of the United States. He saw it as serving the interests of northern industry by oppressing southern agriculture. The President of the Second Bank, Nicholas Biddle, attempted to pass the re-chartering of the  bank during President Jackson’s re-election campaign, hoping the public pressure would force Jackson to sign the charter. Jackson vetoed the charter, ending the Second Bank of the United States in January of 1836.

Set to Between Old Hickory and Bully Nick—1834
Image Courtesy of the Library of Congress: link

1837 – Panic of 1837
A lack of gold and silver currency caused the Panic of 1837. Many factors caused this shortage of hard money, but most of these were the result of President Jackson’s actions both in closing the Second Bank of the United States, and in restricting the deposit of federal funds to western and southern banks. The panic resulted in a recession that lasted for almost seven years.

The Times—1837
Image Courtesy of the Library of Congress: link

The Era of “Free” Banking
The end of the Second Bank of the United States marked the beginning of what is called the Era of Free Banking. Without a federal banking system, states offered charters to any bank that asked, often without oversight. Banks came and went, while states, banks, and even private companies offered their own paper currency at will. This came to an end with  the passage of the National Banking Act of 1863.

The Erie and Kalamazoo Railroad Bank $2 bill—1854
Image courtesy of the Harford Coin Company: link

1856 – Robert Latham Owen is born

1857 – Panic of 1857
Land speculation in the west caused the Panic of 1857 was by, crashing wheat prices, and the failures of railroad companies. The United States Supreme Court decision in Dred Scott v. Sanford may have caused western land prices to plummet, due to the possibility of slavery expanding into those territories. The recession caused by the panic was more severe in the North than the South, which had the effect of alleviating tensions in the South over the issue of slavery, as some southerners felt the North might now realize how much it depended on the Southern economy and be more amenable to the needs of slave-owners.

Run on the Seamen's Savings' Bank During the Panic—1857
Image courtesy of the Library of Congress: link

1861 – The Civil War
Congress pushed for banking laws and established the first national currency during the Civil War, while the Confederate States of America began issuing their own currency. The National Bank Act of 1863 created the first national system for issuing bank charters. Prior to this act, States issued bank charters and state banks issued their own currency. After the Civil War, these powers fell to nationally chartered banks under the supervision of the Department of the Treasury.

Five Dollar "Greenback"—1862
Image courtesy of the Smithsonian Institute: link

One Hundred Dollars Confederate Currency—1862
Image courtesy of Manuscripts and Archives, Yale University: link

1869 – The First Transcontinental Railroad is finished

1873 – Panic of 1873
The Panic of 1873 was a global crisis that caused the longest depression in the history of the world, known today as the Long Depression. There were many causes to the panic, but the two most important occurred in Germany and the United States. The young nation of Germany declared in 1871 that it would no longer mint silver coins, called Thalers. The United States also declared it would no longer mint silver coins in 1873. This caused silver prices to plummet, and had a ripple effect on land values, railroad companies, and banks.

Run on the Fourth National Bank, No. 20 Nassau Street—1873
Image courtesy of the Library of Congress: link

1877 – Reconstruction ends

The Long Depression
The Long Depression began in 1873 and lasted until 1896 in some countries. In the United States, the Long Depression ended in 1879, which made it 22 months longer than the Great Depression. During the Long Depression, 18,000 business and 10 states declared bankruptcy.

We've All Got to Retrench—1893
Image courtesy of the Library of Congress: link

1884 – Panic of 1884
New York City banks halted investments and called in loans, due to depleted gold reserves in European countries. Many smaller banks failed without the extra money from the big banks in New York. The United States then plunged into another recession, after showing signs of recovering from the Long Depression. Unemployment in the Northeast surged to 14 percent from 2.5 percent, and elsewhere rose to 7.5 percent.

$2 Silver Treasury Note—1896
Image courtesy of the National Numinsmatic Collection at the Smithsonian Institution: link

1889 – The Land Run of 1889

1893 – Panic of 1893
Land speculation in Argentina and failing railroad companies led to a gold shortage in U.S. banks. This caused more than 500 banks and 15,000 businesses to fail in the next four years. People blamed President Grover Cleveland and the democrats who were in charge for the country’s latest economic problems, which allowed Republican nominee William McKinley to win the presidency. The Klondike Gold Rush in Alaska in 1897 brought the country out of the depression and promoted growth for the next 10 years.

Coxey's Army in Camp—1894
Image courtesy of the Colorado Historical Society: link

1898 – The Spanish-American War

1907 – Panic of 1907
A failed attempt to corner the copper market by unscrupulous financiers caused a run on New York City banks. Without the funds to pay all of their depositors, the banks called in loans given to other, smaller banks. The ripple effect spread throughout the country and the value of stocks at the New York Stock Exchange fell almost 50 percent. With the country on the verge of a crisis, it was a private citizen, J.P. Morgan, who stepped in to save the banks and halt the crisis. Many financers and economists worried about what would have happened without J.P. Morgan, and began the call for a national bank that could perform similarly in the future. Those calls for action would lead to the Federal Reserve Act of 1913.

The Central Bank—1910
Image courtesy of the Library of Congress: link

1913 – The Federal Reserve Act is signed into law

1914 – World War I
A conflict on a scale never seen in the history of the world, the Great War began in 1914. Over ten million people, soldiers and civilians, died during four years of fighting. The Federal Reserve opened in November of 1914, four months after the war began. Wile the United States did not enter the war until 1917, the Federal Reserve was able to aid the war effort by helping businessmen sell war goods to U.S. allies in Europe. When the United States entered the war, the Federal Reserve was responsible for selling “Liberty Bonds,” savings bonds sold by the government to fund the American war effort. Fighting ended at 11:00 AM on November 11, 1918 and the war ended the next year with the signing of the Treaty of Paris.

Liberty Bond Drive Poster—1918
Image courtesy of the Library of Congress: link

1927 – Charles Lindbergh makes the first trans-Atlantic flight, and the first motion picture with sound is released

The Great Depression
Throughout the 1920s, credit was very easy to obtain and a lot of stockbrokers were “buying on the margins,” or borrowing money to buy stocks with other stocks used as collateral. This caused a boom in the New York Stock Exchange, fed by speculation. On October 29, 1929, a day known as “Black Tuesday,” the stock market crashed, losing 25 percent of its value over two days. The market showed some signs of recovery over the next months, but the brief recovery was halted by a banking panic that spread across the country over the next three years. Over 4,000 banks failed, unable to pay out all of their deposits during bank runs. The Dust Bowl also played a role, the decade-long drought caused many farmers to go bankrupt and contributed to the rising levels of unemployment. At the peak of the Great Depression, approximately 25 percent of Americans were without work.

Family in front of their shack at May Avenue Camp
in Oklahoma City—1939
Image courtesy of the Library of Congress: link

While many different people and institutions attempted to end the Depression, none of the solutions put forward had a dramatic effect on the crisis. President Roosevelt’s New Deal and several banking laws helped, but by 1940 the unemployment rate was still at 15 percent. It was the start of World War II and the increased war production in American factories that finally broke the Great Depression, as the United States attained almost 100 percent employment.

1941 – World War II
World War II officially began on September 9, 1939, when the army of Nazi Germany invaded Poland. The United States supported her allies in Europe with weapons and vehicles, but did not officially enter the war until after the surprise attack on Pearl Harbor on December 7, 1941.  World War II was unlike any war, before or since. Over 40 million people died in the conflict worldwide. At the same time, Nazi Germany and its collaborators perpetrated the atrocity known as the Holocaust, killing over 11 million individuals, 6 million of them people of Jewish heritage.

The Federal Reserve helped the United States fund the war by once again selling war bonds to generate money.

Buy War Bonds—1942
Image courtesy of the Library of Congress: link

1948 –The Berlin Airlift Occurs

1950 – The Korean War begins and lasts three years

1954 – The Supreme Court rules on Brown v. Board of Education, de-segregating public schools

1963 – March on Washington, led by Dr. Martin Luther King, Jr.

1969 – The Woodstock Music & Art Fair takes place in Bethel Woods, New York

1974 – Nixon Resigns

1979 – The Iran Hostage Crisis

1982 – Penn Square Bank and the Oil Market Crash
The 1970s and early 1980s were a turbulent time for countries in the Middle East. The Iranian Revolution was in 1979 and the Iran-Iraq War began in 1980. This caused the price of oil to increase, due to lower production in Middle Eastern countries. Banks in the United States saw this as an opportunity to invest in oil companies, and the largest purveyor of these investment opportunities was the Penn Square Bank. Penn Square Bank was located inside the Penn Square Mall in Oklahoma City, and began as a small bank. When oil prices began to rise, bankers at Penn Square Bank found investors lining up to buy oil company bonds from them. Then, the price of oil began to drop due to increased domestic production as a result of increased investment.

Without the high oil prices, oil and gas companies started to go under. This meant they couldn’t pay Penn Square Bank for their loans, and Penn Square Bank couldn’t pay their investors. Penn Square Bank  failed in 1982. The deposits in the bank at that time were valued at 470 million dollars. The FDIC didn’t have enough money in reserve to insure all of the bank’s deposits, and no other bank wanted to assume responsibility for deposits at such a large sum.

Banks from across the United States had invested in the oil company loans at Penn Square Bank and many of them  looked ready to fail.  Even Continental Illinois National Bank and Trust Company, the seventh largest bank in the United States, was failing. The FDIC and the Federal Reserve stepped in and saved Continental, preventing its total failure, in 1984. This was the largest government seizure of a bank, until the failure of Washington Mutual in 2008. In the end, 139 banks in Oklahoma and 737 banks nationwide failed as part of the same crisis that claimed the Penn Square Bank.

Newspaper Headlines from the Savings and Loan Crisis—1942
Image courtesy of the FDIC: link

1991 – The World Wide Web debuts as an Internet service

1999 – The Dow Jones Industrial Average closes above 10,000 for the first time

2001 – The September 11th attack on the World Trade Center occurs

2004 – Facebook launches

2008 – The Great Recession
In the early 2000s, the United States saw an unprecedented rise in both housing costs and household debt. Easy credit and lax loan standards led to individuals taking on debt to pay for more and more expensive housing. In 2007, the housing bubble burst. The New York Stock Exchange entered a downward spiral. Over the next year and a half the Dow Jones Industrial Average dropped from an all –time high of over 14,000 to its lowest point of 6,600. The crisis spread around the world, causing high unemployment, as families and nations struggled to pay off the debt they had accumulated during the housing boom of the early 2000s.

Trading Floor of the New York Stock Exchange—August, 2008
Image courtesy of Wikimedia Commons: link