lesson2f - 318 1 Chapter 13 Financial Industry Structure...

Info iconThis preview shows pages 1–4. Sign up to view the full content.

View Full Document Right Arrow Icon
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
318 1 Chapter 13 Financial Industry Structure Unit Banks . Banks with Branches SOURCE: Federnl Deposit lmurance Corporation, Historical Statistics of Banking, http://ww2.fdic.gov/~ob/indexXnrp. tendency toward consolidation with nondepository institutions. The second half of the chapter will study the functions and characteristics of nondepository institutions. Banking Industry Structure Today's banking system bears little resemblance to the one Americans knew in 1960 or 1970. Then people used their neighborhood banks. Not only did customers walk into the bank to conduct their business, but they knew the tellers and bank managers they saw there. Today most of us don't go beyond the ATM in the lobby, and if we do, we probably don't recognize the employees inside. Banks have been transformed so that location doesn't matter the way it once did. This change has occurred on both the national and the international level. The best way to understand the structure of today's banking industry is to trace it back to its roots. That means looking at the legal history of banking. In this section we'll learn that banking legislation is the reason we have so many banks in the United States. We'll look at the trend toward consolidation that has been steadily reducing the numb& of banks since the mid-1980s. And we'll briefly consider the effects of globalization. A Short History of U.S. Bankinq If you want to start a bank, you can't just rent a space, put up a sign, and open the door. You need permission in the form of a bank charter. Until the Civil War, all bank charters were issued by state banking authorities. Because the authors of the U.S. Constitution feared a strong central government, in the early years of the Republic the federal govern-
Background image of page 2
320 1 Chapter 13 Financial Industry Structure Furthermore, if the Comptroller of the Currency won't allow a bank to engage in a particular practice, the bank can always change its charter. This ability to switch back and forth between state and federal charters created what amounts to regulato- ry competition, which has hastened innovation in the financial industry. In the 1990s, changes in banking law required federal and state agencies to coordinate their oversight of financial intermediaries. But the globalization of the financial system, together with banks' ability to move funds easily across international boundaries, means that today regulatory competition exists not so much between state and feder- al government regulators but between national government regulators. The next major event in U.S. banking history occurred in 1933, in the midst of the Great Depression. From 1929 to 1933, more than a third of all U.S. banks failed; individual depositors lost $1.5 billion, or about 3 percent of total bank deposits. At the time, total income was less than $50 billion, or about $1 billion a week.
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 4
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 07/25/2008 for the course ECON 330 taught by Professor Minetti during the Spring '08 term at Michigan State University.

Page1 / 10

lesson2f - 318 1 Chapter 13 Financial Industry Structure...

This preview shows document pages 1 - 4. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online