The Changing Face of American Banking : Deregulation, Reregulation, and the Global Financial System

He also wasn't successful at staving off the gold standard; his Republican opponent and the winner of the 1896 elections, William McKinley, was in favor, and the country formally joined the gold standard in 1900. Many countries adopted the gold standard because they wanted to emulate Britain's success with its financial policies. Their ability to do so was aided by two factors. The first was the discovery of new gold deposits in the United States and Australia during the 1850s, 1860s, and 1870s. About 20 percent of the gold in circulation today was found between 1801 and 1900, as compared to only about 10 percent that was mined prior to 1800. 25 The other development was technological advancement in the form of the laying of transatlantic cables starting in the 1860s, combined with the advent and advancement of the steamship from 1840 onward. These offered the necessary infrastructure for the gold standard to operate. An international gold standard is said to exist when, in most major countries, gold is the only precious metal used in coins, there is two-way convertibility between gold and national currencies at a stable ratio, and gold can be freely exported and imported. Domestic money supply would increase and decrease as gold flowed in and out of a country. Moreover, in order to support unrestricted convertibility into gold, banknotes were backed by gold reserves of a minimum stated ratio. Hence the currencies of most countries were directly convertible into gold. For example, one dollar could be turned in to the U.S. Treasury in exchange for one-twentieth of an ounce of gold; similarly, one British pound could be turned in to Her Majesty's Treasury in exchange for one-quarter of an ounce of gold. Hence the exchange rate between the pound and the dollar was 0.2/1. So tying currencies to gold established a fixed-exchange-rate regime. The gold standard came with a set of advantages. The highly stable exchange rates provided an environment conducive to international trade and investment, with London as the hub of international transactions. One of the great features of the gold standard was that trade imbalances were taken care of by the system. Consider a scenario where Britain exported more to France than what France exported to Britain. Net exports had to be accompanied by a net flow of gold in the opposite direction as payment. Under the gold standard, money supply would go up (down) as the country experienced an inflow (outflow) of gold. Hence money supply and the price level in Britain would go up, and those in France would fall, causing British exports to decline and French exports to rise. This would cause the initial British trade surplus to disappear. This phenomenon became known as the price-specie-flow mechanism. The price-specie-flow mechanism, in addition to balancing trade, also stabilized prices. If prices began to rise, they could only rise so much before the reduction in exports and increase in imports spurred a gold outflow that would lower the money supply and, in turn, the price level. However, there were two main drawbacks of the gold standard. Money supply couldn't be changed at will, as it had to be consistent with the fixed exchange rate set out by the rate of conversion between the various currencies and gold. More With Almost 6,300 Commercial Banks, Significantly More Than In Any Other Country, The World Of Us Banking Is Unique, Fascinating, And Always In Flux. Two Principal Pieces Of Legislation Have Shaped The Banking Structure In This Country: The Mcfadden Act Of 1927, Which Prohibited Banks From Branching Into Other States, And The Glass-steagall Act Of 1933, Which Separated Commercial And Investment Banking Activities. The Repeal Of The Glass-steagall Act In 1999 Was One Of The Main Contributing Factors Behind The Global Financial Crisis Of 2008. This Measure Resulted In The Passage Of The Dodd-frank Wall Street Reform And Consumer Protection Act Of 2010, Which Once Again Prohibited Commercial Banks From Making Certain Types Of Speculative Investments. The Changing Face Of American Banking Analyzes The Impact Of Both These Acts - As Well As That Of Their Subsequent Repeal - In Depth, Examining The Real Effects Of Government Regulations On The Us Commercial Banking Sector. Ray Chaudhuri Pinpoints The Evolving Nature Of Us Commercial Banks And Banking Regulations And Explores Their Impact On The Economy. Instead Of Just Focusing On Banks And Regulations, This Work Considers The Correlations And Causality Between Banking Performance And Economic Growth And Productivity. It Also Brings The Banking Literature Up To Date With The 2008-2009 Financial Crisis And Its Aftermath, Including The Passage Of The Dodd-frank Act Of 2010 And Its Effect On American Banking. A Brief Chronology Of U.s. Banking Regulations -- The Free Banking Era -- The Big Markets : New York And California -- The Little Markets : The Story Of Unit Banks -- The Early Days Of The Federal Reserve -- The Great Depression & The Glass-steagall Act -- The Stable Years -- The Housing Market And The Savings & Loan Associations Crisis : The 1980s -- Deregulation And The Great Recession : The 1990s And The 2000s -- Reregulation : The Response To The Financial Crisis -- Wall Street And Main Street : Banking Regulations And The Real Economy -- U.s. Banks And The Global Financial System -- The Road Ahead. Ranajoy Ray Chaudhuri. Includes Bibliographical References (pages 241-260) And Index. Chaudhuri pinpoints the evolving nature of US commercial banks and banking regulations and explores their impact on the economy. With almost 6,300 commercial banks, significantly more than in any other country, the world of US banking is unique, fascinating, and always in flux. Two principal pieces of legislation have shaped the banking structure in this country: The McFadden Act of 1927, which prohibited banks from branching into other states, and The Glass-Steagall Act of 1933, which separated commercial and investment banking activities. The repeal of the Glass-Steagall Act in 1999 was one of the main contributing factors behind the global financial crisis of 2008. This measure resulted in the passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, which once again prohibited commercial banks from making certain types of speculative investments. The Changing Face of American Banking analyzes the impact of both these acts - as well as that of their subsequent repeal - in depth, examining the real effects of government regulations on the US commercial banking sector. Ray Chaudhuri pinpoints the evolving nature of US commercial banks and banking regulations and explores their impact on the economy. Instead of just focusing on banks and regulations, this work considers the correlations and causality between banking performance and economic growth and productivity. It also brings the banking literature up to date with the 2008-2009 financial crisis and its aftermath, including the passage of the Dodd-Frank Act of 2010 and its effect on American banking With almost 6,300 commercial banks, significantly more than in any other country, the world of US banking is unique, fascinating, and always in flux. Two principal pieces of legislation have shaped the banking structure in this country: The McFadden Act of 1927, which prohibited banks from branching into other states, and The Glass-Steagall Act of 1933, which separated commercial and investment banking activities. The repeal of the Glass-Steagall Act in 1999 was one of the main contributing factors behind the global financial crisis of 2008. This measure resulted in the passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, which once again prohibited commercial banks from making certain types of speculative investments. The Changing Face of American Banking analyzes the impact of both these acts - as well as that of their subsequent repeal - in depth, examining the real effects of government regulations on the US commercial banking sector. Ray Chaudhuri pinpoints the evolving nature of US commercial banks and banking regulations and explores their impact on the economy. Instead of just focusing on banks and regulations, this work considers the correlations and causality between banking performance and economic growth and productivity. It also brings the banking literature up to date with the 2008-2009 financial crisis and its aftermath, including the passage of the Dodd-Frank Act of 2010 and its effect on American banking.-- Provided by Publisher Front Matter....Pages i-xi A Brief Chronology of U.S. Banking Regulations....Pages 1-6 The Free Banking Era....Pages 7-19 The Big Markets: New York and California....Pages 21-34 The Little Markets: The Story of Unit Banks....Pages 35-42 The Early Days of the Federal Reserve....Pages 43-70 The Great Depression and the Glass-Steagall Act....Pages 71-82 The Stable Years....Pages 83-94 The Housing Market and the Savings and Loan Associations Crisis: The 1980s....Pages 95-110 Deregulation and the Great Recession: The 1990s and the 2000s....Pages 111-146 Reregulation: The Response to the Financial Crisis....Pages 147-184 Wall Street and Main Street: Banking Regulations and the Real Economy....Pages 185-200 U.S. Banks and the Global Financial System....Pages 201-210 The Road Ahead....Pages 211-215 Back Matter....Pages 217-279