BANKS

BY DR. JUNE TERPSTRA

 What’s your experience with
banks?
 Checking
 Saving
 Fees
 Loans
 Credit
 Interest
COULD YOU MANAGE WITHOUT IT?
 MONEY AS DEBT
 http://www.brasschecktv.com/page/135.ht
ml
  A simple form of banking was practiced by the
ancient temples of Egypt, Babylonia, and Greece,
which loaned at high rates of interest the gold
and silver deposited for safekeeping.

Private banking existed by 600 AD
and was considerably developed
by the Greeks, Romans, and
Byzantines.
 Medieval banking was dominated by the
Jews and Levantines because of the
strictures of the Christian Church against
interest and because many other
occupations were largely closed to Jews.
Banking developed rapidly throughout the
18th and 19th cent., accompanying the
expansion of industry and trade, with each
nation evolving the distinctive forms
peculiar to its economic and social life.
• Goldsmiths had always been the
storehouses for cash and valuables so
they were in a unique position to evolve a
system of banking. It was they who
introduced paper money and checks. They
also started to lend their customers'
money for interest.
The Bank of Venice (1171) and the Bank of
England (1694), functioned in connection
with loans to the government

The Bank of Amsterdam (1609), to receive

deposits of gold and silver.
 17th Century
 During the 17th century trade in England
developed at a rapid pace and new methods of
finance were required.
 As the Usury Laws, which had forbidden the
lending of money for interest, had been repealed
in the previous century, banking was in a
position to develop in England.
The Rothschild banking family of
Naples
founded by
Calmann (Carl) Mayer von Rothschild
(1788-1855) who was sent to the
Kingdom of the Two Sicilies
his sons were sent to different European
cities to establish a financial institution to
invest in business and provide banking
services.
Essential Money supplies of the
colonists
1. Traditional native currencies such as furs and
wampum which were essential for frontier
trading with the indigenous population but
thereafter were widely adopted by the colonists
themselves, e.g. in 1637 Massachusetts declared
white wampum legal tender for sums up to one
shilling, a limit raised substantially in 1643.
2. The so-called "Country Pay" or "Country
Money" such as tobacco, rice, indigo, wheat,
maize, etc. - "cash crops" in more than one
sense.
Tobacco was used as money in and around
Virginia for nearly 200 years, so lasting about
twice as long as the US gold standard.
3. Unofficial coinages, mostly foreign, and
especially Spanish and Portuguese coins.
--John Hall set up a private mint in
Massachusetts in 1652 and his popular "pine-
tree" shillings and other coins circulated
widely until the mint was forced to close down
in 1684.
4. The scarce but official British coinage.
5. Paper currency of various kinds, particularly
in the colonies' later years.
A Brief History of U.S. Banking
 The First Banks: 1791 to 1832
 In most states of the early federal union, bank
organizers needed special permission from the
state government to open and operate.
 For a while, an additional layer of oversight
was provided by the Bank of the United States,
a central bank founded in 1791 at the initiative
of the nation's first Secretary of the Treasury,
Alexander Hamilton.
 The Bank was bitterly opposed by
Thomas Jefferson and James Madison, who
saw it as an engine for speculation, financial
manipulation, and corruption.
 Congress refused to extend its charter in 1811,
and as a result Madison's government had
great difficulty financing the War of 1812.
 A second Bank of the United States
was created in 1816 and operated
until 1832.
 It was basically a copy of the First Bank, with
branches over the country. Andrew Jackson,
who became president in 1828, denounced it as
an engine of corruption that benefited his
enemies.
 His destruction of the bank was a major
political issue in the 1830s and shaped the
Second Party System, as Democrats in the
states opposed banks and Whigs supported
them.
• In those days, city bankers tended to
be extremely cautious about to whom
they lent and for how long. Thirty to
sixty days was the norm.
• Typically manufacturers and
shopkeepers would use these funds
to pay their suppliers and workers
until they could sell the goods to
customers. After that sale they would
pay off the bank loan.
.
• In less settled parts of the country, lending
standards tended to be more liberal. There
white male farmers could frequently obtain
bank loans to buy land and equipment and
finance the shipment of farm products to
market. Because of the unpredictability of
weather and market conditions, loan losses
tended to be higher too.
 Many Kinds of Money: 1832 to
1864
• banks made loans by issuing their own currency.
These bank notes were supposed to be convertible,
on demand, to cash—that is, to gold or silver.
• It was the job of the bank examiner to visit the bank
and certify that it had enough cash on hand to
redeem its outstanding currency.
• Because this was not always done, many bank
note holders found themselves stuck with worthless
paper.
• It was sometimes difficult or impossible to detect
which notes were sound and which were not,
because of their staggering variety.
 By 1860 more than 10,000 different bank
notes circulated throughout the country.
 Commerce suffered as a result.
 Counterfeiting was epidemic. Hundreds of
banks failed.
 Throughout the country there was an
insistent demand for a uniform national
currency acceptable anywhere without
risk.
 National Currency Act in 1863 &
National Bank Act of 1864
These laws established a new system of national
banks and a new government agency headed
by a Comptroller of the Currency.
The Comptroller's job was to organize and
supervise the new banking system through
regulations and periodic examinations.
Creating a National Currency: 1865
to 1914
 National banks bought U.S. government
securities, deposited them with the Comptroller,
and received national bank notes in return.
 By being lent to borrowers, the notes gradually
entered circulation. On the rare occasion that a
national bank failed, the government sold the
securities held on deposit and reimbursed the
note holders.
 National bank notes were produced and
distributed through an involved process.
 Once the basic engraving and printing were
done (at first by private printers, later by the
U.S. Bureau of Engraving and Printing), the
notes were entered on the books of the Office
of the Comptroller of the Currency, then
returned to the printer where the seal of the
Treasury Department was stamped on each.
 National bank notes were the mainstay of the
nation's money supply until Federal Reserve
notes appeared in 1914.
The Banking Crisis: 1929 to 1933

 In the last quarter of 1931 alone, more than

1,000 U.S. banks failed, as borrowers defaulted
and bank assets declined in value.
 This led to scenes of panic throughout the
country, with long lines of customers queuing up
before dawn in hopes of withdrawing cash
before the bank had no more to pay out.
 Who benefited?
• The banking crisis was the first order of
business for President Franklin D.
Roosevelt. The day after taking office, on
March 5, 1933, he declared a bank
holiday, closing all the country's banks
until they could be examined and either be
allowed to reopen or be subjected to
orderly liquidation. The bulk of this work
fell to the Office of the Comptroller of the
Currency (OCC).
June 1933, Congress enacted federal
deposit insurance.
 Accounts were covered up to $2,500 per
depositor (now $100,000).
 Other laws were passed regulating bank
activities and competition, with the objective
of limiting risks to banks and reassuring the
public that banks were, and would remain, safe
and sound.
A Capitalist Revolution
• During the last quarter century, banking has undergone
a revolution. Technology has transformed the way
Americans obtain financial services.
• Telephone banking, debit and credit cards, and
automatic teller machines are commonplace, and
electronic money and banking are evolving.
• The techniques of bank examination have changed, too.
Today OCC examiners use computers and technology to
help ensure that the banks they supervise understand
and control the risks of the complex new world of
financial services.
 1913: Creation of the Federal
Reserve System
 In Thorstein Veblen’s The Theory of the Leisure Class. he
argues that the modern businessman, including the
international banker, is not different from a barbarian because
he uses brute force, cunning and competitive skills to make
money from others, and then lives off the spoils of conquests
rather than producing things himself.
 Modern scholars, such as the Professor of Economics
Robert Heilbroner, describe robber barons in a similar way. In
his book The Worldly Philosophers Heilbroner claims that
robber barons used deception, violence, kidnappings and
extraordinary dishonesty to gain economic power and
industrial supremacy.
 Robber Baron JP Morgan
 John Pierpont Morgan (April 17, 1837 – March 31, 1913) was an
American financier, banker, philanthropist, and art collector who
dominated corporate finance and industrial consolidation during his time.
 In 1892 Morgan arranged the merger of Edison General Electric and
Thompson-Houston Electric Company to form General Electric. After
financing the creation of the Federal Steel Company he merged the
Carnegie Steel Company and several other steel and iron businesses to
form the United States Steel Corporation in 1901.
 He bequeathed much of his large art collection to the
Metropolitan Museum of Art in New York City. At the height of Morgan's
career during the early 1900s, he and his partners had financial investments
in many large corporations. By 1901, he was one of the wealthiest men in
the world. He died in Rome, Italy, in 1913 at the age of 75, leaving his
fortune and business to his son, Jack Pierpont Morgan.
 List of businessmen who were called robber barons
 John Jacob Astor (real estate, fur) – New York City
 Andrew Carnegie (railroads, steel) – Pittsburgh, Pennsylvania
 Jay Cooke (finance) – Philadelphia, Pennsylvania
 Daniel Drew (finance) – New York state
 James Buchanan Duke (tobacco) – near Durham, North Carolina
 James Fisk (finance) – New York state
 Henry Flagler (railroads, oil, the Standard Oil company) – New York City
and Palm Beach, Florida
 Henry Ford (automobile) – Dearborn, Michigan and metropolitan
Detroit, Michigan
 Henry Clay Frick (steel) – Pittsburgh, Pennsylvania and New York City
 John Warne Gates (steel, oil) – Chicago and Texas
 Jay Gould (finance, railroads) – New York (both state and city)
 Edward Henry Harriman (railroads) – New York state
 Collis P. Huntington (railroads) – California, Virginia, and New York
 Mark Hopkins (railroads) - California
 Charles Crocker (railroads) - California
 Leland Stanford (railroads) – Sacramento, California and
San Francisco, California
 Morgan’s Scam of 1861
 In 1861, he bought 5,000 of useless weapons for
$3.50 each and sold them back to the Army for $22
apiece, making $92,500, a small fortune.
 When [General] Frémont’s soldiers tried to fire these
‘new carbines in perfect condition,’ they shot off their
own thumbs…. The government refused to pay
Morgan’s bill. Morgan promptly sued the govern-
ment…. A special commission… allowed half of [his]
claim, and proposed to pay $13.31 a carbine.
 Morgan… sued [again] …and the court promptly
awarded him the full sum, because ‘a contract is
sacred’" (Engelbrecht and Hanighen, 1934).
 Guns and Money
 In the U.S., the banker is the all-important person in
industry.... While few cases are known where an important
government official or member of Congress has been a
director of an armament firm, all arms manufacturers have
important financial connections. In the Morgan group will be
found the DuPont Co., Bethlehem Steel Corp., U.S. Steel
Corp., together with copper, oil, electric appliances,
locomotive, telephone and telegraph interests. This tie-up also
leads over into the great banks, including the National City,
Corn Exchange, Chase National, etc. It is the Morgan Group
of corporation clients and banks which dominate the American
arms industry" (Engelbrecht and Hanighen).
 Morgan cont.
 After the Civil War, Morgan loaned money to the
U.S. treasury at high interest rates. In 1871, he
financing the Army’s payroll and in 1877, he
refinanced the government’s debt. After his father,
Junius, died in 1890, J.P. Morgan began consolidating
the family empire. He put himself at the helm of their
four main firms, in New York, Philadelphia, London
and Paris. Several times in the 1890s, he sold the
government gold to shore up the dollar. He also sold
official U.S. and British government bonds.
 BANKS AND INEQUALITY
 Home ownership is the primary means of passing on wealth to
one's descendants, in the form of equity.
 Because of racist, sexist and class based housing policies in
every generation Native and Black Americans and Latinos
have been denied effective access to this mode of wealth
creation.
 The result: the median white family possesses eight to twelve
times the wealth of the median Black family.
 This is the kind of wealth that finances college educations,
starts young people out in business - in short, the "bootstrap"
that people need to hoist themselves up in society, and pass on
more wealth to their children.
 Mortgage lending practices
 A study of mortgage lending practices in
Greater Boston reveals that 71 percent of
Black families with household incomes of
more than $150,000 a year were paying
high interest rates on their mortgages.
 Less than ten percent of whites in Greater
Boston paid high interest rates.
High interest rate tax is subtracted
every year from the future
inheritance of children.
• There is far less home equity to borrow
against to send the kids to college, or to
finance a start-up business concept
thought up by a son or daughter. 
 Seventy percent of upscale Blacks pay this tax,
compared to less than ten percent of whites in
the same income bracket. It doesn't take a
rocket scientist to predict the societal results
that will accrue 20, 40 and 60 years from now:
escalating white upward mobility, and a
continuing downward spiral of African
Americans. Current banking practices
guarantee that ever-greater racial wealth
disparities will be locked into the American
future.
 We're not talking about the legacy of past
discrimination, but contemporary institutional
racism that manifests itself in a regressive tax
on Black home ownership - a tax on the
economic future of Black people.
 For people making far less than $150,000 a
year, the future is bleak, indeed. The entire
banking structure is arrayed against them and
their children.
 In whole Black neighborhoods that look like
prosperous "middle class" enclaves are, in fact,
devoid of equity, because of race-based
interest gouging. The bankers are stealing
from Black children.
 Top ten banks in the USA
1Bank of America Charlotte, NC Billions $6832 billion
Citicorp New York, NY $6283
JP Morgan Chase New York, NY $5844
Wachovia Charlotte, NC $3305
Wells Fargo San Francisco, CA $3086
Washington Mutua lSeattle, WA $2047
HSBC Holding London $1278
SunTrust BankAtlanta, GA $1229
U.S. Bancorp Minneapolis, MN $12210
Royal Bank of Scotland Edinburgh $99
• Top ten banking groups in the world 2005
• $)1  United KingdomHSBC79 billion
• 2  United StatesCitigroup75 billion
• 3  United StatesBank of America73 billion
• 4  United StatesJP Morgan Chase72 billion
• 5  JapanMitsubishi UFJ Financial Group64 billion
• 6  FranceCredit Agricole Group60 billion
• 7  United KingdomRoyal Bank of Scotland48 billion
• 8  JapanSumitomo Mitsui Financial Group40 billion
• 9  JapanMizuho Financial Group39 billion
• 10  SpainSantander Central Hispano38 billion
IMF & WORLD BANK
For poor countries, the IMF and World Bank's
emphasis on exports is to a considerable extent
an entreaty to exploit cheap labor as a
"competitive advantage." But with countries
around the world all forced to follow the same
strategy, relying on cheap labor becomes a race
to the bottom -- with countries forced into a de
facto race to the bottom to offer foreign
investors the lowest wages and least substantial
labor protections.
Structural adjustment
condition for loans and repayment.
--developing nation governments are required to open
their economies to compete with each other and
with more powerful and established industrialized
nations.
----provide lower standards, reduced wages and
cheaper resources.
• Debt is an efficient tool. It ensures access to other peoples’ raw
materials and infrastructure on the cheapest possible terms.
Dozens of countries must compete for shrinking export
markets and can export only a limited range of products
because of Northern protectionism and their lack of cash to
invest in diversification. Market saturation ensues, reducing
exporters’ income to a bare minimum while the North enjoys
huge savings. The IMF cannot seem to understand that
investing in … [a] healthy, well-fed, literate population … is the
most intelligent economic choice a country can make.

• — Susan George, A Fate Worse Than Debt, (New York: Grove

Weidenfeld, 1990)
 WORKS CITED
• http://www.factmonster.com/ipka/A0801059.html
• http://en.wikipedia.org/wiki/History_of_central_b
anking_in_the_United_States
• http://coat.ncf.ca/our_magazine/links/53/morgan.
html
• http://www.blackagendareport.com/index.php?
option=com_content&task=view&id=240&Itemid
=33
• http://images.search.yahoo.com/
• MONEY AS DEBT
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