Banking in the United States

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United States Banking began in 1781 with an act of United States Congress that established the Bank of North America in Philadelphia. During the American Revolutionary War, the Bank of North America was given a monopoly on currency; prior to this time, private banks printed their own bank notes, backed by deposits of gold and/or silver.

Robert Morris, the first Superintendent of Finance appointed under the Articles of Confederation, proposed the Bank of North America as a commercial bank that would act as fiscal agent for the government. The monopoly was seen as necessary because previous attempts to finance the Revolutionary War with paper currency had failed; after the war, a number of banks were chartered by the states under the Articles of Confederation, including the Bank of New York and the Bank of Massachusetts, both of which were chartered in 1784.

The Bank of North America was succeeded by the First Bank of the United States, which the United States Congress chartered in 1791 under Article One, Section 8 of the United States Constitution, after the Constitution replaced the Articles of Confederation as the foundation of American government. However, Congress failed to renew the charter for the Bank of the United States, which expired in 1811. Similarly, the Second Bank of the United States was chartered in 1816 and shuttered in 1836.

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[edit] The era of free banking

Prior to 1836, a bank could only be chartered by a legislative act. It has been speculated that this led to many abuses, with proprietors lacking connections in their legislatures being effectively barred from establishing banks. The dissoluting of the Second Bank of the United States in 1836 lead 18 states to establish clear rules for incorporation -- any individual or group that met a certain financial requirement was permitted to issue bills of credit.

This lead many a period of fiscally irresponsible of Wildcat banking in many states, which partially destabilized the system of financial intermediation, and lead in part to the massive panic in 1837-1838 in Michigan.

During this period, bills were not redeemable at face value, but could be cashed according to certain common discount rates, which reflected the reputation and solvency of the issuing banks.

In 1863, Congress passed the National Bank Act in an attempt to retire the greenbacks that it had issued to finance the North's effort in the American Civil War. This opened up an option for chartering banks nationally. As an additional incentive for banks to submit to Federal supervision, Congress began taxing any issue of bills of credit a standard rate of 10%, which encouraged a large majority of state banks to become national ones.

However, by the 1880s an increased demand for savings accounts changed the primary source of revenue for many banks, and the trend was reversed because of the inherent costs of Federal regulation under the National Banking Act. This dual system of banking has survived to this day. New banks may choose either state or national charters, with Federal Banks required to participate in the FDIC, while State Banks usually voluntarily join it in an attempt to bolster their appearance of solvency.

[edit] The dual banking system

The National Bank Act of 1863 created a system of banks throughout the United States that were chartered by the federal government. In 1865, an amendment to the act placed a tax on state bank notes, bringing all banks in the United States under federal supervision. However, a number of banks were exempt from the tax and continued under their state charters until the Federal Reserve Act of 1913. This was known as the "dual banking system."

[edit] The Federal Reserve System

The Federal Reserve Act of 1913 established the present day Federal Reserve System and brought all banks in the United States under the authority of the federal government, creating the twelve regional Federal Reserve Banks which are supervised by the Federal Reserve Board. Notwithstanding the Glass-Steagall Act of 1932 and the Banking Acts of 1933 and 1935, which were attempts to reform various banking abuses, the Federal Reserve System has remained more or less unchanged through to the present day. The Glass-Steagall Act was repealed in 1999, whereas the Banking Act of 1933 simply strengthened the supervisory powers of federal authorities and created the Federal Deposit Insurance Corporation.

[edit] Deregulation

Legislation passed by the federal government during the 1980s, such as the Depository Institutions Deregulation and Monetary Control Act of 1980 and the Depository Institutions Act of 1982, diminished the distinctions between banks and other financial institutions in the United States. This legislation is frequently referred to as "deregulation," and it is often blamed for the failure of over 500 savings and loan associations between 1980 and 1988, and the subsequent failure of the Federal Savings and Loan Insurance Corporation (FSLIC) whose obligations were assumed by the FDIC in 1989. However, some critics of this viewpoint, particularly libertarians, have pointed out that the federal government's attempts at deregulation granted easy credit to federally insured financial institutions, encouraging them to overextend themselves and (thus) fail.

[edit] Bank mergers and brands

Some brands in the banking/financial services industry today are the result of a merger where the acquiring bank assumed the brand name of the bank it took over. This happened in the case of these mergers:

  • The Nations Bank/BankAmerica merger
  • The Norwest/Wells Fargo merger
  • The Firststar/US Bank merger
  • The Travelers/Citibank merger
  • The Chemical Bank/Chase merger
  • The Travelers Group/Citicorp merger
  • First Union/Wachovia merger

[edit] Top three changes in Banking Profitability

The top three changes affecting or detracting from a bank's profitability are the following: *1)Increasing overhead - primarily due to escalating real estate prices and health benefits increase. *2) Online lending - Non traditional banks have gained a foothold by leveraging the internet. *3) Mortgage Brokers - Mortgage Brokers have gained more than 70% of the mortgage origination market over the past decade. Mortgage Brokers sell originated loans primarily to large wholesale mortgage servicing companies which can offer sharply reduced mortgage pricing as they do not have the same high cost or overhead as a retail bank branch. Therefore a retail bank may be competitive in the mortgage lending field on a retail basis, but not able to offer a comparative wholesale program to mortgage brokers. Therefore the mortgage brokers often sell the bulk of originations to large mortgage servicing companies.

[edit] Bank size information

[edit] Top ten bank holding companies in the U.S. ranked by assets

Figures as of September 30, 2006, in U.S. dollars[1]

  1. Citigroup Inc. — 1.746 trillion
  2. Bank of America Corp. — 1.452 trillion
  3. J.P. Morgan Chase & Co. — 1.338 trillion
  4. Wachovia Corp. — 560 billion
  5. Wells Fargo & Co. — 483 billion
  6. HSBC North America Inc. — 474 billion
  7. Taunus Corp. — 430 billion
  8. U.S. Bancorp — 217 billion
  9. Countrywide Financial Corp. — 193 billion
  10. SunTrust Banks, Inc. — 183 billion

[edit] Top ten bank holding companies in the U.S. ranked by deposits

As of June 30, 2005 in U.S. dollars. These are U.S. deposits only. This is not a ranking of the largest U.S.-based global banks.[2]

  1. Bank of America Corp. — 577 billion
  2. J.P. Morgan Chase & Co. — 406 billion
  3. Wachovia Corp. — 286 billion
  4. Wells Fargo & Co. — 262 billion
  5. Citigroup Inc. — 207billion
  6. U.S. Bancorp — 117 billion
  7. SunTrust Banks, Inc. — 107 billion
  8. Royal Bank of Scotland PLC — 99 billion
  9. National City Corp. — 76 billion
  10. BB&T Corporation — 69 billion

[edit] Top ten Commercial Banks and Savings Institutions in the U.S. by Total Domestic Deposits

As of June 30, 2005 in U.S. dollars. These are U.S. deposits only. This is not a ranking of the largest U.S.-based global banks. [3]

  1. Bank of America Corp. — 577 billion
  2. J.P. Morgan Chase & Co. — 384 billion
  3. Wachovia Corp. — 284 billion
  4. Wells Fargo & Co. — 256 billion
  5. Washington Mutual Inc. — 186 billion
  6. Citibank — 131 billion
  7. U.S. Bancorp, Inc. — 117 billion
  8. SunTrust Banks — 106 billion
  9. HSBC Bank USA NA — 62 billion
  10. World Savings Bank — 58 billion

[edit] United States - State Specific Information

Banking and lending laws vary by state in the United States. Each state has its own commercial and consumer regulatory guidelines. Each state has a banking commission or finance department.

  • AK - Alaska Division of Banking & Securities Commission, 150 Third Street, Suite 217 Juneau, AK 99801
  • AL - J.A. Whitehead

AL State Banking Dept., Center for Commerce Suite 680 401 Adams Avenue,Montgomery, Alabama 36130-1201

  • AR
  • AZ
  • CA - Department of Corporations, 320 West 4th Street, Suite 750 LOS ANGELES, CA 90013-1105
  • CO
  • CT - Connecticut Department of Banking, Consumer Credit Division 260 Constitution Plaza Hartford, CT 06103-1800
  • DC - Office of Banking & Financial Institutions 717 14th Street, Suite 1100, Washington, D.C. 20005
  • DE - Office of State Banking Commissioner 555 E. Lockerman St, Suite 210 DOVER, DE 19901
  • FL
  • GA
  • HI
  • IA - Iowa Division of Banking
  • ID - Department of Finance
  • IL - Department of Financial and Professional Regulation
  • IN - Department of Financial Institutions
  • KS - Office of the State Bank Commissioner
  • KY - Department of Financial Institutions, 1025 Capitol Center, Dr., Suite 200, Frankfort, KY 40601, 502-573-3390, Toll free: 1-800-223-2579,Fax: 502-573-8787, http://www.dfi.state.ky.us
  • LA - Office of Financial Institutions
  • MA
  • MD
  • ME
  • MN
  • MI
  • MO
  • MS
  • MT
  • NC
  • NE - Nebraska Department of Banking & Finance Commerce Court 1230 'O' Street, Suite 400 Lincoln, NE 68508-1402
  • ND - Dept of Banking, State Capitol, 600 E. Boulevard, Bismaarck, ND 58505-0080,
  • NJ - Department of Banking and Insurance Division of Banking Office of Consumer Finance, 20 West State Street P.O. Box 040, Trenton, NJ 08625-0325
  • NM - REGULATION & LICENSING DEPT.FINANCIAL INSTITUTIONS DIVISION, Financial Institutions Division, 2550 Cerrillos Road, 3rd Floor, Santa Fe, NM 87505
  • NV - LAS VEGAS OFFICE, Mortgage Lending Division, 3075 E. Flamingo #104A, Las Vegas, Nevada 89121
  • NV - Carson City Office, Mortgage Lending Division, 400 W King Street, Suite 406,Carson City, Nevada 89703
  • NY - [List of New York Commercial Banks, Thrifts, Savings & Loans both State and Federally Chartered Institutions/ http://www.lendny.com] NYS Banking Department, 2 Rector Street-21st Floor, New York, NY 10006
  • OH - Dept of Commerce, DIVISION OF Financial Institutions,77 S HIGH STREET, 21st FLOOR, COLUMBUS, OH 43266-0121
  • OK - DEPT. OF CONSUMER CREDIT, 4545 LINCOLN BLVD., SUITE 104, OKLAHOMA CITY, OK 73105
  • OR - [Department of Consumer And Busines Services (DCBS)/ http://www.cbs.state.or.us/external/dfcs/]
  • PA - Bureau of Licensing and Consumer Compliance, DEPARTMENT OF BANKING, 333 MARKET ST., 16TH FL., HARRISBURG, PA 17101-2290
  • RI
  • SC
  • SD - DIVISION OF BANKING STATE CAPITOL, 500 EAST CAPITOL AVENUE, PIERRE, SD 57501-5070
  • TN - STATE OF TENNESSEE[DEPT. OF FINANCIAL INSTITUTIONS/ http://www.state.tn.us/financialinst/]502 JOHN SEVIER BUILDING 500 CHARLOTTE AVENUE, NASHVILLE, TN 37219
  • TX - [Texas Savings and Loan Department/ http://www.tsld.state.tx.us/], 2601 North Lamar, Suite 201, Austin, Texas 78705 & [TEXAS CONSUMER CREDIT COMMISSION/ http://www.occc.state.tx.us/], 2601 N. LAMAR, AUSTIN, TX 78705-4207
  • UT - [Utah Division of Real Estate/ http://www.commerce.utah.gov/dre/mortlicensing.html], Heber Wells Building, 2nd Floor East, 160 East 300 South, Salt Lake City, Utah 84111 or STATE OF UTAH DEPT. OF FINANCIAL INSTITUTIONS P.O. BOX 89, , 324 SOUTH STATE, , SUITE 201 , SALT LAKE CITY, UT 84110-0089
  • VA - Applications/Licensing, STATE OF VIRGINIA, BUREAU OF FINANCIAL INSTITUTIONS Tyler Bldg, 8th Floor,1300 E. Main Street,Richmond, VA 23219, PO BOX 640, RICHMOND, VA 23218-0640
  • VT - [Department of Banking/ http://www.bishca.state.vt.us/], Insurance,

Securities & Health Care Administration, 89 Main Street Drawer 20, Montpelier, Vermont 05620-3101

  • WA - Dept of Financial Institutions, Division of Consumer Services and Administration 210 11th Street SW Room 300, Olympia, WA 98504
  • WI - Dept. of Financial Institutions, 345 W. Washington Avenue, 4th Floor, P.O. Box 7876, Madison, WI 53707-7876
  • WV - TRACY HUDSON/MARLA GARDNER DIVISION OF BANKING1900 Kanawha Boulevard, East Building #3, Room 311 Charleston, WV 25305-0240
  • WY - HERSCHLER BUILDING-3RD FLOOR 122 WEST 25TH STREET CHEYENNE, WY 82002

[edit] See also

[edit] Further reading

[edit] Notes

  1. ^ http://www.ffiec.gov/nicpubweb/nicweb/Top50Form.aspx Federal Financial Institutions Examination Council, National Information Center
  2. ^ http://www2.fdic.gov/sod/sodSumReport.asp?barItem=3&sInfoAsOf=2005 fdic.gov, Analysts, Summary of Deposits, Summary Tables, Top 50 Bank Holdings Companies by Deposits
  3. ^ http://www2.fdic.gov/sod/sodSumReport.asp?barItem=3&sInfoAsOf=2005 fdic.gov, Analysts, Summary of Deposits, Summary Tables, Top 50 Commercial Banks and Savings Institutions by Total Domestic Deposits
Commercial banks in the United States
Bank of America | Bank of the West | BB&T | Capital One Bank | Charter One Bank | Chase | Citibank | Citizens Bank (Rhode Island) | Citizens Bank (Michigan) | Comerica | Commerce Bank | Compass Bank | Fifth Third Bank | First Tennessee Bank | Harris Bank | HSBC | Huntington National Bank | Key Bank | LaSalle Bank | M&T Bank | Marshall & Ilsley | National City | North Fork Bank | PNC Bank | RBC Centura | Regions Bank | Sovereign Bank | SunTrust Bank | TCF Bank | TD Banknorth | Union Bank of California | U.S. Bank | Wachovia | Washington Mutual | Wells Fargo | Zions Bancorp
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