A History of the Banking Sector

A History of the Banking Sector
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A History of the Banking Sector
The banking industry is among the oldest businesses in the United States. The system has since developed from the colonial era where people gave each other credit and loans from merchants and banks in Great Britain. The first bank, the Bank of New York, was formed in 1784. Thousands of banks have since been formed. Their most significant economic functions are to operate a payment system and act as financial intermediaries, lend and invest the money deposited (Rothbard, 2002).
The banking system through its transformation over the years has had a great impact on the market, transportation and technological advancement in America. By 1830, many banks had been chartered by the states and they led to a rapid growth in the economy of the Unites States (US). During the civil war and the reconstruction eras, the system was characterized by political controversy and corruption. The system was also characterized by chaotic currency where there was more than eight thousand paper currency. In 1860, the trend changed with the election of Abraham Lincoln as the president. The federal government was given the function of chartering banks and creating a uniform currency (The Gilder Lehrman Institute of America History, 2009-2015).
During the Gilded Age from 1878 the banking system was a developing system despite some of its instabilities. There was a growth in the capitalist system. The capitalist entrepreneurs with the money from the banks resulted in an improved transportation network, innovation and technology, new advertisement and marketing technology. The rail transport assisted in the distribution of goods, natural resources, and communication through Telegraph. The heavy steel industries also grew rapidly. There were massive profits made by the investors and owners of the means of production mainly through cheap labor from immigrants (Walton & Rockoff, 2014).
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