Bank Regulation Of The Modern Day Economy

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Bank regulation plays a vital part in the economy today and can be attributed for a lot of its success. It has even been taken to the extent of individuals claiming bank regulation to be the backbone of our modern day economy. To fully understand this topic it is first important to define what bank regulations are. Bank regulations are a kind of government regulation that makes banks liable to certain requirements, restrictions and guidelines. Bank regulation includes determining specific regulations and guidelines to oversee all of the activities and operations of banking organizations. Banking regulations can vary widely between nations and can even be changed due to certain jurisdictions. However, even though they can differ, most…show more content…
Robert Morris, who served as the first Superintendent of Finance by the Articles of Confederation, proposed the Bank of North America would act as the sole fiscal and monetary agent for the government. Hence Morris’s nickname as, "the father of the system of credit, and paper circulation, in the United States. This ultimately led to the creation of the first bank in 1791, the Bank of North America which is located in Philadelphia until its congressional charter expired in 1811 (which was used specifically to fund the American Revolutionary War). This allowed for The Bank of North America to be granted a monopoly on the issue of bills of credit as currency at the national level. A second Bank of the United States was created in 1816 and operated until 1832 (primary used to fund the US War in 1812). During these time periods, banks were extremely cautious about who they allowed to lend their money to and typically only distributed short term loans. After this time period, the United States experienced a period where the majority of banks were made up of small commercial banks instead of one centralized unit. One of the risks that occurred from transitioning from central banking to the use of small banks was a high risk of failing because they ran the risk of liquidity risk. Liquidity risk is defined
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