bank failures Essay

A $180bn bailout; while Bank of America got $45bn as well as JP Morgan Chase

For centuries, banks have relied on fractional reserve banking. This is the method in which only a fraction of a bank’s deposits are actually backed by a reserve of cash-on-hand, available for immediate withdrawal. This procedure allows the bank more capital to lend and at the same time, grows the economy. The reserve amounts are determined by a ratio stipulated by the Federal Reserve. In theory, fractional reserve banking works most of the time. However, in difficult economic times, people have demanded to withdraw

“ [The bankers did this] in order to protect the millions of dollars in loans that banks had made to those countries.”

So, $1K somehow magically becomes $100K ($1K+$99K). Assuming that $1K is backed by Gold, then $99K is now backed by loan. It seems like the banks only create $9K but in reality $99K (x10 times) of money has been created out of nothing. Therefore, bank can create as much as money people can borrow. As long as new loan agreement is signed, brand new money is created!

The checks of course always bounced and he would have to appear in court to keep from

The banking industry has over the years evolved from simple to large and complex organization. They have grown from one street building into having multiple branches some of which are international. Their clients range from individual and institutions to governments and other banks. Banks do not manufacture physical things. Their work is simply services for money (Koch & MacDonald 2010). Such services include storing, lending and managing money. All people and institutions, as well as governments, need money to operate accordingly.

be able to repay but he promises to do so anyway. This action is not consistent

Britain, having exhausted most of its own financial resources in the war; was forced to ask the United States Government for a loan of more than a billion dollars to meet

After Congress refused the national bank before the war of 1812, the states started their own banks with their own currency. This made things difficult for the American people. There more than 400 different banks by 1818, with each of them having their own currency. Investors were losing and winning by just by picking different currency to follow. This left America in trouble. “To end the mayhem and strengthen the national government, proponents of the American System designed the Second Bank of the United States” (Shultz, 2014, p. 168). The new bank began in 1816. The start of the bank caused a major economic recession; when it first started it was loose with credit and then suddenly they changed to strict

If a person uses money wisely, and takes advantage of the money that is waiting on them, they

The banking crisis of the late 2000s, often called the Great Recession, is labelled by many economists as the worst financial crisis since the Great Depression. Its effect on the markets around the world can still be felt. Many countries suffered a drop in GDP, small or even negative growth, bankrupting businesses and rise in unemployment. The welfare cost that society had to paid lead to an obvious question: ‘Who’s to blame?’ The fingers are pointed to the United States of America, as it is obvious that this is where the crisis began, but who exactly is responsible? Many people believe that the banks are the only ones that are guilty, but this is just not true. The crisis was really a systematic failure, in which many problems in the

The bailout was a slap on the wrist for the major banking companies; they were not punished for their risky investments. The amount they were forced to pay in fines was merely nothing compared to the amount of money their bank makes per year. As said by William Cohan who worked on Wall Street for seventeen years as a mergers and acquisitions

In 2008, the world experienced a tremendous financial crisis which is rooted from the U.S housing market. Moreover, it is considered by many economists as one of the worst recessions since the Great Depression in 1930s. After bringing a huge effect on the U.S economy, the financial crisis expanded to Europe and the rest of the world. It ruined economies, crumble financial corporations and impoverished individual lives. For example, the financial crisis has resulted in the collapse of massive financial institutions such as Fannie Mae, Freddie Mac, Lehman Brothers and AIG. These collapses not only influenced own countries but also international scale. Hence, the intervention of governments by changing and expanding the monetary

According to the Federal Deposit Insurance Corporation (FDIC), the number of bank branches shrinks dramatically after the crisis. A total loss of 7, 689 bank branches occurred from 2009 to 2016. Figure \ref{f: map} shows the gain and loss of bank branches in the U.S. counties. In the local lending markets, banks used to act as the key financial intermediaries. A well developed banking network eases access to credit, which benefits the local economy by eliminating poverty (Burgess and Pande 2005) and activating the labor markets (Bruhn and Love 2014). However, the use of credit score and the development of secondary market reduces the importance of lender-borrower distance in local credit supply markets (Petersen and Rajan 2002; Berger

“If you owe your bank a hundred pounds, you have a problem; but if you owe it a million, it has.(1)”