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How banking evolved into the sophisticated operation

Give a short history of how banking evolved into the sophisticated operation. Start first with the Goldsmith and sum up with the Banking system which we experience nowadays.

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Colonial America used British pounds as money when it was a colony of Great Britain. The “dollar” was issued during the sixteenth century. The Spanish silver dollar was comparatively more stable from the 16th to the 19th century. In 1690, Massachusetts government issued government paper money, which started in medieval China. This was redeemable in gold. Though there were money lenders since long, banking began in England in the 17th century to lend out the savings of others. Thus banking began gradually in colonial America simultaneously, but they did not last long.

The prominent bank was Massachusetts Land Bank, which issued notes and lent them on real estate. The private bank notes as well as deposits were redeemable in specie. Later in 1782, the Bank of North America began and enjoyed monopoly power to issue paper money. Later in 1784, the Bank of New York and Massachusetts Bank began and the specie was driven out gradually with more bank notes being issued.

In 1792, Coinage Act was passed, which established a bimetallic dollar standard where dollar was defined to have a 15:1 ratio of silver and gold. But this led dollar to be subjected to Gresham law, which drove out gold by 1810 and silver coins were frequently used between 1810 and 1834. The Bank of North America was unsuccessful, which led to the development of the Bank of the United States in 1791, with a charter for 20 years. Soon after, eight new banks were established and additional ten banks, thus totaling to 18 banks by 1796. However, as the charter terminated, the bank was closed in 1811. Banks lent with a very stringent policy during these periods and only short-term loans ranging between thirty and sixty days were offered.

The second bank was established in 1816 and it functioned until 1832. After 1832, state governments supervised and regulated banks, instead of the central government. However, this was insufficient with a variety of bank notes being issued which differed in quality, which led to people owning worthless paper. There were nearly 10,000 different notes by 1860, which led to the failure of a large number of banks. National Bank Act was passed in 1864, establishing a new system for banking. This system was a success with many regulations and the central government as the regulator and no bank note owner was defaulted. National bank notes were only frequently used until 1914 when Federal Reserve notes were established. In 1929, the worldwide depression led to a banking crisis, which resulted in the failure of nearly 1000 US banks.
In 1933, Roosevelt took sufficient measures to overcome the banking crisis and more laws were passes regulating bank activities and limiting risks to banks. The Office of the Comptroller of Currency (OCC) was established, which even now regulates banks and imposes the banking laws. Banking industry underwent a technological revolution after 1970s, thus leading to phone banking, mobile banking, credit and debit cards, automatic teller machines, gold loans, etc. Though the tools have been enhanced for the banking industry, OCC still has the same mission and functions efficiently.

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