This master's thesis explains the dual banking system in the USA.
The experience of a national bank similar to the British bank was the first step in the creation of the dual banking system in the United States of America, this latter system was enforced through history.
The government felt the need to a national bank ―The First National Bank - because of some debt from a Revolutionary War, and due to the diversity of currency forms. Up to the time of the bank's charter, coins and bills were issued by state banks. Proposed by Alexander Hamilton, the Bank of the First United States was chartered for twenty years in 1791 to serve as a repository for federal funds and as the government‘s fiscal agent.
The creation of a national bank seemed unconstitutional at that time for many members of the congress. They argued that such an institution would be implementing a monetary monopoly within the United States especially that one of the reasons of this creation is to unify the currency, which means that the National Bank will be the only authorized party that can issue money notes.
As a private institution, shares were sold to private parties, and after few years of the creation of the bank, 70 percent of the shares were owned by foreigners. This fact was not strange to the American financial system, but politicians had worries about it. Thus, in 1811 after 20 years of the first charter, the re-chartering process failed and did not pass in the congress.
The second relevant fact that enforced the dual banking system was the two national banking acts in 1863 and in 1864, The National Bank Acts were two United States federal laws that established a system of national charters for banks, the United States national banks.
Table of Contents
Part 1: Foundation of the Dual Banking System
Chapter 1: Origins of the Dual Banking System
Section 1: National Banking Experience
Paragraph 1: The First National Bank
Paragraph 2: The Second National Bank
Section 2: Effects of Federal Reserve Act on Banking
Paragraph 1: Competitiveness Status of National and State Banks prior to 1913
Paragraph 2: Spirit of the Dual banking System since the Passage of the Federal Reserve Act
Chapter 2: Banking Industry between Stakeholders and Activities
Section 1: Federal Intervenient
Paragraph 1: The Office of the Comptroller of the Currency
Paragraph 2: Federal Reserve System
Section 2: American Banks Activities: National and International
Paragraph 1: American Banks Activities
Paragraph 2: International Activities of US Banks
Part 2: The Soul of Duality
Chapter 1: Accompanying Banks within Duality
Section 1: Banks Chartering
Paragraph 1: National Chartering
Paragraph 2: State Chartering Process
Section 2: Banks Regulation: Supervising and Control
Paragraph 1: National Banks Supervision
Paragraph 2: States Banks Supervision
Chapter 2: Duality between Internal Synergies and External Joints
Section 1: Duality Issues
Paragraph 1: Covered Benefits of the Dual Banking System
Paragraph 2: Purported Benefits of the Dual Banking System
Section 2: Preventive Measures to the Success of US Banking industry
Paragraph 1: Anti-Money Laundering: Customer Due Diligence Program
Paragraph 2: Banks Governance
Research Objectives and Core Themes
This thesis examines the historical and structural development of the "dual banking system" in the United States, analyzing how the coexistence of state and federal regulatory frameworks has shaped the evolution of American banking, influenced institutional supervision, and necessitated the implementation of modern governance and anti-money laundering standards.
- Historical origins and evolution of the dual banking system in the U.S.
- The distinct roles of the Office of the Comptroller of the Currency (OCC) and the Federal Reserve System.
- Regulatory dynamics between national and state-chartered banks.
- Preventive measures in modern banking, including anti-money laundering protocols and corporate governance frameworks.
Excerpt from the Book
Paragraph 1: The First National Bank
In order to find enough reserves to finance the American Revolution, a new national paper money was printed under the proposal of the Continental Congress. These papers were known as "continentals," intention was to keep these papers redeemable on demand in specie. However, the Congress broke its promise and issued many notes, which led to an inflation situation. Eventually, because of the inflation the expression of “not worth a Continental” was largely used in the United States to say that something is worthless.
Just after the end of the Independence War, the country had a new name, which is the United States of America by application of the Articles of Confederation “Provided the 13 colonies with a system of government from 1777 until replaced by the U.S. Constitution in 1789. Among other things, the Articles gave Congress the authority to make war and conduct foreign affairs.”
The young country left the war with heavy debts and a jumbled economic and financial system, due to the weakness of government to regulate this sector and other sectors that need the actual existence of the state. Thus, leaders of the United States at that time had to deal with many challenges such as “re-establishing commerce and industry, repaying war debt, restoring the value of the currency, and lowering inflation.”
Summary of Chapters
Chapter 1: Origins of the Dual Banking System: This chapter traces the historical roots of American national banking, highlighting the influence of British models and the economic challenges post-independence that necessitated the establishment of the First and Second National Banks.
Chapter 2: Banking Industry between Stakeholders and Activities: This chapter defines the federal stakeholders, specifically the OCC and the Federal Reserve, and explores how their mandates evolved to regulate both national and international banking activities within the U.S.
Chapter 1: Accompanying Banks within Duality: This section details the practical processes of bank chartering at both the national and state levels, contrasting the oversight mechanisms of federal agencies with state-specific regulations.
Chapter 2: Duality between Internal Synergies and External Joints: This chapter explores the ongoing debate surrounding the benefits and drawbacks of the dual system, while addressing necessary modern interventions such as anti-money laundering (AML) compliance and corporate governance.
Keywords
Dual Banking System, National Banks, State Banks, Federal Reserve, Office of the Comptroller of the Currency, OCC, Banking Regulation, Monetary Policy, Corporate Governance, Anti-Money Laundering, BSA, Financial Stability, Bank Chartering, US Banking History, Financial Supervision
Frequently Asked Questions
What is the primary focus of this dissertation?
The work provides a comprehensive analysis of the dual banking system in the United States, tracing its historical roots and examining its contemporary regulatory structure, which involves both state and federal authorities.
What are the central thematic pillars of the research?
The research focuses on the evolutionary history of U.S. banking, the interaction between different regulatory stakeholders, the specific mechanisms of bank chartering, and the importance of modern protective measures like AML and corporate governance.
What is the fundamental objective of the study?
The primary objective is to clarify the overall functioning of the American banking system, explaining how an unintentional historical outcome became a stable and unique model for banking regulation.
Which scientific methodology is employed?
The author employs a historical-analytical approach, reviewing legislative acts, institutional reports, and scholarly research to explain the development and structural mechanics of the dual banking model.
What core topics are addressed in the main chapters?
The main chapters discuss the origins of the system (National/Second National Bank), the role of federal intervenients (OCC/FED), the technical processes of bank chartering, and contemporary challenges like money laundering and bank governance.
Which keywords best describe this research?
The study is defined by terms such as Dual Banking System, Federal Reserve, OCC, Bank Chartering, Regulatory Policy, AML (Anti-Money Laundering), and Corporate Governance.
How did the concept of "dual banking" emerge historically?
The dual banking system emerged largely as an "unintended byproduct" of 19th-century legislation, specifically the National Banking Acts, which did not intend to create two parallel systems but failed to fully consolidate the industry.
How does the author evaluate the "super parity" theory in Texas?
The author highlights the Texas "super parity" law as a mechanism that allowed state-chartered banks to maintain competitive equality with federally chartered institutions, ensuring they could offer similar powers and privileges.
Why is the Office of the Comptroller of the Currency (OCC) significant?
The OCC is significant as the primary federal agency chartered in 1863 to regulate and supervise national banks, providing a unified regulatory framework that stands in contrast to various state-level regulatory systems.
How does the author relate banking governance to financial stability?
The author argues that effective corporate governance in banks is essential for transparency and risk mitigation, particularly because banks have a higher debt-to-capital ratio than other non-financial corporations, making them uniquely vulnerable to systemic failure.
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- Houssem Eddine Bahi (Autor:in), 2015, The Dual Banking System of the United States of America, München, GRIN Verlag, https://www.grin.com/document/316375
