The concepts and the basis of the U.S. banking system

The current U.S. banking system was formed in 1980 under the impact of the Federal Reserve System, and adopted the Law on the deregulation of depository institutions and monetary control. Up to this point the United States remained the only one among the developed nations a country where there was no centralized organization. The banking structure consisted of a myriad of small independent banks, the scope of which was limited to a very small area, the number of banks in 1860 reached 3,000, in 1913 there were over 20,000, about 7,000 of them were emissionalnymi national banks, and the rest operated under the laws of their state and had no right to issue banknotes. Such freedom of banking was significantly different from its European interpretation.

 U.S. banks were virtually devoid of any possibility of constructing a system of branches. Banking firm, established in one state did not have the opportunity to spread its operations beyond its borders or by opening offices in other states, nor in any other way. Following the adoption of the national banking law the right to open branches was retained only for those banks that entered into the national banking system, already having their offices. Therefore, the position of the majority of banks operating outside the major cities, in varying degrees, approaching the position of local monopolies.
 Nationwide banking law prescribes very specific scheme to issue banknotes. However, over time the benefits of the scheme became more and more questionable. Government bonds, which are presented with a huge demand as the basis for issuance of bank notes, are usually sold at a premium, and this, combined with the rule that the bank could produce emissions only in the amount of 90% of the value of bonds purchased, largely reduced the profitability of investments for the purposes of issue, and in those cases where the bank had the ability to lend, without issue, he preferred to do so, and that gave rise to significant variations in the amount of circulating notes from year to year depending on the region.