US Banks currently offer a safe haven for customer money. Most US workers have their employers send their net paycheck amounts directly to their Banks as Direct Deposits. These Banks process checks customers write to pay bills and keep track of the deposits and withdrawals.
The Banks are able to invest the money customers deposit and charge “interest” on loans. Banks also make money offering Financial Services like credit cards and Investment accounts. Profits from interest payments allow Banks to offset losses from bad loans.
Bank lending rates: The average monthly prime lending rate from 1950 to 2024 was 6.54%. The all-time high was 20.50% in August 1981, and the record low was 2.00% in February 1950.
Fed funds interest rates: The average interest rate from 1971 to 2024 was 5.42%. The all-time high was 20.00% in March 1980, and the record low was 0.25% in December 2008.
The average interest rate charged by US banks for business loans from 1800 to 1900 was 4 to 6 percent.
The federal funds rate is currently between 4.75% and 5.00%. The federal funds rate in 2019 was 1.50% and 1.75%. That allowed mortgage interest to hit under 3%, when the Fed Funds Rate was 0%.
There have been periods when US Banks ran out of money. These were called “Panics” from 1800 to 1913 and occurred when Banks ran low on cash. The Great Depression from 1929 to 1939 resulted in the creation of the FDIC.
The FDIC insures deposits up to $250,000 per depositor, per insured bank, and per ownership category. This includes principal and any interest accrued or due to the depositor up to the date of default.
The history of banking can be traced back to ancient Mesopotamia, around 2000 BCE, where temples acted as the first banks, storing valuables like grain and lending them out to farmers, essentially marking the beginning of the concept of lending and deposit keeping;. This practice continued in ancient Greece and Rome, with temples serving as centers for money exchange and loans, while later, in medieval Italy, prominent families like the Medici established sophisticated banking systems with branches across Europe, considered a major development in modern banking.
Ancient origins: Temples in Mesopotamia, Greece, and Rome were
the first "banks", storing valuables and providing loans to farmers
and merchants.
Early banking practices: Included basic functions like money
exchange, storing valuables, and lending grain.
Medieval Italy: Cities like Florence, Venice, and Genoa became
major banking centers with families like the Bardi and Peruzzi dominating the
industry.
Goldsmiths as bankers: In England, goldsmiths emerged as early
bankers by safeguarding valuables and issuing promissory notes based on their
credit, essentially creating a form of paper money.
Birth of the modern banking system: The Medici Bank, established by Giovanni Medici in 1397, is often considered a significant milestone in the development of modern banking.
Important developments in the history of banking:
Bills of exchange: The Roman Empire introduced bills of
exchange, allowing for the transfer of funds across different locations.
First central banks: The establishment of the Bank of England in
1694 marked the beginning of central banking systems.
Industrial Revolution: The rise of industrialization fueled the
need for more sophisticated banking practices to support business growth.
The American banking system: Alexander Hamilton played a key role in establishing the first Bank of the United States in 1791 to manage war debt and stabilize the economy.
Crusades: In the 12th century, the need to transfer large sums of money to finance the Crusades stimulated the re-emergence of banking in western Europe. In 1162, Henry II of England levied the first of a series of taxes to support the crusades. The Templar and Hospitaller Christian knights acted as Henry's bankers in the Holy Land. It is Pope Innocent II's decree that allowed the success of the Templar. This decree freed the Templar from paying tithe to the church and also granted them the ability to collect tithe for their own profit. The Templars' rich land holdings across Europe also emerged during 1100–1300 as the beginning of Europe-wide banking. They took in local currency and issued demand notes redeemable at any of their castles across Europe, allowing movement of money without the usual risk of robbery while traveling. It is unclear if the Templar Knights used any hidden codes or encryptions to protect the notes given from any possible fraud.
Norb Leahy, Dunwoody GA Tea Party Leader
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