Business Studies, Sample Thesis Papers

Thesis: Principal policy objectives of banking in the US

Sample Thesis Paper

Historically, banking law in the US has been shaped by three principal policy objectives. The first objective has been to limit the economic power of banks over consumers, business entities and the national economy. The second objective has been to prevent, or at least minimise the impact of, bank failures. The third objective has been to ensure that banks provide adequate service to their communities and promote economic growth.

Examples reflecting the first policy objective include: the 19th century political battles over the chartering of the First and Second Banks of the US; restrictions on geographic expansion in the Bank Holding Company Act of 1956 (the BHC Act) as well as McFadden Act of 1927; and restrictions on bank affiliations with other financial and non-financial companies in the BHC Act and its 1970 and 1982 amendments.

Examples reflecting the second policy objective include: restrictions on bank powers in the 1864 National Bank Act and the 1913 Federal Reserve Act; adoption of deposit insurance in the 1933 Federal Deposit Insurance Act; and capital requirements and prompt corrective action provisions in the 1991 Federal Deposit Insurance Corporation Improvements Act.

Examples reflecting the third policy objective include: the Federal Reserve Act limitation of loans eligible for discount at the Federal Reserve Banks (which was designed to encourage productive lending under the real bills doctrine); single customer lending limits in the National Bank Act*; the Community Reinvestment Act of 1987; and so-called `life line’ banking account requirements adopted by several states.** (Kalven, 74) Although this provision is generally viewed as related to bank safety and soundness, it was originally designed to ensure that a bank’s loans were well spread throughout the community.

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