A g re a t m a n y o f th e c o n c e rn s g e n e ra te d b y re g u la tio n o f th e e c o n o m y h a v e o rig in a te d in o u r fi n a n c ia l in stitu tio n s a n d th e ir re la te d m e c h a n ism s . F o r o u r p u rp o se s h e re w e w ill re fe r to “b a n k s” a n d “b a n k in g ” e v e n w h e re th e tra n sa c tio n s a n d u n d e rly in g b u sin e ss o p e ra tio n s b e a r lit tle re se m b la n c e to th e p u b lic ’s u n d e rsta n d in g w h a t a b a n k c a n o r sh o u ld d o . G ra d u a l “b lu rrin g ” o f th e m e a n in g o f b a n k in g h a s a d d e d to th e c o n fu sio n o v e r th e y e a rs a s b a n k s sta r te d to e n g a g e in b u sin e ss a c tiv itie s lo n g th o u g h t to b e in se p a ra te d o m a in s . P ro b le m s o f te n a ro se b o th w h e re th e e x p a n d e d a c tiv itie s in v o lv e d risk s a b o v e a n d b e y o n d th o se u su a lly u n d e r ta k e n in b a n k in g a n d w h e re th e risk s in v o lv e d u n d e rm in e d th e fi n a n c ia l so u n d n e ss o f th e b a n k s th e m se lv e s .
T h e e c o n o m ic h is to r y o f th e U n ite d S ta te s h a s o f te n c e n te re d o n c rise s in v o lv in g —a n d so m e tim e s e n g e n d e re d b y —b a n k s in v a rio u s fo rm s . In d iff e re n t e ra s, th is h a s ta k e n th e fo rm o f b a n k fa ilu re s, “ru n s” o n b a n k s (w h e re d e p o sito rs ru sh to w ith d ra w th e ir fu n d s), m a n ip u la tio n b y w e a lth y in d iv id u a ls a n d in te re s ts, a n d p o o r le n d in g p ra c tic e s o n th e o n e h a n d a n d ro u g h tre a tm e n t o f b o rro w e rs o n th e o th e r h a n d . In th e e a rly d a y s o f th e U n ite d S ta te s, th e re w e re a n u m b e r o f c o n tro v e rsie s th a t c e n te re d o n b a n k in g , in c lu d in g th e id e a o f a “n a tio n a l b a n k .” S o m e h is to ria n s w o u ld s a y th a t th e u n d e rly in g issu e s o f b a n k in g w e re se c o n d o n ly to sla v e r y a s d iv id in g issu e s in e a rly U n ite d S ta te s p o litic s . A n d o th e r h is to ria n s m ig h t a d d th a t issu e s o f b a n k in g w e re c lo se ly c o n n e c te d to la te r c o n tro v e rsie s c o n c e rn in g c u rre n c y issu a n c e a n d e a rly m o n e ta r y p o lic y. P u b lic o v e rsig h t o f b a n k in g w a s o f g re a t c o n c e rn to m a n y 19 th c e n tu r y p o p u la r m o v e m e n ts . T h e c o n c e rn m a n ife s te d itse lf in n u m e ro u s p ro p o s a ls fo r d e m o c ra tic a lly c o n tro lle d b a n k in g c o m m issio n s, c o o p e ra tiv e s a v in g s a n d le n d in g in s titu tio n s, a n d e v e n p u b lic ly o w n e d a n d o p e ra te d b a n k s . In a fe w c a se s d u rin g th e p o p u lis t a n d p ro g re ssiv e e ra s, th e p ro p o s a ls to o k fo rm in a c tu a l p ra c tic e . S u c h e ff o r ts w e re g e n e ra lly o p p o se d b y fi n a n c ia l a n d e c o n o m ic e lite s . B u t th e c u rre n t a n d p e rsis te n t p ro b le m s o f c re d it a n d d e b t a re ra isin g fre sh in te re s t in th e id e a o f b a n k s to o p e ra te in th e p u b lic in te re s t.
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