Homework Question on The Rise of Commercial Banking in the United States
Write a paper talking about “The Rise of Commercial Banking in the United States”.
Homework Answer on The Rise of Commercial Banking in the United States
Even though the activities of commercial banks as a source of funds to both non-financial borrowers and financial borrowers in America have declined over the past few decades, commercial banking from history has remained an important pillar in US economy. It helps policy makers to create a balance between currency in circulation and currency in banks and other financial institutions. Prior to the inventions that led to the creation of banks, different studies have shown instances of increasing demand for commercial banking in USA, which linked to the fundamental economic forces in the financial sector.
The people of America have always remained innovative throughout history, and such innovative steps have created a base for increased competition within financial markets. Significant to mention is the greater competition in the financial sector, which has resulted to cost benefits for commercial banks in acquiring funds from the federal banks.
A Brief History on the Commercial Banking Industry
The U.S commercial banking industry has evolved utterly over the past 25 or so years, but through mergers and acquisition, the numbers of commercial banks have reduced significantly while the size and financial holdings of banks have increase ten-folds (Ramirez 32). The processes of mergers and acquisition exposes commercial banking to market risks such as fraud and negative growth in profits. Such risks are some the reasons for policy adjustments within financial institutions like the regulatory frameworks used by U.A.S during the periods of the Great Depression (Ramirez 32).