Finance Banks
Finance banks are the backbone to our economic lending system. Finance banks inject capital into the economy and induce economic growth. Without lending it would be very difficult for firms to expand their operations. Without lending it would be very difficult for to purchases major assets such as vehicles, boats, planes, or property.
Institutional lending in the United States has its roots in mortgage lending. As home ownership in the lower economic classes rose in the early 1800s, institutional lending also increased. Prior to the 1800s mortgages were handled by either insurance companies or private venture capitalists. These loans were very risky to low income borrowers. The lenders oftentimes counted on the borrower defaulting in order to book profits.
The modern day savings and loan traces its roots to the Philadelphia Savings Fund Society, founded in 1816. It was the first savings bank to organize and do business in the United States. Later, in 1932 during the Great Depression, Congress passed the Federal Home Loan Bank Act. It established the Federal Home Loan Bank, a finance bank whose purpose was to provide funds to building and loan institutions. The Federal Home Loan Bank also provided liquidity and made personal mortgages widely available.
In the 1970’s federal banking regulations changed. During this period traditional savings and loans became virtually indistinguishable from the traditional banks which offered checking accounts and other bank services.
The 5 biggest United States banks, ranked by deposits in billions of US dollars:
- Bank of America – $835.9
- J.P. Morgan Chase – $692.1
- Wells Fargo – $680.3
- Citibank – $263.8
- PNC Bank – $174.6