Lesson 4 - Banking/Investing

Why Bank?

Banks are in the business of credit and serve as financial intermediaries, bringing borrowers and depositors together. Banks also make bill paying easy and keep depositors’ money safe. Earning enough money is a problem for many people, but imagine that time in history before banks when keeping money safe was an enormous problem. Without banks people had to decide to carry their money with them at all times or find a place to hide it. Stories abound of unfortunate situations arising from money kept under mattresses, buried in the yard, or stashed in time cups.

Although money has been used for thousands of years, banks only came into being around the 15th or 16th century. In the United States, the early history of banking up to the 20th century included bank panics, failures and runs on the banks (when people ran to take out all their money.) In response Congress established the Federal Reserve System in 1913, and in 1934, the Federal Deposit Insurance Corporation (FDIC) to protect the money of depositors and to restore confidence in the banking system. Today people can know their FDIC deposits are safe.