Banking For Today

In the movie It's a Wonderful Life, Jimmy Stewart portrays a banker at a savings and loan institution. Set in 1940's small-town America, Stewart loans money to poor people to help them build decent homes. Unfortunately, a misplaced bank deposit that ends up in the hands of the heartless Lionel Barrymore might spell trou­ble for Stewart. Mr. Barrymore initiates an audit of Stewart and his bank. However, the people Stewart put his faith in don't let him down. Eventually, they make their way to the bank—money in hand—to bail him out.

Times are a lot different than they were in the 1940s. Then, banks were a convenience to many of the people who used them. Today, banks have become a necessity in order to compete and survive in the financial marketplace.

Banks help their customers in a variety of ways. Fresh and inno­vative methods are constantly being developed to help make the banking experience more accessible to the customer. Along with new banks opening all the time, banking methods are becoming increasingly high-tech. Banking can now be done online by way of the Internet. If almost everything else can be accessed via the in­formation superhighway, why not banking?

THE EVOLUTION OF BANKING

The sophisticated banking establishment of today, with its innu­merable customer services, computerized operations, branches, and far-flung business activities presents a striking contrast to those ancient banks that developed after people adopted copper, silver, and gold coins as their money or medium of exchange.

Actually banking is as old as civilization itself. The Babylo­nians developed a complex system of lending, borrowing, and holding money on deposit long before 2500 b.c. Later, in Greece, the shrines at Delphi, Delos, and Ephesus served as some of that country's earliest banks. Surely, the early Greeks reasoned, no one would incur the wrath of the gods by stealing money left inside the temple.

A state bank at Troy attracted capital by paying as much as 10 percent interest while an Egyptian banker invited deposits on which he paid interest and permitted the depositors to withdraw their money at will. The Romans copied the Greek banks but went even further—offering services for transferring accounts, making loans, writing checks to withdraw funds, and various other conve­niences. With the fall of Rome, however, the Empire's large-scale financial dealings ceased, and during the Early Middle Ages the banking business slumped in most of Europe, although it contin­ued in parts of Asia and North Africa.

During the thirteenth and fourteenth centuries, banks were rees­tablished in Italy and grew rapidly as the Italians became world­wide traders. The word bank originated at that time. Money changers sat behind portable benches in public squares where they displayed their coins. The word banco (bench) symbolized the business and was carried over into the Italian word banca and the French noun banque.

With the revival of trade between Italy (especially Venice) and other parts of the world, banks sprang up elsewhere and intricate banking systems soon evolved. Prior to this century, family and national banks played an important though little known role in Eu­rope's growth.

The first colonists in America had little need for banks. These settlers were self-sufficient for the most part, and since agriculture was the principal business, barter rather than cash served their needs at first. The original banks, called "land banks," lent money or issued bank notes to farmers who put up their property as collat­eral. The government of South Carolina authorized a land bank in 1712 and two years later Massachusetts did the same. Similar banks appeared shortly thereafter in all the colonies so that there would be cash to circulate among the people as well as money to finance military defenses and expeditions.

The King of England in 1741 declared the banks illegal, and the colonists had to wait forty years before the first real American bank, the Bank of North America in Philadelphia, was chartered by the Continental Congress. Other private banks were soon estab­lished as was the Bank of the United States, which Congress au­thorized as the fiscal agent of the new federal government.

Gradually banks grew in number, size, and importance. The fi­nancial stability of the young republic was tied to the fortunes of its banks and their ability to provide financial banking for the chal­lenging expansion to the West. As the cities grew and their indus­try expanded, they too needed banking credit and services. Even as the wagon trains pushed west across the plains and over the moun­tains, settlement after settlement sprang up and with them the little banks so necessary for every community. New banks are still opening today while many of the older ones are merging or being acquired by foreigners. What's more, the industry is more dy­namic than ever—adjusting to change, seeking new horizons, and becoming one of the most important elements in the lives of most citizens because banking, although it involves finance, is predom­inantly concerned with people.