A bank is an institution for receiving, keeping, and lending money. In 1791, Congress set up the Bank of the United States. It lent money to the federal government and issued bank notes, a form of representative money backed by gold and silver. The Bank brought stability to American banking. However, many people were opposed to it. They worried that a centralized bank would respond only to the needs of wealthy individuals and large businesses. It ceased to exist in 1811, when its charter, or license, expired. A second central bank had the same fate, expiring in 1836. The period between 1837 and 1863 is known as the Free Banking Era. This period was dominated by state-chartered banks. Many did not have enough gold and silver to back their paper money.

     During the Civil War, Congress enacted important bank reforms. These laws gave the federal government the power to charter banks. Banks were now required to hold adequate gold and silver reserves. The government also established a uniform national currency.

     In 1913, Congress established the Federal Reserve System. It served as the nation’s first true central bank, or bank that can lend to other banks in times of need. In the 1930s, the severe economic decline called the Great Depression led to new laws regulating banks. One established the Federal Deposit Insurance Corporation (FDIC), which insures customer deposits if a bank fails.