1900-1924: A History of America's Banks and The ABA

1900: The Growth of Professional Development
The American Institute of Bank Clerks—forerunner of ABA’s American Institute of Banking, which will exist until 2014—is launched to unite bank employees for education and social purposes. The institute offers a series of correspondence courses and courses administered through local chapters.
1900: Relief for Smaller Banks
In a regulatory relief measure, capital requirements are eased for small-town national banks. Congress amends the National Bank Act to permit national banks to be formed in small towns with $25,000 in capital rather than $50,000.
1902: Hunting Down the Wild Bunch
Under contract to ABA, the Union Pacific Railroad and the Great Northern Express Company, the Pinkerton Agency identifies and hunts down Butch Cassidy’s “Wild Bunch” gang of bank robbers. By September 1902 the Pinkerton Agency believes that only three members of the gang remain alive—including Cassidy and the “Sundance Kid,” both of whom have fled to Bolivia.
1902: Serving Savings Banks
ABA establishes a division for savings banks. Within a year, 548 banks are members.
1902: Representing State Interests
The first organization for state bankers’ associations is established. It becomes a division of ABA in 1910 and today remains the Alliance of State Bankers Associations.
1903: A Pioneer for Women, African Americans
Maggie Walker, an African-American civil rights leader, becomes the first woman to found a bank when she establishes the St. Luke Penny Savings Bank in Richmond, Va.
1905: Lending Up
In a legislative win for ABA, Congress increases the lending limits of national banks.
1907: The Last Straw
When the collapse of the Knickerbocker Trust sets off a chain of failures of the less-regulated trust industry in autumn 1907, cash dries up and called loans threaten to topple the U.S. financial system. With his own money, plus pledges secured in a bravura convening of bank presidents, J. Pierpont Morgan puts an end to the crisis and pooled loan certificates are issued by the clearinghouses to stem further runs on the banks and brokerages. The panic begins to lay the foundation for the future Federal Reserve; as Sen. Nelson Aldrich notes, “We may not always have Pierpont Morgan with us to meet a banking crisis.”
1908: Informing Bankers
Combining several existing print publications, the Journal of the American Bankers Association begins publishing with a circulation of 11,000.
1908: The Fed’s Forerunner
As a near-term measure to stop panics like 1907’s, the Aldrich-Vreeland Act authorizes emergency issues of asset-secured bank notes and establishes the Federal Reserve’s forerunner, the National Monetary Commission.
1908: Tax-Free Competition
St. Mary’s Bank Credit Union is founded in Manchester, N.H.—the first credit union in the United States. Although initially intended to serve individuals of modest means, and given a tax exemption for that purpose, credit unions will grow rapidly and the largest will become virtually indistinguishable from banks—with the exception of their favorable tax treatment—by the 21st century.
1909: Santa Savings
The Carlisle Trust Company, Carlisle, Pa., starts the first Christmas savings club.
1910: Credit on Character
Arthur Morris opens the first “Morris Plan” bank in Norfolk, Va. The Morris Plan uses installment payments and character endorsements from “co-makers” to bring credit to worthy borrowers without traditional collateral. Morris takes his idea across the country and eventually develops factory financing of auto sales.
1911: Routing toward Progress
ABA institutes its routing number system providing a unique numeric identifier for each bank in the country. It is quickly adopted nationwide and streamlines the clearing and settlement of checks.
1911: The Check Is in the Mail
The Postal Savings System opens as the first consumer financial institution whose deposits were backed by the U.S. government. The system initially paid small depositors—initially capped at $500—2 percent interest. Appealing principally to recent immigrants, who often preferred banking with a state-run institution in their home county, the system would peak in deposits in 1947. With the rise of widespread deposit insurance, its trust advantage over banks dwindles and it closes in 1969.
1913: The Creation of the Federal Reserve
The Federal Reserve System is established, including the Federal Reserve Board of Governors and 12 regional Federal Reserve banks that would put government money to work in situations in which banks had previously stepped in, as well as pay a 6 percent dividend on bank surpluses, handle deposits and offer remittance facilities. The central bank would also issue Federal Reserve notes as currency. Congress gives national banks the right to make real estate loans and exercise trust powers.
1913: Standing Up for Farm Banks
ABA’s first committee for agricultural banks is established.
1914: U.S. Banks Expand Abroad
National City Bank of New York—now Citibank—opens in Buenos Aires the first overseas branch office of any U.S. bank.
1914: Speaking Up for Banks
ABA launches its public relations department, promoting banks’ role in the economy and correcting false impressions when banks were unfairly criticized.
1915: Advocating for National Banks
At the 1915 Annual Convention, ABA creates a section for national banks. In 1919, ABA—still headquartered in New York—will open its first Washington office to help advocate on behalf of national banks.
1916: Fueling a Farm Bust
Congress establishes 12 government-sponsored cooperative federal land banks to extend long-term credit to farmers—especially those who due to their inexperience, youth or small holdings did not always qualify for bank loans. By the time they get up and running, however, they prove superfluous, as banks are also lending to farmers, and the oversupply of credit creates a farm bust in the early 1920s. These federal land banks will evolve into the Farm Credit System, today a tax-advantaged $250 billion institution that competes directly with banks and makes loans outside of its original purpose.
1916: Serving State Banks
ABA establishes a section for state banks, with more than 8,000 initial members.
1917: Patriotic Banking
With the entry of the United States into World War I, Federal Reserve policy shifts to support war borrowing. ABA supports the Liberty Loan campaigns of World War I. Its five war-loan drives between 1917 and 1919 raise over $21.4 million.
1918: Creation of Fedwire
The Federal Reserve launches Fedwire, a real-time gross settlement funds credit transfer network.
1919: Banking on the Edge
Congress passes the Edge Act, allowing banks to establish offices across state lines to engage in international banking and assist in foreign trade transactions.
1919: Milestone for Women
The First Women’s Bank of Clarksville, Tenn., opens as the first commercial bank founded and managed by women and continues after a 1926 merger. Brenda Runyon is its founder and president.
1919: Growing Industry
National City Bank of New York—now Citibank—becomes the first bank to reach $1 billion in assets.
1920: Bankers Teaching Economics
ABA creates a committee to promote teaching of economics and banking in public schools. The committee identifies helpful textbooks and prepares sample lectures for banks to present in schools—a tradition that continues through Teach Children to Save and Get Smart About Credit.
1922: The Most Banks
The number of U.S. banks peaks at more than 30,000.
1924: Open Market Operations
The Federal Reserve conducts its first open market operations, buying government securities in the open market and thus creating more lendable funds in the money market.
1924: Educating Business Leaders
The longtime president of First National Bank of New York and former ABA treasurer, George F. Baker, becomes the founding donor of Harvard Business School.

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1900-1924: A History of America's Banks and The ABA

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