Which Presidential Signatures Changed Payments?

 

 

 

 

 

 

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American statesmen have been molding the U.S. commercial system since our nation’s founding. But after centuries of changes, six key pieces of legislation stand out as having had an enormous impact on how today’s modern payments industry works.

1. Coinage Act of 1792 (signed by George Washington)

We wouldn’t have dollars without the Coinage Act. The origin of today’s system of U.S. currency, the Coinage Act originally allowed for 11 unique denominations of money, including the “eagle,” a $10 coin made with 16 grams of pure gold. The original dollar coin was required to contain 24.1 grams of pure silver.

The act also created the United States Mint, and established Philadelphia as the site of the Mint’s first physical headquarters.

Read the original: “An Act establishing a Mint, and regulating the Coins of the United States”

2. National Banking Act of 1863 (signed by Abraham Lincoln)

Throughout the first half of the 19th century, banks opened and operated under state-issued charters. And many of those state-chartered banks issued their own unique currency notes. In Paying with Plastic, PYMNTS.com’s David Evans estimates that roughly 10,000 different kinds of paper currency were being circulated throughout the U.S. in 1860.

The National Banking Act allowed for the issue of national bank charters, as well as the creation of a national bank note, which was officially backed by U.S. government bonds. A standardized national currency greatly facilitated interstate commerce.

3. Federal Reserve Act (signed by Woodrow Wilson in 1913)

While the National Banking Act achieved a national currency that could be used throughout the U.S., it did nothing to address the liquidity issues that led to several banking panics at the end of the nineteenth and beginning of the twentieth century. Many argued that the federal government needed its own reserve of currency that could be deployed when demand for dollars spiked.

In 1913, Congress agreed that a federal currency reserve was needed, and thus passed the Federal Reserve Act. The act set up a network of 12 regional Reserve Banks, and required all nationally-chartered banks to become members of the new Federal Reserve System. This gave the federal government a means for supplying member banks with additional dollars to combat financial panics.

4. Executive Order No. 6102 (signed by Franklin D. Roosevelt)

In 1933, Franklin D. Roosevelt banned Americans from owning gold.

No, really. In Executive Order No. 6102, Roosevelt tried to establish a moral argument behind his decree, using the word “hoarding” four times in its text (including the title: “Forbidding the Hoarding of Gold Coin, Gold Bullion and Gold Certificates”).

But the order wasn’t about preventing a few misers from going too far with emulations of Ebenezer Scrooge. Roosevelt set the cap on gold ownership at $100 worth of the precious metal — roughly $1,700 in 2012 dollars, nearly equal to the current price of one ounce of the stuff.

The order was eventually repealed (obviously), but not until 41 years later, when Gerald Ford removed the restrictions set by Roosevelt.

5. Fair Credit Reporting Act (signed by Richard Nixon in 1970)

After legislators spent a good hundred years-plus establishing a functional currency for the United States, Congress was able to focus its attention on more subtle facets of interstate commerce later on in the twentieth century.

One act in particular gave way to the standardization of consumer credit in the U.S.: the Fair Credit Reporting Act of 1970.

“An elaborate mechanism has been developed for investigating and evaluating the credit worthiness… of consumers,” Congress lamented at the start of the bill’s composition. To simplify the process, lawmakers established standards for scoring a consumer’s credit. For example, the act made consumer reporting agencies (CRAs) responsible for providing consumers with information stored about an individual’s credit history, and set an expiration date for negative information, like missed payments and tax liens.

National credit reporting standards continue to change. In 2003, the act was amended to require that CRAs issue one free credit report to each individual consumer each year, via the Fair and Accurate Credit Transactions Act signed by George W. Bush.

And in 2009, the Credit CARD act signed by Barack Obama added a slew of new provisions to protect cardholders, including: a required 45 days’ notice before interest rate hikes can be applied; the prohibition of retroactive interest rate increases; an increase of the minimum number of days prior to due date for the mailing of billing statements to 21; and a requirement that gift cards be valid for at least five years.

Read the original: “The Fair Credit Reporting Act”

6. Troubled Asset Relief Program (signed by George W. Bush in 2008)

To bail out the financial sector, George W. Bush provided $700 billion in capital from the U.S. Treasury to buy from banks their “troubled assets” — primarily securitized subprime mortgages, although the law gave the Treasury Secretary the power to deem other purchases necessary.

That $700 billion figure was later reduced significantly by the Dodd-Frank Act, to $475 billion. On March 3, the Congressional Budget Office estimated that TARP would cost taxpayers $19 billion.

7. Dodd-Frank Wall Street Reform and Consumer Protection Act (signed by Barack Obama in 2010)

It’s hard to summarize this monster of a bill in a few sentences. The final version took more than 2,300 pages of paper to print each copy; even the President’s summary of the law went 89 pages.

In short: the law creates government agencies to monitor risks to the U.S. financial system (including banks that might be “too big to fail”); added regulations for derivatives and asset-backed securities trading; created a Consumer Financial Protection Agency with broad powers; and established standard practices for future financial crises.

BusinessWeek has also attempted to summarize the law’s effects, in what seems like a very thorough infographic.