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The National Bank Act of 1863 was passed on February 25, 1863, and was the first attempt to establish a federal banking system after the failures of the First and Second Banks of the United States, and served as the predecessor to the Federal Reserve Act of 1913.
The National Banking Acts of 1863 and 1864 marked an important moment in the development of the U.S. banking system. Congress passed these bills as a wartime expedient to (i) help finance the war effort by increasing the demand for federal government debt and (ii) promote a stable uniform currency.
The Act entitled “An Act to provide a national currency secured by a pledge of United States bonds, and to provide for the circulation and redemption thereof,” approved June 3, 1864, shall be known as “The National Bank Act.”
In June 1864, the legislation underwent substantial amendment and became known as the National Bank Act. Modified and supplemented over the years, the National Bank Act continues to provide the basic governing framework for the national banking system today.
The National Bank Act of 1863 was designed to create a national banking system, float federal war loans, and establish a national currency. Congress passed the act to help resolve the financial crisis that emerged during the early days of the American Civil War (1861 – 1865).
The National Bank Act of 1863 provided for the federal charter and supervision of a system of banks known as national banks; they were to circulate a stable, uniform national currency secured by federal bonds deposited by each bank with the comptroller of the currency (often…
National Bank Acts. Designed to replace the corrupt, decentralized, and inefficient system of state banks and bank notes, the National Bank Act of 1863 was largely the work of Secretary of the Treasury Salmon P. Chase and Senate Finance Committee member John Sherman of Ohio.
The National Currency Act of 1863 created the national banking system and the Office of the Comptroller of the Currency. The immediate challenge was meeting the costs of a civil war that vastly exceeded anything the government had confronted before.
Abraham Lincoln understood the importance of a common national currency and bank credit to support a healthy economy. As a young man in frontier Indiana and Kentucky, he saw the ways in which unreliable paper money and inadequate credit frustrated the ambitions of his neighbors.
This paper presents an overview of the legal and financial history of this period. It begins with the reasons the National Banking System was created. It also examines the rules of operation for national banks as established by the National Banking Act and its subsequent revisions.