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The National Bank Act of 1863, also known as the National Currency 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 Act sought to give national banks competitive equality with state-chartered banks by letting national banks branch to the extent permitted by state law. The McFadden Act specifically prohibited interstate branching by allowing each national bank to branch only within the state in which it is situated. [22]
The National Banking Act of 1863, besides providing loans in the Civil War effort of the Union, included provisions: To create a system of national banks. They were to have higher standards concerning reserves and business practices than state banks. Recent research indicates that state monopoly banks had the lowest long run survival rates. [8]
The banks each had the power to issue standardized national bank notes based on United States bonds held by the bank. The Act was totally revised in 1864 and later named the National-Bank Act, or National Banking Act, as it is popularly known. The administration of the new national banking system was vested in the newly created Office of the ...
To correct such conditions, Congress passed (1863) the National Bank Act, which provided for a system of banks to be chartered by the federal government. The National Banking Acts of 1863 and 1864 were two United States federal laws that established a system of national charters for banks, and created the United States National Banking System.
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In order to prosecute the Civil War, Congress passed the acts of 1863 and 1864 creating national banks. Exceptions were made to the prohibition against depositing government funds in private banks, and in certain cases payments to the government could be made in national bank notes.
In 1863 the federal government passed a National Bank Act that created a national currency based on federal debt. This was not another centralized system. Local private banks issued the new currency, but under uniform rules that prevented confusion about the value of each bank's notes.