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The National Bank Act (ch. 58, 12 Stat. 665; February 25, 1863), originally known as the National Currency Act, was passed in the Senate by a 23–21 vote, and was supplemented a year later by the National Banking Act of 1864. The goals of these acts was to create a single national currency, a nationalized bank chartering system, and to raise ...
Ever since the National Bank Act, national-chartered banks were effectively prohibited from interstate banking. This prohibition was further enshrined in the McFadden Act of 1927. The restriction on interstate banking prevented banks from achieving geographic diversification, making them especially vulnerable to local economic disruptions.
By 1865, there were already 1,500 national banks. In 1870, 1,638 national banks stood against only 325 state banks. The tax led in the 1880s and 1890s to the creation and adoption of checking accounts. By the 1890s, 90% of the money supply was in checking accounts. State banking had made a comeback.
Between 1867 and 1900 U.S. steel production increased more than 500 times from 22,000 tons to 11,400,000 tons and Bessemer steel rails, first made in the U.S. that would last 18 years under heavy traffic, would come to replace the old wrought iron rail that could only endure two years under light service.
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.
It replaced $45 million in "temporary loan certificates," paper bearing 3% interest but which circulated as currency, with the same amount of national bank notes issued by newly chartered banks. While achieving currency stabilization, the act answered midwestern pressure for more currency, and midwestern dissatisfaction with the concentration ...
Jackson was heavily involved in the monetary policy of the government. He was a strong opponent of national banks, seeing them as inherently corrupt, and in 1832 he vetoed a bill that would renew the bank's charter. This triggered the Bank War, a major political dispute over the future of the national bank in the United States. Jackson ...
National bank currency was considered inelastic because it was based on the fluctuating value of U.S. Treasury bonds. If Treasury bond prices declined, a national bank had to reduce the amount of currency it had in circulation by either refusing to make new loans or by calling in loans it had made already.