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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 First Bank of the United States was established in Philadelphia, Pennsylvania, while the city served as the national capital, from 1790 to 1800. The bank began operations in Carpenters' Hall in 1791, some 200 feet from its permanent home. Branches opened in Boston, New York, Charleston, and Baltimore in 1792, followed by branches in Norfolk ...
In 1791, former Morris aide and chief advocate for Northern mercantile interests, Alexander Hamilton, the Secretary of the Treasury, accepted a compromise with the Southern lawmakers to ensure the continuation of Morris's Bank project; in exchange for support by the South for a national bank, Hamilton agreed to ensure sufficient support to have the national or federal capitol moved from its ...
The advantage of holding a National Bank Act charter is that a national bank is not subject to state usury laws intended to prevent predatory lending. [6] However, in Cuomo v. Clearing House Association, L. L. C. , the Supreme Court ruled that federal banking regulations do not preempt the ability of states to enforce their own fair-lending ...
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.
The Second Bank was a national bank. However, it did not serve the functions of a modern central bank: It did not set monetary policy, regulate private banks, hold their excess reserves, or act as a lender of last resort. [39] The bank was launched in the midst of a major global market readjustment as Europe recovered from the Napoleonic Wars. [40]
The push for the creation of a new national bank occurred during the post-war period of American history known as the Era of Good Feelings. There was a strong movement to increase the power of the federal government. Some people blamed a weak central government for America's poor performance during much of the War of 1812.
The First Bank of the United States [29] had a mixture of government and private ownership and was subject to public oversight. The federal government appointed five of the 25 Bank's directors and held one fourth of its stock. The remaining 20 of the Bank's directors were selected, and the other 75% of its stock was provided by the investors.