Legislation that prohibited the printing of paper money by
anyone other than the federal government and established
rules for banking structure in the United States.
Until the Civil War, currency was based on gold and silver. State banks printed “money,” but it was not always accepted as legal tender or it might be discounted. The National Bank Act of 1863 began as a revision of the National
Currency Act of 1863 by Hugh McCulloch, first comptroller
of the currency. It was passed by Congress June 3, 1864. The
new act granted more control to the federal government
over the chartered banks than the original legislation had
granted. State banks had not accepted the National Currency
Act; they preferred the less-strict regulations of a noncentralized system. The new law raised the tax on state banknotes from 2 to 10 percent; this rate taxed the state banknotes out of existence and allowed for the new uniform
currency called greenbacks or National Bank certificates. By
1865 most state banks had either become national chartered
banks or had been dissolved.
The new banks had to comply with stricter federal regulations. Requirements included having at least five members on
the board, having $50,000 to $100,000 in stable assets, and
purchasing U.S. bonds equal in value to at least one-third of
the bank’s start-up capital. In exchange the Department of
Treasury printed currency equaling 90 percent of the bonds’
value, which the bank then used for transactions. Banks also
received interest payments from purchased government
bonds in the form of gold. This was an enticement to the remaining state-chartered banks to file for a federal charter and
stop using private currency for daily business.
The National Currency Act and the National Bank Act
served as the foundation for the United States banking system
until the Federal Reserve Act was passed in 1913.
—Deana Covel