The Adaptation Of The National Banking Act Was Due To The

1427 WordsApr 22, 20176 Pages
The adaptation of the national banking act was due to the American civil war between the northern and southern states. When the war started in April of 1861, the federal government had no idea that it would last as long as it did, nor did they think that it would cost as much as it did. Soon after the war started, the federal Government realized that it needed a huge flow of cash if they wanted to defeat the south. The government then tried all applicable means of generating money to pay for the expense of the war. They increased taxes, sold bonds and forced banks to lend them money in exchange for the right to issue its own banknotes and the privilege to print fiat currency. When that wasn’t enough, the government then formed a…show more content…
Banks took advantage of this opportunity as well and profited from it. The National Bank act of 1863 was definitely an improvement to the nation’s banking system but it was not successful as it was thought of to be, it did not fix the financial problems of the Nation at the time It drove approximately 1500 state chartered banks out of business and some was forced to become national charter banks because they were losing profits with the 10 percent tax increase that was imposed on the issuing of their banknotes. The state chartered banks that staid in business turned to the use of checking accounts and as a result, they became more successful and outgrew the nationally chartered banks. For this reason, I do personally thinks that the National banks acts was a failure. The dual banking system was a system that was formed following the passing of the national bank act. There were state chartered banks and nationally chartered banks that were both regulated and supervised but different entities. state chartered banks were regulated by states. While nationally charter banks were regulated by the federal government. There were also laws set by legislator that limited branching of banking to five. for this reason, there were lots of unit banks which made the US banking system remarkably unstable. There was also lots of bank panic because depositor was writing checks against their deposit that could not be clear by the banks. In order to
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