National Bank Act of 1863
NATIONAL BANK ACT OF 1863
The National Bank Act of 1863 was designed to create a national banking system, float federal war loans, and establish a national currency. Congress passed the act to help resolve the financial crisis that emerged during the early days of the American Civil War (1861–1865). The fight with the South was expensive and no effective tax program had been drawn up to finance it. In December 1861 banks suspended specie payments (payments in gold or silver coins for paper currency called notes or bills). People could no longer convert bank notes into coins. Government responded by passing the Legal Tender Act (1862), issuing $150 million in national notes called greenbacks. However, bank notes (paper bills issued by state banks) accounted for most of the currency in circulation.
In order to bring financial stability to the nation and fund the war effort, the National Bank Act of 1863 was introduced in the Senate in January of that year. Republican congressman from Pennsylvania Thaddeus Stevens (1792–1868) opposed the act; Secretary of the Treasury Salmon Chase (1808–73), aided by Senator John Sherman (1823–1900) of Ohio, promoted it. The bill was approved in the Senate by a close vote of 23 to 21, and the House passed the legislation in February. National banks that were organized under the act were required to purchase government bonds as a condition of start-up. As soon as those bonds were deposited with the federal government, the bank could issue its own notes up to 90 percent of the market value of the bonds on deposit.
The National Bank Act improved but did not solve the nation's financial problems—some of the 1500 state banks, which had all been issuing bank notes, were converted to national banks by additional legislation (that amended the original Bank Act and was passed June 1864). Other state banks were driven out of business or ceased to issue notes after the 1865 passage of a 10 percent federal tax on notes they issued (which made it unprofitable for them to print money). The legislation created $300 million in national currency in the form of notes issued by the national banks. But because most of this money was distributed in the East, the money supply in other parts of the country remained precarious; the West demanded more money. This issue would dominate American politics in the years after the Civil War. Nevertheless, the nation's banking system stayed largely the same—despite the Panic of 1873—until the passage of the Federal Reserve Act in 1913.
See also: Federal Reserve Act, Greenbacks
"National Bank Act of 1863." Gale Encyclopedia of U.S. Economic History. . Encyclopedia.com. (November 23, 2017). http://www.encyclopedia.com/history/encyclopedias-almanacs-transcripts-and-maps/national-bank-act-1863
"National Bank Act of 1863." Gale Encyclopedia of U.S. Economic History. . Retrieved November 23, 2017 from Encyclopedia.com: http://www.encyclopedia.com/history/encyclopedias-almanacs-transcripts-and-maps/national-bank-act-1863
Encyclopedia.com gives you the ability to cite reference entries and articles according to common styles from the Modern Language Association (MLA), The Chicago Manual of Style, and the American Psychological Association (APA).
Within the “Cite this article” tool, pick a style to see how all available information looks when formatted according to that style. Then, copy and paste the text into your bibliography or works cited list.
Because each style has its own formatting nuances that evolve over time and not all information is available for every reference entry or article, Encyclopedia.com cannot guarantee each citation it generates. Therefore, it’s best to use Encyclopedia.com citations as a starting point before checking the style against your school or publication’s requirements and the most-recent information available at these sites:
Modern Language Association
The Chicago Manual of Style
American Psychological Association
- Most online reference entries and articles do not have page numbers. Therefore, that information is unavailable for most Encyclopedia.com content. However, the date of retrieval is often important. Refer to each style’s convention regarding the best way to format page numbers and retrieval dates.
- In addition to the MLA, Chicago, and APA styles, your school, university, publication, or institution may have its own requirements for citations. Therefore, be sure to refer to those guidelines when editing your bibliography or works cited list.