national bank

national bank in the United States, financial institution of a class authorized by Congress in acts of 1863 and 1864. The acts were intended to provide a way of marketing the large bond issues made necessary by the Civil War and to give circulation to a paper currency more trustworthy than the notes of state banks had proved to be. The act of 1864 authorized the formation of private banking corporations that were to invest a large part of their capital in bonds of the United States and that might then issue their notes as currency. The amount of the notes was not to exceed 90% of either the face value or the par value of the bonds, depending on which of the two was smaller. Subsequent acts modified the act of 1864 in various details, and the plan was changed fundamentally by the Federal Reserve Act of Dec. 23, 1913, which provided for the gradual substitution of Federal Reserve notes and Federal Reserve bank notes for national bank notes. The Federal Reserve Act also required all national banks to become members of the Federal Reserve System .

Bibliography: See bibliography under banking.

First National Bank of Boston v. Bellotti, 435 U.S. 765 (1978), argued 9 Nov. 1977, decided 26 Apr. 1978 by vote of 5 to 4; Powell for the Court, Burger concurring, White, Brennan, Marshall, and Rehnquist in dissent. Reversing the highest court of Massachusetts, a bare majority of the Supreme Court held unconstitutional the portion of a state statute that banned corporations from spending to influence the outcome of a ballot referendum concerning a graduated income tax. Such corporate expenditure is protected by the First Amendment no less than anyone else's expenditure in the exercise of the right to free speech. The Court thus added another constitutional barrier to the major obstacles already erected by Buckley v. Valeo (1976) against legislative efforts to restrict campaign expenditures (See Financing Political Speech).

Banks and other corporations, like individuals, are free to spend their funds to advocate or oppose public policies submitted for voter consideration. They could still, however, be constitutionally prohibited, as they are by federal and many state laws, from contributing money to candidates for elective office. And, it turned out, corporations could also be prohibited from spending on behalf of a candidate independently of a candidate's campaign (Austin v. Michigan Chamber of Commerce, 1990).

In Bellotti, the Court appears to follow its distinction in Buckley between campaign expenditures and campaign contributions to candidates. Expenditures are entitled to a constitutional protection not afforded to contributions that might be thought, when large, to corrupt elected officials. Bellotti is significant in extending the protection of expenditures to outlays of corporate funds. Justices Byron White and William Rehnquist, in vigorous dissenting opinions, separately disputed this result, contending that states should have the power to determine the potential harm of corporate campaign expenditures.

See also Elections; Political Process; Speech and the Press.

Leon D. Epstein