Banking, Investment and Speculation
FROM 1836, when the Second Bank of the United States was allowed to expire, to 1863, the Federal government exercised no direct control over American banking activities. This was the period of State or State-chartered banks, and it corresponds in some respects to the phase of English banking history in the first few decades of the 19th century. Of these State-chartered banks, America possessed about 1600 in 1862. T h e notes which they put out provided a thoroughly untrustworthy paper currency, and it was chiefly to remedy this that the National Bank Act of 1863 was passed. This Act, which in several important particulars was based on the British Bank Act of 1844, was a product of 'Currency School' thought, seeking to place restrictions on the individual banker's freedom of action. T h u s it required that all banks should have at least five stockholders, a prescribed capital stock (depending on the size of the city in which the bank was located; the minimum was $50,000), and that they deposit with the Federal government Federal bonds either equal to one third of the bank's capital or a minimum of $30,000, in re turn for which the banks were to receive 90% of the current market value of the bonds so deposited in the shape of national bank notes. T h e banks showing no enthusiasm to toe the line, the note issues of State banks were driven out, at least for a while, by a 10% tax in 1865.