Dictionary.net

The free banking system of the State of New York (1838) gave all parties freedom to establish banks, and required securities to be deposited with the State for bank issues. In December, 1861, Secretary Chase recommended to Congress a similar system of national banks. He repeated this recommendation in 1862. The Act of February 25, 1863, authorized the free formation of banks, entitled to issue notes to the amount of ninety per cent of the par value of the United States bonds which each bank deposited with the Treasury Department. The system was to be supervised by an official called the comptroller of the currency. $300,000,000 of bank notes in all might be issued. A revised act was passed June 3, 1864. The Act of 1865 taxing State bank notes forced most of these to become national banks. The Act of 1870 increased the total amount of issue to $354,000,000. The system greatly benefited the Government in the placing of its bonds, and gave the country a superior system of banking, the Government guaranteeing the notes. There are now nearly 4000 national banks, with capital amounting to nearly $700,000,000, and deposits aggregating nearly $1,800,000,000.