Hamlin Bank was one of many banks in the country that was involved with the N.B.A.  Many people thought Henry couldn't open a bank during the Civil War, but he did.

After the outbreak of the Civil War in 1861, Abe Lincoln was concerned with financing the war so he proposed a system of national banks authorized to issue national bank notes fully backed by federal bonds.  The system would provide a uniform national currency and would bring banks that entered it under federal control.

On Feb. 25, 1863, Congress passed the N.B.A. The acts of 1863 and '64 remained the basis of national banking policy until 1913 when the Federal Reserve Act came in.  In 1866, the number of national banks were 1,582 out of 1,879 banks all together. By 1913, two thirds of banks were under states.
The accomplishments of the N.B.A. were.....

        • 1) It created a uniform currency
        • 2) Promised prompt redemption of it's paper money
        • 3) Provided more effective bank supervision
However, the system was not respective for the people's needs because of the federal debt's size.  If it had not been for the increasing use of checking accounts, the money shortage would have increased.  As the economy grew, the volume of reserve funds needed enlarged but it was fixed by law.

Reserve and country banks were permitted to deposit part of their reserves with banks in cities.  New York City banks paid high interest rates on deposits which attracted smaller banks.  They held a considerable amount of the nation's reserves.  When some unforeseen event compelled a number of banks to call in their New York reserves, and N.Y. couldn't, then all of the makings of a financial panic were created.

It affected the price of securities on the N.Y. Stock Exchange.  After many recurrences of these crisis's, a financial reform was made by Congress in 1908.  It was called the Aldrich Vreeland Act.  It permitted national banks to issue band notes backed by state and city bonds and short-term promises to pay.  In 1912, there were 15 branches capable of functioning as a central bank.

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