The American banking system evolved with the emergence of the United States after the Civil War. There are two types of banks in America: state- chartered banks, which are chartered by the banking department of each state; and national banks, which are chartered and authorized to operate by the federal government through the U.S. Department of the Treasury. One of the reasons Congress created a banking system that issued national currency was to finance the Civil War. Although national banks no longer issue currency, they continue to play a prominent role in the nation's economic life. It is important to understand that banks, be they state chartered or national, are empowered to issue credit facilities that carry the same effect of issuing currency, but only in terms of credit and in the form of a promissory note against the borrowers, as discussed in Chapter 5.

National Banks

Congress has established a number of long-range goals of for the national banking system in America. These are:

■ Supporting a stable national currency.

■ Financing commerce.

■ Acting as private depositories.

■ Generally supporting the nation's economic growth and development.

The realization of these goals required a type of bank that was not just safe and sound, but whose powers were dynamic and capable of evolving so that national banks could perform their intended roles, well beyond the Civil War. Key to these powers is language set forth in 12 U.S.C. § 24 (Seventh), which provides that national banks are authorized to exercise:

.. . all such incidental powers as shall be necessary to carry on the business of banking; by discounting and negotiating promissory notes, drafts, bills of exchange, and other evidences of debt; by receiving deposits; by buying and selling exchange, coin and bullion; by loaning money on personal security; and by obtaining, issuing, and circulating notes.

The national banking system demonstrates the value of applying nationwide standardization by introducing uniform national banking standards to banking activities and products.

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