GROWTH OF THE NATIONAL 
BANKING SYSTEM 
1 this chapter it is impossible to attempt anything approaching 
a comprehensive history of national banking in the United States. 
The subject itself is so broad and so involved with other subjects 
in the fields of finance closely akin to it, that it can be treated here 
only in general outline. The sketch following is presented with the 
idea that it may serve as the background that is essential to a thorough 
understanding of the national banking system as it operates today. 
For convenience, and for purposes of comparison, the history of 
national banking may be divided into four main periods: 
I—1863-1882 Formative Period. 
I11—1883-1899 Natural Development. 
[11—1900-1918 Development of Smaller Banks. 
IV—1914 to 
present date Under Federal Reserve System. 
FORMATIVE PERIOD 
Tue fundamental difference between the general course followed 
by American banking before and since the establishment of the 
national banking system is this: 
In the earlier period the tendency of banking was toward the extensive use of 
bank credit in the form of note issue; this form of credit completely lacked 
stability and constant value, since it was subjected to no central supervision. 
During the national banking period, the tendency was toward more extensive 
use of bank credit in the form of deposits, and relatively less in the form of note 
issue. Note issue was a privilege conferred only upon those banks under Federal 
supervision, and was hence subjected to central control, with resultant stability 
of value. 
A very simple set of figures illustrates this differentiation quite clearly. 
We may assume that the national banking system had become 
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