ald 
27 
GROWTH OF THE NATIONAL BANKING SYSTEM 
bonds. By 1866, this right had been made exclusive by a 109, tax 
on state bank note circulation. 
The measure providing for the system was introduced in Congress 
in the winter 1861-1862 but was not acted upon until the following 
session, in 1863. By the close of 1865—the year marking the end 
of the Civil War—there were 1582 national banks with total capital 
of $403,300,000, owning government bonds in excess of that sum, 
while their circulation was equal to approximately one-half of their 
total capitalization. 
Circulation had been rigidly limited by Congress—first to $300,- 
000,000 then to $354,000,000, and as a result, something of a finan- 
cial injustice had been imposed upon the newer sections of the 
country. National banks in the East and North, which were either 
organized or converted soon after the National Bank Act went into 
effect, had naturally obtained the bulk of the circulation that was 
available. This left the banks which were organizing in the newer 
sections of the country—where both capital and currency were 
urgently needed—at a decided disadvantage. For example, the 
banks of the Eastern and Middle States, in 1870, had some 80 million 
dollars’ worth of currency in excess of their share on a basis of popula- 
tion and wealth. The banks of the Southern States, on the other 
hand, were entitled to some 57 million dollars in currency more than 
they could obtain. 
In 1875, Congress coupled with the passage of the Specie Resump- 
tion Act, a measure providing for “free banking”—i.e., the removal 
of all limitations upon the volume of bank currency. Some (although 
no great), impetus to the organization of new banks was given by 
this measure. The year 1875 saw the organization of 107 new national 
banks, capitalized at some 12 million dollars against 71 with capitaliza- 
tion of 6.7 million dollars for the previous year, 1874. In each of the 
four years following 1875, however, the total number of national 
banks in the country decreased by a slight margin. 
As originally enacted, the National Bank Act provided for charters 
extending over a period not exceeding 20 years, so in 1883-84 the 
charters granted the first national banks (and extending 20 years) 
would have automatically expired. As a matter of fact, the charters 
of 29 banks organized for periods of less than 20 years, expired 
prior to July 12, 1882. Congress in 1882, in the face of bitter opposi- 
[13] 
0 i?