NATIONAL BANKING UNDER THE FEDERAL RESERVE SYSTEM 
IIT 
DEVELOPMENT OF SMALLER BANKS 
Prior to 1900, the minimum national bank capitalization permissible 
under the law was $50,000. This meant that in many of the less 
populous and less wealthy communities, where capital normally was 
badly needed for development of natural resources of the country, 
establishment of a national bank was often extremely difficult. 
Congress in March, 1900, amended the National Bank Act to provide 
for the organization of banks with a minimum of $25,000 capital. 
The same act also provided for the refunding of the national debt, 
and for issuing 2 per cent. consols, eligible as a basis of national 
bank circulation. 
The effect of this new legislation on the organization of national 
banks was almost instantaneous. During the five years preceding 
1900, the average net yearly decrease in the total number of national 
banks in active operation had been 27. For the five years 1900-1904 
inclusive, the average net yearly increase in the number of national 
banks of the country was 385. The few years immediately succeed- 
ing the passage of the Act of 1900 may be described as the “Golden 
Age” of national bank organization. No other period in the history 
of national banking approaches it for the prolific organization of 
national banking institutions. The net average yearly increase for 
the period 1900-1918 was 278. 
The following tabulation, made on the same basis as that indicated 
in the preceding section, shows how, during this period, national 
banks increased still further their ability to extend their credit. 
YEAR 
1899 
1918 
pe 
DEPOSITS PER 
$1 OF CAPITAL 
LOANS PER 
$1 OF CAPITAL 
$4.17 $4.12 
5.63 5.81 
Due to the new provisions that had been made for national bank 
currency by the Act of 1900, the volume of bank notes increased 
materially during the period 1900-1913. In June of the former year, 
bank note circulation was $265,000,000, or 11.89, of the total money 
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