National Bank Act Of 1863

How Did The Civil War Change The American Currency?

The Act entitled “An Act to provide a national currency secured by a pledge of United States bonds, and to provide for the circulation and redemption thereof,” approved June 3, 1864, shall be known as “The National Bank Act.”

The National Bank Act of 1863 was designed to create a national banking system, float federal war loans, and establish a national currency. Congress passed the act to help resolve the financial crisis that emerged during the early days of the American Civil War (1861–1865).

Three results of the National Banking Acts of 1863 and 1864 were that they gave the federal government the power to charter banks, the power to require banks to hold adequate gold and silver reserves to cover their bank notes, and the power to issue a single national currency.


As part of Chase’s plan for financing the war, the statutes passed during the early 1860s imposed taxes on the capital and bank notes of commercial banks, both state and national. With the tax on state-chartered banks, Chase was attempting to encourage them to convert to national charters. This plan was challenged in Veazie Bank v. Fenno (1869), in which Chase, by then Chief Justice of the Supreme Court, wrote the majority opinion. The Court upheld the constitutionality of the tax, but it did not directly address the constitutionality of the NBA to grant banking charters.

That issue was finally addressed in passing in Farmers’ & Mechanics’ National Bank v. Dearing (1875). The Supreme Court stated that the constitutionality of the NBA rested “on the same principle as the act creating the second bank of the United States.” That principle was upheld under the necessary and proper clause of Article I, section 8 of the Constitution in McCulloch v. Maryland (1819) and Osborn v. Bank of the United States (1824). The validity of the NBA has been unchallenged since then.

Published by lmgllc6

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