A bank is an institution for receiving and lending money. The banking institutions of the United States may be classed as national and State banks, private banks or bankers, savings banks, and loan and trust companies. In 1780 the Congress of the Confederation chartered the Bank of North America with a capital of $400,000. Doubt as to the power of Congress caused the bank to be rechartered by Pennsylvania in 1781. By 1791 Two more banks had been established, one in New York, the other in Boston. In that year Congress established the Bank of the United States. The charter authorized an existence of 20 years and a capital of $10,000,000, one-fifth to be supplied by the United States. 

In 1811 Congress refused to renew the charter. During the trying times of the War of 1812 only State banks existed. In 1816 the second United States Bank was chartered to run 20 years, with a capital of $35,000,000, four-fifths of the amount being in Government stocks. The bank was to have custody of the public funds, and 5 of its 25 directors were to be appointed by the United States. Congress passed an act renewing its charter in 1832, but President Jackson vetoed it (II, 576). After a Presidential election in which his fight with the bank was made an issue President Jackson ordered the public funds to be removed from the Bank of the United States and placed in State banks (III, 5). In 1836 the bank's charter expired. In 1841 President Tyler vetoed 2 bills to revive it (IV, 63, 68). In 1846 the Independent Treasury system was established. Between 1836 and 1863 only State banks existed. Feb. 25, 1863, the national-bank act was passed.

National Banks

Dissatisfaction and losses in connection with the State banking system in vogue in the first half of the nineteenth century led to the passage of laws by the Federal Government for the protection of holders of the circulating medium. The first national bank act of the new and comprehensive series was suggested to Congress by Secretary Chase in 1861 and passed in 1863. It was amended by a law passed June 3, 1864. These acts form the basis of the present law. It is patterned after the New York State banking law, which in 1849 required circulating notes of all banks of that State to be secured by a deposit of stocks and bonds, one-half in issues of that State. The circulating notes were redeemable at one of several agencies within the State. This latter feature of the New York law was adapted from the Suffolk system in vogue in New England.

Under the national banking law any 5 persons with a combined capital of $50,000 may open a bank and receive circulating notes to the amount of 90 per cent of their capital invested in United States bonds, but not to exceed 90 per cent of the par value of the bonds. In cities of more than 6,000 inhabitants the capital required is $100,000, and double this amount where the population exceeds 50,000. The ratio of circulating medium to capital remains the same in all places. The law also established the National Bank Bureau in the Treasury Department and created the office of Comptroller of the Currency. This act added some $350,000,000 to the currency of the country. The total number of banks organized under this act aggregates 5,127. Of these, 1,545 have since become insolvent or gone into liquidation, leaving on July 14, 1898, a total of 3,582 in operation, with resources aggregating $3,977,675,445.17, and a circulation of 189,866,298.50 outstanding.

Pet Banks

When President Jackson ordered the public funds withdrawn from the United States Bank in 1833, it became necessary for the Administration to find some other place of deposit for the Federal moneys. Certain State banks were chosen and the allegation was made that the selection was determined not so much on the ground of fitness as on that of party fidelity, a principle also much in vogue in the granting of bank charters before the system of free banking came into use. The banks selected by Jackson as public depositories were in derision called "pet banks."

Postal Savings Banks

Post-office savings banks were established in England in 1861 to meet the growing wants of the people for a secure place of deposit for savings, as well as to provide facilities for those who live in places remote from any regular savings institution. At First only certain post-offices were designated, but the system was later extended to include all the money-order offices in the United Kingdom. The depositor receives a pass book in which his deposit is entered, and the postmaster-general is immediately notified by the officer receiving the money, and the deposit is acknowledged by the department. The money is invested in Government funds. The Government is responsible for all money received, so that depositors are secured against the dishonesty of officials.

A depositor may apply for repayment at any post-office savings bank in the Kingdom, and may direct payment to be made to him at that or any other post-office savings bank. His order is forwarded to the postmaster-general in London, and in due time he receives a warrant on the designated office, which he presents, together with his pass book, and receives the money. Deposits can be made of sums ranging from 1 shilling to L50 in one year, the total never to exceed L200, including interest, which is at the rate of 2 1/2 per cent. The success of postal savings banks in England and other foreign countries has attracted the attention of economists in the United States. Several Postmasters-General have advocated their establishment in the United States, and from time to time their recommendations have been favorably indorsed by the Chief Executives.

Savings Banks

The first savings bank in the United States was the Boston Provident Savings Institution, incorporated Dec. 13, 1816. The Philadelphia Savings Fund Society began business the same year, but was not incorporated until 1819. In 1818 banks for savings were incorporated in Baltimore, Md., and Salem, Mass., and in 1819 in New York, Hartford, Conn., and Newport and Providence, R. I. There are now (1898) 980 such banks throughout this country, with deposits aggregating $1,983,413,564. These institutions are for the encouragement of the practice of saving money among people of slender means and for the secure investment of savings, the profits thereof being paid as interest to the depositors.

State Banks

A State bank is an institution chartered by a State legislature for banking purposes. It performs similar functions to national banks. After the expiration of the charter of the Bank of the United States in 1836 and the refusal of Congress to recharter it, State banks sprang up in large numbers throughout the Union. Each State passed its own law for their government or control. In many States these laws were not carefully drawn and the holders of their circulating notes not sufficiently protected against loss from suspensions and failures. Between 1836 and 1863 there were no United States banks or national banks, and only State banks existed. Being allowed to issue notes to circulate as currency, they availed themselves of this privilege, and in many instances the privilege was much abused. By act of Congress passed Mar. 3, 1865, all circulating notes of banks other than national banks were taxed 10 per cent. The result of this law was to speedily cause the retirement of all such notes.