National Bank Act  From Wikipedia, the free encyclopedia Jump
to: navigation, search    For most of the nineteenth century,
the American banking system consisted of state-chartered banks.
The paper currency issued by state-chartered banks had to be
redeemable. Depending on the state, the capital requirements for
banks, set forth in the bank charter, differed. If a bank could
not redeem its bank notes for money (gold or silver), the bank
had committed fraud and was subject to prosecution. Most of the
state-chartered banks in the North and East created redeemable
currency against Bills of Exchange (Real Bills) under the real
bills doctrine set forth by Adam Smith. (See "The Wealth of
Nations", 1776 by Adam Smith). Real Bills were negotiable
instruments, payable in 90 days, which banks discounted. Real
Bills were a means of financing production of consumer items
moving to market. Banks created uniformly denominated redeemable
bank notes against the value of the Real Bills in their
inventory.  If redemption deman