If an exam revealed that the bank’s capital had become impaired, it could be expelled from the clearing house. BIS Review 44/1997  -4National Banking (1863-1913) One compelling piece of evidence that contemporary observers did not regard free banking as a failure is that the National Banking System, established by an act of Congress in 1863, incorporated key elements of free banking.
These included free entry and collateralized bank notes. However, unlike the state laws, the federal law interfered with private market forces by imposing an aggregate limit on note issues, along with a set of geographic allocations of the limit that produced a serious maldistribution of notes.