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What was the National Bank Act?

The National Bank Act of 1863, passed by the U.S. Congress (the country's law-making body), created a national banking system, loaned money to finance the Civil War (1861–65), and established a national currency (paper money and coins). Congress passed the act because there was no program of taxation to finance the war. Prior to this time, independent banks called wildcat banks, issued their own currency. With the Legal Tender Act of 1862, the United States issued $150,000,000 in national notes, called greenbacks. The following year the National Bank Act required national banks to purchase government bonds that were deposited with the federal government. Then the national bank could issue its own notes up to 90 percent of the market value of the bonds on deposit. Most of the national banks were located in the Eastern states, so a money shortage existed in the Western states for many years...

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