son's administration.

Sec. 2. #Banking from 1836 to 1863#. The Federal Government, which up to
that time had deposited its funds in the central bank and its branches
and in local state banks, established the "independent treasury," in
1840 (abolished in 1841 and re-established in 1846). By this plan the
government kept its money of all kinds in various depositories (or
sub-treasuries) in charge of public officials. While from 1792 to 1836
almost continuously a central banking system was in operation, other
banks, organized under state charters, were steadily increasing in
number. They received deposits, issued bank notes under state laws,
and cared for local commercial needs. The abolition of the central
national bank in 1836 left to the various state banks for twenty seven
years all the banking functions of the country. The banks of some
states (notably those of New England and New York), under careful
regulation and held to strict standards by public sentiment, for the
most part maintained a high credit; but many banks, under lax laws and
regulations, were guilty of great abuses of credit and of downright
dishonest practices. The evils were more especially evident in
connection with excessive issues of bank notes.

Sec. 3. #National Banking Associations, 1863-1913#. The next step in
federal legislation was taken in 1863 in the midst of the Civil War by
chartering local "national banking associations." The purpose was in
part to provide banks under national charters for banking purposes
(both of deposit and of issue), and in part it was to make a wider
market for United States bonds at a time when government credit was
at low ebb. The plan adopted followed the experience of New York state
(1829 on) with a system of bond-secured bank notes. Congress provided
that every bank taking out a national charter must purchase bonds of
the United States and deposit them with the treasurer of the United
States, in return for which it would receive bank notes to the amount
of 90 per cent of the denomination or of the market value of the
bonds.[1] Bank notes issued on this plan, being secured by the bonds,
rest ultimately on the credit of the government, not on the credit of
the bank. They are not promptly sent back for redemption to the banks
issuing them, as should be done if they were typical bank notes. They
may circulate thousands of miles away from the bank that issued them,
and for years after the bank has gone out of busin