The first Act "to provide a national currency secured by a pledge of United States stock and to provide for the circulation and redemption thereof" became a law February 25, 1863. This was found defective in some particulars and was amended during the following year. The Act contained most of the provisions which had been found necessary in the experience with state banks during preceding years. It provided for inspection and examination on the part of the federal government through a currency bureau; for the maintenance of reserves, the redemption of notes over the counter of the issuing bank and at agencies in certain principal cities; for the conversion of state banks into national banks; for the deposit of public moneys in banks, when necessary, upon security of United States bonds; for the taxation of the banks, and numerous other points, some of the more important of which have already been mentioned in foregoing discussions.

The striking feature of the Act was seen in the provisions which controlled the objects for which it had been created and which governed the methods of note issue in a certain degree. The banks were required to buy government bonds as an incident to their receiving charters. At least 25 per cent of the amount of the capital had to be put into government bonds by the smallest class of banks. This requirement became smaller as the capital of the bank became larger, and in the large banks the amount of bonds bought was a comparatively small percentage of the capitalization. Notes could be issued to the amount of 90 per cent of the par value, but not exceeding the market value of the bonds held by the institution, such bonds being in any event deposited in trust with the Treasury Department. The amount of notes to be issued in the aggregate was, however, limited to $300,000,000, and this amount was apportioned to the several states according to population and existing banking conditions.

With the comparatively rigid restrictions imposed by the Bank Act, with the requirement that bonds be purchased, and with the necessity incumbent upon state banks that they change their names before entering the system, the existing institutions were somewhat slow to give up their old charters and reorganize under the national law. The effect of this hesitation was to prevent the banks from rushing into the new system as they had been expected to. Late in 1864 there were only 584 banks in the system, and they had outstanding a circulation of only $65,000,000. The results which were expected in the way of a demand for United States bonds originating with the national banks were consequently not realized.

The national banking system did not materially influence the demand for bonds, but the advantages arising out of the creation of a uniform currency were more and more generally recognized, and various administrators, who at first had opposed the plan, became advocates of it. Some went so far as to urge that legislation be adopted whereby state banks would practically be compelled to cease issuing notes, and in harmony with such recommendations Congress in the Act of March 3, 1865, imposed a tax of 10 per cent on state-bank issues, beginning with July 1, 1866. Thereafter the banks came into the system much more rapidly, and there was a considerable drift away from the state banking systems. It was speedily perceived, however, that the state systems, even without the power to issue notes, had a place of their own. Some of the strongest state banks preferred to retain their charters under state laws and to go on doing a discount and deposit business.