The National Bank Law of 1863 did not abolish the state banks. It merely set up another system of banking alongside them. Since that time the two systems have grown and prospered; the chief difference between them being, as we have seen, that national banks may issue notes secured by government bonds. The notion generally prevails that national banks are sounder and stronger than their state competitors. This, however, is the case only where, capital and business integrity being equal, state laws are more lax than federal laws. Fortunately, the states have become more strict in their requirements, until now many state banks are as rigidly supervised as are national banks. It is true that the largest commercial banks in the country operate under federal charters, yet some of the oldest and soundest banking institutions in our largest cities are state banks.

No account of banking since the Civil War would be complete without a notice of commercial private banking. In some of the states, banks, so far as the law is concerned, are as easily established as grocery stores or restaurants. In those states any man can become a banker by announcing that fact. To be sure, if he expects to do any business, he must secure a money safe and a set of books, and above and beyond all else he must possess the confidence of his neighbors and business associates. Such a bank often serves as good a purpose in a rural community as would a national or state bank. But in the cities, where even next-door neighbors are unacquainted, the private commercial bank is usually undesirable. This statement is particularly true of unregulated private banks operated in foreign sections. There the people, being strangers to our methods of carrying on the banking business, look on a bank as a bank whatever may be the character of its organization. They do not understand that national banks are carefully supervised by the federal government; and state banks, by the state. Since private banks usually have no such supervision, customers doing business with them are ordinarily compelled to carry a heavier risk than would be necessary in dealing with a national or state bank.