Though all banknotes were uniformly denominated in dollars, notes would often circulate at a steep discount in states beyond their issue.

In the end, well-publicized frauds arose in states like Michigan, which had adopted free entry regimes but did not require the redeemability of bank issues for specie.

The United States government, on the other hand, still had limited taxation capabilities and so had an interest in the seigniorage potential of a national bank.

[2] Without a national mechanism for issuing currency, the Lincoln administration could not exploit the powers and loopholes that, for example, Britain could with its central bank, in order to finance the high expenses involved.

Many thought this promise backing the bills was about as good as the green ink printed on one side, hence the name "greenbacks.

[12][13] The act allowed the creation of national banks, set out a plan for establishing a national currency backed by government securities held by other banks, and gave the federal government the ability to sell war bonds and securities (in order to help the war effort).

National banks were chartered by the federal government, and were subject to stricter regulation; they had higher capital requirements and were not allowed to loan more than 10% of their holdings.

[12] The 1864 act, based on a New York State law, brought the federal government into active supervision of commercial banks.

The tax rate was intentionally set so high as to effectively prohibit further circulation of state bank and private notes.

[citation needed] Hugh McCulloch originally opposed the National Banking Act but it grew on him and he organized the Currency Bureau.

A later act, passed on March 3, 1865,[17] imposed a tax of 10 percent on the notes of state banks to take effect on July 1, 1866.

[3] In 2004, the Act was used by John D. Hawke, Jr., Comptroller of the Currency, to effectively bar state attorneys general from national bank oversight and regulatory roles.

Many blame the resulting lack of oversight and regulation for the late-2000s recession, the bailout of the U.S. financial system and the subprime mortgage crisis.