Upon the establishment of the national banking system the greater
number of the banks incorporated under the laws of the several States
were organised as national banks. With others, however, the rights of
issue did not outweigh some inconveniences of the national system, and
as a result there is now an important class of banks, and loan and
trust companies, organised under State legislation and carrying on a
deposit and loan business. The regulations under which they work are
necessarily diverse, and the amount of public supervision over them
varies in different states. The State banks in existence when the
national banking system was organised were obliged to retire their
note circulation, owing to the fact that the government imposed a tax
of ten per cent. on their circulation. The object of the tax was to
secure the retirement of the State bank-notes to make room for the
circulation of the national banks. The internal mechanism of State
banks differs but slightly from that of national banks.