How Organized

State banks are organized under the laws of the state in which they are located, the preliminary steps being much the same as those in organizing national banks.

Circulating Notes

Prior to July 1, 1866, state banks issued notes which circulated as money, but on that date the government imposed a tax of 10 per cent on the circulation of all state banks, which had the effect of withdrawing the circulation, as the rate was to high to allow any profit to the banks.

Difference Between State And National Banks

National banks are organized under the National Bank Act, are under the supervision of the general government and alone issue circulating notes, while state banks are organized under the laws of the various states, are subject to the state statutes, and do not issue circulating notes. The advantages claimed by state over national banks is that they are not restricted so closely in their business methods as national banks.