The cacophony of circulating notes made conducting business difficult, especially across state lines. Banking laws and regulations varied by state, and notes issued by banks in one state were often accepted only at a discount, if at all, in other states. Before the Civil War, the nation's currency consisted of coins and notes issued by state-chartered banks. Greenbacks added to the multitude of notes already in circulation. They therefore represented the "first real paper money ever issued by the United States government." 2 The Legal Tender Act of 1862 also authorized $150 million in non-interest-bearing notes in denominations as small as $5 that later became known as "greenbacks." Although not convertible into gold or silver, greenbacks could be used to pay taxes and purchase the bonds authorized by the act. As provisionary war measures, Congress authorized sales of $250 million in government bonds in 1861 and an additional $500 million in 1862. The growth in federal spending required the Treasury to issue large amounts of debt. The conflict required significant government spending, and despite large tax increases, the federal budget went from a surplus of $5.6 million before the war to a deficit of $423 million by 1862. Originally expected to be a short skirmish, the Civil War quickly developed into a full-blown military and industrial endeavor. In 1863, the United States was entering its third year of violent and costly fighting. The National Banking Acts also established many federal banking regulations that would remain until (and in many cases after) the Federal Reserve System was established in 1914. Congress passed these bills as a wartime expedient to (i) help finance the war effort by increasing the demand for federal government debt and (ii) promote a stable uniform currency. The National Banking Acts of 18 marked an important moment in the development of the U.S.
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