Most importantly, it standardized the country's currency by replacing state bank notes with national bank notes and created a multitiered credit structure where reserves were ultimately concentrated in a handful of bankers' banks. It also created a comptroller of the currency who had the power to charter and regulate the new national banks and established federal management of national banks' reserve requirements (Timberlake 1993, 86-87; Rockoff 2000, 651-52; White 2013, 8-10).
These prestigious banks were against it mainly because of their earlier troubles with Secretary Chase over financing the war, they did not see the benefits of issuing national bank notes, and, most importantly, they would lose a significant portion of their business by no longer acting as bankers' banks for banks in other large cities, who before the act was passed were allowed to keep part of their reserves in the form of bank deposits in New York City under existing state banking laws.
The Postwar Banking Era and the New York City Bankers' Banks
Moreover, New York City, once hostile to die system, after the 1864 amendment to the National Banking Act also benefited by strengthening its position as the home of the country's leading bankers' banks.
Cooke also later profited by helping to establish new national banks, including a large one in New York City, which later became one of the largest bankers' banks in the city.
The legislation at the end of 1913 creating the system of "bankers' banks," which became known as the Federal Reserve System, never envisioned what evolved into a purely fiat currency managed by a "monetary authority." Without
the outbreak of World War I, the United States would not have abruptly abandoned specie backing of national currencies soon after operation of the 12 "bankers' banks" commenced in the fall of 1914.
system of bankers' banks in 1914, the 12 Federal Reserve Banks, held gold (or claims to gold) as the primary "reserve" asset, and earnings to cover the cost of operations came from very short-term, collateralized loans to banks ("rediscounting" by commercial banks at the Fed banks).
The liabilities of a bankers' bank are "outside money" and serve as the monetary base upon which the "inside money" (customer-owned deposits at transfer/banking companies) stands.