What it is:
How it works/Example:
For example, let's say Company XYZ is a bank. To become a national bank, it must receive a charter from the Comptroller of the Federal Reserve for more on how this works). The bank also receives coverage for its depositors, meaning that most depositors' be protected even if Company XYZ goes bankrupt.
The Federal Reserve is the bank for the U.S. Treasury. In this capacity, local Federal Reserve banks hold receipts and make payments on behalf of the Treasury. The Federal Reserve banks maintain Treasury accounts, clear checks drawn against the Treasury, and manage the physical issuance, servicing and redemption of Treasury securities and savings bonds.
Why it matters:
National banks have existed since the 1860s, when the U.S. implemented the National Bank Acts of 1863 and 1864. The U.S. didn't have a consistent national government bonds. (National bank notes don't exist anymore.)
National banks hold the vast majority of the country's . Until 2004, they were almost never allowed to underwrite insurance or engage in merchant banking or real estate development.