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The McFadden Act is a United States federal law that reformed the U.S. banking system. [1] The Act liberalized branch banking rules, forcing states to give the same branching rights to national banks and state banks. [2] [1] The bill, based on the recommendations made by former Comptroller of the Currency Henry May Dawes, was signed into law by President Calvin Coolidge on February 25, 1927. [3]
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It is named after Louis Thomas McFadden, member of the United States House of Representatives and Chairman of the United States House Committee on Banking and Currency. [3]
The bill was first introduced in Congress by McFadden on February 11, 1924. [3]
The Act sought to give national banks competitive equality with state-chartered banks by letting national banks branch to the extent permitted by state law. [4] The McFadden Act specifically prohibited interstate branching by allowing each national bank to branch only within the state in which it is situated. Under a grandfather clause, three major banks were allowed to continue conducting interstate banking (Northwestern National Bank, First Bank Stock Corporation, and First Western Bank).
Although the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 [5] repealed this provision of the McFadden Act, it specified that state law continues to control intrastate branching, or branching within a state's borders, for both state and national banks.
