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Why there was no such thing as a National Bank in the United States before 1996

When I started working for Valley National Bank in 1990, I was already familiar with the term "National Bank". It seems like every other bank that I had ever heard of had the word "National" in it. But national banking, that is, banking across state lines, was illegal before 1996. And I got to watch a company gamble on the chance that the law would change. That company was Bank One.

The reason that banks couldn't be national had to do with their fragility after the Wall Street crash of 1929. By law, banks had to be contained in states. And that meant that if a bank failed, it would only affect that particular state, not the entire country.

But in 1996, true "national banking", what we take for granted today, became legal. And in preparation for that, Bank One had been buying up banks all over the country, including Valley National Bank of Arizona.

The four years that I watched Bank One make the transition from being some kind of distant "hands-off" benefactor to preparing to run its business as a true "national" bank was like watching someone at a casino throwing the dice. And in 1996, when national banking became legal, they won.

And since the term "national bank" had always been around, it was a change that no one outside of the banking industry even noticed. But it was a revolution.

JP Morgan Chase now controls what used to be Bank One, and Valley National Bank, from New York. It's a strong, national bank. A real national bank.

Image at the top of this post: The Valley National Bank sign on the Professional Building, southeast corner of Central and Monroe, Phoenix, Arizona. From the 1957 Annual Report.

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