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Definition: McFadden Act
The Mcfadden Act is a United States Federal law that was enacted in 1927. This law gives the state government the right to govern the branches of banks located within the state premises. This involves not just National Bank, but also Private Charter Banks.
So basically the Act was bought into the system to encourage competition between the national banks and the state chartered banks. So compared to previous conditions that existed, after the law the national banks could easily open branches within the state limits in which it was based. So it could open multiple branches in different sectors to compete with the district based banks. But the law didn’t allow the national banks to branch out, outside its origin state.
The Act basically catered to three main issues. The first being longevity of the Federal Reserve, The second and main issue as already spoken was related to Bank branching, but the provisions with respect to bank were controversial. The third issue pertained to competition between commercial banks belonging to the Federal Reserve System and the commercial banks that did not.