Under the National Banking system, which statement is accurate?

A. There were frequent widespread suspensions of 'National Banks' bank note liabilities but not of their deposit liabilities.

B. There were frequent widespread suspensions of 'National Banks' deposit liabilities, but not of their bank note liabilities.

C. There were frequent widespread suspensions of both 'National Banks' bank note and deposit liabilities.

D. Suspensions of any of 'National Banks' liabilities were very rare and isolated.

E. National Banks had no bank note liabilities, but their deposit liabilities underwent frequent widespread suspensions.

Under the National Banking system, suspensions of any of the 'National Banks' liabilities were very rare and isolated due to measures like the implementation of deposit insurance proposals by Congress to prevent a potential banking collapse.

Explanation:

The question addressed the behavior and characteristics of the National Banking system. The correct answer would be D. suspensions of any of 'National Banks' liabilities were very rare and isolated. As a result of any indication of a bank's potential negative net worth or even rumors, could lead to a bank run, where clients withdraw their deposits. Such a scenario could even endanger healthy banks triggering potential instability throughout the banking structure, often intensifying recessions.

However, measures like the implementation of deposit insurance by the Congress were put in place to counter bank runs. Under such a system, operated by organizations like the Federal Deposit Insurance Corporation (FDIC) in the United States, banks provided a premium based on their total deposits and the nature of their financial risk. Even if the bank was to go bankrupt, these deposit insurances would ensure that depositors do not lose their money.

During the National Banking system era, the availability of these security measures made suspensions of liabilities at National Banks a rarity. This answer provides a broad understanding of the National Banking system and the measures taken to prevent bank runs or the collapse of the banking structure.

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