6

That officer in his report urged the adoption of the second of these plans. A bill to establish national banks having been introduced in Congress, it was urged that the proposed system would prove of great benefit in furnishing a permanent market for the large issues of

An article written by John J. Knox, formerly Comptroller of the Currency, may be found in Hunt's Merchant's Magazine of January, 1862, advocating the passage by Congress of a National Bank Law of a like character to the Free Banking Act of this State.

During the month of August, 1861, Orlando B. Potter, of the city of New York, submitted to President Lincoln and to Secretary Chase a plan for a national currency secured by government stocks. This plan was to permit banks and bankers, duly authorized, in the loyal States, to secure their bills by deposit. ing, with a superintendent appointed by the government, government stocks at their par value, in the same way that the banks and bankers in New York then secured their circulation, by depositing stocks of the State of New York or of the United States with the State Banking Department, thus making the stocks of the United States a basis of banking on which alone a national circulation can be secured. To do this, he stated, "it is necessary only for the government to authorize and appoint a superintendent connected with the treasury, whose duty it shall be to receive from duly authorized banks and bankers within loyal States, United States stocks in sums of not less than, say, $200,000 from one party, and hold the same as security for an equal amount of bills to be properly stamped and signed by such superintendent, and delivered to the depositing bank or banker. This mark or stamp and signature of such superintendent to guarantee to the holder of the bills issued, that the same are secured by United States stocks deposited with and held by the government; and that in case the same shall fail to be redeemed by the bank or banker issuing them, then on due demand and protest, such superintendent will sell, after proper notice to the bank or banker, and apply to the redemption of said bills, the stocks held to secure the same.

'This money might properly be designated United States currency, as distinguishing it from the bills issued in the several States, and not thus secured; and should be so plainly and unmistakably designated as to be readily distin guishable everywhere at sight. It might be received and paid out by the gov ernment in cases where it is not otherwise agreed or provided, but this is not at all essential to the plan, and might encounter the prejudices of those who think specie more reliable than the faith and covenant of the government under which they live." He further stated that the foregoing plan would be fully understood, by an examination of the statutes of this State regulating the securing of their circulations by our banks, by deposit with the State. It will be noticed that this is the plan substantially adopted by Congress, February 23, 1863, with the exception that national banks were created subject to the supervision of the general government.

• This bill was introduced by Elbridge G. Spaulding, formerly Treasurer of the State of New York, and then representing the Second Congressional District of that State.

bonds, which it was then evident must be made to meet the expenditures of a great war. The bill met with strong opposition; but after spirited and able debate, it passed both branches of the National Legislature by an exceedingly small majority, and became a law February 25, 1863 (ch. 68.) The statute creating this system of national banks is dissimilar in many essential respects from the previously mentioned laws incorporating the two Banks of the United States. This act is entitled "An act to provide a national currency secured by a pledge of United States bonds, and to provide for the circulation and redemption thereof," and is based upon the Free Banking Act (ch. 260, Laws of 1838) of the State of New York. The satisfactory experience of the people of this State in connection with the practical working of the General Banking Law of 1838, doubtless led to the adoption, by the National Legislature, of its leading features; and it is a remarkable fact, that experience has demonstrated, that only in a few instances have either the State or the national act required any change in order to improve them. Prior to November 28, 1863, 134 national banking associations had organized, under this law, having a total capital of $7,184,715. The bonds deposited with the Treasurer amounted to $3,925,275.

The act of 1863 was repealed during the first session of the Thirtyeighth Congress, by the law of June 3, 1864; the latter being a substituted act containing similar provisions. The few amendments and additional acts which have been passed by Congress, from time to time, are hereafter mentioned in the notes, and are printed in full. An act of June 20, 1874, declares this law shall thereafter be known as "the National Bank Act."

On October 1, 1865, there were in existence 1,513 national banking associations with a capital of $395,729,597.83, and having bonds deposited with the Treasurer to the amount of $276,219,950.

NATIONAL GOLD BANKS.

July 20, 1870, an act was passed, authorizing the organization of national gold banks. These banks are permitted to receive from the Treasurer of the United States, upon government bonds deposited 7 See Historical Sketch, ante.

with him, eighty per centum thereof in circulating notes. Such notes are payable in gold at the office of issue, and are a legal tender in payment of debts to any other national gold bank, provided the association by which they were issued is still redeeming its notes. These banks are obliged to maintain a reserve in gold and silver coin of an amount equal to one-quarter of their circulation; and, except as to circulation, are subject to the same regulations as other national banks. An act of Congress passed February 14, 1880, authorized the conversion of national gold banks into currency banks, with the same powers and privileges granted by law to the latter associations.

AMENDMENTS.

An important statute became a law July 12, 1882, and is entitled "An act to enable national banking associations to extend their corporate existence, and for other purposes." It permitted such banks to extend the period of succession for not more than twenty years, by an amendment to their articles of association. A further act of April 12, 1902 (post), extends this period to twenty years further additional. The law also provided, that "the jurisdiction for suits brought subsequent to its enactment in connection with any of such associations, except suits between them and the United States, or its officers or agents, shall be the same as, and not other than, the jurisdiction for suits by or against banks not organized under the United States Statutes, which do or might do banking business where such nation banking associations may be doing business, when such suits may be begun." Section 12 of this act authorized and directed the Secretary of the Treasury to receive deposits of gold coin, and to issue certificates for the same; such certificates as well as silver certifi cates, to be counted as part of the lawful reserve of banks. The object of this amendment is to make the use of specie more available, by saving the expense of transporting it from place to place. Section 5146 of the National Bank Act, was amended February 28, 1905, to the effect that a director of a national bank of a capital of not exceeding $25,000 shall own five shares of stock, instead of ten, as before required.

By the original law national banks were required to pay their own notes at their counter, and also to redeem them through the agency of

a like bank located in one of eighteen enumerated cities, called redemption cities; but by section 3 of the act just quoted, they were required to redeem their notes at the Treasury of the United States. Banks carrying on business in these cities are required to appoint a redemption agent in the city of New York. Sixteen of the cities are now termed reserve cities 8 in the statute.

But, by an act passed

March 3, 1903, it was provided that upon the request of three-fourths of the national banks in any city having a population of twenty-five thousand, such city may be added to the list of reserve cities. March

3, 1883, the capital and deposits of banks, bankers and national banking associations were excepted from taxation by the act passed to reduce internal revenue taxation; and it may be added, the law imposing the stamp tax on bank checks was repealed by the same act. An amendment to section 5200 of the Revised States of the United States became law June 22, 1906. The amendment changed the section so as to read as follows: "The total liabilities to any association, of any person, or of any company, corporation, or firm for money borrowed, including in the liabilities of a company or firm. the liabilities of the several members thereof, shall at no time exceed one-tenth part of the amount of the capital stock of such associations, actually paid in and unimpaired and one-tenth part of its unimpaired surplus fund: Provided, however, That the total of such liabilities shall in no event exceed thirty per centum of the capital stock of the association. But the discount of bills of exchange drawn in good faith against actually existing values, and the discount of commercial or business paper actually owned by the person negotiating the same shall not be considered as money borrowed."

May 1, 1886, a law was passed which provided that any national bank may, with the approval of the Comptroller of the Currency, by the vote of shareholders owning two-thirds of its stock, increase its capital in accordance with existing laws, to any sum approved by that officer, notwithstanding the limit fixed in its original articles of association and determined by him; and no increase of capital either within or beyond the limit fixed in its original articles of association may be made except in this manner.

At the request of the Comptroller of Currency the National Bank 8 See § 5192, U. S. R. S., U. S. Comp. Stat. 1901, p. 3487, post.

Act was materially amended by a statute which became a law May 30, 1908. This statute amended sections 5172 and 5214 of the National Bank Act; and section 9 of the Act approved July 12, 1882, amended March 4, 1907, was further amended. It provided (section 17) for the creation of a "National Monetary Commission " to be composed of nine members of the Senate and nine members of the House of Representatives.

Any national bank may change its name or the place where its operations of discount and deposit are to be carried on, to any other place within the same State, not more than thirty miles distant. with the approval of the Comptroller of the Currency, by the vote of shareholders owning two-thirds of the stock. A duly authenticated notice of the vote and of the new name or location selected should be sent to that officer; but no change of name or location is valid until he has issued his certificate of approval of the same.

All debts, liabilities, and powers under its old name devolve upon and inure to the association under its new name.

A statute passed August 13, 1888, provides that in all litigations affecting national banks they shall be deemed citizens of the States in which they are respectively located, and in such cases the United States courts do not have jurisdiction other than such as they would have in litigations between individual citizens of the same State.

[It should be noted that the Act of August 13, 1894, declares that circulating notes and legal tender notes and certificates, and coin, shall be deemed taxable as money on hand or on deposit; and that the Act of March 2, 1897, made substantial changes in section 3 of the Act of June 30, 1876, and more specifically regulates the distribution of the assets of insolvent banks.]

CERTIFICATION OF CHECKS.

The last section but one (13) of the statute of July 12, 1882, provided that certified checks are not to be issued contrary to the provisions of the act of March 3, 1869; the same being section 5208 of the United States Revised Statutes, and prescribed a penalty for such illegal issue, and that conviction therefor should result in the imposition of a fine of not more than $5,000, or imprisonment for not more than five years, or both, in the discretion of the court. The act just mentioned was the first legislative notice taken of the certification of checks.