Furthermore, the original act was defective in many respects. The state banks, a majority of which, it was expected, would incorporate under the new law, did not do so in any large numbers. Therefore there was no great demand for government bonds.
In 1864, the law was amended so as to make the conditions of incorporation somewhat more attractive, but it was not until 1865, when a law was passed providing for a tax of ten per cent on all notes issued by state banks, that conversion of state into national banks became general. By this provision all state banks that wished to issue notes were forced into the system. Thus, the demand for bonds did not come until after the war was over and the necessity for their immediate sale had disappeared.
This National Banking Act, as amended at various times, became the backbone of our banking system. Its provisions, therefore, are worthy of careful at tention.
4. Comptroller of the of the national banking system is vested in a bureau of the United States Treasury under the direction of the Comptroller of the Currency. Certain powers of the bureau are now exercised by the Federal Reserve Board. It is the function of this bureau to supervise the issue and redemption of notes, the granting of charters, and the enforcement of the various pro visions of the law. To accomplish this end, exami ners are appointed by the Comptroller whose duty it is to examine the affairs of each bank in the system from time to time. These examinations are made at any time the Comptroller selects and without previous notice to the banks. The examiner has access to all the books and accounts of the banks, and he is re quired to make a thoro investigation of all loans out standing. This examination is reported in detail to the Comptroller, who calls the banks to account for any illegal or unsound practices which may be re vealed. Once a year the Comptroller makes a report to Congress showing the condition of the banks in detail. In case of the failure of any national bank, a receiver is appointed by the Comptroller.
5. Summary of the National Banking Act.— Charters are granted for periods not longer than twenty years. Application must be made by not fewer than five persons, and the Comptroller must be satisfied of their good character.
Fifty per cent of the capital must be paid in before a bank can open, and the remainder within six months. The minimum capital for cities of 3,000 population or less is $25,000; for cities between 3,000 and 6,000, $50,000; for those between 6,000 and 50,000, $100,000; and for those greater than 50,000, $200,000.
Each bank is required to have a board of directors of not less than five members, each of whom must own at least ten shares of stock. The stockholders are individually liable for all obligations of the bank up to an amount equal to their holdings of stock. In case of failure they may be assessed to pay deposits.
The technical powers of national banks are briefly as follows: (1) to receive deposits, (2) to issue notes, (3) to lend credit on personal security, (4) to dis count notes and other evidences of debt. A bank may own only such real estate as is necessary for conduct ing its business and which may come into its posses sion in settlement of previously contracted debts. In the latter case, the property must be sold within five years. A bank may not lend more than one-tenth of its capital and surplus to one individual or corpora tion.
Before a national bank could open it was required by the Act to deposit with the United States Treas ury a certain amount of government bonds. This amount varied with the capitalization of the bank. For banks with a capital of $200,000, or less, the re quirement was an amount equal to one-fourth of their capital; for those of over $200,000, it was $50,000. This amount had to be deposited irrespective of whether or not the bank expected to issue notes. It is entitled, however, if it desires, to receive from the Comptroller, circulating notes equal in amount to the par value of the deposited bonds. These notes are "receivable at par in all parts of the United States in payment of all taxes and excises, and all other dues to the United States except duties on imports; and also for all salaries and other debts and demands owing by the United States to individuals, except in terest on the public debts." They are also legal ten der in payment of any debts to national banks. Na tional banks are no longer required to purchase and deposit bonds unless they wish to issue notes.