NATIONAL BANKS. Of the national banking system. it may be said that the Civil War pre sented to Congress as its first duty the invention of some plan for repressing the hetero geneous banking system and providing a system of a homogeneous and absolutely safe character; one that would be truly national, operating alike in every part of the United States. The necessities of the Government inspired the new order, but the old was rapidly failing to meet the wants of the people. The new, therefore. may lie said to have grown out of the necessities of business as well as the straits of the nation. The new system preserved all the advantages of the old, and added many new ones. It gave absolute protection to the holders of the national bank-notes, as Government bonds were deposited with the United States Treasurer in ten per cent. excess of their issue for the security of their redemption. It provided security of a uniform and almost absolute character for the deposits, making the stockholder liable, in an equal amount of his stock interest, for the ultimate payment of the deposits. It provided for a uni form hank-note of equal value in every part of (2) One-quarter of one per cent., semi-annually, on the average deposits for the half year. (3) One-quarter of one per cent., semi-annually, on capital not in Government bonds. Their stock holders are subject to local taxation on the market value of their stock as personal property. Each bank must keep with the Treasurer of the United States, in legal-tender notes, for the redemption of its bills, 5 per cent. of the amount of its circulation.
Without any wide departure from the prin the country, so engraved and issued, that se curity against counterfeits was far better at tained than ever before. It provided for a system of redemption which msde exchange merely nominal, and gave to national bank-notes, issued in most distant places, a uniform value in all the great financial centres of the country. It provided a system of published reports over the sworn signatures of the executive officers of the banks, and a uniform system of exami nation under the direction of the Comptroller of the Currency.
The national banks were required to pay to the revenues of the General Government as fol lows: (1) One-half of one per cent., semi annually, on the circulation allowed by law.
ciples laid down in the original act, the laws governing national banks have, from time to time, been considerably modified in details. Thus the restriction upon the aggregate amount of bank-note issues has long since (1875) been• removed. The charters of the banks were to
lapse in twenty years, but in 1882 Congress authorized the recharter of the banks for terms of equal length. The currency law of March 14, 11100, made a number of important changes in the conditions of the issue of national bank-notes. It permits the issue of notes to the par value of the bonds deposited, instead of 90 per cent. of the par value, subject only to the restriction that in case the market value of the bonds should fall below the par value of the same, additional deposits of bonds or of lawful money might be required to maintain the security for the notes issued. The law provided for the conversion of several series of outstanding bonds into 2 per cent, gold bonds, payable thirty years after date. To effect this change it offered to the banks a special inducement in reducing the tax upon the circulation, so far as issued upon the new bonds, from one per cent. to one-half of one per cent. The act, moreover, favors the extension of the national banking system to small communities, inasmuch as it permits the erection of banks with a capital of $50,000 in places whose popu lation does not exceed 6000 inhabitants, and of banks with a capital of 825.000 in places where the population is less than 3000. The object of these changes was to extend the system and ren der the issue of notes more attractive. How far it has accomplished this end is sufficiently evi dent from the statistical exhibit already made.
National banks are the only banks of issue in the United States. But the States have char tered several forms of deposit banks in large number, while private bankers are also numer ous. The business operations of State banks differ from those of national banking associa tions only in so far as they lack the feature of note issues. On the other hand, the loan and trust companies present some variations. In so far as they do a banking business, they differ from the State and national banks in paying in terest on deposits. They are, moreover, generally restrained by law from discounting mercantile paper, and their loans are made upon collateral. The peculiar features of savings-banks call for no extended notice here. Both their deposits and their investments are, as a rule, of a more per manent character than those of other banks. The relative strength of the several forms of banks and other points which summarize banking operations in the United States are given in the accompanying statements from the last Report of the Comptroller of the Currency, for the fiscal year ending June 30. 1900.