Section 46. That if any national bank shall not maintain its required average cash reserve, as prescribed by this Act, it shall pay at the end of the year as a penalty therefor, 10 per centum upon all loans in excess of such required cash reserve; and such penalty so paid shall be paid without any reference to any rediscounts made with the board of control for gold: Provided, however, That the board of directors of the American Reserve Bank may at any time suspend the whole or any part of said 10 per centum penalty that may result from a demand for gold during a panic, crop-moving period, or any unusual or extraordinary condition.
Section 47. That any national bank desiring to take out for issue and circulation an amount of national bank notes in excess of its paid-up and unimpaired capital, without depositing United States bonds or any other securities to secure the payment thereof, may do so to an amount not to exceed 100 per centum of its paid-up and unimpaired capital stock, provided the board of control of the commercial zone to which such bank belongs first gives its approval thereto.
Section 48. That the United States Government shall print and place in the hands of the respective boards of control an amount of national bank notes for each national bank in its zone equal to the paid-up capital thereof in addition to the bank notes taken out in accordance with Section 30.
Comment:—You will observe, gentlemen, that by Section 43 a bank is allowed to fall 75 per cent below its average cash reserve; that by Section 45 it can buy gold from the Board of Control with its commercial paper and build up the reserve; also that by Section 47 it can take out an additional amount of currency to meet any emergency that may arise. Now, when you appreciate the fact that the Board of Control is going to make every bank qualify in the outset, as sound and then is virtually responsible for its condition, with the power to aid it in case of necessity, it is difficult to even imagine a case where a bank would fail.
Mr. Merchant: That is so; every bank ought to be kept in liquid shape by the Board of Control; then its means of defense, as you have just pointed out, are unlimited. Of course it would then have all its present resources by way of rediscounting paper with its city correspondent; and on top of that the provisions of your bill. You could not possibly bust a bank.
Section 49. That national bank notes shall be a first lien upon all the assets of the bank issuing them, including the double liability of the stockholders, and any person or bank holding any of the national bank notes of a failed bank shall be entitled to recoup the amount thereof out of the first moneys received on account of the failed bank.
Comment:—These credit notes should be a first lien precisely as our present bank notes are; as the Scotch notes are and as the Canadian notes are. Bank notes should be made a first lien, because they are a public convenience and because the holder is morally and practically compelled to take them in the ordinary course of business.
Mr. Manufacturer: He could refuse if he chose and demand legal tender, could he not?
Mr. Lawyer: Certainly, but public policy should put the goodness of bank notes beyond question under all circumstances.
Section 50. That the expense of transmitting national bank notes by a bank to its financial centre, except its own bank notes, shall be paid by the board of control of the commercial zone in which such financial centre is located.
Section 51. That the expense of transmitting national bank notes from a financial centre outside of the zone to which they belong to the financial centre to which they belong shall be paid by the bank issuing the national bank notes so returned.
Comment:—It will not cost bankers anything to forward notes for redemption, as the expense of transportation will be paid by the commercial zones. This fact will insure the immediate return of all notes for redemption.
Section 52. That the national bank notes issued in accordance with the provisions of this Act shall be received at par in all parts of the United States in payment of taxes, excises, public lands, and all other dues to the United States, including duties on imports, and also for all salaries and other debts and demands owing by the United States to individuals, corporations, and associations within the United States, except interest on the public debt and in redemption of the national currency. Said notes shall be received upon deposit and for all purposes of debt and liability by every national banking association at par and without charge of whatsoever kind.