CHAPTER XX
STATE BANKS AND TRUST COMPANIES SINCE THE PASSAGE OF THE NATIONAL BANK ACT
[140]The banking institutions of the United States other than national banks are ordinarily classified into (a) state banks, (b) trust companies, (c) stock savings banks, (d) mutual savings banks, and (e) private banks. The following pages deal with two of these classes, viz., state banks and trust companies. It will be desirable at the outset to distinguish them from the other classes, and to outline the history of legislation concerning them since 1865.
The term "state bank" has been used in the United States in several different senses; but whatever the variance in meaning, such banks have always had one common characteristic—incorporation under state authority. In the bank reports of some of the States, private banks are not distinguished from state banks. This is due to the fact that in these States incorporated and unincorporated banks are subject to the same regulation. A private bank, however, is an unincorporated bank.
Not all banking institutions incorporated by the States are state banks. Mutual savings banks, stock savings banks, and trust companies are also corporations organized under state laws or charters granted by state legislatures. The distinction between mutual savings banks and state banks is clear. Mutual savings banks do not have a capital stock and do not carry on a discount and deposit business—i. e., they do not discount commercial paper, and do not receive demand deposits payable on check. State banks, on the other hand, have a capital stock and carry on a discount and deposit business. Many state banks, however, receive also savings deposits. The line of demarcation between state banks and stock savings banks is much less definitely marked. Both state banks and stock savings banks have a capital stock. Stock savings banks are primarily savings banks, and many of them do not do a discount and deposit business, but confine themselves to the savings bank business. But in several States the distinction between state banks and stock savings banks is of the most unsubstantial character, since the stock savings banks carry on the business of a commercial bank, receiving demand deposits payable on check, and discounting commercial paper. Finally, the distinction between state banks and trust companies is not exactly the same in any two of the States.
"State banks" then, as the term is used in the following pages, are banks of discount and deposit (as distinguished from savings banks, mutual and stock) incorporated by one of the States or Territories (in contrast with private banks, which are unincorporated, and with national banks, which are organized under the national-bank act).[141]
In 1860 there were in the United States 1,562 state banks. Owing to the repressive influence of the national-bank act, hastened in its effect by the 10 per cent. tax on state-bank notes, the number of state banks had by 1868 fallen to 247. One result of this decline in the number and importance of state banks was the cessation of state banking legislation. The old laws regulating state banks of issue were swept away by code revisions, or remained obsolete and unchanged on the statute books.
The number of state banks began to increase about 1870. In a few States old banking laws intended for the regulation of banks of issue hampered their development, but in the remaining States they were left for a considerable period almost entirely without regulation. As late as 1892, in his digest of the state statute law, Mr. Stimson said: