The issue of further Treasury notes was stopped by the repeal of the act of 1890 in November, 1893, and since this repeal confidence in the ability of the Treasury to maintain gold redemptions has been gradually restored.
Under the provisions of the Act of May, 1878, the legal-tender notes when redeemed cannot be canceled. They must be paid out again, and therefore when reissued, they may again be presented for redemption. This constitutes the so-called endless chain by which the gold in the Treasury is always liable to be drawn out.
V. THE NATIONAL BANKING SYSTEM.
The desirability of perfecting the banking and currency system of the country was readily perceived on the breaking out of the Civil War in 1861. Secretary Chase in two annual reports, those of 1861 and 1862, recommended a system of national banks, whose supervision should be by national authority, and whose issues of notes should be based on deposits of bonds of the government. After several unsuccessful attempts, a bill, introduced by Mr. Sherman, passed both Senate and House, and became a law February 25, 1863. This act embodied the essential features of Mr. Chase’s reports. Under it the first charter was issued to the First National Bank of Philadelphia.
The formation of national banks proceeded very slowly at first. In order to hold out greater inducements for the State banks to enter the national system, the act was amended on June 3, 1864. The first report of the Comptroller of the Currency, November 28, 1863, showed that only 134 national banks had been organized up to that date; but when the act of June 3, 1864, went into operation, new banks were formed more frequently. A more rapid increase took place after the passage of the act of March 3, 1865, imposing a tax of 10 per cent on the circulating notes of State banks. This increase was from 638 banks in January, 1865, to 1513 in October of the same year; with an increase in capital of from $135,618,874 to $393,187,206; and in circulation of from $66,769,375 to $171,321,903. Prior to 1869 national banks were required to make their reports on fixed dates, but after March 3, 1869, they were required by law to make their reports to the Comptroller five times a year on some past date fixed upon by the Comptroller.
National Bank Laws and Regulations.—The national banks are under the supervision of the Comptroller of the Currency, who is appointed by the President on the recommendation of the Secretary of the Treasury. His salary is $5000 a year.
A national bank may be organized by any number of persons not less than five, on permission of the Comptroller. The capital required is not less than $50,000 in any case, and this minimum applies only to towns the population of which does not exceed 6000; in cities having a population exceeding 50,000, the minimum capital is $200,000. For places having a population over 6000 and not exceeding 50,000, the capital required is $100,000. One half of the capital must be paid in before the bank is authorized to begin business, and the remainder in installments of not less than 10 per cent on the entire amount of the capital, as frequently as one installment at the end of each succeeding month from the time it is authorized to begin business. Capital stock is divided into shares of $100 each.
The banks are managed by a board of not less than five directors, chosen by the stockholders. Executive officers of the bank—president, vice-president, cashier, and assistant cashier—are chosen by the directors.
Shareholders are individually liable for the debts, contracts, and engagements of the bank to the extent of the amount of their stock therein, at the par value, in addition to the amount invested in such shares. This is what is known as the double liability of shareholders, and is one of the features adding to the strength of the system.
National banks are designated by the Secretary of the Treasury to act as depositaries or custodians of public money. Such deposits are secured specially by a deposit of United States bonds with the Treasury.