At five dates each year, selected by the Comptroller of the Currency, national banks must make detailed reports of their condition on prescribed blanks and publish abstracts of such reports in local newspapers. They must also submit to examination by persons appointed for that purpose by the Comptroller as often as this official may deem necessary and proper.
National banks have been organized in every state of the Union, and in Maine, Massachusetts, and Vermont they have completely supplanted the state banks. Elsewhere they exist side by side with state banks and compete with them. In some states they are more and in others less numerous than state banks. In the kind of business transacted the only important difference between the two classes of institutions consists in the loans on real estate security, which national banks are prohibited, and state banks allowed, to make. The latter, therefore, share this class of business with the trust companies only, and where it predominates have a distinct advantage in competition over the national institutions.
3. The Independent Treasury System
While not a banking institution, the Treasury of the United States handles its funds in such a manner and performs such functions with reference to the currency that it has become an important part of the banking system of the country.
Previous to 1840 the funds of the federal government were kept on deposit in banking institutions, during the greater part of the time in the First and Second United States banks. Friction between President Jackson and the Second United States Bank resulted in their withdrawal from that institution in 1834 and their deposit in selected state banks, several of which failed and all of which suspended specie payments during the crisis of 1837. The embarrassment which the treasury experienced in consequence, combined with previous unsatisfactory relations between the government and its depositories, convinced President Van Buren that the Treasurer ought himself to keep and to disburse the funds of the government. He made a recommendation to this effect to Congress, which in accordance therewith enacted the first independent treasury act in 1840. The revival of agitation for a third United States Bank led to the repeal of this act the following year, but in 1846 it was reenacted and with modifications has remained upon our statute books to the present day.
In its original form this act provided for the acquisition of vaults in certain cities, in which should be deposited the funds of the government as soon as possible after they came into the hands of the receiving officers, and out of which should be taken, upon drafts issued by the Secretary of the Treasury, the money needed for the payment of the government's obligations. It further provided that all dues to the government in the future should be paid either in coin or in currency issued exclusively by the government, and that all expenses should be paid in the same forms of money.
Important modifications in this act were made during and after the Civil War. In 1863 permission was granted the Secretary of the Treasury to deposit in national banks funds accumulated in the treasury, and derived from any source except duties on imports, provided the banks selected for this purpose should deposit with him government bonds for their security. Subsequently the discretionary power of the Secretary in this direction was extended so that at the present time he is authorized at his discretion to deposit in national banks surplus funds derived from any source, trust funds alone excepted, and to accept as security therefor other securities than government bonds. Other laws have made national bank notes acceptable for certain public dues, and have given the Secretary authority to issue gold and silver certificates against gold coin and silver dollars deposited in corresponding amounts, and to redeem United States notes in gold coin and to keep on hand for that purpose a gold reserve of $150,000,000.
In its operation, this independent treasury system affects the reserves of the banks and through them their discounts and the commerce of the country. Whenever the receipts of the government exceed its expenditures, money accumulates in the treasury and the reserves of the banks are diminished; and, under opposite conditions, they are increased. The return of accumulated surplus funds to the banks is possible when the Secretary of the Treasury decides that such return is desirable or necessary and when the banks are able and willing to supply the bonds demanded as security. In case a deposit is agreed upon the funds go to a relatively small number of national banks selected as depositories by the Secretary of the Treasury, the amount allowed each depository also being determined by him.
Through its ability to issue gold and silver certificates, its obligation to redeem United States notes in gold on demand, its administration of the United States mints and assay offices and the laws regulating the supply and distribution of subsidiary coin, the United States Treasury cooperates with the banks in the supply and distribution of the circulating medium of the country. The people apply to the banks for the forms of money and currency desired and these institutions meet the demand by means of the funds deposited with them or by their exchange at the various subtreasuries, if the forms of money deposited do not correspond with these demands.