State banks may reorganize less than two-thirds of the capital stock of the association. Any national banking association now organized which shall not within one year after the passage of this act become a national banking association under the provisions herein before stated, and which shall not place in the bands of the Treasurer of the United States the sums hereinbefore provided for the redemption and guaranty of its circulating notes, or which shall fail to comply with any other provision of this act, shall be dissolved; but such dissolution shall not take away or impair any remedy against such corporation, its stockholders or officers, for any liability or penalty which shall have been previously incurred: Provided further, That compliance with the provisions of this section by any national banking association shall not be construed as abrogating or changing the term of the existing charter of the bank in so far as to require compliance with the provisions for the organization of new banks. SEC. 39. That any bank or banking association incorunder this act. porated by special law of any State, or organized under the general laws of any State, and having a paid-up and unimpaired capital sufficient to entitle it to become a national banking association under the provisions of this act, may, by the consent in writing of the shareholders owning not less than two-thirds of the capital stock of such bank or banking association, and with the approval of the Comptroller of the Currency, become a national bank under this system, under its former name or by any name approved by the Comptroller. The directors thereof may continue to be the directors of the association so organized until others are elected or appointed in accordance with the provisions of law. When the Comptroller of the Currency has given to any such bank or banking association a certificate that the provisions of this act have been complied with, such bank or banking association, and all its stockholders, officers, and employees, shall have the same powers and privileges, and shall be subject to the same duties, liabilities, and regulations in all respects as shall have been prescribed for associations originally organized as national banking associations under this act. Modification of act for extension of corporate existence. SEC. 40. That so much of section nine of an act entitled "An act to enable national banking associations to extend their corporate existence, and for other purposes," approved July twelfth, eighteen hundred and eighty-two, as reads as follows, "And no national bank which makes any deposit of lawful money in order to withdraw its circulating notes shall be entitled to receive any increase of its circulation for the period of six months from the time it made such deposit of lawful money for the purpose aforesaid: Provided, That not more than three millions of dollars of lawful money shall be deposited during any calendar month for this purpose: And provided, That the provisions of this section shall not apply to bonds called for redemption by the Secretary of the Treasury, nor to the withdrawal of circulating notes in consequence thereof," be, and the same is hereby, repealed; and the Comptroller of the Currency is hereby authorized and directed to have pre Vested rights pared and keep on hand, ready for delivery on application, SEC. 42. That all provisions of law inconsistent with or superseded by any of the provisions of this act, be, and the same are hereby, repealed. er. General repeal. INDEX TO THE BILL. DIVISION OF ISSUE AND REDEMPTION. Sec. 1. Establishment of division of issue and redemption.. notes and silver. Sec. 4. Duty of Secretary of Treasury to maintain said reserve.. Sec. 5. The Secretary of the Treasury may transfer certain funds. Sec. 7. Gold certificates aud currency certificates to be canceled.. Sec. 8. Exchange of gold coin, United States notes, and Treasury notes. Sec. 10. Notes redeemed in gold to be paid out only for gold or United States bonds. 44 Sec. 11. No United States notes less than $10; silver certificates $1, $2, $5 BANKING PROVISIONS. 45 Sec. 12. Two classes of notes defined.. 45 45 Sec. 20. Bank-note guaranty fund.. Sec. 21. Assessment to cover deficiency in guaranty fund. A. Currency notes based on bonds.. C. Currency notes a paramount lien on all assets. Sec. 14. Description of bank notes Sec. 15. Uses of reserve notes.. Sec. 17. Amount of bonds required during five years. 45 46 46 46 47 47 47 48 48 48 49 Sec. 22. Guaranty fund may be invested in United States bonds.. Sec. 23. Interest thus secured to be supplementary to guaranty fund. Sec. 33. Bank notes not payable by the United States Government. 52 52 Sec. 35. Examination of banks.. 53 Sec. 36. Loans or gratuities to bank examiners forbidden.......... 53 Sec. 37. Extra examinations provided for.. 53 Sec. 38. One year allowed for reorganization under this act 53 54 Sec. 40. Modification of act for extension of corporate existence. Sec. 42. General repealer... 54 55 55 REPORT OF THE SPECIAL SUBCOMMITTEE ON THE BILL DRAFTED BY IT, ENTITLED A BILL TO PROVIDE FOR STRENGTHENING THE PUBLIC CREDIT, FOR THE RELIEF OF THE UNITED STATES TREASURY, AND FOR THE AMENDMENT OF THE LAWS RELATING TO NATIONAL BANKING ASSOCIATIONS. The purpose of this bill, as declared by its title, is the strengthening of the public credit, the relief of the United States Treasury, and the amendment of the laws relating to national banking. These objects, we believe, will be best attained by relieving the Treasury Department of the current redemption of demand notes, casting that burden upon the national banks, and permitting the banks to provide the elastic element of the paper currency of the country. These results are sought in the bill herewith reported by the following provisions: THE GENERAL SCOPE OF THE BILL. 1. A division of issue and redemption is established in the Treasury, for which the Secretary of the Treasury is authorized to set aside the general cash balance in excess of $50,000,000. This excess on March 17, 1898, was $176,139,532. United States notes received by this division for redemption in gold are to be canceled and retired in proportion as certain substitute currency is issued. No note redeemed in gold is to be again paid out except under exceptional conditions, which are carefully guarded. 2. National banks are required to assume the current redemption of United States demand notes in order to obtain circulation based upon their commercial assets. A new class of notes, called "national reserve notes," is to be issued in lieu of legal-tender notes deposited by the banks with the Treasury, and these reserve notes are to be redeemed upon demand by the banks out of the redemption fund which they are required to maintain in gold. These reserve notes are not treated in any respect as bank notes, because the banks are not liable for their ultimate redemption. 3. The basis of national-bank note circulation will eventually be the commercial assets of the banks. This result will be reached, however, only after a series of years by a conservative method. National banks will continue to be required during one year after the passage of this bill to maintain the same amount of United States bonds as security for circulation which is required by existing law, but they will be perImitted to issue notes to the face value of these bonds. This bond deposit may be reduced by one-fourth annually, beginning one year after the passage of the act. 4. National banks are to be permitted to issue "national currency notes" upon their commercial assets to the amount of the reserve notes issued to them in return for deposits of United States notes. The purpose of this provision is to induce the conversion of United States notes into reserve notes, as well as to limit the issues of currency upon commercial assets. 5. Treasury notes issued under the act of July 14, 1890, are to be dealt with eventually upon the same basis as United States notes. 6. A tax of 2 per cent is levied upon national currency notes issued in excess of 60 per cent of the capital of any national bank. A tax of 6 per cent is levied upon circulation of the same character in excess of 80 per cent of the capital. 7. The national currency notes based upon commercial assets are to be secured by a bank-note guaranty fund, made up by the contribution in gold coin of 5 per cent of the entire circulation of the banks. This fund may be replenished by calls upon the banks, if reduced by the redemption of the notes of failed banks; but no bank shall be required to pay more than 1 per cent in addition to its original deposit of 5 per cent in any one year. The currency notes are also secured by a first lien upon the bonds on deposit as security and upon all the other assets of the bank. 8. The national reserve notes will continue to be legal tender until received into the Treasury from failed and liquidating banks, when liability for them will be assumed by the Government and they will be redeemed and canceled. Provision is made that they shall cease to be required as a basis of circulation when the Secretary of the Treasury is satisfied that there is no longer a sufficient amount available to meet the demands for new banks and increased circulation. 9. Standard silver dollars are to be redeemable in gold, but silver certificates are redeemable only in standard silver dollars. The parity of silver with gold is secured by a gold redemption fund, deposited in the division of issue and redemption, equal to 5 per cent of the amount of silver which has been coined. 10. Silver certificates are hereafter to be issued only in denominations of $1, $2, and $5. No United States notes or bank notes are to be issued in denominations below $10. 11. National banks are required to pay a tax of one-eighth of 1 per cent semiannually upon their capital, surplus, and undivided profits. 12. National banks are permitted to establish branches, under regulations to be prescribed by the Secretary of the Treasury. There are other provisions of the bill changing the existing national banking law in minor particulars, but they are nearly all directed to bringing existing law into harmony with the plan just outlined for the protection of the Treasury and the adoption of a more scientific banking currency. In view of the importance of these objects, your committee have thought proper to limit their discussion substantially to features enumerated above. NECESSITY FOR PROTECTING THE TREASURY. The necessity of so protecting the Treasury as to strengthen the public credit ought not to be a subject of dispute among those familiar with the events of the last five years. The essential purpose of the bill in this respect is to relieve the Treasury from the burden of the constant redemption of Government paper money, and to obviate the necessity of selling interest-bearing bonds running for a long term in order to obtain gold for the continued and repeated redemption of the notes. It does not matter what view is taken of the responsibility for the condition in which the Treasury has been found on several occasions during the last five years, which has resulted in the issue of $262,000,000 in long-term interest bearing bonds. If any political organization or any error of administration at the Treasury Department is responsible for these events, it only emphasizes the necessity of placing our currency system beyond the reach of political accidents. Our financial system should be such that no Administration, without radical change of law, should have the power to involve the commercial business of the country in disaster because the fiscal and banking operations of the Treasury might not be wisely conducted. This is one of the essential purposes of the bill reported by your committee-to separate the operations of the fiscal service of the Government from the operations of commercial banking. There can be no question of the benefits to the Treasury and to the public credit in relieving the Treasury of the constant necessity of redeeming demand obligations. Such objections as have been made to methods heretofore proposed for terminating these conditions are, we believe, obviated by the plan herewith reported. The details and operation of that plan will be discussed after a general definition of the purposes of the proposed bill. Your committee propose to relieve the Treasury absolutely of the obligation of finding gold for the redemption of a very large proportion of the legal tender notes, and they believe that the small amount of such notes left outstanding will be given such enhanced credit by the operation of their plan that they will never again become a menace to the public credit and never bring in question the ability of the United States to fulfill the mandate of the act of November 1, 1893-"the maintenance of the parity in value of the coins of the two metals, and the equal power of every dollar at all times in the markets and in the payment of debts." EFFECTS OF DOUBT ABOUT THE PARITY. The importance of maintaining unquestioned and unimpaired the parity of all our forms of money is such that it involves almost every transaction of life and peculiarly the volume of business, the safety of investments, the value of pensions and insurance policies, and the legitimate profits of agricultural, industrial, and mercantile enterprises. From 1893 to 1896, the United States, by heroic efforts, succeeded in preventing any depreciation of their paper currency, but the mere suspicion of the possibility that such a depreciation might occur was among the potent causes of the shrinkage of values and the paralysis of industry. Some conception of the effects of this uncertainty may be formed from the fact that the transactions of the New York clearing house shrunk from $34,421,380,870 for the year ending October 1, 1893, to $24,230,145,368 for the year ending October 1, 1894. The clearings throughout the leading cities of the country showed a shrinkage in the same period from $58,880,682,455 to $45,017,960,736. Figures like these measure, in some slight degree, the reduction in the volume of business, in the earnings of the people and in the employment for labor. There can be no doubt also that the withdrawal of foreign capital, as the result of like uncertainty regarding the maintenance of the parity of all our forms of money, added to the tendency to panic by the persistent withdrawal of gold, and diminished by the amount withdrawn the productive resources of the country. The cost to the laboring and industrial interests of the country was many times the amount which could possibly have been saved to the |