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deposit of lawful money for the purpose aforesaid: Pro-
vided, That not more than three millions of dollars of law.
ful 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is hereby, repealed; and the Comptrollers of the Currency
are hereby authorized and directed to have prepared and
keep on hand, ready for delivery on application, blank
notes to such an amount as he may deem advisable for
each national banking association having circulation,
SEC. 45. That nothing contained in this act shall be con-

Vested rights strued to alter or affect any vested rights of property or

preserved. contract, or any penalties incurred before the taking effect of this act, or any part of it. SEC. 46. That all provisions of law inconsistent with or

General resuperseded by any of the provisions of this act be, and the pealer. same are hereby, repealed.

INDEX TO THE BILL.

DIVISION OF ISSUE AND REDEMPTION.

Page. Sec. 1. Establishment of division of issue and redemption...

75 Sec. 2. Funds to be held in division of issue and redemption..

76 Sec. 3. Reserve in division of issue and redemption, against United States notes and silver...

76 Sec. 4. Duty of Secretary of Treasury to maintain said reserve

76 Sec. 5. The Secretary of the Treasury may transfer certain funds

77 Sec. 6. Duties of division of issue and redemption....

77 Sec. 7. Gold certificates and currency certificates to be canceled..

77 Sec. 8. Exchange of gold coin, United States notes, and Treasury notes

77 Sec. 9. Notes may be transferred for cancellation .

77 Sec. 10. Notes redeemed in gold to be paid out only for gold or United States bonds

78 Sec. 11. No United States notes less than $10; silver certificates $1, $2, $5 78

BANKING PROVISIONS.

Sec. 12. Two classes of notes defined
Sec. 13. Methods of issuing bank notes

A. National reserve notes......
B. National bank notes...

C. National currency notes.
Sec. 14. Currency notes a lien on assets.
Sec. 15. Description of bank notes..
Sec. 16. Legal status of notes ...
Sec. 17. Reduction of bond security
Sec. 18. Amount of bonds required during eight years.
Sec. 19. Currency notes finally without reserve notes
Sec. 20. Withdrawal and redistribution of reserve notes
Sec. 21. Reduction of circulation...
Sec. 22. Clearing-house districts
Sec. 23. Bank-note guaranty fund ..
Sec. 24. Assessment to cover deficiency in guaranty fund
Sec. 25. Guaranty fund may be invested in United States securities.
Sec. 26. Interest thus secured to be supplementary to guaranty fund.
Sec. 27. Bank-note redemption fund...
Sec. 28. Liability of United States limited
Sec. 29. Two-fifths of bank reserves in coin.
Sec. 30. Taxes on circulation

78 78 79 79 79 80 80 80 81 81 81 82 82 82 82 84 84 84 84 84

85

Sec. 31. Collection of duties on circulation...
Sec. 32. Taxes on franchise...
Sec. 33. Banks going into liquidation....
Sec. 34. Requirements as to amount of capital..
Sec. 35. Branch banks authorized
Sec. 36. Bank notes not payable by the United States Governinent.
Sec. 37. Examination of banks
Sec. 38. Loans or gratuities to bank examiners forbidden
Sec. 39. Extra reports provided for....
Sec. 40. Reserve notes required on organization ....
Sec. 41. One year allowed for reorganization under this act
Sec. 42. State banks may become national banks.
Sec. 43. Extension of powers of banks..
Sec. 44. Modification of act for extension of corporate existence..
Sec. 45. Vested rights preserved.
Sec. 46. General repealer..

Page.

85 86 86 86 86 86 87 87 87 87 87 88 88 88 89 89

55TH CONGRESS,

2d Session.

HOUSE OF REPRESENTATIVES.

REPORT
No. 1575.

STRENGTHENING THE PUBLIC CREDIT, ETC.

JUNE 15, 1898.-Committed to the Committee of the Whole House on the state of the

Union and ordered to be printed.

Mr. MCCLEARY, from the Committee on Banking and Currency, sub

mitted the following

REPORT.

[To accompany H. R. 10289.]

The Committee on Banking and Currency, having had under con. sideration House bill 10289, respectfully report as follows:

The purposes of this bill, as declared in its title, are the strengthening of the public credit, the relief of the United States Treasury, and the amendment of the laws relating to national banking associations. The bill is framed to accomplish the first two of these results without contracting the currency, without the issue of interest-bearing bonds, and without cost to the Treasury of the United States. The protection of the Treasury from demands for gold and from the necessity for issuing bonds is accomplished by imposing upon the national banks the current redemption of the Government notes. The amendment of the national banking laws is intended to afford a test, in a conservative and limited manner, of the system of basing note issues upon the commercial business of the country, with the purpose of affording in the near future a sufficient supply of currency in every part of the country at all seasons of the year, extending credit accommodations, and thereby reducing the rate of interest to borrowers.

The first eleven sections of the bill relate to operations of the Treasury; the remaining sections cover amendments to the national banking act.

WORK OF THE TREASURY DIVIDED.

The bill divides the operations of the Treasury. The fiscal operations of collecting revenues and disbursing them for Government expenditures are left as at present, but a new division is created, to be known as the division of issue and redemption. This division is to be under the charge of three comptrollers of the currency, who take the place of the present Comptroller and assistant comptroller. All matters relating to the issue, redemption, and exchange of currency, whether coin, Government notes, or bank notes, are intrusted to the division of issue and redemption. The Secretary of the Treasury is authorized to transfer to it all funds in excess of a cash balance of $50,000,000 and all gold and silver coin and bullion now held in the Treasury for the purpose of redeeming United States notes, Treasury notes, and certificates. The Secretary of the Treasury is also authorized to transfer

91

to this division from time to time such surplus revenues as the Treasury may contain, and to issue short-term Treasury certificates, if necessary, for the sole purpose of replenishing the reserve.

The division of issue and redemption is required to redeem United States notes and Treasury notes in gold, to exchange gold coin for silver dollars and silver dollars for gold coin or other lawful money; to redeem silver certificates in silver dollars, and to make other ordinary exchanges of currency.

United States notes redeemed in gold are, from time to time, to be canceled. The division must maintain a gold reserve of 25 per cent of the outstanding United States notes and Treasury notes and 5 per cent of the silver dollars which have been coined.

THE EXCHANGE OF THE GREENBACKS. The present outstanding issues of United States notes known as “greenbacks” will cease to be a burden upon the Treasury for redemption in gold, so far as they are exchanged by national banks for national reserve notes.

National reserve notes are a new form of currency provided by the bill, in place of the existing greenbacks. They are not, properly speaking, bank notes. They are Government notes whose current redemption is provided for by the banks. They are legal tender and are intended for circulation as currency or for use in the reserves of the banks in exactly the same manner as the existing greenbacks. National reserve notes are to be issued to any national bank to any amount not exceeding its paid-up capital, upon its surrender to the Treasury of an equal amount of greenbacks.

The United States notes thus received are canceled and destroyed. The banks taking reserve notes are required to contribute to the current redemption fund held in the Treasury 5 per cent of the amount of their reserve notes in gold coin, and to replenish this reserve whenever it is reduced by the redemption of the reserve notes.

The money in circulation is not reduced by any of the preceding provisions. National reserve notes take the place of the greenbacks for which they are exchanged, and gold coin takes the place of greenbacks which are directly redeemed.

Existing national banks are required to take reserve notes to the amount of 25 per cent of their capital, but two privileges are offered the banks in compensation for their assumption of the current redemption of the notes. One of these is the privilege of issuing currency notes upon general assets, as set forth under the next general head. The second privilege is partial remission of the tax of one-fourth of 1 per cent per year levied by the

bill upon the capital, surplus, and undivided profits of each bank. The remission thus allowed is at the rate of one-half of 1 per cent per year of the amount of reserve notes issued to the bank.

National reserye notes may be recalled from the banks to which they have been issued by the Secretary of the Treasury in equitable proportions and distributed to new national banks, which are required to pay for them in gold coin after the United States notes cease to be available. The withdrawal of reserve notes does not reduce the limit of currency based upon commercial assets.

BANK-NOTE CURRENCY.

National banks having charters under the old law may continue to issue currency as at present. The minimum amount of bonds required

upon the passage of the bill is the same as under existing law-25 per cent of the capital, but not exceeding $50,000—but banks may issue notes upon all their bond deposits to the par value of the bonds (and to the full amount of their capital), instead of 90 per cent, as at present. Beginning four years after the passage of the act, any bank may withdraw the bonds deposited to secure circulation at the rate of 25 per cent of the required deposits per year, and may withdraw those in excess of the minimum requirement at any time.

The privilege of issuing currency based upon commercial assets, without the deposit of United States bonds, is granted to national banks to the amount of 40 per cent of their paid-up capital, but only upon condition that notes secured by bonds and national reserve notes are taken in equal amounts. Thus a bank organized under this bill having a capital of $100,000 is required to take out $25,000 in national reserve notes and to have on deposit in the Treasury $25,000 of United States bonds, against which it may issue $25,000 in national-bank notes. It

may also issue $25,000 additional in such notes based upon commercial assets, and may increase such issues if it increases also its bond deposits and its holdings of reserve notes in equal proportions. This process may be continued up to the point where the amount of notes secured by bonds, the amount of notes not thus secured, and the amount of national reserve notes are each equal to 40 per cent of the paid-up capital, making an aggregate of $80,000 in bank notes and $40,000 in reserve notes.

When circulation is issued in excess of 80 per cent of the paid-up capital, exclusive of issues of reserve notes, the excess is liable to a tax of one-half of 1 per cent monthly. But bond-based notes may be issued to the full amount of the capital without any tax on them.

All paper money except silver certificates shall be in denominations of $10 and higher. Silver certificates issued by the Treasury shall be in denominations of $1, $2, and $5 only.

THE REDEMPTION OF NOTES.

The burden of the current redemption of paper currency rests upon the banks. They are required to redeem their reserve notes over their own counters, and to maintain in the Treasury a 5-per-cent gold fund for current redemption of the notes in gold. The reserve notes are guaranteed by the Government to be ultimately redeemed in gold from its own resources upon failure or liquidation of the bank to which they may have been issued. Reserve notes redeemed by the Government may, at its option, be reissued to new banks.

The current redemption of currency notes not secured by United States bonds may be provided for through clearing-house districts under regulations prescribed by the Comptrollers of the Currency.

The currency notes are redeemed, in case of failure of the issuing bank to redeem them, from a gold guaranty fund in the custody of the Secretary of the Treasury, known as the bank-note guaranty fund, which is made up by each bank which takes out circulation upon its commercial assets contributing in gold 5 per cent of its asset circulation. Upon the failure of a bank, its notes shall be immediately redeemed from this fund and the fund reimbursed from the assets of the failed bank. Bank notes form a first lien upon the assets and have behind them also the individual liability of the stockholders for assessment up to the amount of their stock. Should these sources fail to fully reimburse the fund, the Treasury may make an assessment

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