NATIONAL BANK ACT

(As amended)

AND COGNATE

UNITED STATES STATUTES.

(ANNOTATED.)

INTRODUCTION.

Ir will be seen by reference to the preceding historical sketch1 that the first Bank of the United States was chartered in 1791. After an existence of twenty years, the bill to re-charter the same was defeated in each house of Congress by a single vote. Five years afterwards a second United States Bank was created, which likewise continued in existence twenty years.

This last-mentioned bank had a capital of $35,000,000. If a similiar institution were to be established to-day, bearing a like proportion to the wealth of the country, it would require a capital of more than $600,000,000, many fold larger than the combined wealth of the Bank of England and the Bank of France. The contemplation of

such an enormous power placed in the hands of any body of men, gives a just appreciation of the conduct and motives of President Jackson in his contest with this institution. His judgment was correct. He saw that such a corporation, increasing with the growth of the country, would surely tend to corruption, while its unlimited power might be directed to interfere with the independence of Congress, and with the liberty of the people.2

After the downfall of the second United States Bank, several unsuccessful attempts were made to establish a National Bank. Dur

1 See title "First and Second Banks of the United States," Historical Sketch, ante.

2 Blaine's Twenty Years of Congress, vol. i., p. 418.

ing the administration of President Tyler, Congress passed a bill creating such a bank. This bill was vetoed by him because of certain features which he alleged were objectionable; yet notwithstanding the removal by Congress of the objectionable features from the bill, he vetoed it a second time.

The Treasury Department was established September 2, 1789. The Government began its existence by assuming debts amounting in the aggregate to $72,775,895, of which $12,556,874 was foreign, and $10,256,802 was domestic debt of the Confederation, and $19,962,219 was debt of the States.

From 1833, when the renewal of the bank charter was refused, to 1836, the note circulation of the country increased from $94,000,000 to $149,000,000. The public debt was paid in full in 1835. In the year 1836 the Government found itself in the possession of a large surplus revenue, amounting to over $40,000,000, resulting chiefly from the sale of public lands. All such surplus, except the sum of $5,000,000, was distributed among the States, on the basis of their respective Congressional representation.

January 1, 1849, the public debt was $63,000,000. The greater part of this sum was incurred by reason of the Mexican war. It was increased $5,000,000 in 1850 by the payment of the Texan Indemnity. January 1, 1851, the debt amounted to $68,304,796, and January 1, 1857, it amounted to but $28,699,831.

In 1846, Congress established the Independent Treasury. From that time the Government has collected and disbursed its revenues, without the intervention of the banks. Its receipts and payments were thereafter in specie alone. This was the system in vogue at the beginning of the civil war in 1861. At that time the debt of the Government was $90,580,873. The increase was due to the expenses of several Indian wars, and to some small loans made in anticipation of internal difficulties.

TREASURY NOTES.

Prior to the civil war, no bank of issue had ever been created by the Government of the United States. At that time the amount of paper money in circulation by State banks was about $200,000,000, threefourths of which had been issued by the banks located in the Northern

States. July 17, 1861, Congress authorized the issuing of Treasury notes payable on demand, to the amount of $250,000,000, or so much thereof as the Secretary of the Treasury might deem necessary for the public service. This law did not make such notes a legal tender. Statutes were enacted during the year 1862 by the national legislature, on February 25, and July 11, authorizing the issue of Treasury notes to the amount of $300,000,000, of which sum $50,000,000 were in lieu of the notes issued in pursuance of the act first mentioned. This last issue was made a legal tender except in payment of duties on imports, and of interest on the national debt. By the act of March 3, 1863, an additional issue of $150,000,000 of Treasury notes was authorized. June 30, 1864, an act was passed providing that the total of legal tenders should not exceed $400,000,000, and such additional sum not exceeding $50,000,000, as might be "temporarily required for the redemption of temporary loans."

The highest point which the government debt ever reached was $2,844,649,626, August 31, 1865, when the annual interest charge was $150,977,697. The largest amount of legal tenders in circulation was during this year, and aggregated $432,687,966. April 12, 1866, a statute was enacted to fund the legal tender notes, under which more than $72,000,000 were retired; but February 4, 1868, an act became a law without the approval of the President, whereby any further reduction was prohibited, thus leaving the volume of legal tenders outstanding at $356,000,000. During the year 1866, many of the State banks changed to the national system because of a law passed March 3, 1865, imposing a tax of ten per centum on the amount of notes of any State bank or banking association paid out after July 1, 1866.

The law of March 18, 1869, declared the faith of the United States to be solemnly pledged to the payment, in coin or its equivalent, of all its obligations, not bearing interest, known as United States notes, and of all its obligations bearing interest, except in cases where the law authorizing the issue of any such obligations has expressly provided that the same might be paid in lawful money, or other currency than gold or silver.

The maximum amount of Treasury notes was fixed at $382,000,000 by section 6 of the act of June 20, 1874.

A statute entitled "An act to provide for the resumption of specie payments," was enacted January 14, 1875, whereby Congress repealed section 5177 of the Revised Statutes,3 limiting the aggregate amount of circulating notes of national banking associations, and enacted that whenever and so often as circulating notes should be issued to such associations, it should be the duty of the Secretary of the Treasury to redeem legal tender notes to the amount of eighty per centum of the national bank-notes so issued, and to continue such redemption until there should be outstanding the sum of $300,000,000 of such legal tender notes and no more; and that on and after the 1st day of January, 1879, that officer should redeem in coin the United States legal tender notes then outstanding, upon their presentation for redemption at the office of the assistant Treasurer of the United States, in the city of New York, when presented in sums of not less than $50.

That act of June 20, 1874, previously mentioned, authorized banks to deposit with the Treasurer lawful money for the redemption of their circulation, and to withdraw from deposit a proportionate amount of bonds. Many banks, induced by the high premiums upon their government bonds and by the low rates of profit to be gained by issuing circulating notes, availed themselves of this authorization, and withdrew their circulation in whole or in part; hence the effect of the law under discussion, although it removed all bounds to the increase of notes to be issued by the banks both as to amount and geographical limits, was not to augment, but on the contrary, for a considerable period, to decidedly diminsh the volume of circulation. To enable that officer "to prepare and provide for the redemption in this act authorized or required, he is authorized to use any surplus revenues, from time to time, in the Treasury not otherwise appropriated, and to issue, sell and dispose of, at not less than par in coin," any of the five, four and a half and four per cent. bonds authorized by the law of July 14, 1870. The unlimited power thus given to the Secretary of the Treasury by this law, enabled him to deter by the sale of bonds, any transfer of coin to foreign countries,

3 In June, 1866, Congress directed the revision and consolidation of all the general and permanent statutes of the United States (ch. 140). Such revision, embracing the laws in force December 1, 1873, was approved June 20, 1874, and was entitled the Revised Statutes of the United States" (ch. 338).

which transfer might have hazarded the redemption of the legal tender notes.

May 31, 1878, a statute was enacted, entitled "An act to forbid the further retirement of United States legal tender notes." This law was to the effect, that it should be unlawful for the Secretary of the Treasury, to cancel or retire any more legal tender notes, but when any of the same are redeemed or received into the Treasury under any law, they should not be retired or destroyed, but should be re-issued, and kept in circulation. This statute in terms repealed all laws in conflict therewith. It is evident that the intention of this act is, that notes re-issued should retain their original quality of legal tender. A decision of the Supreme Court of the United States in connection with this statute declares, that Congress has the constitutional power to direct, at any time in its discretion, unlimited issues of Treasury notes with all the legal attributes of coin. In other words, the National Legislature may make any kind of paper currency a legal tender in payment of private debts, and this power may be exercised whenever a condition of affairs obtains which that body shall consider to be an exigency.*

NATIONAL BANK ACT.

The Secretary of the Treasury, in his annual report for 1861, submitted two plans for obtaining the necessary means for prosecuting the war:

First, to substitute government notes payable in coin on demand, for those already issued by private corporations.

Second, to gradually issue national bank-notes secured by the pledge of government bonds, to take the place of the then existing State bank-notes issued pursuant to authority derived from the statutes of the several States.5

4 This decision was given in Juillard v. Greenman, 110 U. S. 421, 28 L. ed. 204, 4 Sup. Ct. Rep. 122.

5 See report of Millard Fillmore, Comptroller of this State, December 30, 1848 (pp. 56, 57), suggesting that circulating notes issued by State banks be secured by United States stocks, the same "to be received for public dues to the national treasury; this would give to such notes a universal credit, co-extensive with the United States, and leave nothing further to be desired in the shape of a national paper currency."