HEARINGS

BEFORE THE

COMMITTEE ON BANKING AND CURRENCY.

FIRST SESSION.

COMMITTEE ON BANKING AND CURRENCY,

Washington, D. C., Monday, February 17, 1896.

The committee met at 10.35 a. m. Members present: The chairman (Mr. Walker), and Messrs. Van Voorhis, McCleary, Fowler, Lefever, Spalding, Hill, Cooke, Cox, Cobb of Missouri, Cobb of Alabama, Black, and Newlands.

STATEMENT OF HON. JOSEPH H. WALKER.

Hon. JOSEPH H. WALKER, of Massachusetts, chairman of the committee, addressed the committee in advocacy and explanation of the bill H. R. 171.

[Bill H. R. 171, Fifty-fourth Congress, first session.]

A BILL to secure to the people the advantages accruing from the issue of circulating promissory notes by banks, to increase the volume of such notes, and to supervise and control banks by officers of the United States.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That national banking associations may be organized for the transaction of business under this act and shall be subject to existing law, excepting as is hereinafter provided. All national banking associations hereafter organized shall be organized under this act and all national banking associations whose corporate existence is extended shall be reorganized under this act.

SEC. 2. That any bank incorporated by special law, or any banking institution organized under a general law of any State, having a capital of twenty thousand dollars or more, may become a national banking association under this act, with the approval of the Comptroller of the Currency, by the name prescribed in its organization certificate, adding the word national; and in such case the articles of association and the organization certificate may be executed by a majority of the directors of such bank or banking association; and the certificate shall declare that the owners of two-thirds of the capital stock have authorized the directors to make such certificate and to change and convert such bank or banking institution into a national banking association under this act. A majority of the directors, after executing the articles of association and organization certificate, shall have power to execute all other papers and to do whatever may be required to make the organization perfect and complete under this act. A majority of the board of directors of each association organized under this act, and not less than three in number, shall be of persons who perform no other official service for the association.

SEC. 3. That any banking association organized and doing business under existing law of the United States may reorganize under this act, and a recorded affirmative vote of three-fourths of all the directors of any national banking association in favor

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of reorganizing such association under this act, approved in writing by the Comptroller of the Currency, and the compliance of such association with the provisions of section five of this act, shall be deemed a reorganization of such association under this act.

SEC. 4. That in places of less than four thousand inhabitants, with the permission of the Comptroller of the Currency, banking associations may be organized with a paid-up capital of not less than twenty thousand dollars.

SEC. 5. That every association organized under this act, before it shall be authorized to commence a banking business, shall deliver to the Treasury of the United States United States legal-tender notes, including Treasury notes, or coin, or coin certificates, or mixed, as provided in section six, in amounts as follows:

First. Every association having a capital not exceeding two hundred and fifty thousand dollars, an amount equal to not less than one-tenth of the capital stock. Second. Every association having a capital in excess of two hundred and fifty thousand dollars, an amount not less than twenty-five thousand dollars, and receive therefor currency notes as provided in section six.

SEC. 6. That upon a delivery of coin, coin certificates, or United States legaltender notes, including Treasury notes, or mixed, to the Treasurer of the United States, the association making the same shall be entitled to receive from the Comptroller of the Currency United States legal-tender notes of different denominations, having printed on the reverse side the currency note of the association authorized in section ten, in blank, registered and countersigned as provided by existing law, equal in amount to the coin, coin certificates, and United States legal-tender notes, including Treasury notes, delivered; but at no time shall the total amount of all currency notes supplied to and issued by any association under this section and section ten exceed the amount of its capital stock at such time actually paid in and unimpaired, excepting as provided in section seventeen. The promise of the association receiving the same to pay such notes on demand shall be attested by the signature of the president or vice-president and cashier before being issued by it. SEC. 7. That no banking association shall plead in defense, in any action brought against it, that any note issued by it is a United States legal-tender note.

SEC. 8. That the Secretary of the Treasury is hereby authorized to issue United States legal-tender notes described in section three of the act of March third, eighteen hundred and sixty-three, in the manner described in section six, to the amount necessary to carry into effect the provisions of this act.

SEC. 9. That the lawful name and description of notes issued under section six shall be greenbacks.

SEC. 10. That the Comptroller of the Currency shall issue, in blank, to any association, and the association may issue currency notes of different denominations, as provided in section twenty, in addition to the greenbacks described in section six, not to exceed in amount a sum equal to the sum of its reserve held during the first year of its corporate existence under this act. Thereafter he may issue to any association, and the association may issue, the notes described in this section to the amount of the average reserve held by that association during any six consecutive months of the previous year and recall the same from any association at any time in order to reduce the volume of such notes held by any association to the amount of the reserve averaged to be held during any six consecutive months of the previous year. The amount to be issued to or retained by any association under this section shall be annually or oftener, at his discretion, ascertained and determined by the Comptroller of the Currency. The notes issued in blank in compliance with this section shall never exceed in amount the greenbacks issued to the association under section six, and never exceed one-half its paid-up and unimpaired capital stock. SEC 11. That the lawful name and description of notes issued under section ten shall be reserve notes.

SEC. 12. That the Treasurer shall forthwith redeem and destroy existing United States legal-tender notes issued under acts passed before July first, eighteen hundred and ninety, and put in circulation previous to the passage of this act, in such manner as he may deem proper, equal in amount to ninety per centum of the aggregate of the coin, coin certificates, and United States legal-tender notes, including Treasury notes received for greenbacks, issued under section six; and the Treasurer shall set aside ten per centum of such aggregate paid in for the redemption fund, as described in section twenty-seven.

SEC. 13. That when there shall be no more in amount of the legal-tender notes described in section twelve outstanding issued before the passage of this act than the amount of the gold then held by the Treasurer for the redemption of such notes, the gold so held shall then be set aside by the Treasurer of the United States and used only to redeem and cancel such notes; and from and after thirty days from the setting aside of gold herein mentioned such notes shall not be used by any banking association in redeeming its notes or be counted in the reserve fund of any national { banking association.

SEC. 14. That upon the execution of the provisions of the preceding section, the provisions of section twelve concerning legal-tender notes issued previous to the passage of this act shall apply to Treasury notes issued under the act of July fourteenth, eighteen hundred and ninety, so long as such notes are paid into the Treasury or presented for redemption. Thereafter the ninety per centum mentioned in section twelve shall be covered into the Treasury as a miscellaneous receipt.

SEC. 15. That if any banking association organized under this act neglects or refuses to take and issue the greenbacks provided for in section six, to the amount averaged to be taken and issued by three-fifths of all national banking associations organized under this act of like or nearly like capital and deposit, and doing the same or nearly the same class of banking business done by such banking associations, when directed so to do by the Comptroller of the Currency, upon a notice issued by the Comptroller of the Currency and approved by the Secretary of the Treasury, and fails to take the greenbacks directed to be taken by said officers for the period of three months, it shall be liable to and shall pay into the Treasury of the United States a duty equivalent to twelve per centum per annum upon the face value of the notes it is directed to take and fails to take so long as such failure continues.

SEC. 16. That the Comptroller of the Currency may classify and reclassify or group together, in whole or in part, at any time he may deem proper, banks organized under this act, for the purpose of executing the provisions of the preceding section, and the decision of the Comptroller as to what class or group any particular bank belongs in shall be final when approved in writing by the Secretary of the Treasury, until such time as the bank shall be placed in a different class or group by the Comptroller of the Currency.

SEC. 17. That the Comptroller may issue to the national clearing house, provided for by section sixty-two, or to any banking association organized under this act the greenbacks described in section six to any amount approved of in writing by the Secretary of the Treasury, in addition to the amount issued under section six: Provided, That the association applying for such additional notes shall deposit in the United States Treasury or any subtreasury bonds in kind and amount acceptable to the Secretary of the Treasury, as security for such notes, and shall pay interest on the sum of such notes so issued at such rate as is fixed by law to be paid on loans by the State in which the bank or clearing house is located, such interest on such notes to be paid at such time and in such manner as the Comptroller of the Currency may determine. But a sum no more than ninety per centum of the par value of any bond shall be issued in such green backs.

SEC. 18. That any association depositing bonds and receiving greenbacks secured thereby, as provided for by section seventeen, may withdraw such bonds so deposited after thirty days from the date of such deposit upon paying the accumulated interest on the notes issued upon the deposit of such bonds up to the date of their withdrawal, and in addition to such interest shall deposit with the Treasurer lawful money or greenbacks, issued to associations under section six of this act, or mixed, to an amount equal to the greenbacks issued to the association under section seventeen and for which the bonds were deposited for security; but no more than five per centum of the greenbacks issued to any other one association under section six of this act shall be accepted as a deposit for the withdrawal of such bonds.

SEC. 19. That the notes deposited for the withdrawal of bonds shall be immediately put in redemption and the money received for them shall be kept as a special fund with which to redeem and destroy the amount of greenbacks issued to the association under section seventeen of this act, and such greenbacks shall be destroyed equal in amount to the greenbacks issued to the association when the bonds hereinbefore mentioned were deposited to secure such notes.

SEC. 20. That in order to furnish suitable currency notes for circulation as money, under sections six and ten, the Comptroller of the Currency shall furnish such notes, in blank, to banking associations entitled to receive them, and every provision of this act shall, unless otherwise provided, apply equally to the currency notes issued under sections six and ten: Provided, however, That the reserve notes issued under section ten shall have printed on the reverse side of them the statement that they are to be finally redeemed and paid by the Treasurer of the United States as provided in section thirty-four, and the greenbacks issued under section six shall be finally redeemed and paid as provided in section twenty-six. The Comptroller may cause a supply of each kind of such notes to be printed in anticipation of their delivery to any association.

SEC. 21. That hereafter no certificates shall be issued or reissued by the Treasury of the United States upon the deposit of gold coin, silver coin, or any other money, and that all existing coin certificates and money certificates shall be canceled and destroyed upon being received into the Treasury, and the coin or money remaining upon which they were issued shall be treated as free coin or money in the Treasury; and no currency note authorized under existing law shall be issued or reissued to any banking association of a less denomination than three dollars, and all such

notes of less denomination than three dollars hereafter received for redemption shall be canceled upon being received in the Treasury and like notes in blank of a larger denomination shall be returned in place of them; and no United States legal-tender notes, including Treasury notes, of a less denomination than three dollars shall be hereafter issued or reissued, but those of a larger denomination shall be issued and reissued in place of them.

SEC. 22. That any association, upon giving to the Comptroller of the Currency notice of its intention so to do, may surrender its greenbacks, or any part of them, issued under section six, in excess of the amount it is required to take under section five, and receive lawful money therefor.

SEC. 23. That any association dissolving its organization, upon surrendering to the Treasurer greenbacks issued under section six to any association to the amount of its own greenbacks shall receive lawful money therefor from the Treasury of the United States.

SEC. 24. That any association which reduces its capital stock may then deposit a like proportion of its greenback notes in excess of the amount it is required to have in section five of this act, and receive lawful money therefor, and the Treasurer of the United States is hereby authorized and directed to redeem the greenbacks herein. described as they are presented, out of any moneys in the Treasury not otherwise appropriated, and the Comptroller shall forthwith put in redemption the money paid in or surrendered and destroy those of the bank reducing or surrendering greenbacks in the manner prescribed by law.

SEC. 25. That any association may reduce its reserve notes issued to it under section ten of this act by surrendering them for destruction to the Treasury of the United States, and the Comptroller shall destroy the notes so surrendered in the manner prescribed by law. The liability of any association for its reserve notes issued under section ten shall neither be canceled nor reduced in any other manner: Provided, however, That the doing by an association or others of any one of the things provided for in this section, and sections twenty-two, twenty-three, and twenty-four, must be with the approval and permission of the Comptroller of the Currency.

SEC. 26. That upon the expiration of the corporate term of any association organized under this act, and its corporate existence not extended by the Comptroller of the Currency, or upon the insolvency of an association, or by the order or with the consent of the Comptroller, approved by the Secretary of the Treasury, the Treasurer shall redeem the greenbacks issued to the association under the provisions of section six of this act. In redeeming such notes the Treasurer shall do so in coin of the same intrinsic value as the nominal value of the money deposited by the association for the greenbacks issued to the association upon the date of such deposit.

SEC. 27. That the Treasurer shall at all times keep and have on deposit in the Treasury of the United States in coin, or coin certificates, for the redemption fund of each association during the solvency of the association, the ten per centum provided in section twelve, to be held and used for the current redemption of its greenback and reserve notes; and when the notes of any association organized under this act, assorted or unassorted, shall be presented for such redemption to the Treasurer of the United States, in sums of five hundred dollars, or any multiple thereof, or in sums equaling not less than one per centum of its total circulation of banks having less than thirty thousand dollars in circulating notes, the same shall be redeemed. SEC. 28. That the right to confer the duties and responsibilities of executing the provisions of the preceding section, or any part thereof, and of other sections or parts of sections of this act relating to the redemption fund provided for in section twelve, or the redemption of such notes, upon reserve banks, or other suitable agents, under such regulations as he may deem safe and proper, and to deposit any part of the redemption fund or funds provided for in section twelve in such places, taking such security therefor as he may deem proper, is hereby conferred upon the Treasurer of the United States, with the approval of the Secretary of the Treasury; but no part of such deposit shall be counted as a part of the reserve of any bank. SEC. 29. That the Secretary of the Treasury shall publish in one of the three papers having the largest circulation in business circles in New York City a list of the securities and the amount of each kind accepted by him to secure any notes issued on bonds under section seventeen, or to secure any and all deposits made in any bank.

SEC. 30. That to enable the Treasurer of the United States to fund the greenbacks issued under section six, the redemption of which by him is provided for in this act, and to enable him to execute all the provisions of this act, the Secretary of the Treasury is hereby authorized to issue from time to time, on the credit of the United States, coupon bonds or registered bonds, redeemable at the pleasure of the United States after two years, and payable in coin five years from date, and bearing interest at a rate not exceeding four per centum per annum, payable semiannually, to any amount then necessary for that purpose; and the bonds herein authorized shall be of such denominations, not less than fifty dollars, as may be determined upon by