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or normal conditions and for arfticipating and averting
monetary disturbances instead of delaying action until
they have become acute. These three essential points,
which it has been sought to embody in the plan for the

■




Reserve Association, are these:
r. The organization of the central organ in a more
definite legal manner than the clearing houses.
2. The extension of this organization over the entire
country instead of its limitation to separate communi ties.
3. The grant of definite legal powers to the cer.'tral
organism sufficient to enable it to accomplish its pro­
posed objects.
The adoption of che individual bank as a unit in its
relations with other banks, and the organization of such
individual banks into local associations and district asso­
ciations having a definite legal status and responsibility,
has seemed to the Commission to be the most direct way
of accomplishing the first object. The linking up of these
local and district associations into the National Reserve
Association through the representative system has seemed,
jn its turn, to be the most effective means of accomplish­
ing the second object.
It would not be practicable to accomplish all the objects
proposed by the plan of the Commission simply by con­
ferring new powers upon existing clearing houses. Clear­
ing houses exist only in the larger cities and differ greatly
in their form of organization, their functions, and their
powers. In so far as the desired result might be accom­
plished by casting clearing houses into the same legal
form and giving to each distinct corporate powers and
responsibilities, this is practically what is proposed by
tlie plan for the National Reserve Association. It has
seemed advisable, however, in seeking this end, to provide
for new and distinct local organizations, in which each
bank should have its position and rights clearly defined.
No attempt is made, therefore,, to deal directly with
existing clearing houses, and it is probable that most such,
institutions will continue to perform their present clearing
functions independently of the local associations to be
organized under the plan of the Reserve Association.
Whatever may occur in this respect, it remains true that
the principle set forth in the plan of the Reserve Associa­
tion is substantially the principle of the federation of the
banks of the country through local groups corresponding
in many respects to the clearing houses. This is the
essential point of departure of the proposed Reserve
Association from the European conception of a central
bank of issue, and only with this distinction clearly in
mind can the plan proposed be intelligently discussed.

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^ As in the earlier days/every successful
baiii. manager is brought into close and confidential
relations with the men upon whose activities and in­
fluence the welfare of every community depends. Hi$
advice and assistance are solicited for the promotion and
Support of every industrial enterprise, and his counsel is
asked with reference to the investment of the savings and
earnings of the people he serves.
In respect to their important responsibilities in this con­
nection the great mass of the bank managers of the United
States leave nothing to be desired. In no other country
do we find their equals in the uniform courtesy and intelli­
gence with which their business is transacted. They are
vigilant in safeguarding the interests of their stockholders
as well as their customers. Nowhere else do we find the
sairfe skill in the technique of the profession. The prac­
tical details of the business of a bank are conducted here
with a facility and rapidity quite unknown outside the
United States. Everyone who has attempted to transact
simplest business in a foreign bank—cashing a check,
•'e—will confirm this stat*******''










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Might i t bo w ell to add to Paragraph 6, on Page 2, a suggestion that
the issuo o f Clearing House c e r tifio a to s , the only emergency means o f pro­
tectin g looal conditions, while answering the purpose fo r which issued are
themselves la rg e ly the cause o f breaking down domestic exchange, and, there­
fo re , Clearing House banks h esitato to issue them u n til conditions become
unbearable.
In Paragraph 17, Page 3, I think I v/ould insert " i t i3 charged that
as a result o f th is action discrimination and favoritism have resultod in
the treatment o f d iffe re n t banka,"

j

In the middle o f the same page, speaking o f lo oa l associations, thi3

f
j sentence is used.
J voting u n it."

"In the looal association the individual bank is the

Is that s t r ic t ly tru e, when the stock held by these banks

is one o f the elemento in e le c tin g director3T
I think I would loave out tins last sentence in the same Paragraph.
While i t i 3 true, I do not exactly lik e to emphasize, at least any more
than is necessary, the fact that wo are d e lib e ra te ly putting the control
o f looal associations and the branches in the hands o f the smaller banks.
In the f i r s t lin e o f the *fth Paragraph, on Pago if, loavo out the words
"at f i r s t . "
O Page 3, under the duties o f National Reaerve A ssociation, you
n
sta te, " i t holds the cash roserves o f the banks o f the United States with
provision fo r th e ir use only fo r s p e o ific purposes."
to say, " i t holds a portion, e tc ."




V/ould i t not bo bettor

-2 -

In the sontonco before the sections re la tin g to note issues, on the
sane page, would i t not bo w ell to in sert a fte r the v/ord " e f f o c t i v e , " —
"by a ll European countries," or rewrite the sentence and say that i t is
the universal practice in European countries to purchase short tin e b i l l s ,
e tc .
Under note issues, in lin e 9, you 3tate, "Those bonds are la rg ely o f
a class which i t would not be p ro fita b le fo r banks to buy as a basis fo r
c irc u la tio n ."

As a n atter o f fa c t, banks do buy a l l classes o f bonds, or

rather bonds bearing d iffe re n t rates o f in te re s t, changing them from tin e
to tine when they can make a p r o fit by so doing.
In the fourth lin e o f the last Paragraph on the sane page, re fe rrin g
to the standard o f commercial paper established in the b i l l : -

It seems to

m wo have established three or four standards, and i f so should we not
e
say "to conform to the standards established in the b i l l . "
In the Paragraph re fe rrin g to Government bonds, on Page 6, at the
bottom o f the page, you state that the 2s would have a market value of
approximately 6 j ,

Of course the market prioo o f a bond would depend on

it s maturity, and 6~f would only bo the price i f i t were to run in d e fin ite ­
ly .
O Page 9* the Paragraph commencing "A wider domestic exchange,"—
n
TCould it not be w ell to add the words "and, as a matter o f fa c t, most panios are produced by th is oondition."




It has boon charged

o ft on}

toolievo, by those who have not given

careful in vestigation to the subject, that the National Reserve .Association is
.SMpflty another United States Bank, sim ilar to the First and Second in stitu tion s
o f that name, and that troubles w ill a rise fron an adoption o f th is plan simi­
la r to those which brought about the downfall o f both the First and Second
United States Banks.

Without going into the merits o f those controversies, or

whether i t was wise end ju s tifia b le to terminate those banka, we submit that
the in s titu tio n which we propose is so d iffe re n t in it s organization and in
it s powers from e ith e r the First or Second United States Banks— which d if f e r ­
ed in d e ta il, but were the same in general character— that no proper conclusion
can be reached a3 to the result o f thi3 proposed

3 ystem

from the operation o f

those whioh have gone be fo r e .
The suggestion o f a few o f the many differen ces which exist w ill illu s ­
tra te this statement.

Tlie ca p ita l o f the National Reserve Association is

furnished by the subscribing bonks and must be retained by thorn as long as
they are members o f the Association.

Therefore, i t cannot get into the hands

o f foreigners or o f in terests which might uoe it fo r p o lit ic a l or speculative
purposes, and looms cannot be mode on it by the Reserve Association i t s e l f .
Loans were made by the First and Second United States Banks on th eir own stock,
tyin g up, in this way, a large part o f th e ir available ca p ita l.

Much o f the

stock d rifted into the hands o f foreign in te rests, a movement which was stim­
ulated because stock in the name o f a foreign er was not taxed, and as such
shares had no vote it increased the capacity o f lo ca l in terests to get con­
tr o l o f the bank by buying m
uch loss than a majority o f the en tire c a p ita l.
V/hilo the United States carried on substantially a ll it s business through
the United States Bank, p ra c tic a lly the only benefit i t obtained by so doing
was the dividends on the capital which it held in the bank and the tra n sfer­




-2 -

rin g o f money, without charge, from one section o f the country to the other.
In the proposed b i l l the United States w ill be the b en eficiary o f a l l
o f the earnings o f the Reserve Association a fte r dividends are paid on the
oapital stock, no part o f which is furnished by the Government, and which are
only in amount about equal to the return made on f i r s t class municipal secur­
itie s .

Both the F irst and Second United States Banks conducted a general

banking business, which brought them into a ctive competition with a l l the ex­
is tin g banks at that time, and as they had the advantage o f the Government
name and the Government deposits i t w&3 natural that they were trouble-ome
competitors and that much o f the complaint against them oame from the owners
and managers o f banks which v/ere affected by the competition.

The proposition

which we make is e n tire ly d iffe re n t in that the Reserve Association shall only
oarry on business with the Government and it s subscribing banks, and only
with the la t te r in oases where the business w ill inure to the benefit o f the
subscribing bank i t s e l f .
The organization o f tlie early banks produced cen tra liza tion because the
boards o f directors o f the branches, and th e ir cashiers, were appointed by
the board o f directors o f the Central Bank; while the President o f the branches
wa3 elected by the board o f directors o f the branch, as the la t te r were ap­
pointed by the central board en tire control o f the branch rested with the
central organization.
In th is b i l l not only are the boards o f d irectors o f the looal associa­
tions and branches elected by the shareholders o f the banks in the t e r r ito r y
served by them, but they must be residents o f that section, and oven the m
an­
agers o f branches, who ore appointed by the Governor, must be residents o f
the section oovered by that branch.

This insures lo ca l government and decen­

tra liz e d control instead o f centralized control.




-3 -

?he d irectors o f the First and Second United States Banks declared that
they gave the preference, in making loans, to loans secured by c o lla te ra l
over business paper, thus follow in g a p olicy which would oncourage and develop
speculation at the expense o f commercial a ffa ir s .

In the plan which we pro­

pose not only is every part of it designed to develop commercial a ffa ir s , but
wo proh ioit in direct terms the National Reserve Association from loaning on
notes secured by c o lla te r a l, or notes which do not origin ate as the result o f
a commercial transaction.
Although the capital of the United States Bank wan large, and suitable
fo r the business conditions as they then existed, it s specie holdings were a l­
ways small, and, therefore, i t never had a sound basis on which to issue a
note currency.

The specie basis required fo r noto issues by the Association

which we propose is quite as large as that which obtains in European banks
oi the same character, and w i l l , we b elie v e , bo amply su ffic ie n t fo r such pur­
poses.







NATIONAL MONETARY COMMI SSI ON,

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c e r t i f i c a t e s and c o o p e r a t i o n in o t h e r im p o r ta n t r e s p e c t s .




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ITov. 10, 1911.

Hon. N. W. A

A g a in t h a n k i n g you f o r y o u r c o n f i d e n c e ,
I am
V ery t r u l y y o u r s ,

Hon. ITelsan ¥ • A l d r i c h ,
540 P a r k Avenue,
Hew York C i t y .




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\
As I have already stated, one of the principal defects

of our banking system grows out of the artificial and unscien­

tific treatment of reserves required by our banking laws.

There is universal agreement that a portion of a bank’s

assets must be kept at all times in liquid form to enable it

to meet promptly its demand obligations.

With us a certain

/
AL*
j
percentage of its liabilities axe required to be kept in ac­

tual cash, and another portion on deposit with reserve agents.

In ordinary times withdrawals of balances are equalized

by new deposits; but banking institutions must be prepared

at all times to meet exceptional demands, and all well-managed
l U t f

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r

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financial institutions have a secondary reserve of commercial

A
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paper or other quick investment assets that she^Ad be readily

convertible into cash.

In this country we have had but

little serious discussion with reference to the proper char-




V

>*i?55X

acter and extent of bank reserves; but all must agree that

the manner of distribution makes them useless when needed.

When we consider that the cash reserves of the banks are

necessarily divided into 25,000 widely scattered portions, it

is not surprising that they should fail of their purpose and

prove useless in time of trouble.

Instead of being concen­

trated, as they are in all other countries, for the effective

protection and benefit of any, they are rendered by this

distribution ineffective and useless to all.

In other

countries reserves are regulated, both as to character and

extent, by the judgment and custom of managers of banks, and

not by legislative provisions.

One trouble arises largely from the absurd limitation

prescribed by the national banking law —

a limitation that

has been generally followed by legislation in the States --

1% ' 3*
*
V ■. " 7
X
■

that not

on±y

Prevents a bank from giving credit or discount-

ing the paper of its customers, but practically forbids the

use of its reserves for the purposes for which they were cre­

ated whenever and so long as the aggregate of cash and balan­

ces falls below the prescribed legal percentage.

of this paralysis is disastrous in times of stress.

The effect

Not only

is extension of relief to customers prohibited, but no method

is provided

jpf

protecting or replenishing the reserves.

In every other commercial nation, deposits by joint

stock banks in a central institution are held by custom to

be equivalent to a cash reserve; and this balance can always

be increased upon reasonable dernand by the rediscount of

commercial paper of a recognized standard.

In all other

countries in times of stress or anticipated trouble aid is

liberally extended to all solvent customers who have the

credit or necessary collateral, and the reserves of the banks




-=Tt3S-

are freely used, protected, and increased in the manner I

have described.

You are all familiar with our experience in 1907.

fore and during the general suspension,

Be­

individual banks,

almost without exception, outside of the great cities, took

every means to increase the amount of their cash reserves,

as they natxirally believed tnis course was nece 3 3 ary for self­

preservation.

This scramble for an increase in the cash

reserves of the banks from the Atlantic to the Pacific accen­

tuated, if it did not create, panicky conditions.

It is clear that in times of pressure the scattered cash

/• /
reserves in the possession of individual banks are practical­

ly useless and ineffective for any of the purposes for which




reserves are created.




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In order to afford the assurance, however, that the gen­
eral interests of thejjiatke^arid of the business community
shall be conserved, as well as the interests of the shareholders of tfoi Reserve
and the public.

C

is brought

ncTTesponsibility to, the Gov-

into close relatio

Vernment

ithe

It is required that s^Higof the

directors chosea tJw*inrh tho

V

A * <rt.

J

cliyo.

holder^ oggani^Uion„shall J^,peia»oa^-.w.liQ “ fairly j;epre-

*0

ial, commercial, agricultural^and other
interests bf the! country, and who sHatt-nbf be officers of
banks.”

V

This insures an infusion of representative busi­

A;

ness men int/0 the governing board who ace-under- every
motive to act in the public interest and not exclusively in
the interest of the Reserve Association.

-»

n -

Further than

.
X,

A

V

this.^thre^/oAdie highest officials of the Government of the
United States are made ex officio members of the govern­
ing board of the bank— the Secretary of the Treasury, the
Secretary of Commerce and Labor, and the Comptroller of
the Currency.

Still further restraint upon the adminis­

tration of the bank from narrow or selfish motives is im­
posed by the requirement that the governor of the Reserve

>

Association shall be selected by the President of the
United States from a list submitted by the board of
/directors.
COOPERATIVE CHARACTER OF THE RESERVE ASSOCIATION,
.

^

,

t-

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'

In providing for the creation of a new organ of American
banking, dtacrihod-^

the National Reserve Association of

the United States, it has been the aim of the Monetary
Commission to follow, the line3 uf ATiTGTcafi~sdgtrrh^rnrl,

. ,
u the
a•
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1
economic development—hv. coordination of local organ­

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rt &
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isms into an effective central organ by a system of coopera­
tion and representation.

M
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*q

It is in tAis respect that the plan

of the National Reserve Association differs radically from
the conception of a central bank upon European models.
Its sources of authority are democratic instead of coming
exclusively from the State.

Instead of overshadowing

local banking organizations, it is their representative.

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So carefully has this principle of representation been
guarded in the plan submitted by the Commission that

•) > < ^
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lu u "

each bank which enters the Reserve Association is per­
mitted exactly the same ratio of ownership in proportion
to its capital as every other bank.

I

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It can not change this

ratio of ownership except by changes in its own capital,
and it can not alienate its shares^to any other bank or
to any individual, firm, or corporation whatsoever.

CK

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The

Reserve Association is thus made the channel through
which local banking institutions are to exercise what may
be called their federated powers.
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8 CN

MONO. SEC.
In this respect the banking system in tile United States,
has lagged behind other organs of the sqpial and economic
mechanism.

Cooperation of a sort therie has always been,

through clearing arrangements and the relations'of coun­
try banks with

Uy zx-

tiieir city correspondents; yet, in the

forcible language of Professor Cooke (Bulletin of the
American Economic Association, June, 1911, p. 234):

l

“ There is not one country bank, fliowever small, that

IT)

u Vv

has assurance that any correspondent, however large, is
powerful enough to save it if it nee<jU saving in a general
panic.”
Obviously, this principle of cooperation and coordina­
tion follows ini its essential outlines the reform which htw
bcun often iceIVimilllIL
tigtliy
Affljprifiap, .hanking

tier legal recognition of the clearing

!hCL'L'^tU^s (^fr

hous^ as organs of mutual protection* The g W r benefits,
of the cooperation of the banks throhgl'their local clearing

^

houses have been so often demonstrated in periods of panic
that the subject does not call for elaboration.

c ,

f ix - - t
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In every

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important crisis of recent years, when tlie legal machinery
for transferring credit has broken down from insufficiency
oftshc currency supply , oTTIas ceased ut OpLiaU rffuiTtVcly
by

nf th° r iffid b ^ -^ ^ p g r t w -lh e clearing houses

hpvfvflopped into the-hregrh an d-Itavc create! a fopm of
currency, tomporn ry in its
p W n f a d theon of exchanges.

hlli-

nf 1 ,,r nnA
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*'**!•*»-» carrying

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First issmTl'TiTTSho, to an amount in

. New York of $7,375,000, issuesof^learing-house certificates
attained a maximum throughout the country in the crisis

£:

T> n\,

of 1907 of about $260,000,000,/xclusive of other temporary

f

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■

, substitutes for currency.
What, is sought in effect by the plan for the National
Reserve .Association is-to give legality, s^stiftn, aruf efffcienscy of detail to this method of self-protection by the
banks which has emerged from the occasional break­
down of the legal\machinery of banking.

Careful con­

sideration of the subject, however, has made it apparent
that the system of mutual protection adopted temporarily
;ip periods of crisis through the clearing-house system
must be modified in at l°ast three important particulars,
in order to make it- nflr»r»«-Nr«

mnofjmr the reauireinents

a

i j J - X ? * - '

1-fL

MONETARY - SPECIAL.

Recommendations comptroller Currency amendments
National Banking Laws.




p u b l ic

D o cu m en t.

FREE.

U S SENATE.
. .

*

U. S. 8.

M



RHODE ISLAND

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AM
ENDM
ENTS SUGGESTED TO THE NATIONAL BANK ACT, WITH-TOOT NOTES EXPLAINING
W Y THE AM
H
ENDM
ENTS ARE NECESSARY.

Section 327.

"There s h a ll be In the Bureau of the Comptroller of the

Currency-*JjW£ Deputy Comptroller^ of the Currency, to be appointed by the
Secretary o f the Treasury,

oho sh a ll each

be e n titled to a salary o f ■4m three
s-

thousand fiv e hundred d o lla rs a year and who s h a ll possess the power and per­
form the duties attached by law to the o ffic e of Comptroller during a vacancy
in the o ffic e or during the absence or in a b ilit y of the Comptroller.
Comptroller^

The Deputy

s h a ll also take the oath of o ffic e prescribed by the Constitu­

tion and laws o f the United States, and s h a ll each give a lik e bond in the
penalty o f f i f t y thousand d o lla rs .

*

(Note: There are now two deputy Comptrollers, one appointed
by the Secretary of the Treasury, and the other appointed by the
President and confirmed by the Senate. The one appointed by the Secretary
of the Treasury receives ,*3,500 a year; the one appointed by the Pres­
ident receives $3,000 a year. The situation is anomalous, to say the
le a s t. There should be two Deputy Comptrollers, each receiving the same
sa la ry ; each an appointee of the same appointing power; th e ir work
assigned to them by the Comptroller of the Currency, and changed, i f need
be, from time to time, so that each of the Deputies s h a ll be fa m ilia r
at a l l times with the work o f the Bureau. )

Section 885.

Nlepiee A copy o f the

. y —
—

------*

bankin g associa t ion, c e r tific a te o f the Comptroller of the Currmcv authorizing
any natio n a l banking association to begin the business of banking,

duly c e r ti­

fie d by the Comptroller o f the Currency, and authenticated by his se a l of
o ffic e , s h a ll be evidence in a l l courts and places within the ju risd ic tio n of
the United States o f the existence o f the association, and o f every matter
which could be proved by the production o f the o rig in a l c e r t ific a t e ”.

(Note: When banks are engaged in p rivate lit ig a t io n they o a ll
upon the Comptroller of the Currency fo r c e rtifie d copies of the papers
which w i l l prove th eir corporate existence, and when there are criminal
proseoutions o f bank o ffic e r s or other persons, the U. S. D istric t Attorneys
the same request.
Much time o f the clerks i s taken up in making
these c e r tifie d copies, to the detriment of the current work of the Bureau.




*

t
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The Government receives no fee fo r making these c e rtifie d copies. The paper
usually calle d for to prove the corporate existence is the organization
c e rtific a te , whieh is very often a very voluminous document, with many
signatures which cannot be read. Quite generally the Courts in recent
years have accepted a copy of the c e rtific a te of the Comptroller author­
izing the banks to beu'in the business of banking. This c e r tific a te
recites that *evidence has been presented to the Comptroller that the
association has complied with a l l the provisions of the statutes of the
United States required to be complied with before an association sh a ll be
authorized to begin the business of banking, and that i t has been auth­
orized to begin business".
A c e r tifie d copy of this paper can be
made in a few minutes, and i f this section is amended so as to make this
C e rtific a te le g a l evidence o f the existence of the corporation, i t w ill
save the time of clerks in the Com ptroller's o ffic e , as w ell as getting
the c e rtifie d copies promptly to those who want them.
As stated above, th is c e r t ific a t e is now generally received by the
Courts as evidence of the bank's existence, but it is d esirable to have
the statute expressly state that it sh a ll be so received.)

Section 5140.

At le a st f i f t y per centum of the ca p ita l stock of every

association s h a ll be paid in cash pro rata by the shareholders lis t e d in t h e __
organization c e r tific a te or th eir duly authorized assignees before i t sh a ll be
authorized to commence business;

and the remainder of the c a p ita l stock of such

association s h a ll be paid in installments of at le a s t ten per centum each, on
the whole amount o f the c a p ita l, as frequently as one instalment at the end of
each succeeding month from the time i t s h a ll be authorized by the Comptroller
o f the Currency to commence business;

and the payment of each installment sh all

be c e r tifie d to the Comptroller, under oath, by the president or cashier o f
the association.

(Note: Up to a few months ago the o ffic e received a c e r tific a te stating
that f i f t y per cent^of the c a p ita l had been paid in, but did not inquire
who paid the instalment on the c a p ita l. As a matter of fa c t, very
often the stockholders named in the organization c e r tific a te were
merely figure-heads, and had not paid a penny fo r the stock which stood
in th e ir names, but the instalments were paid by promoters, acting in­
d ivid u ally or as a corporation.
These promoters very often took the stock
in a block, and paid fo r i t , and then sold i t whenever and wherever they
could, frequently and almost always at a premium, which the pranoters
themselves took as compensation fo r th eir work.
The law contemplates
that the stockholders themselves should pay fo r the stock, and that they
should not be named in the organization c e r tific a te as stockholders when
they are not such, either d ire c tly or in d irectly .
The practice of the o ffio e now is that the stockholder must pay his
pro rata assessment on the stock, which has broken up the bad practice here­
tofore complained o f, and the Comptroller asks that the statute be made
to conform to this practice, which is having a good e ffe c t,
)




—n

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Section 5141.

Whenever any shareholder, or hie assignee, f a i l s to pay

any instalment on the stock when the same is required by the preceding section
to be paid, the directors of such association may s e ll the stock c f such de­
linquent shareholder at public auction, having given three weeks ten days,
previous notice thereof in a newspaper published and cf general circulation in
the city or county where the association is located, or i f no newspaper is published
in said city or county, then in a newspaper published nearest thereto, to any
person who w i l l pay the highest price therefor, to be not less than the amount
then due thereon, with the expenses of advertisement and sale ;
i f any, s h a ll be paid to the delinquent shareholder.

and the excess,

I f no bidder can be found

who w i l l pay fo r such stock the amount due thereon to the association, and the
cost of advertisement and s a le , the amount previously paid sh a ll be fo rfe ite d
to the association, and such stock s h a ll be sold as the directors may order,
within six months from the time of such f o r f e i t u r e ^ - and i f not sold i t shal l be
cancel ed and deduct ed f r om the cap it al at octt o f the associ a tio n ,— I f any-such
oaaoc l l a t le a and r eductio n shal l

reduce the c a p ita l ef the aceeei a t l en

the

minimum o f ca p it a l requi r ed by lawy- the-capi t al s tock shel l t with in t h iH y days
^_Q
_ .
.

f rom the data o f can cellation, be increased te the required amount;
e f which

in d e fa u lt

For fa ilu r e to s e l l the f o r f e it ed shares of stock within the time herein

provided, a receiver may be appointed, according to the provisions of section f i f t y two hundred and th irty -fo u r, to close up th6 business of the association.

(Note: This section is construed as re la tin g to the payment of
instalments subsequent to the payment of the f i r s t f i f t y per cent. When
a bank is organised subscribers to the stock agree to pay f i f t y per cent
cf th e ir o rig in a l subscription, at a d efin ite period, end the subsequent
installments as provided by law, that is at least ten per cent each month,
subsequent to the date of the c e rtific a te authorizing the bank to begin
businesB. Ten days is regarded at su ffic ie n t time subsequent to the date
on which an instalment is due, to enable a shareholder to pay hie in­
stallment, As the subscribed stock subsequent to the issue of the c e r t i f ­
icate authorizing a bank to begin business, has a book value of at
le a s t f i f t y par cant, the sale of shares by reason of fa ilu r e to pay
subsequent instalments is attended with no d iffic u lt y , and in practiew
no caee h« s ever ccme to the knowledge of th is o ffic e when i t has not been
possible so to dispose o f the delinquent shares. This being the case,
authority to deduct the shades from the cap ital stock should be revoked,
ae such deduction might reduce the c a p it a l below the minimum required by
law and theroby necessitate proceedings to fo r f e it the charter.




»

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In lin e with the other provisions of the lew, the la s t clause is added,
providing that i f fo rfe ite d shares are not sold w itin the time sp ecified ,
a receiver may be appointed.
The only change made is reducing the time of notice o f 's a le of
delinquent stock from 21 to 10 days, and giving power to appoint a redeiver
in case the stock cannot be disposed o f . )

Section 5142,

Any ***eci«ti** formed under th is T itle My, by it*

article* of association, provide for an ia epsas* of it# eep ital from time to
t in s, a* may ba deemed expedient, -subject to the lim itations of thi* T itle .
But tho maximum of such increase to bo provided in the a r tic le s of association
•h a ll be determined by the Comptroller of the Currency;

and ns i ncrease of capital

sh e ll be valid u n til the who le amount of auoh increase i s paid in, end notice
thereof has been transmitted to the C
omptroller of the Currency, and hie c e r tif­
ic a te obta ined specifying the amount of euch in crease of capital stock, with hie
app reval the ree f , and that i t ha* boon duly paid in as port of tho capital o f
each association.
Section 1 * f the le t o# May 1, ISSd.
That any naticn^.l banking association may, with tho approval o f the
Comptroller of the Currency, by the vote of shareholders owning tvro-thirds of
tho stock of such association, increase its capital stock, in accordance with
ex istin g laws, tc any sum approved by the said Comptroller, notwithstanding the
lim it fixed in it s o rig in a l a r tic le s of association and determined by said
Comptroller;

and no increase o f the capital stock o f any national banking associa­

tion either within or beyond the lim it fixed in its o rig in a l a rtic le s of ssscciaticn sh all be made except in the manner herein provided.

In case an in crease in

capital. • tock la. made for t he J>urjDoee of acquiring the business of another bank^
the additional shares mav be sold by the directore at n
£th.®.r. Ael sjtaroholders i f
fl.

s ch
u

s.al

o

s._auth_o.r.i z.ed. by vote of share held e re

sent ing not l ess, .thy, twc-thlrdfl of the. stock of t he
meeting at vh.ich the, increase in capital stoc




SPiJLFf. t o pareens

k

is author i z ed.

repre­

_taken at the

«

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(Note: This amendment strik es out language o f o rigin a l section ,
now obsolete, and substitutes as section 5142, the Act of May 1, 1886, under
which we are operating.
At com on law and under the a rtic le s of association of national banks
m
generally, the right of shareholders is recognised to p articipate pro rata
in any increase of cap ital. In rn^-ny cases the cap ital of a national bank
is increased for the purpose of acquiring the business of another bank,
and i t is desired to issue a portion of the new stock to those interested in
the absorbed bank. I t is therefore suggested that the law be so emended
to authorize such disposition of increased stock under authority of a
resolution adopted by the seme vote by which the increase is approved. ) .

Section 5144.

In sill elections o f directors, and in deciding a l l questions

at meetings of shareholders, etch shareholder sh a ll be entitled to one vote on
each share of stock held by him.
in w ritin g;

Shareholders may vote by proxies duly authorized

but no d ire cto r, other o ffic e r , clerk, t e lle r , or bookkeeper of

such association sh all act as proxy;
stock subscription

and no shareholder whose l i a b i l i t y for

is past due and unpaid sh all be allowed to vote.

(Note: Thia section re lates to the rights of shareholders to vote, e t c ,,
and provides in part that any shareholder whos©liability is p* st due and
unpaid sh all not bs allowed to vote. The meaning of this clause has been
open to question, but it is held by the C irc u it Court of the United States
in the case of United States vs. Barry that the words " l i a b i l i t y past due
and unpaid" re fers only to unpaid subscriptions fo r stock.
This is
assumed to be the intent of the statute, and should be eo written into the
law. Elsewhere in the law a "d irec to r" is held to be an " o ffic e r " , and is
so characterized in the case c f U. S. vs. Means, (42 Fed. Rep. 599), but
to avoid question should be written into th is sectio n .)

Section 5147.

Each directo r, when appointed or elected, sh all take an

oath that he w i l l, so fa r as the duty devolves on him, d ilig e n tly and honestly
administer the a ff a ir s of such association,

and w i l l not knowingly v io la t e ,

or w illin g ly permit to be violated, any o f the provisions o f this T it le , and
that he is the owner in good fa ith , and in his own righ t, of the number of
shares of stock required by this T it le , subscribed by him, or standing




in

I

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his name on the books of the association, end that the same is not hypothecated#
or in any way pledged^ae security fo r any loan or debt.

Such oath, subscribed

by the d ire cto r making i t , and c e rtifie d by the o ffic e r before whom i t ie taken
a judge of any court of record or notary public^ shall be immediately transmitted
to the Comptroller of the Currency, and sh a ll be file d and preserfed in his
of f ic e .

I f such oath is not taken and tra nsmitted t o the_ Com t r o lle r of the Currency
p

within t h i rty days a fte r the electio n or appointment of a d ire c to r.

vacancy shall

be deemed to have been created which sha l l be f i l l e d, as provided by Section f i fty-one
hundred and. f o rty-e igh t of the Revised Sta tutes of the United St ates.

(Note:
The law requires d irectors to take oath but f a i l s to provide
the o ffic e r before whom the oath may be taken. This amendment supplies
that omission and alec fix e s a time lim it of 30 days in which to q u a lify .
Vacancies in many instances exist fo r an entire year, - a condition requiring
correction. The 30 day lim itatio n may be met by renewal o f appointment by the
board, in the few extraordinary caees which may a ris e by illn e s s or absence
from the country; but except in the ra rest cases, 30 days is amply s u ffic ie n t
time in which to f i l l vacancies,
)

Section 5149,

If,

from any cause, an election of directors is not made

at the time appointed, the association s h a ll not fo r that cause be dissolved,
but an election may be held on any subsequent day, th irty days'notice thereof in
a l l esses having been given bv m l or in a newspaper published in the city, town,
ai
or county in which the association is located;

and i f no newspaper is published in

such city, town^or county, such notice s h a ll be published in a newspaper published
nearest thereto.

I f the a r t ic le s of association do not fi x the day on which the

election shall be held, or i f no election is held on the day fixed , the day for
the election sh all be designated by the board of directors in th eir by-laws, or
otherwise;

or i f the directors f a i l to fi x the day, shareholders representing

two-thirds of the shares m do so.
ay




t

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(Note: The only addition tc th is section is the words "By mail o r".
As a matter of fact, wherever notice has to be given, the bankers say that
notice by mail is much more e ffe c tiv e . I t is almost universally preferred
by the banks. This simply gives permission tc give the notice either way.)

Section 5150,

One of the directors, to be chosen by the board, sh all be

president of the board association ,

(Note:
The law of 1864 provided that the directors shall elect
one of th e ir number as president of the association. Revised Statutes
read "of board", making i t a question as to whether there may not be
two presidents - one of the bank and the other of the board. This
amendment leavee no ground for dispu te.)

Section 5151,

The shareholders of every national banking association shall be

held in divid ually responsible, equally and ratably , and not one fo r another, for
a l l contracts, debte-and engagements of such association, to the extent o f the
amount of th eir stock therein, at the par value thereof, in addition to the amount
invested in such shares;

except that shareholders of any banking association now

existing under State laws, having not less than fiv e m illions of d o llars of capital
actually paid in, and a surplus of twenty per centum on hand, both to be determined
by the Comptroller of the Currency, sh a ll be lia b le only to the amount invested
in th eir shares;

and such surplus of twenty per centum sh all be kept undiminished9

and be in addition to the surplus provided fo r in th is T it le ;

and i f at any time

there is a deficiency in such surplus of twenty per centum, such association sh all
not pay any dividends to its shareholders u n til the deficiency is made good;

and in

case of such deficiency, the Comptroller of the Currency may compel the association
to close its business and wind up it s a ffa ir s under the provisions of chapter four
of th is T it le .




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Anv corporat i c n organized under authority of anv act of Congress or under
the lews o f any of the states of this Union, which i n fa ct purchases. or acquiree
Jta owner, etcck of a national banking asso ciatio n, cr wh ich Knowin gly permits
.st ock of a national banking association to stand in i ts name as owner on the
books of_ such 's s c c i a t i cn. shall be l i a b l e , as other shareholders, for a l l contracts,
debts and engagements of such national banki ng associatio n , notwithstanding its
lack of Power to purchase, acquire or hold such stock,______________________________

(Note:
The Supreme Court of the United States has frequently held
that when a corporation has no pcwer to invest it s funds in the stock of
a national bank, i f i t actually does so i t cannot be held lia b le fo r the
assessment against i t as a shareholder. I t makes no difference how long
the stock may have been held, what amount of dividends the corporaticn
may have received, nor what part i t may have taken in directing the a ff a ir s
of the national bank. The law is a p p lic ab le , also, to national banks
holding stock as an investment o f th e ir funds in another national bank.
P rio r to the f i r s t decision o f the Supreme Court o f the United States,
three United States c irc u it courts of appeals had held that under such
circumstances the corporaticn was lia b l e , notwithstanding it had exceeded
its powers by making such investment.
The resu lt of the ru ling of the Supreme Court places a premium upon the
i l l e g a l exercise of powers by a corporation. A ll national banks and most
corpcraticns under state laws have the right to acquire stock in a national
bank, provided it is accepted in good fa ith to realize upon a loan of money
previously made. That a corporation m d elib era tely purchase stock in a
ay
national bank, dictate the policy of the national bank, accept dividends fo r
years, and escape a l l l i a b i l i t y when the national bank becomes insolvent,
is an e v il imperatively c a llin g fo r a remedy, and unless corporations are
prohibited from owning stock in a national bank as hereinbefore recom­
mended, the law should be amended making corporations lia b le to assessment
the same as in divid u als.
)

Section 5154.

Any bank incorporated by sp e cial law,

or any banking in­

stitu tio n organized under a general law o f any £ tete or organized t e r r ito ry ,
m become a national association under th is T it le by the name prescribed in it s
ay
organization c e rtific a te ;

and in such cose the a r tic le s of association and the

organization c e rtific a te may be executed by a majority of the directors of the
bank or tanking in atitu ticn ;

and the c e rtific a te sliall declare that the owners

of twc-thinds of the capital stock have authorized the directors to make such




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c e r t ific a t e , and to change or convert the bank or banking in stitu tio n into a
national association.

A majority of the d irectors, a fte r executing the a rtic le s

of association and organization c e r tific a te , sh all have power to execute a l l
other papers, and to do whatever may be required to make it s organization
perfect and complete as

a

national association.

The shares of any such bank may

continue to be for the same amount each as they were before the conversion, and the
directors may continue to be the directors of the association u n til others
are elected or appointed in accordance with the provisions of th is chapter^ *

and

any^atate

bank

State laws,may
organized

under

which i s

a

stockholder in any other bank,

continue to hold it s stock, although eith er

by

bank,

and have accepted the provisions of this T it le ,

Comptroller of the Currency has given to such association

a

authority o f
er both,

may be

When the

c e rtific a te , under

his hand and o f f i c i a l se a l, that the provisions o f this T it le have been com­
p lie d with, and that i t is authorized to commence the business of banking,
the association sh all have the same powers and p riv ile g e s , and shall be sub­
ject to the same duties, re sp o n sib ilitie s.a n d ru les, in a l l respects, as
are prescribed fo r other associations o rig in a lly organized as national banking
associations, and sh a ll be held and regarded as such an association.

But no such

association sh a ll have a less c a p ita l than the amount preBcribed for associations
organized under this T it le ,

(Note: The in sertion of "or organized t e r r it o r y " , follows the con­
struction of the law by the Department of Justice. The language stricken
out , ie demanded by the court decisions that a national bank cannot in­
vest in tha stock of other corporations. The exemption was mainly in ths
in terest of New England banks, holding stock in the National Bank of
Redemption, Boston, now out of existence.)

Section 5155.

I t s h a ll be lawful fo r any bank or banking

association organized under State laws, and having branches, the cap ital being




t

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join t and assigned to and used by the mother-bank and branches in d e fin ite pro­
portions, to become a national banking association in conformity with existing
laws, and to retain and keep in

operation its branches, or such one or more of

them ns i t m elect to retain ;
ay

the amount of the circu lation redeemable at

the mother-bank, and each branch, to be regulated by the amount of cap ital
assigned to and used by each.

The provisions of this section sh all not apply

in the case of t he conversion of a state bank into a national banking association
subsequent to the date of the passage of th is act . _

(Note: A provision has been added to this section, making i t
unlawful for a state bank having branches to convert into the national
system, and carry over the branches and operate them under the national
system as branches. I t has been held by a l l the Comptrollers that it is
unlawful under the national bank act for a national bank to have branches,
and it w il l be obviously un fair to the seven thousand national banks now in
the system to allow a state bank with branches to convert to the national
system and carry over it s branches at the tia a of the conversion. Wa would
tnen have soma national banks with branches, le g a lly operating them, and
very many others which could not have them.)
Section 5159,

Every association, afte r having complied with the provisions

of this T itle.p relim in ary to the commencement of the banking business, and before
i t s h a ll be authorized to commence banking business under this T it le , 9hall trans­
fe r and d eliv er to the Treasurer of the United States as security fo r i ts cir c ulating
notes. any United States registered bonds, bearing in terest, to an the amount

lees

ant

than thirty thousand d o lla rs and not lees than one third of the capital stock

paid in . of fift y thousand d o lla rs , except that banxa with ca p ita l of one hundred
and f i f t y thousand do11are or lees sh a ll only be required to deposit bonds to the
extent of one-fourth o f capital stock.

Such bonds s h a ll be received

by the Treasurer upon deposit and sh a ll be by him safely kept in his o ffic e , u n til
they s h a ll be otherwise disposed o f, in pursuance of tne provisions of this
T it le




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(Note: The omitted words ere held to be modified by the
acts of June 20, 1874, end July 12, 1882. Section 4, act of June 20, 1874,
which follows section 5167, provides in part that the amount of bonds on
deposit fo r circulation s h a ll not be reduced below $50,000. This determines
the amount of bonde required to be deposited by banks organizing with capital
stock over $150,000.
,
Banks having a c ap ital o f $150,000, or less, are not required -o
keep on deposit bonds in excess of one-fourth of the capital stock as
security for their c ircu latin g notes, by act of July 12, 1882, chapter 290,
section 8. This change w il l make the law clear, but does not change existing
law .)

Section 5160.

The deposit of bonds made by each association sh a ll be increased

ae i t s cap ital m be paid up or increased, so that every association sh a ll at
ay
a l l times have on deposit with the Treasurer registered United States bonds to the
amount of at least one-third o f ite cap ital stock actually paid in provided by
sectibn fifty -o n e hundred and fifty -n in e of the Revised Statutes of the ,Uni ted__
States.

And any association that may desire to reduce it e c a p ita l, or close up its

business and dissolve it s organization, may take up ite bonds upon returning to the
Comptroller its c ircu latin g notesj, $ r bv depositing lawful money f in the propor­
tion hereinafter required, or m take up any excess of bonds beyond one-third of ite
ay
capital stock, the minimum amount hereinbefore provi ded, and upon which no circu latin g
notes have been delivered,

(Note: The explanation of necessity for the indicated amendments to
this section is contained in the memorandum following section 5169.)

Section 5168.

vrhenever a c e r tific a te is transmitted to the Comptroller of

the Currency, as provided in this T it le , and the association transmitting the same
n o tifie s the Comptroller that at le s s t f i f t y per centum of its capital stock has
been duly paid in pro rata by shareholders lis te d in the organization c e r t ific a t e _
or th eir assignees^

and that such association has complied with a l l the pro­

visions of tnis T itle requirod to be complied with before an association sh all




!

t

-12-

be authorized to commence the business o f banking, the Comptroller shalLaxamine
into the condition of euch association, ascertain esp ecially the amount of money
paid in on account of it s cap ital, the name and place of residence of each of it s
d irecto rs, and the amount of the cap ital stock of which each is the owner in good
fa ith , and generally whether such association has complied with a l l the provisions
of this T it le required to e n title i t to engage in the business of banking;

and

sh a ll cause to be made and attested by the oaths of a majority of tne directors,
and by the Preeident or cashier of the association, a statement of a l l the facts
necessary to enable the Comptroller to determine whether the association is law­
fu lly e n title d to commence the business o f banking,

(Note: The explanation of the necessity fo r the indicated amendment to
th is eection follow s Section 5140, both amendments being in the same l i n e , , )

Section 5172,

In order to furnish su itable notes fo r circulation, the

Comptroller of the Currency s h a ll, under the d irection of the Secretary of the
Treasury, cause p lates and dies to be engraved, in the best manner to guard against
counterfeiting and fraudulent alte ra tio n s, and s h a ll have printed therefrom, and
numbered, euch quantity o f circu latin g notes, in blank, of the denominations of
fiv e d o lla rs , ten d o lla rs , twenty d o lla rs , f i f t y d o lla rs , one hundred d o lla rs , fiv e
hundred d o lla rs , one thousand d o lla rs , and ten thousand d o lla rs , as m be re­
ay
quired to supply the associations en titled to receive the same.

Such notes sh all

state upon th eir face that they are secured by United States bonds or other
s e c u ritie s , c e rtifie d by the written or engraved signatures of the Treasurer and
R egister and by the imprint of the seal of the Treasury,

They sh a ll also express

upon th eir face the premise of the association receiving the same to pay on demand,
attested by the signature^ of the president or vice-president and cashier £ r
assistant cashier.

The Comptroller of the Currency, acting under the d irection

o f the Secretary of the Treasury, sh a ll as soon as practicable cause to be prepared
c ircu latin g notes in blank, registered and countersigned, as provided by law,



1

I

-13-

to tin amount equal to f i f t y per centum of the capital stock of each national
banking association;

such notes to be deposited in the Treasury or in the sub­

treasury of the United States nearest the place of business of each association,
and to be held fo r such association, subject to the order of the Comptroller of the
Currency, fo r th e ir delivery as provided by lawj

Provided, That the Comptroller

o f the Currency m issue national-bank notes of the present form u n til plates
ay
can be prepared and circu lating notes issued as above provided:

provided, however,

That in no event s h a ll bank notes of the present form be issued to any bank as
additional circulation provided for by this act.

(Note:
The d e s ira b ility of permitting c ircu latin g not^s to be signed
by an assistan t cashier is evidenced by the experience of this o ffic e , as it
frequently occurs that the cashier of a bank is temporarily absent from the
bank, or that there is a vacancy in the cash iersh ip.)

Section 5173.

The plates and special dies to be procured by the Comptroller

of the Currency for the printing of such c ircu latin g notes sh a ll
•hie the

remain

control and direction o f the Secretary of the Treasury ^

be under

and the expenses

necessarily incurred in executing the laws respecting the procuring of such notes,
and a l l other expenses of the Bureau of the Currency, s h a ll be paid out of the
proceeds of the taxes or duties assessed and collected on the circulation of
national banking associations under this T it le ,

(Note: The Comptroller having no control over the plates and
dies used in preparing circu lating notes, but these instruments being
in the custody of the Director of tne Bureau of engraving and P rin tin g,
who is subject to the supervision of the Secretary o f the Treasury, the
necessity for the amendment in question is apparent, )




I

I
14'

Sec. 5184.

I t sh a ll be the duty of the Comptroller of the Currency to

receive worn-out or mutilated circulating notes issued by any banking association,
and a lso , on due proof of the destruction of any such circu latin g notes, to
d e liv e r in place thereof to the association other blank circu latin g notes to an
equal amount.

Such worn out or mutilated notes, a fte r a neraorandura has been entered

in the proper books, in accordance with such regulations as m be established by
ay
the Comptroller, as well as a l l circu latin g notes which sh a ll have been paid or
surrendered to be canceled, sh a ll be burned to ashes, macerated

in tfce presence

of four persons, one to be appointed by the Secretary of the Treasury, one by the
Comptroller of the Currency, one by the Treasurer of the United States, and one by
the association, under such regulations as the Secretary of the Treasury m pre­
ay
scrib e.

A c e r tific a te of such burning maceration^signed by the p arties so appointed,

s h a ll be made in the books of the Comptroller, and a duplicate thereof forwarded to
the association whose notes are thus canceled.

Any gain that my/ arise from t h e __

f a i lu r e to present such circu latin g notes fo r redemption s h a ll inure to the benefit
of the United States.

__

(N o te: The suggested amendments do not change the existin g law, but
i f the proposed amendments to the act of July 12, 1882, re latin g to the extension
of corporate existence o f national banks are adopted, one of which eliminates
section 6 of that act, the sentence therein providing that -"Any gain that
m arise from the fa ilu r e to present such circu latin g notes fo r redemption
ay
sh all inure to the ben efit of the United States” should be retained; and,
as indicated, added to section 5184.)

(Note: Sections 5185, 5186, and the Act of February 14, 1880,
related to banks issuing gold notes. These two sections, and the Act of
February 14, 1880, are now en tirely obsolete and should be repealed, as
there are now no gold currency banks in existence. There were ten organized,
but they have a l l eith er been liquidated or converted to currency banks.)




t

»

-15-

Section 5196.

Every national banking association formed or existin g under

this T it le , s h a ll take and receive at par, fo r any debt or l i a b i l i t y to i t ,

any

and a l l notee or b i l l s issued by any law fully organized national banking association.
But this provision sh a ll not apply to any association organized for the purpose
of issuing notes payable in gold.

(Note: I f sections 5185, 5186 and the Act of February 14, 1880, are
repealed, the saving clause in this section in favor of banks organized
fo r the purpose of issuing gold notes should be stricken out. I f , how^
ever, sections 5185, 5186 and the Act of February 14, 1880, are not
repealed, then this section should be l e f t as i t is .
)

Section 5199,

The d irectors of any association may, semi-annually, declare

a dividend of so much of the net p ro fits of the association as they s h a ll judge
expedient;

but each association sh all, before the declaration of a dividend,

carry one-tenth part of it s net p ro fits of the preceding h a lf year p e r iod covered
bv the dividend to its surplus fund u n til the same sh a ll amount to twenty per
centum of it s cap ital stock.

(Note: The existin g law permits the directors of an association to
declare a dividend serai-annually, and only requires an addition to the
surplus fund frcro the p ro fit s of the bank earned during the preceding
s ix months. As it is the custom of many banks to declare dividends at
varying in te rv a ls, the f i r s t amendment suggested is deemed d esirable. As
a bank frequently passes dividends, carrying a l l net earnings to the
undivided p ro fit account, i t seems d e s ira b le to require the transfer to
the surplus fund of ten per cent of the net p ro fits fo r the period covered
by the dividend.)

Section 5205.

Every association which s h a ll have fa ile d to pay up it s capital

stock, as required by law, and Every association whose cap ital stock s h a ll have
become impaired

by losses or otherwise, s h a ll, within three months thirty dave

a fte r receiving notice thereof from the Comptroller of the Currency, pay the




«

)

-16-

deficiency in the capital stock, by assessment upon the shareholders pro rata for
the amount of capital stock held by each;

and the Treasurer of the United States

sh a ll withhold the interest upon a l l bonds held by him in trust for any such
association, upon n o tific atio n from the Comptroller of the currency, u n til otherwise
n o tified by himj

and the board of directors upon receipt of such notice of im­

pairment of cap ital are hereby required immediately to notify in w ritin g each and
every,gharoholder of the association of such impairment and of the amount of such
share holder! pro rata share of the as cessment ne cessary to make good the deficiency
in t he capit a l stock, and in the same notice sh a ll c a ll a meeting of the shareholders
to be held within f i fteen days from the d?-»te of such notice fo r the purpose of
determining whether the deficiency in the cap ital stock s h a ll be paid in or the
bank placed in voluntary l iquidation.

I f any such association sh all f a i l to

pay up it s cap ital stock, and sh all refuse to go into liq u id a t io n * ^ provided by
law, for three months thirty days

a fter receiving notice from the Comptroller, e
.

receiver may be appointed to close up the business of the association, according to
the provisions o f section fifty -tw o hundred and th irty -fo u r:

And provided, That i f

any shareholder or shareholders of such bank sh a ll neglect or refuse, a fte r threw
month# receiving notice, to pay the assessment, as provided in this section, i t sh all
be the duty of the board of directors to cause a su ffic ie n t amount of the cap ital
stock of such shareholder or shareholders to be sold at public auction (a ft e r thirty
ten days* notice within the th irty day period hereinbefore prescribed sh all be given
by posting such notice o f sale in the o ffic e of the bank, and by publishing such
notice in a newspaper of the city or town in which the bank is located, or in a
newspaper published nearest thereto) to make good the deficiency, and the balance,
i f any, sh e ll be returned to such delinquent shareholder or alia reholders.
p ro v is ion

The

_rft_sp_ect_ to c a l l ing meetings of shar e holders to determine y h e _ t n e _ _
_

d e ficiency in capital stock s h a ll be paid in ah a l l not be held to c o n flict with
other existin g provisions of law o rjvith the a b i d e s




of association i n respect to

t

I

-17-

callinK meet ings of shareholders fo r other .purposes.

(Note: There Is an inconsistency between this provision o f lew and
Section 4 of the Act of June 30, 1P76, While the former requires the c a p ita l
to be made good within three months in order to escape a receivership, the
la tt e r requires the stock of any shareholder who f a i ls to pay hie proportion of
the assessment within that time to be advertised fo r a further period of thirty
days a fte r the expiration of the three months before i t can be sold by the
directors “o make good the deficiency. The directors cannot, therefore, enforce
payment of the assessment on delinquent stock under four months from the date of
receipt of notice of impairment.
These provisions of law are also frequently responsible for the un­
satisfactory conditions which are found to exist in banks which the Comp­
t r o ll e r is powerless to correct. Pending the collection of an assessment
to make good an impairment of capital, the association remains in the hands
c f the same management responsible, in many instances, f o r the losses, either
through incompetency, speculation or otherwise. Depositors continue to put
th eir money in the bank to be loaned or invested and perhaps lo s t cr imperiled
in a like manner.

Section 5209,

Every president, d irecto r, cashier, t e ll e r ,

clerk, or

agent of any association, who embezzles, abstracts, or w ilfu lly misapplies
any of the moneys, funds,or credits of the association;

or who, without authority

from the d irecto rs, issues or puts in circulation any of the notes of the association;
or who, without such authority, issues cr puts forth any c e r t ific a t e of deposit,
draws any order or b i l l of exchange, makes any acceptance, assigns any note, bond,
d ra ft, b i l l of exchange, mortgage, judgment, or decree;

or who makes any fa ls e

entry in any book, report, or statement of the association, with intent, in either
case, to injure or defraud the association or any other company, body p o lit ic or
corporate, or any individual person,

or to deceive any o ffic e r c f the

tion, & £ j t h g . r o ^ l 16 of, the, e r r a n c y.
A
examine the a ffa ir s of any such association;
aids or abets any o ffic e r ,

or

associa­

Rgent appointed to

and every person who with lik e intent

clerk, or agent in any v io latio n of this section,

s lia l. re deemed guilty of a misdemeanor, snd sh a ll be imprisoned not less than
fiv e years nor mo-e than ten.




I

-18-

(Note: This eecti.cn makes i t a misdemeanor fo r any o ffic e r or
employe of a bank to make any fa lse entry in any book, report, or statement
of the association with the intent to deceive an}/ o ffic e r of the association,
or any agent appointed to examine the a ffa ir s of the association.
In sane instances, United States Attorneys and the courts have held
that i t is not a v io la tio n of th is section for a bank o ffic e r to make a
false report of condition to the Comptroller of the Currency, inasmuch as
the Comptroller of the Currency is not mentioned in the sectio n .)

Section 5211.

Every association sh a ll make to the Comptroller of the

Currency not less than fiv e reports during each year, according to the form
which m
ay be prescribed by him, v e r ifie d by the oath or affirm ation of the
president or cashier of such association, and attested by the signature of at least
three of the directors.

Each such report shall exh ibit, in d e ta il and under ap-

prdpriate heads, the resources and l i a b i l i t i e s of the association at the close of
business on any p;ist day be him specified ;
Comptroller in duplicate

and sh ell be transmitted to the

within fiv e days a fte r the receipt of a request

or requ isition therefor from him, end in the same form in which i t is made to the
Comptroller s h a ll be published

in a newspaper published in the place where such

association is established, or i f there is no newspaper in the place, then in the
one published nearest thereto in the sane county, at the expense of the association;
and such proof of publication sh a ll be furnished as may be required by the Comptroller.
The Comptroller shall also have power to c a ll

for sp e cial reports from any par­

tic u la r association whenever in his judgment the sane are necessary* in order to a
f u l l and complete knowledge of it s condition.

(Note: Banks are requested to make th eir reports in duplicate and to
retain a copy for the f i le s in order that the examiner may v e rify it with the
books at the subsequent examination. Duplicate report blanks are sent to each
bank at the time of a c a ll. Many banks neglect or refuse toretain a copy,
M
ary/ others retain only an incomplete or imperfect copy. In such cases, the
examiner has no means of checking up the r e p o t with the books.
In a number of instances where banks have fa ile d and a copy of the
o rigin a l report on f i l e in the Com ptroller's o ffic e has been sent to the
examiner cr receiver, end compared by him with the books, d eliberate f a l s i ­
fications have been shown.
In other cases the bank's retained copy agreed with




t

«

-19-

the bocke but did not agree with the report furnished the Comptroller, The
bank o ffic e r in such cases responsible for the fa ls ific a t io n , knowing that the
examiner would verify the retained copy o f the report with the books, made it
correspond with the records of the bank, but assuming that the examiner was net
lik e ly to compare the retained copy with the o rigin a l report made to the
Comptroller, d eliberately f a l s i f i e d the la t t e r .
I f the lew were amended to require the banks to execute th eir reports
in duplicate and to send both to the Comptroller of the Currency, one copy could
be sent by the Comptroller to the examiner fo r comparison with the books at the
time of "the subsequent examination.
This would impose very l i t t l e la b o r upon
the bank, and under this arrangement the certainty of detection of any f a l s i ­
fic a tio n of a report would act as a deterrent upon the bank o ffic e r disposed to
practice a criminal deception of this character upon the Comptroller,)

Section 5212,

In addition to the reports required by the preceding

section, each association siiall report to the Comptroller of the Currency, within
ten days

is

a fte r

declared *

daelaring

any dividend period^

the amount of

and the amount of etoss and net earnings

in

such

dividend, i f any

excess of

such dividend.

Such reports sh all be attested by the oath of the president or cashier of the
association.

(Note: The changes suggested are necessary', as under the law no
report of earnings is required unless a dividend is declared. Reports
should be made at a ll dividend periods, regardless of the disposition
o f the earnings. )

Section 5213.

Everyr association which f a i l s to make and transmit any

report required under either of the two preceding sections cr proof of pu b lic a t ion
of the report of condition required by section 5211

shall be subject to a

penalty of cne hundred d ollars fo r each day a ft e r the periods, respectively, therein
mentioned, that it delays to make and transmit it s report and proof of p ublication .
Whenever any association delays or refuses to pay the penalty herein imposed, a fte r
i t has been assessed by the Comptroller of the Currency, the amount thereof m be
ay
retained by the Treasurer of the United States, upon the order of the Comptroller
c f the Currency, out of the in terest, e$ i t may become due to the association, on the




t

«

-2 0-

bends deposited with him to secure circu lation.

A ll sums of money collected

fo r penalties under this section shall be paid into the Treasury of the
United States.

(Note: As the law requires reports to be published, and the
submission of proof of such publication, penalty should be Imposed
for fa ilu r e to comply with the law, in whole or in p a rt .)

Section 5223.

An association which is in gcod fa it h winding

up its business for the purpose cf

consolidating with another association

sh a ll not be required to deposit lawful money for its outstanding c irc u la ­
tion;

but it s assets and l i a b i l i t i e s sh a ll be reported by the association

with which i t is in process c f consclidaticn.
Anv two or more .national, Jtwnkinfc AesoAiAtj-onA lo ca t e d i n t he s_apie.
State. Ter ri t or y or d is t r ic t . ere_ hereby auth o rized to.
manner £oJJowJ-J*g:
The respective boards of directors of the

J iiterested

shal l enter in to and make an a g reement under th e ir corporate seals for,-the
consolidation, .prescr i b i ng the terms and conditio n s thereof end the mode of
carrying i t into ef f ect.

This agreement s h all be submitted to the share­

holders of each association at a m
e<
a rtic le s of «ts sjpc ia t ion, and i f such agreement s h a ll be ra tifie d by

a vote

o,f

shareholders of each ass.cciat ic}\ representing at le ast twp.- th irds of the .

gtocjc^the. cglla
.&LidA-lcn^igljjja. JS iL S *. A&d.
bv t he Comptroller- of the Currency'.
entered into by the respective boards

Cert i f ie d

copies of the agreement

__

and cf the vote of r a t i ­

f i c a tion sh a ll b A S j -led with the Comptrcller cf the Currency.

I f . £.r££Uthe

evidence submitted to the Comptrolle r^ i t sh a ll appear that the foregoing pro,




JL15 J l 8 . AO iL*g.A<& JWTA .faftn A W l M ,
. .'.c .

SSL® f £ T ~ tjW
.
-JPurpcsej. the expense

w

-

S

p

e

ci al Axgninaticn.

which shalJ be borne by the

or if

^jjl^.ry.i-6®--iiy r 8- -f-°und that the cpn.di.ticn of, the banks is _satis f act ory. he shril 1
i
issue his certificate of approval of the ^cnsol.idation^________
A associat i on which is consolidated with another national banking associan
-tion .8ha11 not, be required to deposit lawful .mney for the redemption of its
o
■Outstanding circulation, but its assets and l ia b ilities of even nature shall
b e aaB
_
uried by and, become the assets and l iabilitlas .of the association with
which__it is consolidated;

and all the rights, franchiges and, interests of the

said, aeisoelation so consolidated in and to every species of property, real.
ciixed^, and choses in action thereto belonging,

shall be_ deem to
ed

^^tr^X -SX n^A^^ljv^teA i n, sue h as sc ci ati cn into which i t is consolidated
dj^d^r.other^Ar^sfer^. find the said consolidated association shall
xijLht8_ o_f property.. franchises and interest in the
.sjtfg .ft *&nA§ILtiL the^sjnii©^e^rt ent^a^.was, held, and. .erj.cv.ed bv the aesociation so

llif^J^t^ Ulz ed .^fid
^Eai^Jji,Asallal-P/, th asj.oclaticns to be consolidated
_e_
■ S M U > C A P j t .a l^

association and the latter shall require

Auj^Andejipf, .the cert iflea tea pf_._sto_ck held bv each sharehio^L in the __
der
- j-.ps.^d AAAPAl&
p
tidrA. An . .1.8su in, lieu, thereof, its ow certificates.
.d
_e_,^
n
A-tu.4j sn.d_.cprrect lis t c.f the nam residences,_ and num of shares__
es.
_
ber
■ ^LAhAAh^nehoi.ders

of the

coneclidAted a e so ciation. ver if ie d

bv

the

onth of

the

president cr cashier^ sh all be transmitted to the Comr>troller within si^ ty d_ays

lZ9?L ti?A

A A ^ t h e_.1 8 8Ue, of, his ce rt 1f 1cat s authorizin g the consolidation,

■ .yvr shajieholder^1r L A ilf r & C _ a s o ujiQ^gorifl.entlng,to.the, .gonIf
J ^ 4 ^ t4 ^ ^ L
^3_^ieAlJ^et.o^nd^ixfi_JiQUga.in .writing to ,the.,dir.ectcrB
-S th.e..ccn.eA;i.4^t^d
-fJ J l * . A V 'J - J J X V ^ J L
-




.ftl

.the d-te of the issue cf
S JL

All&.Currency. .authorizing the consclldn tinn,

I

-22-

k.ghftUJw. entitled to be raid the, .gurjfi^Lr_VA^
standing in hie nam on the.
e
If the am
ount terid

---o

r

A

net satisfactory to the diss.eAtiAg.

d

_

b

^

.SiAr& fi
fc^.A

_within thirty day.s

from .the da_te .of such tender anneal to the, .CigH
itrcJ^l e.r__pj>.tils. JC
.
l££ftX Jtfhfi. .shsXX
lS3L
forthwith .d.et.erjriir;eu .by. . ^ J ^ A i A ^ l ^ . A X U L - S j a l d . jtQtArrniu&z .
tioA shall* be JfinaJl aM bir-diPA... TM A P L
X A S.e.s. iAQ
.id.eAt. tp. XhA-PPPPAigAL.-hy. - th®.~GQniEtoJUe.c. .a.ii&iA-.hft-Bali Jsy.Ahe AQ
As.oXid& hank. Jua JL eA —aj^xaXsAd
*fiji
& .-th&
value exceeds .the. .sjijn .tPA re.d. Jay. Jda&
i
dA
jiiAAQtune.*.AthPT.w.lsA.the. A & & Ah& JifixjL n e.
LL
hQ A Jay. the apte1 1 ant. The aiLares .autrejidpuad .by..th.AiU£j3.&
Xe
atjjir. .sharphplder^ .whan
.
AhaU JaAjacld. JaitJJiAjliyAQ.ttrAAt.apA-Lasa .than, par..,.in aaelw A
L..public—
or. prlvLale_aflla. J^.tAaJxUhfiAt*Jilddfli*. adJJiln Aihfity d a froa dat.a jaijdiicii
Ly.a
.the. .said, jaiATAAjaAft -s&^yiE&L----------Notice of congpli.da.ticnAliAllbfl_PiLbJhi.shed for AJPAiAcLfiX.JUKIjaPAthfl
iji AAew8A A .sX ^e^r^i^ixcA Utiui p.n.hI;Uhe,d Jja .UiA-C ty. ,o.f h« kjfjarJu^aad,
*?tP ;
I
^;?c Ja a Aeycsp.ap.ex mUlshed.

iji

jjie.j&ty.j>r_Lom JjuwhUk Akfi.JiaakAAEA

located.,. PAAf. PP. /i.e.v/s.ptiper is .tjie.r^jtub.XiAilfi.d3- .thfiAJ a A A .3jD E.sr_Published,
L
ew 3
nearest thereto. . Fyideyice of AASh_ElihliiLf&lfiflS-jjXA°ti caAURU^bA-a^dA.-1iA..tha
Comptroller l a JhA.fjB£3U&£.OilJ»JAlX-be _

(Note; Section 5223 recognizes the right of national banks to
consolidate, but fails to provide the course necessary to pursue.
From the beginning of the national banking system the Comptrollers of
the Currency have held that to effect consolidation the liquidation of
one of the banks interested, and a contract entered into for the transfer
of assets off-setting lia b ilities assumed, are necessary. I f shareholders
interests are to be continued, it becomes necessary for the ab­
sorbing bank to authorize an increase of capital, shareholders to waive
their rights to participate in the increase in order that the increased
3tock m be sold to those interested as stockholders in the liquidated
ay
association.




)

-23-

This waiver is often difficult, if not impossible, to obtain,
and in every case require a personal appeal to each shareholder.
W
here the waiver is not unanimous the stock interests of all cannot be
properly consorved.
It is believed that the section as amended will permit the con­
solidation of banks in the manner contemplated by the framers of the
law,
)

Section 5240, The Comptroller of the Currency, with the approval of the
Secretary of the Treasury, shall, as often as shall be deemed necessary or
proper, appoint a suitable person or persons to m an examination of the affairs
ake
of every banking association, w shall have power to m a thorough examina­
ho
ake
tion into all the affairs of the association, and, in doing so, to examine
any of the officers and agents thereof on oath;

and shall m a full and
ake

detailed report of the condition of the association to the Comptroller, That
a ll persons appointed to be examiners of national banks not located in the
redemption cities specified in section five thousand one hundred and ninety-two
of the Revised Statutes of the United 8tates, reserve cities or central, reserve
c itie s, or in any one of the States of Oregon, c^lifoniia,

Nevada, W
ash­

ington, North nakota, South Dakota, Colorado, Montana, Idaho, W
yoming, and Utah,
or in the Territories, shall receive compensation for such examination as
follows: For examining national banks having a capital less than one hundred
thousand dollars, twenty dollars;

those having a capital of one hundred thousand

dollars and less than three hundred thousand dollars, twenty-five dollars;

those

having a capital of three hundred thousand dollars and less than four hundred
thousand dollars, thirty-five dollars;

those having a capital of four hundred

thousand dollars and less than five hundred thousand dollars, forty dollars;
those having a capital of five hundred thousand dollars and lees than six hundred
thousand dollars, fifty dollars; Those having a capital of six hundred thousand
dollars and over, seventy-five dolLars;




which amounts shall be assessed by the

>

-24-

Comptr oiler of the Currency upon, and paid by, the respective association so
examined^jwd shall be in lieu of the compensation and mileage heretofore allowed
for making said examinations.

Provided^ That the Com
ptroller of the Cur r e n cy^

with Jthe .approval of the Secretary of the Treasury; m\v assess and collect in
?
liKe m
anner an additio/ial a^punt based ucon a percentage of the average gross__
jyL^ihcwj^ by i t 3 jive reports of .condition for the preceding
year Genever the _rats of assessment based upon capital stock, as hereinbefore
■^r,Q
vided^^ s J ,4 e.ffile.4 inadequate com
fre
pensation for the services rendered.
A persons appointed to m examinations of national banks in the reserve
nd
ake
cities or central reserve cities named in section five thousand one hundred end
ninety-two ef the Reviaed-Statutes of the United States, or in any one of the

States of Oregon, California, and Nevada, Washington. North pskota. South nakota.
.Colorado, Montana. Idaho, W
yoming, and Utah. _ or in ths Territories, shall
receive such compensation as m be fixed by the Secretary of the Treasury
ay
upon the recommendation of the Comptroller of the Currency^ ;and the seme shall
be assessed and paid in ths nrannsr hereinbefore provided which amounts shal l
kb assessed _ y .the, .C om
b.
L ptro^^er of tne Currency upon, and paid by, the respective
ABaocifttioji ,so_ examined. But no person shall be appointed to examine the affaire
e f any banking association of which he is a director or other officer, ^ a _
as

national bank examiner shall during his term of office as such, be a director.
•& C
&Q

j

a

m

.

b

e indebted, either directly

or hold any public or private office of trust

JArJloq^txc^le_r_of_ the Currency m reoui re of anv person.
av

80

ap­

pointed such bond and security as he deem proper,
s

(Note: The amendments suggested do not materially change existing
law, except to the extent of authorizing an additional fetj based on gross
assets of banks where the fee based on capital is not commensurate with
the work performed; prohibiting examiners from owning stock in, or bor-




>

-25-

rowing from, national banks, and from being an officer or director of a
national bank, or from holding any public or private office; and authorizing
the Comptroller to require bonds of tne examiners.)

Section 5242. — All transfers of tne notes, bonds, b ills of exchange, or
other evidences of debt owing to any national banking association, or of deposits
to its credit;

all assignments of mortgages, sureties on real estate, or of

judgments or decrees in its favor;

a ll deposits of money, bullion, or other

valuable thing for its use, or for the use of any of its shareholders or creditors;
and a ll payments of money to either, m after the commission of an act of in­
ade
solvency, or in contemplation thereof, m with a view to prevent the application
ade
of its assets in the manner prescribed by this chapter, or with a view to the
preference of one creditor to another, except in payment of its circulating notes,
shall be utterly null and void;

and no attachment, injunction or execution, shall

be issued against such association or its property before final judgment in any
suit, action, or proceeding, in any State, county, or municipal court^ Provided,
That every sale,..gift qnd transfer of stock m by
ade
when the bank i s insolvent, witn intent to evade his

_sharthoMer _ .&national bafik
o.£

%
l

ifrbilUy._as A

.vent or unable to respond to an assessment.

ejiQlder,—

s ll£ d X

v.o.id as against creditors of the bank nr a receiver appointed M the
L

.tne Currency, and the shareholder shall remain liable far a ll delita ^

contracte and engagements of the bank to 1he sam extent and i
e
Jjift .or transfer .fyyj.. jiot J^e9ja

(Note: M to meet insuperable difficulties realized in enforcing
ade
liab ility after fraudulent transfers, under rule of lia b ility imposed by the
Supreme Court of the United States in D«wey v. McDonald, 202 U. S.,510.)




)

-26-

Act June 30, 1876.
Section 1. That whenever any national banking association shall be dissolved,
and its rights, privileges, and franchises declared forfeited, as prescribed in
section fifty-two hundred and thirty-nine of the Revised statutes

of the

United States, or whenever any creditor of any national banking association
shall have obtained a judgment against it in any court of record, and m
ade appli­
cation, accompanied by a certificate from the clerk of the court stating that
such judgment has been rendered and has remained unpaid for the space of thirty
days, or whenever the Comptroller shall become satisfied of the insolvency of the
national banking association, he may, after due examination of its affairs, in either
case, appoint a receiver w shall proceed to close up such association, and
ho
enforce the personal liab ility of the sharenolders, as provided in section fiftytwo hundred and thirty-four of said statutes.
Suit m be brought bv the receiver of an insolvent national bank arainet
ay
a shareholder, to recover upon his liability for an assessment levied bv the
Comptroller, at any time within six years after the assessment becomes due and
payable, and not thereafter._________________

(Note: There is no statute of limitations in the federal statutes
applying to such suits. The courts have held that the statutes of the state
where the suit is instituted are applicable. These are of difficult appli­
cation on account of the nature of the suit and the uncertainty of the
statutes, which were not enacted with such suits in view. M expensive
uch
litigation has been incurred in obtaining construction of state statutes
applicable to such suits. Under these statutes the period of limitation
varies from one year to ten years or longer.
It is the custom of the Comptroller to levy the assessment, usually
making it payable in installments . Under the statute as proposed, suit
could be brought within six years after an installment became due and pay­
able and the statutes of limitations in the state where suit is brought
would not be applicable.)

Section 1 of the Act of July 12, 1882. That any national banking associa­
tion organized under the acts of February twenty-fifth, eighteen hundred and
sixty-three, June third, eighteen hundred and sixty-four.and February fourteenth,




)
-27-

eighteen hundred and eighty, or under sections fifty-one hundred and thirty-three,
fifty-one hundred and thirty-four, fifty-one hundred and thirty-five, fifty-one
hundred and thirty-six, and fifty-one hundred and fifty-four of the Revised
Statutes of the United States, may, at any time within the two yeara six months
next previous to the date of the expiration of its corporate existence under
present law, and with the approval of the Comptroller of the Currency, to be
granted, as hereinafter provided, extend its period of succession by amending
its articles of association for a term of not more than twenty years from the
expiration of the period of succession nam in said articles of association,
ed
and shall have succession for such extended period, unless sooner dissolved
by the act of shareholder? owning two-thi rds of its stock, or unless its franchise
becomes forfeited by some violation of law, or unless hereafter modified or
repealed.

Section 2 of the Act of July 12, 1882, That such amendment of said
articles of association shall be authorized by the consent in writing vote
of shareholders owning not lees than two-thirds of the capital stock of the
as8ociation, taken at a meeting duly called and held within the period of six
months next preceding the date of _ex£i ration jof the corpo^te existence of the
association; and the board of directors shall cause such consent vote to be
certified under the seal of the association, by the president or cashier, to
the Comptroller of the Currency, accompanied by an application m by the
ade
president or cashier for the approval of the amended articles of association
by the Comptroller;

and such amended articles of association shall not be

valid until the Comptroller shall give to such association a certificate under
his hand and seal that the association has complied with adl the provisions




!

»

-2fi-

required to be complied with, and is authorized to have succession for the
extended period nam in the amended articles of association.
ed

Sec, 5, That when any national banking association has amended its articles
of association as provided in this act, and the Comptroller has granted his
certificate of approval, any shareholder not aeeaniing to voting f o r _ such amend­
ment m give notice in writing to the directors, within thi**ty days from the
ay
date of the certificate of approval, of his desire to withdraw from said associa­
tion, in which case he shall be entitled to receive from said banking association
the value of the shares so held by him, to be ascertained by an appraisal
made by a committee of three persons, one to be selected by such shareholder,
one by the directors, and the third by the first two;

the expense of such ap­

praisal to be borne equally by the withdrawing shareholder and the bank^awd in
ease the value eo fixed

In case the directors fa ll t o appoint a m ber of the
em

Committee or the committee f^il,3 to ascertain the value of the shares within
thirty days from date of notice of desire to withdraw, or JL case the value
n
fixed by. the appraisal committee

shall not be satisfactory to any such

shareholder, he m appeal to the Comptroller of the Currency w shall cause a
ay
ho
reappraisal to be made, which shall be final end binding;

and if said reappraisal

shall exceed the value fixed by said committee, the bank shell pay the expenses
of said reappraisal, and cth*rwiee the appellant shell pay said expenses^ and
the value so ascertained and determined shall bs deemed to be a debt due, and be
forthwith paid, to said shareholder, from said bankj

and the shares so surrendered

and appraised shall, after due notice, be soldt at not leaa than ,P_ar.___
public or privete sale,

at

within thirty days after the final appraisal provided in

this sectitn L < default oJljwJiich a receiver m be appointed AC
ir)
ay
AC

_the__

provlsiona. of _eection n
fifty-two Jiundred _ nd _thirty- f cur t .to .close „ £ _the _busines s
a
u
_




Provided, That in the organization of any banking

<

%
\

-29-

a s s o c ia tio n intended to replace any e x is tin g banking a s s o c ia tio n , and r e t a i n i n g
the name th e re o f, th e holders of stock in the expiring a s s o c ia tio n s h a ll be e n t i t l e d
to p referen ce in th e allotm ent of the shares of the new a s s o c ia tio n in p ro p o rticn
to the number of shares held by them re s p e c tiv e ly in the e x p irin g a s s o c ia tio n .

Sec, 6,— That the Circulating notes of any association so axtending the
period of its succession which shall have been issued to it prior to such exten­
sion shall be redeemed at the Treasury of the united States, as provided in sec­
tion three of the act of June twentieth, eighteen hundred and seventy-four, en­
titled "A act fixing the amount of United State# notes, providing for re­
n
diet ribution ef national bank currency, end for other purposes", and such notes
when redeemed shall be forwarded te the Comptroller of the Currency, and de­
stroyed, as now provided by law} and at the end of three years from the date of
the extension of ths

existence of each bank the association so extended

shall deposit lawful money with ths Treasurer of the United States sufficient
to redeem the remainder of the circulation which was outstanding at ths date of
its extension, as provided in eections fifty-two hundred and twenty-two, fifty-two
hundred and twenty-four, and fifty-two hundred and twenty-five of the Revised
Statutes}

and any gain that m arias from ths failure to present such circulating
ay

notes for redemption shall inure to the benefit of the United States;

and from time

to time, as such notes are redeemed or lawful money deposited therefor as provided
herein, new circulating notes shall be issued as provided by this sot, bearing
such devices, te be approved by the Secretary of tha Treasury, as shall m them
ake
readily distinguishable from the circulating notes heretofore issued: Provided,
however. That each banking association which ehal I obtain ths benefit of this
act shall reimburse to the Treasury the cost of preparing ths plate or plates
for such new circulating notes as shall be issued to it .




1

I

-30-

(Note: Sections 1, 2, 5 and 6 of the act of July 12, 1882,
relate to the extension of corporate existence of national banking
associations. Section 2 cf the act provides that an amendment author­
izing extension shall be effected by the consent in writing of share­
holders owning net less than tv/o-thirds of the stock. This is the only
am
endm of the articles of association of a national bank effected
ent
by written consent, as in a ll other instances a majority stock vote is
required; and it would appear to be in the interest of all stockholders
if the matter of amendment be changed to require a vote for authoriza­
tion to be adopted by a two-thirds stock vote at a meeting duly called
for the purpose, and called a reasonable length of time prior to the
expiration of charter, to enable all shareholders to be present and
express their views as to the desirability of an extension of the cor­
porate existence or expiration of charter.
Section 5 of the act of July 12, 1882, provides the means by which
dissenting shareholders m withdraw. This is defective in that it
ay
provides no means cf compelling directors to act promptly and within a
reasonable time in the appointment of a committee of appraisal and
settlement with withdrawing shareholders.
Section 6 of the act requires the bank on extension to order a new
plate cf a different design from the original plate, for the printing of
circulating notes. If any good reason existed for this provision in 1882,
it does net now exist, and there appears to be no reason w a national
hy
bank should be required to go to the Additional expense of paying for
plates for the printing of notes cf a different design, in view of the
provision of section 4 to the effect that any association so extending the
period of its succession shall continue to enjoy a ll the rights and
privileges and immunities granted, and shall continue to be subject to
all the duties, lia b ilities and restrictions imposed by the statutes
having reference to national banking associations.





Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102