The National Banking System
( Originally Published Early 1900's )
The National Banking System was created by Congress in the belief that it was the best permanent method of securing paper money absolutely safe front loss to the holder and readily convertible into coin. Under the laws of the United States any number of per-sons not less than five may form an association and obtain a charter for the purpose of carrying on the business of a national bank. The capital stock of a national banking association is divided into shares of $100 each, and in cities of 50,000 population, or over, no association can be organized with a less capital than $200,000; in cities of less than 50,000, $100,000 capital is required, but, with the approval of the Secretary of the Treasury, national banks may be organized in places of less than 6,000 inhabitants with a capital of $50,000.
National banks are authorized to discount and negotiate notes, drafts, etc.; to receive deposits; to buy and sell exchange, coin, and bullion; to loan money on personal security, and to issue circulating notes. They are prohibited from making loans on real estate, or on security of their own shares of capital, except to secure debts previously contracted, and real estate purchased or mortgaged to secure a pre-existing debt cannot be held for a longer period than five years.
Every national bank, before it is authorized to commence business, must transfer to the Treasurer of the United States registered bonds, bearing interest, to an amount not less than one fourth of the capital stock paid in, as security for its circulating notes. Banks having a capital of more than $150,000 shall be required to deposit bonds to the amount of one third of their capital stock.
Upon a deposit of registered bonds, the association making the same will receive from the Comptroller of the Currency circulating notes of different denominations, in blank, equal in amount to ninety per cent. of the cur-rent market value, not exceeding par, of the bonds so deposited.
The national banks pay to the United States a tax of one per cent. annually upon the average amount of their notes in circulation, one half per cent. annually upon the average amount of their deposits, and one half per cent. annually upon the average amount of capital not in-vested in United States bonds. Banks other than national pay taxes to the United States on account of their circulation, deposits, and capital at the same rates as are paid by the national banks.