minimum requirement. Under this provision currency reapportionment was facilitated as banks were by the act compelled to surrender excess circulation; the amount available for redistribution was $80,000,000. The maximum circulation issuable remained at $354,000,000. A "free banking" provision was presented as an amendment to the bill but defeated, as were also amendments to replace bank-notes with greenbacks, regulate discount rates, and require all reserves to be kept in cash-in-bank. The latter proviso at one stage had passed both houses of Congress but was finally lost; the measure passed by very large majorities. It appears that all the Comptrollers of the Currency down to and including Knox recommended the prohibition of interest upon deposits by reserve banks, and stringent measures against over-certification of checks, believing that the payment of interest abnormally increased the deposits of interior banks in New York City while the certification of checks facilitated the use of the same by stock exchange brokers. This money being in use by the brokers when required for crop-moving purposes was what occasioned the annual stringency in money in the fall of the year. Secretary Bristow disapproved the prohibition of interest upon deposits, as a discrimination against national and in favor of state banks, but suggested a tax upon all interestbearing deposits as a means of discouraging the practice. The strong position against the payment of interest on deposits by banks, taken by the various Comptrollers of the Currency and Secretaries of the Treasury down to 1874, possesses peculiar interest in view of the fact that since 1901 the government itself has required interest upon its deposits in banks. The political revolution in 1874, by which the Republicans for the first time since 1859 lost control of the House of Representatives, was also largely caused by the halting, hesitating, shuffling, and changing positions which they occupied with reference to the retirement of the greenbacks, the resumption of specie payments and the question of sound money generally; the public generally felt that a change might prove beneficial, and this feeling was certainly justified by events. Stung by defeat and brought face to face with the political consequences of their insincere and opportunist method of meeting these questions, they strove to regain lost ground and win back the confidence and support of the business interests of the country. In the short session of the old Congress (1874-1875) the Republicans vigorously pushed a specie resumption measure, coupled with free banking, which finally became law January 14, 1875. It repealed all limits on the volume of national bank-notes, thus doing away with the necessity for redistribution; it was passed by a strict party vote, with a small body of extreme sound money Republicans opposing the measure. ! The passage of the resumption act marks a period in the life of national banks. At this time there were 2027 of these associations with capital of $496,000,000, circulation $331,000,000, individual deposits $683,000,000, loans $956,000,000, government bonds $413,000,000, specie $22,000,000, legal tenders $116,000,000, and 5 per cent. fund with the Treasury $21,000,000. One hundred and seventy-eight banks had gone out of business in the eleven years; thirty-seven of these failed, twelve of them ultimately paid their debts in full, and the balance paid a very large percentage of their indebtedness; all their notes were paid in full. The earnings of the national banks calculated upon capital and surplus had diminished from an average of 11.8 per cent. in 1870, the first year this information was reported, to 10.3 per cent. in 1874; dividends averaged in 1870 10.05 per cent., and in 1874 9.9 per cent.; a generally higher ratio of earnings prevailed in the West and South. The incomplete reports of state banks covered only 551, with capital of $69,000,000, deposits $166,000,000, loans $176,000,000, cash $28,000,000. Many of the states still neglected to require reports from banks. CHAPTER XVIII NATIONAL BANKING SYSTEM 1876-1882 THE changes in the National Bank Act in 1875 broadened the scope and increased the power of national banks with respect to currency by removing all limitation upon the volume, thereby making banking free. This made it possible to organize banks ad libitum in the South and West and tended to relieve in a measure the disadvantages which caused so much just complaint from those sections owing to the inadequacy of currency and credit facilities. Rich in natural, undeveloped resources these sections needed capital for their development. What they thought they needed was currency and believing United States notes most likely to meet their wants, the agitation against national banks and in favor of the substitution of greenbacks for bank-notes continued. Although bank organization and the issue of bank currency was now absolutely free the cry of monopoly was still maintained. Comptroller Knox in elaborate reports in 1875 and 1876, in which the history of banking and bank currency in the United States from the beginning of the government was reviewed, demonstrated that the national system with uniform national currency, was vastly superior to any that had preceded it. The cost of domestic exchange which in 1859 averaged 1 per cent. had, largely by the national system, been reduced to a small fraction of that rate. Against the charge that the national banks made enormous profits, he showed that, taxation considered, the earnings were actually less than those of banks outside the system not subjected to the onerous restrictions of the federal law. The voluntary surrender of over $50,000,000 of notes by the banks, he contended, was proof absolute that the profit on circulation could not be as large as alleged. Under the law the Comptroller appoints receivers for failed national banks, fixes their compensation, adjusts differences, and approves compromises in reducing the assets of failed banks to cash. By means of bank examiners he is fully advised as to conditions. By means of hard and painstaking work he is able to exercise an intelligent judgment and reach a satisfactory conclusion as to the value and adjustment of claims, thereby effecting compromises, speedy settlement and payment, avoiding expensive litigation and delay, realizing a much larger net amount for the payment of creditors, and securing to them their dividends in a much shorter space of time. The Comptroller sustains the same relation to a failed national bank and the receiver, that the court in any of our states does to a failed corporation and the receiver of the same. His powers are parallel and coincident. The cheapness and celerity and high percentage of dividends realized in the settlement of failed national banks compared with the administration of corporate receiverships in our different states is most gratifying and highly complimentary to the national system as administered by the Comptroller of the Currency. A very important feature of the national banking system is the supervision exercised by official examiners. The statute provides that the Comptroller, with the approval of the Secretary of the Treasury, shall "appoint a suitable person or persons to make an examination of the affairs of every banking association, who shall have power to make a thorough study of all the affairs of the association, and, in doing so, to examine any of the officers and agents thereof on oath; and shall make a full and detailed report of the condition of the association to |