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■ One bank restored to solvency. Eleven banks restored to solvency.

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d Annual average amount failed national-bank notes outstanding.

• Annual average rate of tax. Average, thirty-nine years.

APPENDIX.

[H. R. 23017. Fifty-ninth Congress, second session.]

A BILL For the issue and redemption of national bank guaranteed credit notes.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That from and after the passage of this act any national banking association which has been in business for one year, and has a surplus fund equal to twenty per centum of its capital, may take out for issue and circulation nationalbank notes without a deposit of United States bonds, as now provided by law. Said notes shall be known as "National Bank Guaranteed Credit Notes." Said notes shall be issued in such form and denominations and under such rules and regulations as the Comptroller of the Currency shall fix. The amount of said notes so taken out by any national banking association may be equal to forty per centum of the amount of its national-bank notes at any time outstanding which are secured by the deposit of Government bonds, but shall not exceed in amount twenty-five per centum of its capital: Provided, however, That if at any time in the future the present proportion of the total outstanding unmatured United States bonds to the total capitalizatin of all national banking associations in active operation shall diminish, then the authorized issue of national bank guaranteed credit notes shall be increased to a correspondingly greater percentage of the bond-secured notes.

SEC. 2. That every national banking association taking out national bank guaranteed credit notes in accordance with the foregoing section shall pay to the Treasurer of the United States in the months of January and July a tax of one and one-half per centum each half year upon the average amount of such notes in circulation.

SEC. 3. That any national banking association which has taken out national bank guaranteed credit notes, in accordance with the provisions of section one of this act, may take out a further amount of national bank guaranteed credit notes equal to twelve and one-half per centum of its capital; but it shall pay to the Treasurer of the United States in the months of January and July a tax of two and one-half per centum each half year upon the average amount of such notes in circulation.

SEC. 4. That the total amount of bank notes issued by any national banking association, including national bank guaranteed credit notes taken out in accordance with the provisions of this Act, shall not exceed the amount of its paid-up capital.

SEC. 5. That any national banking association, situated and doing business in a central reserve city or a reserve city, shall at all times have on hand in lawful money of the United States an amount equal to at least twenty-five per centum of its national bank guaranteed credit notes in circulation; and every other national banking association shall at all times have on hand in lawful money of the United States an amount equal to at least fifteen per centum of its national bank guaranteed credit notes in circulation: Provided, however, That any national banking association, situated and doing business in a reserve city, may keep one-half of its lawful money reserve in cash deposits in a central reserve city; and that every national banking association, situated and doing business outside of a central reserve city or a reserve city, may keep three-fifths of its lawful money reserve in cash deposits in a central reserve city or a reserve city.

SEC. 6. That the taxes upon national bank guaranteed credit notes, provided for in sections two and three of this Act, shall be paid in gold coin to the Treasurer of the United States. Said taxes, when received, shall constitute a guaranty fund to redeem the notes of failed banks and to pay the cost of printing and current redemption. SEC. 7. That when any national banking association takes out any national bank guaranteed credit notes for issue and circulation, it shall deposit with the Treasurer of the United States in gold coin an amount equal to five per centum thereof. The amount so deposited shall be placed in the guaranty fund for the purposes thereof; but said amount shall be refunded to the respective banks as soon as the taxes provided for in sections two and three of this Act maintain said guaranty fund above five per centum of the maximum amount of national bank guaranteed credit notes taken

out for issue and circulation, but that no bank shall withdraw any part of its deposit of said five per centum until it shall have to its credit in said fund more than five per centum.

SEC. 8. That the Comptroller of the Currency shall designate certain cities conveniently located in the various sections of the United States for the current daily redemption of said national bank guaranteed credit notes; he shall fix rules and regulations for such redemption; and, before authorizing and permitting any national banking association to take out for issue and circulation any national bank guaranteed credit notes, he shall require such bank to make arrangements satisfactory to him for the current daily redemption of such notes in every redemption city so designated.

SEC. 9. That said national bank guaranteed credit notes, issued in accordance with the provisions of this act, shall be received at par in all parts of the United States in payment of taxes, excises, public lands, and all other dues to the United States, except duties on imports; and also for all salaries and other debts and demands owing by the United States to individuals, corporations, and associations within the United States except interest on the public debt and in redemption of the national currency. Said notes shall be received upon deposit and for all purposes of debt and liability by every national banking association at par and without charge of whatsoever kind. SEC. 10. That the holder of any national bank guaranteed credit note shall be a general creditor of the national banking association issuing it.

SEC. 11. That upon the failure of a national banking association, all outstanding national bank guaranteed credit notes taken out by it in accordance with the provisions of this act shall upon presentation to the United States Treasury be paid in gold coin out of the guaranty fund; but the United States Treasury shall recover from the assets of the failed bank its pro rata share with all other creditors and the same shall be paid into the guaranty fund.

SEC. 12. That any national banking association desiring to retire its national bank guaranteed credit notes or go into liquidation shall pay into the guaranty fund an amount of gold coin equal to the amount of its national bank guaranteed credit notes then outstanding.

SEC. 13. That any national banking association desiring to take out national bank guaranteed credit notes and having notes outstanding in excess of sixty-two and onehalf per centum of its paid-up capital, to secure the payment of which United States bonds have been deposited, may, upon the deposit of lawful money, redeem such excess without reference to the limitation of three million dollars each month prescribed in section nine of the act approved July twelfth, eighteen hundred and eighty-two.

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2d Session.

Part 2.

ISSUE AND REDEMPTION OF NATIONAL BANK GUARANTEED CREDIT NOTES.

FEBRUARY 20, 1907.-Committed to the Committee of the Whole House on the state of the Union and ordered to be printed.

Mr. LEWIS, from the Committee on Banking and Currency, submitted the following views of the minority.

[To accompany H. R. 23017.]

The minority members of the Committee on Banking and Currency submit the following report:

Briefly, this bill provides that any national bank which has been doing business for a year, and has a surplus equal to 20 per cent of its capital, may issue credit notes equal to 40 per cent of its outstanding bond-secured currency, but not exceeding 25 per cent of its capital; upon these credit notes an annual tax of 3 per cent is laid. In addition, the bank may, in time of emergency, issue credit notes equal to 12 per cent of its capital, upon which a tax of 5 per cent is laid. The Government holds, as trustee, a 5 per cent security fund out of which to pay the notes of insolvent banks.

With present national-bank capital as a basis of calculation, this bill authorizes an issue of $213,443,694 of credit currency, taxed at 3 per cent, and $106,721,841, taxed at 5 per cent-a total of $320,165,541 of bank credit notes for the present, to be increased as bank capital shall increase, the ratio of increase to be constantly augmented as the national debt is diminished. Against this new kind of currency banks must carry the same reserve of lawful money as is now required to be carried against deposits.

The

The bill purports to be responsive to the demand persistently set up in the money centers at times of financial disturbance for an emergency currency having an element of elasticity. The minority members of the committee oppose its passage, because they think it introduces a new complication into a currency system already the most complex on earth. As an able advocate of the scheme before the committee confessed, "it is merely another patch on a patchwork system." minority members also oppose the passage of the bill because they do not believe the credit notes which it authorizes will be used for real emergency purposes or that the currency thus provided will have any appreciable degree of elasticity. On the contrary, one inevitable consequence of the enactment of this measure would be a permanent inflation of the paper currency to an amount approximating $225,000,000, which would mean, in the last analysis, that much additional strain upon an already insufficient amount of money of final redemption.

At a tax rate of 3 per cent only on these credit notes the Secretary of the Treasury, who can not be classed among the opponents of an

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