Alexandria gazette. [volume] (Alexandria, D.C.) 1834-1974, 1874-03-21
MONETARY AND COMMERCIAL.

UsURY Fly NATIONAL BANKs.-The National
Barking act authorizes he Institutions organized
under it to take the rate of interest allowed by
the laws of uny State or Territory where the
bank is located unless special rate is prescribed
for State banks where this is also to govern the
national banks. In case no rate is thus fixed,
the limit is seven per cent. The penalty which
the National act in terms, provides for taking
an excessive rate is not such to deter these in
situations t: ON violating the rule. 1t is simply
forfeiture of tho whole interest, if this has not
been paid or the light of recovering b.c ( twice
the amount by suit ms iIuted within two years.
W e have called attention ut several times to II
further possible penalty, n, tho right of the
Comptroller Of the Currency to proceed against
the offending institution and to close 1t up Tor
violation Of the law.
The friends Of the New York State banks OBJ
tanned from the Legislature in 1870 special act
in which the terms of the National law were
adopted and applied TO the Institutions orsaliz,
under the local statute the act declaring tina; 1t
Is its true intent and meaning to pace be
State banking a-so, ls.ons "rn an equality IN
hi: particular with the national banks.
In some OF the States which nav stringent
usury laws the local courts have decided that
the provisions IN the National Banking act con-
corning usury did not set aside the statutes
WHICH imposed u HcaN loF pcIlHlty !ol lining MI
excessive ratio of interest. And now comes IN
the Supreme Court # the United 5 atcs and de
c.ares that an agreement made with bank for
rs loan at an excessive rate of Interest Is utterly
void, it being y contract to 60 an illegal act
which canrot BE- enforced. The case is that OF
Tiffany V. The 3 'atmeI's Savings Initiation,
just reported. Judge Davis delivered Tn" op!n-
ION, which VIC copy from tho Albany Law Jour
nsi rs follows: Mere accommodation paper can
have 10 effective or legal existence until 1t Is
transferred to Il bona Ede holder. 1t follows,
then, that the disc"unting by u bank at n higher
rate Of interest than aw allows, Of paper OF is
character made and given TO the LV4d,r for the
purpose # raising money upon 1t, n lts orlSIn
on Y u nominal contract, on winch no &c.l n
could be maintained by any OF the parties to 1t,
if it lad not been discounted, Is usurIous, and
not dcfensiblc, rs n purchA.e
Our readers will no ice that this places the
bank precisely in the same position "a pirate
holder so far as concerns the validity of the con
tract Ii tho note had baen business note, aud
valid in the hands o. the borrower, it would not
be void although afterwards discounted at for
hidden rate But being accommodation paper,
having no binding force on any one uni. the
bank accepted it nj a rate forbidden by law, the
maker cannot be ncld to Day it. The report goes
on to say: "Bu. the Court further held that
where the usuriuus note had been paid, the Dor
rover could only recover back the excess of in
tercst beyond the statutory rate. We think
this mistake in the quotation, as the net plainly
declares that the borrower may recover twice
the amour. of interest thus paid"
This degision will attract general attention
throughout the country, and we hope will AID IN
the movement to abolish tao usuTy laWs.-N J.
Jou7,l0k Of Commerce.