The Indianapolis journal. [volume] (Indianapolis [Ind.]) 1867-1904, 1886-11-01
Attorney General Garland Decides that Banks
Must Deposit IntereSt-Bearing Beads as
Security for Circulating Notes.
Aspiring Statesmen Who Desire To BE
Members of the Labor Congress.
Consul Tanner Gives Further Information
About Slow, Scientific Beer Drinking, and
Shows that 1t COnduces to Temperance.
IBoNps FOR CIRCULATION.
A Decision of Great Importance to National
Banks and Bankers.

Banks and Bankers.
WASHINGTON, Oct. Attorney general
Garland has given an opinion to the Secretary of
the Treasury that national banks must deposit
interest bearing bonds to secure their crcula-
ton, and that called 3-per- cent bonds cannot be
used as basis of circulation.
The following is the text of the ALtorney-gen-
erals opinion:
States, held by its Treasurer security for the
circulating notes of the First National Bank of
North Bend, Neb having been called in for re-
demption and ceased to be interest bearing, the
bank has been notified by the Comptroller of the
Currency to exchange those bonds for interest
bearing bonds of the United States. The bank,
in reply, asks to know by what authority the
demand has been made, alleging that it has once
complied with Section 5l59, Of the Revised Stat
utes by depositing with the Treasurer interest
bearing bonds of the United States which
worth par. An opinion is requested
upon the question thus presented,
namely, whether the stopping of in
terest the bonds deposited resulting
from the call of the Secretary of the Treasury
authorized the Comptroller OF the Currency
to require the bank to substitute interest bearing
bonds for the bonds now on deposit 1t is not
open to question that the bonds deposited by a
national bank to secure its circulation must be-
interest bearing at the time the deposit is made.
On that uoint the law is explict. 1t would seem
to be equally clear that whatever purpose Con-
gress had in view in requiring bonds deposited
by national banks to be interest bearing, that
purpose has continued the same from the first
law on the subject, in 1868, down to the present
time, there being an absence of any legislative
declaration of change IN intention in that par
ticular. In resolving the question whether it Is
| essential to valid deposit of bonds
by national bank that the bonds
deposited should be interest bearing during the
whole time of the deposit, it may assist US to
read the act of 1863, under which the national
bank system wasintroduced in the light of the cir
cumstances in which it was passed. The country
was engaged in a great war. II was of vital i'm.
portance TO strengthen the credit of the govern
ment by increasing the demand for its bonds,
and by averting the impending calamitieS Of a
rapidly expanding paper circulation. 1t was to
accomplish these objects that the national bank
system was devised, and it is impossible
to doubt that 1t was the insention
that the banks composing be pSRtem
should have bonds on deposit with
the government except such as were still cur
! rent, and as the government was interested IN
keeping buoyant in the market. And this you'd
seem to have been the view of the eminent Sec
retarv of the Treasury TO whom is generally
ascribed the authorship OF the national bank sys-
TEN. In his report of the 4th of December,
1862, he says, in recommendation of the pro-
jected system:
1.-THE Secretary has already mentioned the support
to public credit which may be expected from the pro-
posed associations. The Importance of this point may
excuse some additional observations The organiza.
tion proposed if sanctioned by Congress, would re-
qure within very few years, for deposit security
for circulation, bonds of the United States to an
expected indeed since the circulation by uniformity
in scredit and value, and capacity of
quick and cheap TRANSFORMATION, will. be
than any hitherto issued that the demand for bonds
will compass this limit Should Congress see fit to re.
strict the privilege of deposit to the bonds known
fvetwenties, authorized by IL act of the last
sion, the demand would promptly absorb all of that
description already issued, and make large room for
more. steady market for the bonds would thus be
established and the negotiation of them greatly faei-
tated. But it is not in immediate results that the
value of this support would be only chiefly seen.
There always holders who desire to sell securities
of whatever kind. If buyers are few uncertain,
the market value must decline. But the plan pro-
posed would create constant demand eQualing and
often exceeding the supply. Thus steady uniform
ity in price would be maintained and generally at
rates somewhat above those of bonds of equal credit
but not available to banking associations. 1t is not
easy to appreciate the fu benefits of such conditions
to government obliged to borrow
"That the conclusion arrived at, namely, that
it was the intention of Congress that deposits of
bonds by national banks should be kept interest
bearing during the whole period of the deposits,
if correct, would seem to be rendered absolutely
certain hy the act of July, 1882, 'to enable ma
tional banking associations to extend their cor
porate existence and for other purposes Sec
tion provides that any national bank may on
depositing lawful money with the Treasurer of
the United States, withdraw a proportionate
amount of its bonds on deposit, subject however
to the provso that not more than three millions
of dollars shall be deposited during any
calendar month for this purpose and to
the further proviso, that the provisions of this
section shall not apply to bonds called for re-
denption by tho Secretary of the Treasury, nor
to the withdrawal of circulating notes in conse-
quence thereof This language, it would seem,
leaves no doubt that it was the intention of Con-
gress that when the bonds deposited to secure
the circulation of bank are called for redemp-
tion, payment of them means retiring the circu-
lation they secure, unless, indeed the bank. as
it may lawfully do. should make new deposit
of an adequate amount of interest bearing bonds.
1t follows, then, that, unless the First National
Bank of North Bend substitutes interest bearing
bonds for the existing deposit of bonds called for
redemption, the proceeds of the latter must be
applied to retiring the circulation secured by it."
n