St. Paul daily globe. [volume] (Saint Paul, Minn.) 1884-1896, 1886-10-31
THE NATIONAL BANKS.
tnferest-Bearing BOnds the only
LEGAL SacuriIY for lI rcula Inn.


Legal Security for Circulation.
- WASHINGTON, Oct S0.-Attorney Gen
: Tal Garland has given an opinion on re-
quest of the secretary Of the treasury that
national banks must deposit nterest-bear-
ng bonds to secure their circulation. and
hat called per cent. bonds cannot be
ased as a basis of circulation. The follow
ng is the text of the attorney generals
opinion:
Certain per cent. United States bonds
held by the treasurer as security for the cir
eulating notes of the First National bank or
North Bend, Neb. having been called in Tor
redemption and ceased to be Understanding.
the bank has Teen mott; ed by the comptroller
the currency to exchange those bonds Tor
nterest-bearing bonds OF the United States
The bank, in reply, asks to know by what au-
ihority the demand has been made, alleging
shat ii has once complied with section 5l5s OF
the revised statutes by depositing with the
treasurer interest. bearing bonds of the United
States which are worth par. An OPINION IS
requested upon the question thus presented
namely. whether the stopping OF interest on
ponds deposited resulting from the call OF the
Iecretary of the treasury authorized the
comptroller Of the currency TO require the
bank to substitute interest bearing bonds for
The bonds now on deposit. It's
Nu8 OPEN TO QUESTION
mat the ponds QepOSllcu Dy udllOudl Oduh
% secure its circulation must be interest
bearing at the time the deposit is made. On
that point the law is explicit. 1t would seem
20 be equally clear that whatever purpose
congress had in view in requiring bonds de-
posted by national banks to be interest-bear-
ing, that purpose has continued the same
from the first law on the subject in 1906 down
20 the present time, there being an absence
Of any legislative declaration OF change IN
Intention in that particular. In resolving the
question whether it is essential TO valid de-
poSit OF bonds by national baukS,tnat the ooncS
deposited should be inter, st-bearing during
the whole time of the deposit it may assist
US to read the act of 1883 under which the
national bank-syStem was introduced. IN the
light of tie circumstances in Whlcn II was
passed The country was engaged in great
war Ii WAS of vital Importance to strengthen
the credit Of the government by increasing
the demand for its bonds and by aVertlng the
impending calamiIies Of an unregulated and
rapidly expanding paper circulation IL was
10 accomplish these objects that the national
Dank system WAS devised. and 1t IS I'm posslDle
10 doubt thai it was the intention that the
banks composing the system should nave no
bonds on deposit with the government, eN-
.ept such as were still current aud as the
Eovernment was interested in keeping buoy
ant in the market, and this would seem TO
lave been the view of the eminent secretary
IF the treasury, TO whom Is geheraily
Lscribed the authorship OF
THE NATIONAL BANKING SYSTEM.
In his report of the 4th of December, 1852.
ne saws in recommending the protected syS-
:em; The secretary has already mentioned
the support of public credit, which may be
expected from the proposed associations
The importance or this point must excuse
some additional observations The organlZa-
ion proposed. if sanctioned by congress-
would require within q very few years, Tor
deposits as security for circulation. bonds OF
The United States TO an amount not less than
f250, 0OO,O 900. II may well be expected, III
deed, since the circulation by uni
formity in credit and value and
capacity of quick and cheap transportation
will be likely to be used more extensively
than any hitherto issued, that the deInaud
for bonds will compass this limit. Should
congress see ft to restrict the privilege of de-
post TO the bonds known as hVe-tWenties,
authorized by the act of the last session. the
demand would promptly absorb all OF that
description already issued and make large
room for more. a steady market Tor the
bonds would thus be established, and the
negotiation of them greatly facilitated. But
il is not in immediate results that the value
of this support would be only or chiefly seen.
There are always holders who desire TO sell
securities OF whatever kind. If buyers are
few or uncertain, the market value must de-
cline. But the plan proposed would create
demand equally and often exceeding the sup
would be maintained and generally at rate
somewhat above those of bonds OF equal
credit, but not available to banking associa-
tions. It is not easy to appreciate the full
benefits of such condition to government
Obliged to borrow" That the conclusion ar
rived at, namely, that it was
THE INTENTION OF CONG REss.
that deposits of bonds by national banks
should be- kept Understanding during the
whole period of the de. osits, If correct
would seem to be rendered absolutely certain
by the act Of July, 1882 to enable national
banking associations to extend their corpor
ate existence and for other purposes. section
9 provides that any national bank may, on
depositing lawful money with the treasurer
of the United States, withdraw proportionate
amount of its bonds on deposit. subject
however, to the proviso. that not more than
IS 600 shall be deposited during any
calendar month for this purpose, and to the
further provisO. that the provisions of this Sec
ton shall not apply to bonds called for redemp-
ton by the secretary Of the treasury, nor TO the
withdrawal of circulating notes in couse-
ouence thereof. This language, it would
seem leaves no doubt that it was the inten-
ton of congress, that when the bonds de-
posted to secure the circulation of a bank,
are called for redemption. payment of them
means retiring the circulation they secure,
unless. indeed, the bank, it may lawfully
do should make a new deposit of IN adequate
amount of iuterest-bearing bonds. Ii follows
then, that unless the First National bank Of
North Bend substitute Understanding 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. l have the honor to be. sir your
obedent servant, A. II. GARLAND,
Attorney-General."