The Memphis appeal. [volume] (Memphis, Tenn.) 1886-1890, 1886-10-31
an OPINION BY GARLiYD.
HE TELLS THE SECRETARY OF
TIE TREASURY
That National Banks Must Deposit
Interest Bearing Bonds to Sc
cure Ihelr Circulation.


cannot be used as a basis OF circula
ton. The following is the text OF tn
Attorney Generals opinion: Certain
3per cent bonds of the United state
he'd by its Treasurer as stcurity 70
the circu lating NOES of the First Ma
tional Bank of North Bend, Neb., hav
ing been called in for RI redemption anC
ceased to be interest bearing, the banl
has been notified by the Comptroller
of the Currency 10 exchange those
bonds for interest bearing bonds oil
the United States. The bank, in re.
ply, asks to know by what authority
the demand has baen made, alleging
that IL has once complied with section
$3.50 OF the Revised Statutes by de.
posting with the Treasurer interest
bearing bonds of the United States,
which are worth par. An opinion is
requested upon the question thus pre-
sented, namely, whether the stopping
Of interest on the bonds deposited re-
suited from the call of the
Secretary of the Treasury au.
thorized the Comptroller of
the currency to require the bank to
substitute interest bearing bonds for
the bouds now in deposit. 1t is not
open to question that the bonds de.
posted by q ma ional bank to secure
its circulation must be interest bear
ing at the time the deposit is made.
On that point the law is explicit. 1t
would seem to be equally clear that
whatever purpose Congress had in
view in requiring bonds deposited by
national banks to be interest bearing,
that purpose has continued the same
from the frst law on the subject, in
1858, down to the present time, there
being an absence OF any legislative
declaration Of change or intention
in that particular. In resolving the
question, whether it is essential to
valid deposit of bonds by a national
bank that the bonds deposited should
bs interest bearing during the whole
time Of deposit, it may assist us to read
the act Of 1858, under which the ma
ational bank system was introduced ia
the light OF the circumstances on
which 1t was passed. The country
was engaged in great war. 1t was OF
vital Importance to strengthen the
credit of the government by increas-
ing the demand for its bonds, and by
averting the impending calamities OF
an unrsgulated and rapidly expsn ding
paper circulation. 1t was to accom-.
plish these objects that the national
bank system was devised, and it is
impossible 10 doubt that it was the
intention that the banks composing
the systems should have no bonds on
deposit with the government, except
such as were still current, and as the
government was interested in keep
ing buoyant in the market. And this
would eeem to have been the view of
the eminent Secretary of the Treasury,
to whom is generally ascribed the au-
thorship of the national bank system.
In his report of the 4th Of December,
1852, he says, in recommendation of
the projected systemI "The Secre-
taTy has already mentioned the sup
port to public credit, which may be
expected from the proposed sssocia-
tions, The Importance of this point
may excuse some additional obser.
vances. The organization proposed,
il sanctioned by Congress, would
require within few years, for de-
post as security for circulation, bonds
of the United States to an amount not
less than $250,000 600. 1t may we'll be
expected, indeed, since the circulation,
by uniformity in credit and value and
capacity of quick and cheap .trapspor
tation, will be likely to be used more
extensively than any hitherto issued,
that the demand for bonds will COM
pass this limit. Should Congress see
fit to restrict the deposit Of the bonds
known as fvs-twenties, authorized by
the act of last session, the demand |
would promptly absorb all of that de-
scripiion already issued and make
large room fer more. A steady mar
ket for the bonds would thus be es-
tablished and the negotiation of themI
greatly facilitated. But it is not in i'm
media results that the value of this
support would be only or chiefly seen,
There are always holders who desire
10 sell securities Of whatever kind. If
buyers are few or uncertain, the
market must decline. But the
plan proposed would create
i constant demand equaling
and often exceeding the supply. Thus
1 steady uniformity in price would be
and generally rate some.
What above those of binds OF equal
'redit bus not available to banking as
Iociations. 1t is not easy to appre-
late the full benefits of such condi.
ions TO a government obliged 10
That the conclusion ar
ived at, namely, that it was the in
ention OF Congress that deposits in
he national banks should be kept in
crest bearing during the Whole'period
4 the deposits, if correct would seem
o be rendered absolutely certain by
he act Of July, 1883, ITO enable Ma
ional banking associations to extend
heir corporate existence and for other
Section 8 provides that
ny national bank may, on deposit
ng lawful money with the Treasurer
1 the United States, withdraw a pro.
'ortionate amount of its bonds on de-
'osit, subject, however, to the pro-
iso that no more than 49,
OU,VVU Blau ne u6pOSlLeu uuT- |
Dg any calendar month for this
urpose," and to the further proviso
hat the provisions of this section shall
ot apply 10 bonds called for redemp-
on by the Secretary of the Treasury,
or to the withdrawal OF circulating
otes in consequence thereof. This
Ingusge, it would seem, leaves no
oubt that 1t was the intention of Con-
ress that when the bonds dep osited
} secure the circulation Of bank are
allied for redemption payment OF
hem means retiring the circulation
ley secure, unless indeed the bank,
J II may lawfully do, should make it
new deposit of an adequate amount
interest bearing bonds. 1t follows,
1en, that unless the First National ..
ank Of North Bend substitute inter-
# bearing bonds for the existing de- !
osit Of bonds called for redemption, !
10 proceeds Of the latter must be ap-
lied to retiring the circulation in
lred BY it. l have the honor to be, !,
r, your obedient servant. !
A. H. GARLAND,
a.. II