APPENDIX.

THE CURRENCY LEGISLATION OF 1908.

When the Sixtieth Congress met in December, 1907, with the country still in the throes of a serious financial panic, it could be easily foreseen that a large part of the session would be devoted to the discussion of panic preventives and panic cures. Scarcely a senator or representative presented himself in Washington without some measure of "currency reform" framed to forestall the recurrence of such distress. Several bills were offered providing for the establishment of a central bank (Senate No. 547, House No. 13,845); others contemplated the issue of a special currency by the government treasury (House Nos. 12,683, 6178, 14,403, 187, 3886, 3876, 7607, and 9151); others legalized the creation of certificates and currency by clearing-house associations (Senate No. 108, House No. 10,588); while a great variety of bills provided for the issue of an emergency currency by individual banks, upon the pledge of various collateral, the establishment of special reserves, or the payment of special taxes. Most radical and far-reaching of all was the bill (House No. 12,677), emanating from the committee on Banking and Currency in the House, commonly known as the Fowler Bill, which included such unrelated proposals as the unification of national banks in groups for mutual supervision, the replacement of the present bond-secured currency by notes based on general bank credit, the establishment of a compulsory guarantee fund for the mutual insurance of both notes and deposits, the ultimate retirement of the greenbacks, and the endowment of national banks with trust company functions. This drastic and comprehensive measure received support from a considerable number of commercial organizations, but found few adherents among the law-makers.

The discussion in Congress was ultimately focussed upon the respective merits of the so-called Aldrich Bill, sponsored by the Senate Committee on Finance (Senate No. 3023), which, after much emendation, was adopted by the Senate on March 27, 1908, and the so-called Vreeland Bill (House No. 21871), which, after consid

erable modification in its turn, was adopted by the House on May 12, 1908. These two bills were of like intention. They contemplated no reorganization of the banking system, and did not attempt to provide an elastic currency available for crop moving and responsive to seasonal changes in demand. Their object was to allay or prevent an unreasoning panic, with the attendant circumstances of hoarding and bank runs, by making possible temporary additions to the currency in moments of critical emergency upon payment of a heavy and increasing tax. Stripped of irrelevant amendments, the two bills differed essentially only in the kind of security to be exacted and in the method of issue. The Aldrich Bill required the deposit of bonds, either of the federal government or of certain cities, towns, and counties, as a basis for such an emergency issue, and it allowed these issues to be made by individual banks. The Vreeland Bill permitted as a basis for additional circulation, "any securities, including commercial paper," but required that such collateral should be approved and guaranteed by associations of banks numbering at least ten members, and with an aggregate capital and surplus of at least five millions of dollars. Obviously, if so wide a range of collateral were to be allowed, it was necessary that it be passed upon by some other body than the federal treasury, and the issue of notes through bank associations was therefore involved in the use of commercial paper as collateral.

After prolonged debate the main features of the two bills were amalgamated in a compromise which became law on May 30, 1908, the text of which follows. This act, it will be seen, provides for the issue of additional notes by individual banks upon the deposit of other than government bonds, and through associations upon the pledge of commercial paper, such issues to be taxed at the rate of 5 per cent. for the first month, with an additional tax of 1 per cent. for each later month until 10 per cent. is reached. The act further provides for the payment of interest upon government deposits with the banks, at not less than 1 per cent. per year, and at the same time, exempts the banks from the usual reserve requirements in the case of such deposits. The act also creates a "National Monetary Commission," comprising eighteen members divided equally between the Senate and the House, to recommend further changes in the currency laws of the country during the sixyear period in which the act is operative.

A. P. ANDREW.

THE CURRENCY ACT OF 1908.

(APPROVED MAY 30, 1908.)

An Act to amend the National Banking Laws.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That national banking associations, each having an unimpaired capital and a surplus of not less than twenty per centum, not less than ten in number, having an aggregate capital and surplus of at least five millions of dollars, may form voluntary associations to be designated as national currency associations. The banks uniting to form such association shall, by their presidents or vice-presidents, acting under authority from the board of directors, make and file with the Secretary of the Treasury a certificate setting forth the names of the banks composing the association, the principal place of business of the association, and the name of the association, which name shall be subject to the approval of the Secretary of the Treasury. Upon the filing of such certificate the associated banks therein named shall become a body corporate, and by the name so designated and approved may sue and be sued and exercise the powers of a body corporate for the purposes hereinafter mentioned: Provided, That not more than one such national currency association shall be formed in any city: Provided further, That the several members of such national currency association shall be taken, as nearly as conveniently may be, from a territory composed of a State or part of a State, or contiguous parts of one or more States: And provided further, That any national bank in such city or territory, having the qualifications herein prescribed for membership in such national currency association, shall, upon its application to and upon the approval of the Secretary of the Treasury, be admitted to membership in a national currency association for that city or territory, and upon such admission shall be deemed and held a part of the body corporate, and as such entitled to all the rights and privileges and subject to all the liabilities of an original member: And provided further, That each national currency association shall be composed exclusively of banks not members of any other national currency association.

The dissolution, voluntary or otherwise, of any bank in such association shall not affect the corporate existence of the association unless there shall then remain less than the minimum number of ten banks: Provided, however, That the reduction of the number of said banks below the minimum of ten shall not affect the existence of the corporation with respect to the assertion of all rights in favor of or against such association. The affairs of the association shall be managed by a board consisting of one representative from each bank. By-laws for the government of the association shall be made by the

board, subject to the approval of the Secretary of the Treasury. A president, vice-president, secretary, treasurer, and an executive committee of not less than five members, shall be elected by the board. The powers of such board, except in the election of officers and making of by-laws, may be exercised through its executive committee.

The national currency association herein provided for shall have and exercise any and all powers necessary to carry out the purposes of this section, namely, to render available, under the direction and control of the Secretary of the Treasury, as a basis for additional circulation, any securities, including commercial paper, held by a national banking association. For the purpose of obtaining such additional circulation, any bank belonging to any national currency association, having circulating notes outstanding secured by the deposit of bonds of the United States to an amount not less than forty per centum of its capital stock, and which has its capital unimpaired and a surplus of not less than twenty per centum, may deposit with and transfer to the association, in trust for the United States, for the purpose hereinafter provided, such of the securities above mentioned as may be satisfactory to the board of the association. The officers of the association may thereupon, in behalf of such bank, make application to the Comptroller of the Currency for an issue of additional circulating notes to an amount not exceeding seventy-five per centum of the cash value of the securities or commercial paper so deposited. The Comptroller of the Currency shall immediately transmit such application to the Secretary of the Treasury, with such recommendation as he thinks proper, and if, in the judgment of the Secretary of the Treasury, business conditions in the locality demand additional circulation, and if he be satisfied with the character and value of the securities proposed and that a lien in favor of the United States on the securities so deposited and on the assets of the banks composing the association will be amply sufficient for the protection of the United States, he may direct an issue of additional circulating notes to the association, on behalf of such bank, to an amount in his discretion, not, however, exceeding seventy-five per centum of the cash value of the securities so deposited: Provided, That upon the deposit of any of the State, city, town, county, or other municipal bonds, of a character described in section three of this Act, circulating notes may be issued to the extent of not exceeding ninety per centum of the market value of such bonds so deposited: And provided further, That no national banking association shall be authorized in any event to issue circulating notes based on commercial paper in excess of thirty per centum of its unimpaired capital and surplus. The term "commercial paper" shall be held to include only notes representing actual commercial transactions, which when accepted by the association shall bear the names of at least two responsible parties and have not exceeding four months to run.

The banks and the assets of all banks belonging to the association