The business of the national banks, as defined by the statute, is discounting and negotiating promissory notes, drafts, bills of exchange, and other evidences of debt; buying and selling exchange, coin and bullion; loaning money on personal security ; receiving deposits; and issuing and circulating notes. They may also be designated as depositories of the public moneys, except receipts from customs, or employed as financial agents of the government; and in such cases they are to furnish security by depositing United States bonds and otherwise. Every association organized for these purposes is permitted to continue its business for twenty years from the date of its organization, but no such association may engage in general trade or commerce, or hold real estate, except a banking-house, or real property taken for debt, which must be sold within five years.

1 Revised Statutes of the United States, §§ 5133-5243.

The business is to be managed by a board of not less than five directors, who must own at least ten shares apiece of the stock, unencumbered by debt, and three-fourths of them must be residents of the State in which the bank is established. The directors are personally liable for all losses to share-holders, or to the public, through any violation of law occurring with their knowl-edge and consent; and the share-holders are liable, individually, for all debts of the bank, to an amount equal to the par value of their shares, and in addition to their shares. As the number of directors is not less than five, the number of share-holders must be five or more.

In order to provide a suitable basis for the business, the law fixes the minimum of capital stock at $50,000 in places containing a population not over 6000; $100,000 in places containing a population between 6000 and 50,000; and $200,000 for cities containing over 50,000 inhabitants. Half of the capital stock must be paid in before the bank begins business, and the rest within five months afterward; and if the capital should be increased, the additional amount must all be paid in before the in-crease is authorized. If the capital becomes impaired, it must be made good by an assessment upon the shares.

With the cash thus subscribed and paid in, the banks were originally required to purchase and deposit with the treasurer of the United States not less than the amount of one-third of their capital stock in registered bonds of the United States, and in no case less than $30,000 in bonds. Instead of one-third of the capital stock, $50,000 is now the maximum required. If the bonds should at any time become depreciated, the law requires an additional deposit to make the security good.

The banks were entitled, under the act of 1864, to receive notes to the amount of 90 per cent', of the market value of the bonds, not exceeding 90 per cent, of the par value, if bearing interest at a rate not less than 5 per cent., and in no case to exceed the amount of the stock. This provision was qualified the next year, so that banks with a capital from $50,000 to $500,000 should receive in notes only 90 per cent., from $300,000 to $1,000,000 only 80 per cent., from $1,000,000 to $3,000,000 only 75 per cent., and from $3,000,000 upward only GO per cent. of their capital. Payment of the notes so issued is guaranteed by the United States, and the notes are receivable for all dues to the United States except customs, and for all debts and liabilities of the United States except interest, and redemption of the national currency. The notes of any bank are also to be taken at par by all others; and if any bank fails to redeem its notes at par in lawful money on demand, its bonds are forfeited, and the proceeds are applied to the payment of the notes by the United States.1

1 The Maine banking law of 1857, though belonging to the better class of State laws, furnishes a striking contrast to the strict regulations of the National Bank Act. The Maine banks were required to keep only 5 per cent. of their capital in specie. Upon this reserve they might issue bills to the amount of half their capital. After reaching this limit, they were required to keep one dollar in specie for three dollars in bills, and might increase their issues Indefinitely,provided that the whole amount should never exceed the sum of the capital stock and specie on hand, and provided also that all debts, exclusive of deposits, should never exceed twice the capital stock. That is to say, a bank having on hand the cash paid in by the share-holders, might issue twice that amount in bills, without regard to its liability at the same time for deposits ; and no provision was made for the ultimate payment of either bills or deposits, except by recourse to the share-holders, who were individually held for amounts equal and additional to their stock at par. This law still remains upon the Maine statute-book. All that is needed to give it effect, is to repeal the United States tax of 10 per cent. imposed upon State bank-bills in 1SG5, when Congress had finally determined to drive them out of the market.

For the current redemption of the notes, every bank is required to deposit with the treasurer of the United States a special fund at all times equal to 5 per cent. of its circulation; but this fund may be counted as a part of the general reserves, which are based upon the deposits. The banks of St. Louis, Louisville, Chicago, Detroit, Milwaukee, New Orleans, Cincinnati, Cleveland, Pittsburg, Baltimore, Philadelphia, New York, Boston, Albany, San Francisco and "Washington are required to maintain reserves of lawful money equal to 25 per cent. of their deposits; and all other banks are to keep in reserve at least 15 per cent. of their deposits. Three-fifths of the 15 per cent. reserves, however, may be kept on deposit as a redemption fund at any of the financial centres named; and one-half of the 25 per cent. reserves may be kept, in the same way, at New York. The actual reserves have usually been considerably above the requirement. On the 1st of October, 1878, the country banks held 36.7 per cent, of their deposits, and the city banks 81.8 per cent.; the average reserves for the whole country being 33.6 per cent. of the aggregate deposits.1