Whenever a national bank fails to redeem in lawful money any of its circulating notes, upon demand of payment duly made at its place of business during the usual business hours, the holder may cause the notes placed in one package to be protested by a notary public, unless the president or cashier of the bank waives demand and notice of protest and makes, signs, and delivers to the holder making the demand an admission in writing stating the time of the demand, the amount demanded, and the fact of non-payment thereof. The notary public forwards such protest or admission to the Comptroller, who with the concurrence of the Secretary of the Treasury may then appoint a special agent, of whose appointment immediate notice is given to the bank, and who proceeds at once to ascertain and report whether the bank has refused to pay its notes in lawful money when demanded. If, from such protest and the report of this agent, the Comptroller is satisfied that the bank has refused to redeem its notes and is in default, he declares, within 30 days, the deposited bonds forfeited to the United States. After notice has been sent to the defaulting bank it becomes unlawful for the bank to do any business except receive and safely keep money belonging to it and to deliver special deposits.

The holders of the notes of the defaulting bank are also immediately notified that the notes will be redeemed as presented at the Treasury. The Comptroller may then, at his discretion, either cancel an amount of bonds pledged by the bank equal at current market rates, not exceeding par, to the notes paid, or may cause so much of them as may be necessary to redeem its outstanding notes to be sold at public auction in New York City, after giving 30 days' notice of such sales to the bank. If the Comptroller deems it for the best interest of the United States, he may sell any of the bonds at private sale, but not for less than par value or market value thereof at the time of sale. If the proceeds of all the bonds of the bank when thus sold are insufficient to reimburse itself for the amount expended in redeeming the notes of the bank, the United States has a paramount lien upon all the bank's assets for the deficiency.