Reserve Requirements

Every national bank was required to keep, as reserve, an amount equal to from fifteen to twenty-five per cent, of its deposit liabilities, according to whether it was located in a central reserve city, such as New York, Chicago, or other; or in an outlying district.

By petition to the Comptroller of the Currency, a city with a population in excess of fifty thousand could be denominated a central reserve city.

The reserve banks, that is, those holding the reserve deposits of the smaller institutions, would again deposit these reserves with other banks with which they had business dealings, which latter might again redeposit such funds with other institutions, usually larger banks.

Note Issues

National banks were permitted to issue notes secured by bonds of the United States Government deposited with the Comptroller of the Currency. Various regulations as to the extent of such issues of banks notes, in proportion to the bank's capital, were from time to time introduced, the maximum finally being fixed to the full amount of the capital stock of the bank. Notes were redeemable in lawful money at the United States Government Treasury, or Sub-treasuries, or by the bank. As security for the redemption of national bank notes, national banks were required by law to deposit with the Comptroller of the Currency an amount equal to five per cent, of their note issues. This was done chiefly for the purpose of protecting the Government in the event of the failure of the bank.

Government Supervision

The law required the submission of at least five reports annually, to the Comptroller of the Currency. National bank examiners made periodical examinations of the affairs of every bank to ascertain its stability and were empowered to make special investigations if necessary.

Business Conducted By National Banks

The principal business conducted by these national banks was that of "discounts and loans" and making collections for customers. They were purely commercial in character. Foreign exchange operations were carried on principally by the larger institutions, through means of foreign correspondents. They could not assist, generally, to any appreciable extent, in the development of our foreign commerce.

In domestic trade, on the other hand, these national banks had, by long and careful application to the business customs of their communities, succeeded in gaining the confidence of their customers to a large degree. They were satisfied with conditions as they existed and did not wish to see a new system of banking introduced which they feared might destroy those advantages which they had been so long in acquiring.