The policy of separating the fiscal activities of the Government from banks and banking which was adopted with the establishment of the independent treasury system, was abandoned when the national banking system came into existence. Intimate relationship was established between the national banks and the Government through the requirement that every bank must buy government bonds, and become subject to the supervision of a government official, the Comptroller of the Currency. He supervises all the details involved in organizing and chartering the banks, the issue and redemption of circulating notes, and enforces the various provisions of the national bank act. Under his direction all the banks are examined periodically to see that they are conforming to the requirements of the law and are solvent, and once a year he makes a report to Congress showing in detail the condition of all banks in the system. Public revenues except customs receipts may be deposited in banks to be designated as public depositories by the Secretary of the Treasury, who must require the deposit of government bonds "and otherwise" as a security for their repayment. Provision was made also for using the banks as fiscal agents of the Government, and in this relation they have rendered valuable service in placing public loans and in refunding the public debt.
Until 1908 the banks were not required to pay interest on deposits of Government funds. In that year an act was passed requiring them to pay interest at the rate of at least 1 per cent on public deposits and on May 1, 1913, the rate was raised to 2 per cent. A few banks refused to pay the higher rate and their holdings of government deposits were apportioned to other banks. On the date mentioned there were 607 national banks acting as government depositories holding a total of about $53,000,000. The amount of government money held by the banks was never large until 1901 when for the first time the $100,000,000 level was reached. At the close of 1898 government deposits were only $38,748,000, but at the end of the year 1907 they amounted to nearly $250,000,000. In one month of that year the Treasury deposited in the banks nearly $80,000,000 to help check the panic. Banks are not required to keep a reserve against government deposits.