7. Redemption Of Notes Of A Failed Or Retired Bank

When a bank fails or retires from business the government redeems its circulation with government notes. The bonds held by the bank are sold and always yield enough to furnish the means for this purpose. As some of its notes are never presented, having been lost or destroyed, these represent a clear gain, which is kept by the government. The Secretary of the Treasury remarked in his annual report for 1895 that "the gain to the government on account of national bank notes lost or destroyed, and which are consequently never presented for redemption, is estimated to be two firths of one per cent upon the total amount issued, and has according to this estimate amounted to the sum of $2805,715." The banks claim that as the government retains the gain from the loss of their circulation, it ought, besides paying for all the expense of making the notes and printing them, to pay the express charges attending their redemption, and the issue of new ones in place of those redeemed The government, however, is willing to pay the expense only one way.

8. Redemption Of Missing And Partly Destroyed Notes

Very often parts of notes are missing and regulations have been established for redeeming these. The need of making some regulations will appear by an inquiry or two. Suppose about half a note is presented containing the signature of the president. Shall the treasury redeem it at its full value? May not the other part containing the cashier's signature be presented? Suppose the larger part of a note is presented, torn the other way, but containing neither signature. The rule of the issuing bank is, when such a mutilated note is presented, to pay it if assured that there is no other part in existence. Sometimes the presenter is required to make an affidavit stating from whom he received the note and his reasons for believing that the remainder is lost. The government, however, can not exercise any discretion. It has a "discount glass" which it puts over the note to find out how much is destroyed. Notes that are equal to or exceed three fifths of their original proportions, and bear the name of the bank and the signature of one of its officers, are redeemed at their full face value. Notes of which less than three fifths remain, or from which both signatures are lacking, are not redeemable by the Treasurer, but only by the bank that issued them. Fragments less than three fifths which have been accepted by the issuing bank may be redeemed by the Treasurer when they are accompanied by satisfactory evidence that the other parts do not exist. Still more minute regulations exist for redeeming parts of notes at less than their face value.

9. Liability Of Bank For Stolen Blank Notes That Get Into Circulation

As bank notes are printed without the signatures of the president or cashier, if they are stolen when in this condition, and the signatures of these two officers are forged and they are put into circulation, the bank is, nevertheless, responsible for them. This requirement was imposed on the banks in 1892. It is quite contrary to the general rule applying to the negotiable notes of individuals, for the law regards an unsigned note that goes astray and is afterward signed by the finder as an incomplete, forged note, for which the purported maker is not responsible. The law says he never made it.

10. How The Expense For Redeeming Notes Is Borne

Lastly may be mentioned the mode of ascertaining and paying the bill for redeeming bank notes. Once a year the account is made up by the government and divided among all the banks in proportion to the amount the redeemed notes of a bank bears to the entire amount that have been redeemed. The principal charges are for transportation and cost for assorting, which includes the salaries of the persons employed to do the work, printing, and contingent expenses. The expense does not vary greatly from one dollar for each thousand dollars redeemed. The system, it may be added, is effective and economical, and in the main satisfactory to the government, to the banks, and to the public.