Among the amendments to the national banking laws recommended by Mr. Hepburn, which have not since been adopted, are the following:

1. That the tax on national bank circulation be repealed and that the banks be assessed only for an amount sufficient to defray the actual cost to the Government of providing circulation.

2. That the Comptroller of the Currency, with the approval of the Secretary of the Treasury, be empowered to remove officers and directors of a bank for violations of law after due hearing.

3. That the officers and employees of a bank be prohibited from borrowing its funds in any manner, except upon application to and approval of the board of directors.

4. In order to facilitate the collection of assessments upon shareholders in failed banks, that the receivers of such banks be authorized to file with the County Clerk or Register of each county in which any stockholder may reside a statement showing the names of shareholders residing in such count}' and the amount of stock held by them respectively; the filing of such statement to constitute a lien upon the realty of such stockholders, which lien could be vacated by giving proper bond, or be discharged by the receiver upon payment of the assessment.

5. That Section 380, United States Revised Statutes, be amended to permit attorneys other than United States Attorneys to be employed by receivers of failed banks, whenever, in the opinion of the Comptroller, such employment would be for the best interest of a trust.

This last amendment was recommended because of the insistence of some United States Attorneys upon the recognition by the Comptroller of their statutory right to represent receivers of national banks in all litigation for collecting debts due failed banks and to receive the emoluments therefrom.

Mr. Hepburn explained the disadvantages attending the employment of United States Attorneys in such matters and the greater expense and delay involved, as compared with the advantages in every respect of the receiver employing an attorney of his own selection.

While the Section of the Revised Statutes referred to has not been amended, United States Attorneys have not insisted upon their right to represent receivers of failed national banks since the decision of the Supreme Court of the United States in the case of Gibson v. Peters, 150 U. S., 342, to the effect that the expenses of a receivership cannot be held to include compensation of a district attorney for conducting a suit in which the receiver is a party, and he cannot receive any compensation for services rendered or offered to be rendered a receiver.

In support of his first recommendation, Mr. Hepburn advanced the argument that national banks were no longer organized for the purpose of issuing circulation. If the system is to be perfected and perpetuated, he stated, it was incumbent upon Congress to recognize the fact that it must be made less burdensome and more profitable to the banks, not only by a reduction of taxation, but by an enlargement of the scope of their corporate powers, to enable them to meet to a greater degree the competition of other banking institutions operating under State authority. State banks and trust companies had for years gradually but steadily encroached upon the business of national banks, until they had absorbed such a large proportion of the banking business of their respective communities as to make it very difficult, if not impossible, in some sections, for national associations to compete with them within the limitations of their corporate powers and statutory restrictions.

Mr. Hepburn's recommendation for a repeal of the tax on circulation is one which Congress should adopt. The banks should be assessed only for an amount sufficient to reimburse the Government for the actual cost of providing circulation.

The total expenses of the Government for maintenance of the Currency Bureau from the date of its organization in May, 1863, to June 30, 1921, exclusive of contingent expenses, amounted to $20,965,816.00. Since 1863 the banks have paid into the Treasury of the United States over $155,188,318.73 in taxes upon circulation, an amount considerably more than ample to pay the entire cost of operating the Bureau during its existence, including the cost of examinations by national bank examiners. During the same period the banks have lost millions of dollars by depreciation in the market value of Government bonds.

Mr. Hepburn made other recommendations for amendments to the banking laws, some of which have been adopted, in whole or in part, and others have been partly effected by administrative regulations.

The most important of his recommendations in its bearing upon the business of the banks and its effect upon the security of creditors, was, perhaps, his proposed amendment of Section 5200 of the Revised Statutes fixing the limit of loans.

Since the report containing his views on this subject was published, the law was amended increasing the limit of a loan that might be made to any person, company, corporation or firm, to an amount equal to ten per centum of the unimpaired capital and surplus of the bank, but not exceeding thirty per centum of the capital. A bank with a surplus equal to twice the amount of its capital, under this law, could make a loan equal to thirty per cent. of its capital, but a bank with surplus in excess of twice its capital was restricted to the thirty per cent. limit, no matter what its surplus might be. There are not many banks that have a surplus fund greater than double the amount of their capital.

The amendment limiting loans to thirty per cent. of capital was repealed by later legislation authorizing loans to be made to an amount equal to ten per centum of the unimpaired capital and surplus and in addition thereto the discount of notes under certain conditions and restrictions.

The purpose of our legislators in fixing a limitation upon surplus was to discourage the formation of banks with a small capital and a large surplus, with a correspondingly limited stock liability. Formerly banks supplied the wants of their customers from capital furnished by their stockholders, and made their profits through loaning or investing their own funds. Now the tendency seems to be to contribute as small an amount of capital as is necessary to command public confidence, or is permissible under the law, and to do business upon the funds furnished by depositors. This makes it all the more necessary that the interests of the creditors of the banks should be protected as fully as possible by well-defined restrictions in regard to loans and investments.

The only amendment to the banking laws enacted during Mr. Hepburn's administration, notwithstanding the number that were recommended, was the Act of August 3, 1892, amending the Act of June 30, 1876, in regard to the appointment of an agent by the stockholders of an insolvent association to liquidate the remaining assets after the depositors and other creditors of the bank had been paid in full by the receiver. This amendment simply authorized the stockholders to elect whether they should appoint an agent to wind up the bank in their interests or allow the receiver to do so.

JAMES H. ECKELS Comptroller of the Currency, 1893 1897

JAMES H. ECKELS Comptroller of the Currency, 1893-1897.