1 Incorporated under a charter granted by the United States Government, by which it is given authority to receive money on deposit subject to check, make loans, collect drafts, issue national bank bills - which is a form of currency, or money - and do the general business required of a bank which accepts what are known as business deposits. Discounting and negotiating promissory notes, bills of exchange, and other forms of indebtedness, buying and selling exchange, making collateral loans, etc., are among the important functions of such an institution. In a limited way, it may purchase and hold real estate. As a rule, no interest is allowed on deposits, but, of course, may be by special agreement.
1 The query is often raised as to the right of a shareholder of a national bank to inspect its books and records. The United States Supreme Court has rendered a decision in effect that the right of inspection rests upon the primary proposition that the stockholders of a corporation own the property and that its officers are their agents, and, therefore, that a shareholder, with proper motives, may be permitted to inspect the books of such an association upon demand, and can enforce his right in the State Courts.
National banks are not permitted to have branches, which not only accounts, in a large measure, for the difference between the United States and Canadian banking systems, but for the large number of small banks which we have scattered throughout this country.
This restriction on the matter of branches, however, has been broadened under the Federal Reserve Act to permit the establishment of branches in foreign countries.
No bank in the United States, except one chartered as above, is permitted to have as a part of its name the word "National," and every such bank, likewise, must have the word "National " as part of its name.1 This is a protection to the public, and enables every one to be assured that such an institution is safe-guarded by national restrictions.
The history of the national banking system has been marked by very few failures, from 1863 to Oct. 31, 1905, only 5 1/2% of the total number of such associations having been closed as the result of insolvency. In nearly every case it was due to fraudulent management, or violations of the national banking laws.