First National Bank

“ National banks are corporate instrumentalities of the United States created under its laws for public purposes essentially national in character and scope. Their powers are derived from the United States, are to be exercised under its supervision, and can be neither enlarged nor restricted by state laws. The decisions uniformly have been to this effect and have proceeded on principles which were settled a century ago in the days of the Bank of the United States. ”

“ If that alone were enough, then it would seem that state banks which elect to join the Federal Reserve System should also be tax-immune federal instrumentalities. [7]
In any event, there is little difference today between a national bank and its state-chartered competitor: the ownership, control and capital source of each is private; each exists for private profit. More importantly, neither may issue legal tender:
'With the passing of the national bank notes, the United States lost much of the difference between the national banking system and the state banking systems. ”

“ Unquestionably, a competitive advantage accrues to a bank that provides the service of receiving money for deposit at a place away from its main office; the convenience to the customer is unrelated to whether the relationship of debtor and creditor is established at the moment of receipt or somewhat later.
We need not characterize the contracts as a sham or subterfuge in order to conclude that the conduct of the parties and the nature of their relations bring First National's challenged activities within the federal definition of branch banking. ”

“ During the economic depression there was much agitation that bank failures were due to small undercapitalized rural banks and that these banks should be supplanted by branches of larger and stronger banks. The Comptroller of the Currency advocated that national banks be permitted to branch regardless of state law. ”

“ There Chief Justice Marshall, while admitting that it does not appear that a bank was in the contemplation of the Framers of the Constitution, held that a national bank could be chartered under the implied powers of the Congress as an instrumentality of the Federal Government to implement its fiscal powers. The paramount power of the Congress over national banks has. ”

“ Because of pertinent congressional legislation in the banking field, we find it unnecessary to reach the constitutional question of whether today national banks should be considered nontaxable as federal instrumentalities.
As will be seen, Congress has been far from reluctant to pass legislation in the banking field. There are important committees on banking and currency in both Houses which continually monitor banking affairs and propose new legislation when changes are felt to be needed. ”

“ The principal checking accounts of the Government are carried today, not by national banks, but by the Federal Reserve banks. When a new issue of government securities is offered, the Federal Reserve banks receive the applications of purchasers. When government securities are to be redeemed or exchanged, the transactions are handled by the Federal Reserve banks. Those banks administer for the Treasury the tax and loan deposit accounts of the banks in their respective districts. See The Federal Reserve System: Purposes and Functions, supra, at 225-234, 274-277 ”

“ Now this Court is asked to change what legislative history and prior decisions have established is the precise meaning of an Act of Congress. This we cannot do. For, as we pointed out above, the banking field has traditionally been an area of particular congressional concern marked by legislation responsive to new problems. This can be illustrated by the history of § 548 alone. It was originally passed in 1864 because the 1863 Currency Act [4] contained no provision for state taxation of national banks or their shares. ”

“ Senator Carter Glass held a similar belief and introduced a bill that would authorize national banks to organize branches irrespective of state law beyond and 'outside' the municipality of its principal banking house. ”

“ The greatest service of the Bank to the growth and prosperity of the national economy will lie in its use of its prerogatives under the law to create that financial en­vironment in which the growth of sound productive enterprises and the creation of a diversified pattern of production will be greatly encouraged. ”

“ If it had been intended to allow the establishment by an association of not one bank only, but, in addition, as many branch banks as it saw fit, it is remarkable, to say the least, that there should have been no provision for adjusting the capital to the latter contingency or for determining how or under what circumstances such branch banks might be established or for regulating them. ”

“ The act of February 25, 1863, with some subsequent amendments, was the beginning of the national bank system which has ever since prevailed and of which the London Times, not always a friendly critic of things American, said that "the genius of man has never invented a better system of finance." The creation of the national bank system was of great service to the government during the war inasmuch as it assured a certain market for the government bonds which were then issued. ”

“ A National Bank is forbidden to lend more than ten per cent. of its combined capital and surplus to any one firm or individual. "But the discount of bills of exchange drawn in good faith against actually existing values, and the discount of commercial or business paper actually owned by the person negotiating the same, shall not be considered as money borrowed." Also no National Bank can lend on its own stock as security. ”

“ Commercial banks are unique among financial institutions in that they alone are permitted by law to accept demand deposits. This distinctive power gives commercial banking a key role in the national economy. For banks do not merely deal in but are actually a source of, money and credit; when a bank makes a loan by crediting the borrower's demand deposit account, it augments the Nation's credit supply. ”

“ The complaint is that the Eastern States have an undue amount of national-bank circulation, and therefore enjoy in a measure a monopoly. I admit this to be true. I will not discuss here the system of banking in all its aspects, but I will inquire how far the establishment of more national banks of issue in the West and South will remedy the real evil complained of—which evil consists in a lack of loanable capital there. If the remedy proposed is to serve any good purpose at all, then the establishment of new national banks of issue must increase the available amount of loanable money. ”

“ Sir Robert Walpole instantly rose, and said, “I know that the members of the Stock Exchange have combined not to advance money on the loan. Every one is aware how the administration of this country has been distressed by stock-jobbers.” The interest of four per cent. appeared so low to men accustomed to the enormous premiums of a few years previous, that they treated the proposed terms with contempt, and enlisted the sympathy of the public by reporting that it was the first step towards the reduction of the interest on the national debt. ”

“ Today, there is hardly any commercial, agricultural, or industrial activity of national economic importance which has not been assisted by one or all of these corporations,―the Central Bank indirectly, of course, through the support it has given to the loan activities of the two other institutions. ”

“ It would then be sufficient that the Bank should not receive the bills of any other bank, which issued notes of less than 10 or 20 dollars, or which received the bills of other banks, that issued notes less than the same minimum. In fine, a National Bank is an admirable instrument of exchange, and the most influential friends of the Administration are convinced of the necessity of an institution of the sort. ”

“ From this it would appear that the banks must get immensely rich; and inasmuch as national banking is now free it is a wonder that not more of you go into so profitable a business, and a greater wonder still that about thirty millions of national-bank circulation has within a few years been withdrawn by the banks themselves. ”

“ The national bank ought not to be regarded simply as a commercial bank. It will not operate on the funds of the stockholders alone, but much more on the funds of the nation. Its conduct, good or bad, will not affect the corporate credit and resources alone, but much more the credit and resources of the government. In fine, it is not an institution created for the purposes of commerce and profit alone, but much more for the purposes of national policy, as an auxiliary in the exercise of some of the highest powers of the government. ”

“ It appears to me that a national bank, with such modifications as experience has pointed out, and particularly such as would limit its profits, exclude foreign influence in the government of it, and give publicity to its transactions, is the only safe and certain remedy that can be adopted. The great want of the country is a general and uniform currency, and a point of union, a sentinel, a regulator of the issues of the local banks, and that would be supplied by such an institution. ”

“ This other fact, that banks are an usual engine in the administration of national finances, and an ordinary, and the most effectual, instrument of loans, and one which, in this country, has been found essential, pleads strongly against the supposition, that a government clothed with most of the important prerogatives of sovereignty, in relation to its revenues, its debt, its credit, its defence, its trade, its intercourse with foreign nations, is forbidden to make use of that instrument as an appendage to its own authority. ”

“ A duty has been imposed upon their issues so large as to manifest a purpose to compel a withdrawal of all such issues from circulation. In harmony with this policy is the construction we think should be given to the thirtieth section of the act of Congress we have been considering. It gives advantages to National banks over their State competitors. It allows such banks to charge such interest as State banks may charge, and more, if by the laws of the State more may be charged by natural persons. ”

“ Authorized to issue notes which will be received in all payments to the United States, the circulation of its issues will be coëxtensive with the union, and there will exist a constant demand, leaving a just proportion to the annual amount of the duties and taxes to be collected, independent of the general circulation for commercial and social purposes. A national bank will therefore possess the means and the opportunity of supplying a circulating medium of equal use and value in every state and in every district of every state. ”

“ Assuming that we are all agreed as to the result of our talk last Wednesday night upon reserves, that they must be national to be equal and adequate, our conclusions now are inevitable, (1) we must give to the National banks the power to do a Savings bank business, as well as a Commercial business; (2) we must give our National banks the power to do a Trust Company business; (3) we must give our National banks the power to issue a pure credit Bank Note precisely like that issued by the Scotch Banks and the Canadian Banks, and was issued by the five hundred banks in New England before the war. ”

“ The fact that there were State banks with whose business the National Bank might interfere, had nothing to do with the question of the power of Congress to establish the latter. The National [Pg 302] Government does not depend on State Governments "for the execution of the great powers assigned to it. Its means are adequate to its ends." It can choose a National bank rather than State banks as an agency for the transaction of its business; "and Congress alone can make the election." ”