State bank

“ Those interested in the State banks were at first exceedingly hostile to it. The proposition to tax their circulation two per cent. in addition to the three per cent. imposed upon incomes by the new law was considered harsh and unjust. The object was to compel the retirement of the State bank circulation. In no other way could a national system be at once generally instituted. The courts had repeatedly held the authority of the States to charter banks with power to issue and circulate notes as money, to be constitutional. Congress could not abridge this right in any way by direct legislation. ”

“ In eighteen States no bank reserves are now required by law, and in many States there is no supervision whatever of State banking institutions by the State. Is it possible that the National Government has no power to act in the light of these facts when the banking business of the country is essentially not only one kind of a business, but, indeed, one single business, each one being a wheel in the great credit machine? ”

“ The national banking system is proving to be acceptable to capitalists and to the people. On the twenty-fifth day of November five hundred and eighty-four national banks had been organized, a considerable number of which were conversions from State banks. Changes from State systems to the national system are rapidly taking place, and it is hoped that very soon there will be in the United States no banks of issue not authorized by Congress and no bank-note circulation not secured by the Government. ”

“ Conceivably a bank could use an armored car as a place of business by stationing it at designated places during designated hours for opening accounts, receiving deposits, making loans, and the like. But no armored car was so used in these cases.
Federal law stated in the McFadden Act, 12 U.S.C. § 36 (f) , defines 'branch' as any facility 'at which deposits are received, or checks paid, or money lent.' And Congress provided that national banks may establish 'branches' whenever, wherever, and however state banks may do so. ”

“ As a result of the failure of “wildcat” banks during the Territorial period, a clause was inserted in the state constitution forbidding the legislature to charter a bank or pass a general banking law until the people had voted in favour of banks, and providing further that no bank charter or general banking law should be of any force until a majority of the voters at a general election had approved of it. The people gave their approval to a general banking law in 1852, and state banks were incorporated under it. Private banks and one savings bank were also chartered. ”

“ 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. ”

“ The appellees say that, upon the original enactment of the Bank Guaranty Law and the decision of this court sustaining it, the state banks could have done one of three things: (1) Liquidate and invest their capital in some other business; (2) undertake to organize as a national bank; or (3) apply to the state banking department for a certificate of authority to operate under the Bank Guaranty Law. That is, the state banks had to comply with the law in order to continue in business as state banks. ”

“ No law might ever sanction the suspension of specie payments. The State should never be a stockholder in any bank after the expiration of the present State Bank, nor in any other corporation, nor lend its credit to anybody. ”

“ In their report on this resolution the Committee expressed the opinion that the Bank, under a State charter, would speedily run down into a mere State bank, as the Bank of North America had done. They thought that it was essential to a national bank that it should be under the federal courts, which a State bank would not be; that it should be charged with the collection of the revenue, because otherwise it could not regulate the local banks ”

“ The national system will create a reliable and permanent influence in support of the national credit and protect the people against losses in the use of paper money. Whether or not any further legislation is advisable for the suppression of State-bank issues, it will be for Congress to determine. It seems quite clear that the Treasury can not be satisfactorily conducted unless the Government can exercise a restraining power over the bank-note circulation of the country. ”

“ National banks are federal instrumentalities and the power of Congress over them is extensive. 'National banks are quasipublic institutions, and for the purpose for which they are instituted are national in their character, and, within constitutional limits, are subject to the control of Congress, and are not to be interfered with by state legislative or judicial action, except so far as the lawmaking power of the government may permit.' Van Reed v. ”

“ At the session of 1848-9, the Committee on Banks reported that the State Bank had lost a large part of its assets for lack of means to defend its interests, and that this was owing chiefly to the action of the Legislature in 1842 and 1844, in taking out its par funds with which to pay themselves. In a great number of suits, the bank was non-suited because it could not give security for the costs. ”

“ 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. ”

“ Require more frequent and thorough examination of banks Further limit the amount of funds to be loaned to any one person, firm, or corporation Require banks doing both a commercial and savings business to conduct the same as two distinct departments. Require banks to confine themselves to a banking business Provide that in even of failure of a bank its affairs be wound up by the State Bank Examiner under the direction of the courts and not by a receiver appointed by the courts. ”

“ The privilege of becoming a national banking association is given by section 5154 of the Revised Statutes to 'any bank incorporated by special law, or any banking institution organized under a general law of any state.' These words, it is argued, do not embrace savings banks organized in the District of Columbia, and only refer to banks or banking institutions created under the authority of some state, either by a special or general law. ”

“ 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 ”

“ 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. ”

“ What those cases established was that although a business was of a private nature and subject to state regulation, if it was of such a character as to cause it to be incidental to the successful discharge by a bank chartered by Congress of its public functions, it was competent for Congress to give the bank the power to exercise such private business in co-operation with or as part of its public authority. ”

“ 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. ”

“ Thirty States require that the reports be published in the local newspapers; twenty give reports about banks in annual or biennial reports; six make no provision for publishing information about them. Fourteen States allow banks to issue circulation; nineteen prohibit circulation; several have no law on the subject. Twelve States have no provision for the examination of banks by State officers. Seven States have no restrictions on bank loans; nine prohibit loans to officers or employees; most of them prohibit loans on the bank's own stock; twenty-four have no requirement for a cash reserve. ”

“ 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. ”

“ The ancient hostility to a national bank, with its branches, in which is concentrated the privilege of doing a banking business and carrying on the financial transactions of the Government, has prevented the establishment of such a bank since it was abolished in the Jackson Administration. Our present national banking law has obviated objections growing out of the same cause by providing a free banking system in which any set of stockholders can establish a national bank if they comply with the conditions of law. ”

“ Apart from questions which may arise under the national banking laws in the case of national banks, it is no longer open to doubt that a state, by a procedure satisfying constitutional requirements, may compel surrender to it of deposit balances, when there is substantial ground for belief that they have been abandoned or forgotten, Security Sav. Bank v. People of State of California, supra, certainly when the state acquires them subject to all lawful demands of the depositors. ”

“ 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. ”

“ Any association may take, receive, reserve, and charge on any loan or discount made, or upon any note, bill of exchange, or other evidences of debt, interest at the rate allowed by the laws of the state, territory, or district where the bank is located, and no more, except that where by the laws of any state a different rate is limited for banks of issue organized under state laws, the rate so limited shall be allowed for associations organized or existing in any such state under this title. ”

“ The intent of the Congress to leave the question of the desirability of branch banking up to the States is indicated by the fact that the Senate struck from the House bill the time limitation, thus permitting a subsequent change in state law to have a corresponding effect on the authority of national banks to engage in branching. ”

“ Our people have a right to a banking system in which their deposits shall be safeguarded and the flow of credit less subject to storms. The need of a sounder system is plainly shown by the extent of bank failures. I recommend the prompt improvement of the banking laws. Changed financial conditions and commercial practices must be met. The Congress should investigate the need for separation between different kinds of banking ”

“ The General Assembly passed, and on March 9 the Governor approved, an act suspending for eighteen months legislation then applicable to the conduct and liquidation of banks, vesting in the Governor plenary power over state banks, empowering him to extend the time for payment of deposits as the condition of each institution might require; to direct the creation of special trust accounts for receipt of deposits, which should be held separate from other assets and be subject to withdrawal on demand ”