under this act all such incidental powers as shall be necessary to carry on the business of a clearing house for the settlement of money transactions by the mutual set-off of debits and credits, commonly called making clearances for banks, and by obtaining and issuing to the banks composing the association notes according to the provisions of this act, and by acting as trustee for the note holders in accordance with the provisions of this act, by receiving and holding in trust securities pledged by the members of the association as collateral to the notes issued to them, to be called "clearing-house currency," and by acting for the members of the association in their united capacity when authorized to do so by a majority vote of said members; and its board of directors shall also have power to define and regulate by by-laws not inconsistent with the provisions of this act the manner in which its directors shall be elected or appointed, its officers appointed, its property transferred, its general business conducted, and all the privileges granted by this act to associations organized under it shall be exercised and enjoyed; and its usual business shall be transacted at an office or banking house located in the place specified in its organization certificate.

SEC. 4. That the affairs of every association shall be managed by not less than nine directors, one of whom shall be the president, a majority of whom shall be directors in banks, members of the association which are organized under the national currency act. Every director shall, during his whole term of service, be a citizen of the United States, and at least two-thirds of the directors shall have resided in the State, Territory, or district in which such association is located one year next preceding their election as directors, and be residents of same during their continuance in office. Each director when appointed or elected shall take an oath that he will, so far as the duty devolves on him, diligently and honestly administer the affairs of such association and not knowingly violate, or willingly permit to be violated, any of the provisions of this act, which oath, subscribed by himself and certified by the officer before whom it is taken, shall be immediately transferred to the Comptroller of the Currency, and by him filed and preserved in his office. At the annual meetings there shall be appointed or elected a loan committee, whose duties shall be as described in sections nine and ten of this act. Members of this committee shall not be eligible for reelection or reappointment until one year after their terms of office shall have expired. They shall be divided into three classes at their first election or appointment, one-third shall serve one year, one-third two years, and one-third three years, and at every election or appointment thereafter they shall be elected or appointed for a term of three years.

SEC. 5. That the directors of any association first elected or appointed shall hold their places until their successors shall be elected and qualified. All subsequent elections shall be held annually on such day in the month of January as may be specified in the articles of association, and directors so elected shall hold their places for one year and until their successors are elected and qualified. But any director having in any manner become disqualified shall thereby vacate his place. Any vacancy in the board shall be filled by appointment by the remaining directors, and any director so appointed shall hold his place until the next election. If from any cause an election of directors shall not be made at the time appointed, the association shall not for that cause be dissolved, but an election may be held on any subsequent day, thirty days' notice thereof in all cases having been given in a newspaper published in the city, town, or county in which the association is located. If the articles of association do not fix the day on which the election shall be held, or if the election should not be held on the day fixed, the day for the election shall be designated by the board of directors in their by-laws or otherwise: Provided, That if the directors fail to fix the day, as aforesaid, banks representing two-thirds of the capital stock represented in the association may.

SEC. 6 That in all elections of directors, and in deciding all questions at meetings of members of the association, each bank member shall be entitled to a representation equal to the minimum number of directors allowed by law to said bank, but no bank organized under a State or Territorial law shall be entitled to a greater representation at such meetings than that of a national bank. Directors of a bank who shall be appointed to represent said bank at meetings of the association may vote by proxy duly authorized in writing, but no officer, clerk, teller, or bookkeeper of such association shall act as proxy, and no bank any of whose liabilities are past due and unpaid shall be allowed representation in the board of directors or at the meetings of the association.

SEC. 7. That if, upon a careful examination of the facts so reported, and of any other facts which may come to the knowledge of the Comptroller, whether by means of a special commission appointed by him for the purpose of inquiring into the condition of such association or otherwise, it shall appear that such association is lawfully entitled to commence the business of a clearing house as described in this act, the Comptroller shall give to such association a certificate, under his hand and official seal, that such association has complied with all the provisions of this act

required to be complied with before being entitled to commence the business of a clearing house under it, and that such association is authorized to commence said business accordingly; and it shall be the duty of the association to cause said certificate to be published in the city or county where the association is located for at least sixty days after the issuing thereof.

SEC. 8. That the clearing-house association organized under this act, in the chief commercial city in each State, or in the city most central and convenient for business in each State, or any clearing house so organized effecting bank clearings of over two hundred million dollars annually, to be designated and approved by the Comptroller of the Currency, shall be made a clearing house of issue. And if there shall be more than one clearing house of issue in a State, then the Comptroller of the Currency shall divide the State into clearing-house districts, and banks in each State or district shall do business only with the clearing house of issue in their district.

SEC. 9. That a clearing house of issue shall be authorized and empowered to receive from its bank members, or from any clearing house within the State or district in which it is located, commercial assets, promissory notes, bills of exchange, convertible bonds and stocks, and other securities and evidences of debt as collateral security for the circulating notes of the said association to be issued as provided in this act; and on the approval of the value of said commercial assets by its loan committee, the said association may deliver to said bank member, or to the clearing house within its district, seventy-five per centum of said value in its said circulating notes as an advance upon said pledged property, and shall require from said bank member or from said clearing-house association its promissory note of equal amount, which note shall be in form as approved by said clearing house of issue. The bank or association taking said circulating notes shall engage to redeem them at all times when called upon to do so by the association issuing the notes and to give any additional collateral needed to restore any depreciation in the value of the assets pledged, on demand; and on failure to comply with such demands before the close of business hours of the day when made, said bank or association shall be adjudged in default, and shall be thereupon closed pending an examination by a committee from the association which issued the notes. On recommendation by the examining committee, the loan committee shall proceed to liquidate the loan by turning the securities into cash, in accordance with the method provided in section ten. The bank or clearing house taking said notes may release its securities from pledge by depositing with the said clearing house of issue, clearing-house currency, United States legal-tender notes, or coin certificates, with any charges made by said clearing house of issue, whereupon it shall be entitled to and shall receive all its securities so pledged. The charges shall be regulated by each clearing house of issue. Upon the receipt of such deposit the clearing house of issue shall immediately give notice in a newspaper published in the city, town, or county in which the association is located, which notice shall be published at least once a week for six months successively, that the notes of such association or clearing house will be redeemed at par; and that all the outstanding circulating notes of such association or clearing house must be so presented for redemption within six years from the date of such notice, and all notes which shall not be thus presented for redemption and payment within the time specified within such notice shall cease to be a charge upon the funds in the hands of the clearing house for that purpose. At the expiration of such notice, it shall be lawful for the clearing house of issue to surrender, and such association or clearing house, or their legal representatives, shall be entitled to receive all the money remaining after such redemption, except so much thereof as may be necessary to pay the reasonable expenses chargeable against the said accounts, including the payment for the publication of the above-mentioned notices.

SEC. 10. That each bank or clearing house taking such circulating notes shall guarantee the clearing house of issue from loss resulting from such issue to them, and in case of a default in the payment of a loan when demanded by the clearing house of issue, or of default arising in any other manner, then it shall be the duty of said clearing house of issue, if the default is made by a clearing house in its State or district, to levy upon the remaining clearing houses in said State or district, in proportion to their capital, a sufficient sum to provide for the payment of said loan, and if the default is made by a bank member of its own clearing house to levy upon the other bank members in proportion to their capital a sufficient sum to provide for the payment of said loan, which sum shall be held for the payment and redemption of the circulating notes so issued. And if enough money can not be obtained by such assessments, then it shall be the duty of said clearing house of issue to report to the Comptroller of the Currency the fact of said default, and it shall be his duty to levy a further assessment upon all the clearing houses organized under this act in all the States and Territories until such sum is secured, in which case the funds so raised by the Comptroller shall be paid by him to the Treasurer of the United States as a special fund to pay the circulating notes of the defaulting bank or clearing house, and he

shall appoint a receiver for the collateral securities to the loan or loans in default, who shall take possession thereof and turn them into cash and distribute the proceeds to the banks which have contributed to the assessment, and any surplus after reimbursing them their advances shall be handed over to the bank in default or its legal representative. But if the assessment by the clearing house of issue is sufficient to provide the needed funds, then the collaterals shall be administered upon and turned into cash by the loan committee or by a liquidating committee of said clearing house of issue and the cash proceeds shall be appropriated as above provided. At no time shall the total amount of such notes issued to any bank or clearing house exceed the amount at such time actually paid in of the capital stock of the bank or banks composing the clearing house so applying. And said loan committee are charged with the duty of supervising said loans so as to maintain the margin of value of the collateral security, and shall demand additional securities to make good any depreciation in their value, and they may allow withdrawals and substitutions of securities which shall not diminish the said value.

SEC. 11. That in order to furnish suitable notes for circulation, as provided in this act, the Comptroller of the Currency is hereby authorized and required, under the direction of the Secretary of the Treasury, to cause plates and dies to be engraved, in the best manner, to guard against counterfeiting and fraudulent alterations, and to have printed therefrom, and numbered, such quantity of circulating notes, in blank, of the denominations of one dollar, two dollars, five dollars, ten dollars, twenty dollars, fifty dollars, one hundred dollars, five hundred dollars, and one thousand dollars, as may be required to supply under this act the associations entitled to receive the same, which notes shall express upon their face that they are secured by deposit with the clearing house of issue at (naming the city) of commercial assets at seventy-five per centum of their market value, and that said clearing house holds said assets as trustee for the note holder to secure their payment, which payment is guaranteed by the associated banks of the United States through any clearing house, and shall be attested by the signatures of the president or vice-president and treasurer of said clearing house of issue as for account of the bank or clearing house receiving said notes, and on requisition of a clearing house of issue the Comptroller of the Currency shall forward the amount of blank notes in denominations as called for as may be required to supply the banks or clearing houses entitled to receive the same under this act.

SEC. 12. That after any such clearing house of issue shall have caused its promises to pay such notes on demand to be signed by the president or vice-president and treasurer thereof, in such manner as to make them obligatory promissory notes, payable on demand, such clearing house of issue shall deliver them to the bank or clearing-house association entitled to receive them, who are hereby authorized to issue and circulate the same as money, and the same shall be received at par at all the clearing houses in the United States organized under this act, and said clearing house of issue shall thereupon forward to the Comptroller of the Currency a certificate setting forth the amount of notes delivered, the name of the bank or clearing house receiving same, and the amount of the collateral security held in trust for their redemption.

SEC. 13. That it shall be the duty of the clearing house of issue to receive wornout or mutilated circulating notes issued by it to any bank or clearing house, and also, on due proof of the destruction of any such circulating notes, to deliver in place thereof other circulating notes of like tenor and amount. And such worn-out or mutilated notes, after a memorandum shall have been entered in the proper books, as may be established by the clearing house of issue, as well as all circulating notes which shall have been paid or surrendered to be canceled, shall be burned to ashes in presence of three persons, one to be appointed by the Comptroller of the Currency, one by the clearing house of issue, and one by the bank or clearing house on whose account they were issued, and a certificate of such burning shall be made on the books of the clearing house of issue, and duplicates forwarded to the Comptroller of the Currency and to the bank or clearing house whose notes are thus canceled.

SEC. 14. That it shall be unlawful for any officer acting under the provisions of this act to countersign or deliver to any association or to any other company or persons any circulating notes contemplated by this act, except as herein before provided and in accordance with the true intent and meaning of this act. Any officer who shall violate the provisions of this section shall be deemed guilty of a high misdemeanor, and on conviction thereof shall be punished by fine not exceeding double the amount so countersigned and delivered and imprisonment not less than one year and not exceeding fifteen years, at the discretion of the court in which he shall be

tried.

SEC. 15. That it shall be lawful for any such association to purchase, hold, and convey real estate as follows:

First. Such as shall be necessary for its immediate accommodation in the transaction of its business.

Second. Such as shall be mortgaged to it in good faith by way of security for debts previously contracted.

Third. Such as shall be conveyed in satisfaction of debts previously contracted in the course of its dealings.

Fourth. Such as it shall purchase at sales under judgment, decrees, or mortgages held by such association, or shall purchase to secure debts due to said association. Such association shall not purchase or hold real estate in any other case or for any other purpose than as specified in this section, nor shall it hold the possession of any real estate under mortgage, or hold the title and possessions of any real estate purchased to secure any debts due to it for a longer period than five years. SEC. 16. That the plates and special dies to be procured by the Comptroller of the Currency for the printing of such circulating notes shall remain under his control and direction, and the expense necessarily incurred in executing the provisions of this Act, respecting the procuring of such notes and all other expenses of the bureau, shall be assessed each year upon the clearing houses organized under this act, in proportion to the capital stock of their members.

SEC. 17. That the Comptroller of the Currency, with the approbation of the Secretary of the Treasury, as often as shall be deemed necessary or proper or at the request of any clearing house, shall appoint a suitable person or persons to make an examination of the affairs of every association organized under this act, which person shall not be a director or other officer in any association whose affairs he shall be appointed to examine, and who shall have power to make a thorough examination into all the affairs of the association, and in doing so to examine any of the officers and agents thereof on oath, and shall make a full and detailed report of the condition of the association to the Comptroller, who shall fix the compensation for his services.

SEC. 18. That every president, director, treasurer, teller, clerk, or agent of any association who shall embezzle, abstract, or willfully misapply any of the moneys, funds, or credits of the association, or shall, without authority from the directors, issue or put in circulation any of the notes of the association, or shall, without such authority, assign any note, bond, draft, bill of exchange, mortgage, judgment, or decree, or shall make any false entry in any book, report, or statement of the association with intent in either case to injure or defraud the association, or any other company, body, politic or corporate, or any individual person, or to deceive any officer of the association, or any agent appointed to examine the affairs of any such association, shall be deemed guilty of a misdemeanor, and upon conviction thereof shall be punished by imprisonment not less than five nor more than ten years.

SEC. 19. That every person who shall mutilate, cut, deface, disfigure, or perforate with holes, or shall unite or cement together, or do any other thing to any note issued by any such association, or shall cause or procure the same to be done, with intent to render such note unfit to be reissued by said association, shall, upon conviction, forfeit fifty dollars to the association who shall be injured thereby, to be recovered by action in any court having jurisdiction.

SEC. 20. That if any person shall falsely make, forge, or counterfeit, or cause or procure to be made, forged, or counterfeited, or willingly aid or assist in falsely making, forging, or counterfeiting, any note in imitation of, or purporting to be in imitation of, the circulating notes issued under the provisions of this Act, or shall pass, utter, or publish, or attempt to pass, utter, or publish, any false, forged, or counterfeited note, purporting to be issued by any association doing business under the provisions of this Act, knowing the same to be falsely made, forged, or counterfeited, or shall falsely alter, or cause or procure to be falsely altered, or willingly aid or assist in falsely altering, any such circulating notes, issued as aforesaid, or shall pass, utter, or publish, or attempt to pass, utter, or publish, as true, any falsely altered or spurious circulating note issued, or purporting to have been issued, as aforesaid, knowing the same to be falsely altered or spurious, every such person shall be deemed and adjudged guilty of felony, and being thereof convicted by due course of law shall be sentenced to be imprisoned and kept at hard labor for a period of not less than five years nor more than fifteen years, and fined in a sum not exceeding one thousand dollars.

SEC. 21. That if any person shall make or engrave, or cause or procure to be made or engraved, or shall have in his custody or possession any plate, die, or block after the similitude of any plate, die, or block from which any circulating notes, issued as aforesaid, shall have been prepared or printed, with intent to use such plate, die, or block, or cause or suffer the same to be used, in forging or counterfeiting any of the notes issued as aforesaid, or shall have in his custody or possession any blank note or notes engraved and printed after the similitude of any notes issued as aforesaid, with intent to use such blanks, or cause or suffer the same to be used, in forging or counterfeiting any of the notes i-sued as aforesaid, or shall have in his custody or possession any paper adapted to the making of such notes, and similar to the paper upon which any such notes shall have been issued, with intent to use

such paper, or cause or suffer the same to be used, in forging or counterfeiting any of the notes issued as aforesaid, every such person, being thereof convicted by due course of law shall be sentenced to be imprisoned and kept to hard labor for a term not less than five or more than fifteen years, and fined in the sum not exceeding one thousand dollars.

SEC. 22. That it shall be the duty of the Comptroller of the Currency to report annually to Congress at the commencement of its session:

First. A summary of the operations and condition of every association from whom reports have been received the preceding year, at the several dates to which such reports refer, with an abstract of the whole amount of their debts and liabilities, the amount of circulating notes outstanding, and the total amount of means and resources, specifying the amount of lawful money held by them at the times of their several returns, and such other information in relation to said associations as in his judgment may be useful.

Second. A statement of associations whose business has been closed during the year, with the amount of their circulation redeemed and amount outstanding.

Third. Any amendment to the laws relative to clearing houses, by which the system may be improved, and the security of the holders of their notes may be increased. Fourth. The whole amount of the expenses of carrying out the provisions of this act. And such report shall be made by or before the first day of December in each year, and the usual number of copies, for the use of the Senate and House, and one thousand for the use of the Department, shall be printed by the Public Printer and in readiness for distribution at the first meeting of Congress.

SEC. 23. That the clearing houses organized under this act may organize among themselves associations to include the banks members thereof in any State or district, and may hold annual conventions and meetings at other times, for the formulation of rules and regulations for the conduct of their affairs and for the discussion of financial subjects and for the preservation and exchange of information, to govern the granting of credits, and when approved by the Secretary of the Treasury, such rules and regulations shall be binding upon the banks and clearing houses within said State and district.

SEC. 24. That clearing houses organized under this act may form a national association, which shall meet in convention annually, and whose object shall be the promotion of the interests of the banks of the United States receiving the benefits of this act, and said convention may pass rules and regulations to govern the operations of clearing houses and the banks connected with same, which, when approved by the Secretary of the Treasury, shall be binding upon such clearing houses. The delegates to a State or district convention shall number one hundred, and to a general convention three hundred, which numbers divided into the aggregate of the banking capital represented will give in each case the amount of capital to be taken as the basis of representation. The Comptroller of the Currency may unite banks into voting groups where their separate capital is below the basis of representation, and each group shall be entitled to one representative. All elections of representatives to conventions shall be by a majority vote of the directors entitled to vote of single banks and banks composing groups; each bank shall have a vote equal to the minimum number of directors allowed to it by law, but no bank shall be allowed more votes than shall be given to a national bank, and no bank shall have more than one representative in the national association.

Mr. Gilman made the following statement:

MR. CHAIRMAN AND GENTLEMEN: The first stated object of the bill is "to protect and support commercial credit, and so equalize rates of interest," and it provides in its first section for the incorporation of individual banks into clearing-house associations.

The theory of the bill is that the absence of a means of supporting credit is inherent in a system like that at present existing in our country, which provides only for the incorporation of individual banks and stops there.

The organization of individual banks forms the basis of a system, but if the banks are not organized with relations to each other, it is a misnomer to call it a system; it is only an agglomeration. Individual banks are organized under the national currency act on an independent basis and are empowered to take care of themselves and their customers. They are competitive and not mutually supporting; each one is a unit and autonomous, like a petty principality.

We use the term "national banking system" to describe the 4,000