OLEOMARGARINE.

Questions having been raised as to whether it was the intention of Congress to levy a tax on the substance heretofore known as oleomargarine and the other substances named in section 2, unless made in imitation or semblance of butter, or when so made calculated to be sold as butter, or for butter, the matter was referred to the AttorneyGeneral by you October 2, 1886, pursuant to my suggestion made October 1, and the Attorney-General rendered an opinion dated October 18, as follows:

DEPARTMENT OF JUSTICE,

Washington, October 18, 1886.

SIR: Your communication of the 24 October, instant, submits for opinion the ques tion whether or not the various simple and compound substances mentioned in the second section of the act of the 2d August, 1886, entitled "An act defining butter, also imposing a tax upon and regulating the manufacture, sale, importation, and exportation of oleomargarine" must be made in imitation or semblance of butter, or, when so made, calculated or intended to be sold as butter, or for butter," before any of them can be regarded as subjects of taxation under the law.

The question really is whether the language just quoted from the second section of the act is a predicate and qualification of the whole section or only of the clause or member in immediate connection with which it is found.

In my opinion the qualification extends to the whole section and is an essential element of the statutory definition of oleomargarine.

If each of the simple or compound substances mentioned in the law is taxable under the act regardless of whether it is in imitation or semblance of butter, or calculated or intended to be sold as such, it results that some lubricating oils must bear the tax, although not supposed to have been in the contemplation of Congress.

But the language of the law is repugnant to that view. Sections 6, 8, 10, and 13 cannot be understood as applying to fluid substances. In these sections are found directions that oleomargarine shall be “packed” in “firkins, tubs, or other wooden packages"; that no package shall contain less than "ten pounds"; that retail dealers shall pack what they sell in suitable wooden "or paper packages"; that "any fractional part of a pound in a package shall be taxed as a pound"; that the imported article shall, in addition to the import duty, pay an internal-revenue tax of "fifteen cents per pound."

Now, as these embrace all the regulations of the kinds mentioned in the act, it would seem to require the conclusion that it was solids and not fluids that the legis lature had in view, and therefore that the oils and extracts referred to in section 2 are not taxable as oleomargarine.

We do not speak of packing fluids, nor do we estimate their quantity by weight, nor is it customary to pack them in firkins or tubs or other like vessels.

Again, if the simple oil is taxable, it must undergo a repetition of the tax should it afterwards enter into any one of the combinations or mixtures named in the second section, each of which, upon this theory, must be taxed. So that unless the maker of any of these composite substances produce all its constituents, himself, the double taxation he sustains must put him at a disadvantage when brought into competition with those who do-a very small number, I am informed.

To resolve a doubt upon a statute it is a familiar rule to look at the evil the statute was intended to cure. There can be no question that the object in this case was to protect the trade in legitimate butter from the damage caused by the sale of supposititions butter, by requiring the manufacturers of the latter to distinguish their product by an appropriate brand, and by fettering the production of the article with a tax.

If the words of qualification or restriction at the end of section second apply only to the clause in which they occur, it is rather strange that the definition of butter did not follow them instead of forming the subject of the first section, and being given a prominence that indicates an application commensurate with the whole scope of the law.

I have the honor to be, sir, your obedient servant, The SECRETARY OF THE TREASURY.

A. H. GARLAND, Attorney-General.

After I received notice of the opinion of the Attorney-General the oleomargarine regulations were amended October 21, 1886, so that said section 2 should be considered as though it read as follows:

That for the purposes of this act certain manufactured substances, certain extracts, and certain mixtures and compounds, including such mixtures and compounds with

butter, shall be known and designated as "oleomargarine" whenever made in imitation or semblance of butter, or, when so made, calculated or intended to be sold as batter or for butter, namely: All substances heretofore known as oleomargarine, olen, oleomargarine oil, butterine, lardine, suine, and neutral; all mixtures and compounds of oleomargarine, oleo, oleomargarine oil, butterine, lardine, suine, and neutral; all lard extracts and tallow extracts, and all mixtures and compounds of tallow, leef-fat, suet, lard, lard-oil, vegetable oil, annotto, and other coloring matter, intestinal fat, and offal fat.

It is impossible at this time to estimate the amount of internal reverne which will be derived from oleomargarine. If, however, the operation of the law should prove unsatisfactory in its present form, which is construed to levy a tax only upon the article manufactured and sold or removed for consumption or sale as supposititious butter, the law can be so amended as, while imposing a tax upon oleomargarine-oil, neutral, and such like substances without which the supposititious butter cannot be extensively manufactured, to provide also for the use of such substances by subsequent compounders without the payment of a second tax, as rectifiers are allowed to compound distilled spirits on which the tax is paid without paying an additional gallon tax simply by delivering up the original tax-paid stamps and receiving in exchange other stamps representing the same quantity; also for refunding the tax on so much as is used for lubricating purposes or otherwise in the arts and sciences.

In my opinion, the advantage in securing the tax from the manufacturer who derives his material from the slaughtered animals cannot be overestimated. These manufacturers are comparatively few in number. By requiring them to stamp and brand all their productions and to keep such books as will indicate the destination of their products, such products can be followed to the dealers and through the dealers to the consumers.

At the same time, by the use of a system of exchanging stamps similar to that now in operation as to distilled spirits, the article may be readily identified by the consumer without necessitating the imposition of a second tax.

I have the honor to be, very respectfully,

Hon. DANIEL MANNING,

JOS. S. MILLER,

Commissioner.

Secretary of the Treasury.

REPORT OF THE COMPTROLLER OF THE CURRENCY.

TREASURY DEPARTMENT,

OFFICE OF COMPTROLLER OF THE CURRENCY,

Washington, December 4, 1886.

Sir: In obedience to law, I have the honor to submit a report for the year ending November 1, 1886, exhibiting

First. A summary of the state and condition of every association from which reports have been received the preceding year, at the several dates to which such reports refer, with an abstract of the whole amount of banking capital returned by them, 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.

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

Third. Suggestions as to amendments to the laws relative to banking by which it is thought the system may be improved.

Fourth. A statement exhibiting under appropriate heads the resources and liabilities and condition of the banks, banking companies, and savings banks organized under the laws of the several States and Territories, such information being obtained by the Comptroller from the reports made by such banks, banking companies, and savings-banks to the legislatures or officers of the different States and Territories, and where such reports could not be obtained the deficiency has been supplied from such other authentic sources as were available.

Fifth. The names and compensation of the clerks employed in the office of the Comptroller of the Currency, and the whole amount of the expenses of the banking department during the year.

This is the twenty-fourth annual report of the Comptroller of the Currency.

The security now afforded to the holders of national-bank notes by the deposit of bonds in trust with the Treasurer, seems to be complete, and as long as the bonds of the United States remain (as they now are and have been for some years) readily salable at above ninety cents on the dollar, the national-bank currency will continue to enjoy the confidence of the public.

It must not be lost sight of, however, that there are conceivable contingencies in which the salability of these bonds would be impaired, and the security of the notes correspondingly affected, but the probability of any such contingency is too remote for present consideration, while the provision of law giving to the United States a first lien upon all the assets of the bank for the amount of any deficiency in the proceeds of the bonds would seem to be a sufficient factor of safety in any case. The security of other creditors depends upon two conditions: first, the proportion of assets to liabilities; and, second, the solid value of the assets. Both proportion and value, in any given case, will depend upon the management of the business of the bank; hence the supervi sion of the business and management of every bank, by the Comptroller of the Currency, has now become the most important feature of the national banking system.

The laws providing for this supervision, and those which prescribe and limit the character of the business that may be done by the national banks should be frequently revised in order that the light of experience may be utilized to their constant improvement.

To this end I respectfully submit the following suggestions:

First. That section 5137 of the Revised Statutes should be so amended as to express more clearly and definitely the limitation put upon national banks with respect to their dealings in real estate and in mortgages, and to provide a penalty for violation of the law.

Second. That section 5145 be amended by adding the following clause: Whenever the vice-president and the cashier, or either of them, is a director, the board of directors must consist of at least five members be sides such officers.

Third. That section 5151 be so amended as to exempt from farther liability the shareholders of national banks of which the surplus shall exceed by 20 per cent. the amount of the capital stock of the bank, and that they shall be partially relieved from such responsibility in proportion as the surplus shall exceed the 20 per cent. now required by law. Provision, however, should be made that such exemption cannot be ob tained through any process by which capital becomes converted into

surplus, and also that such exemption is not to be enjoyed until after the Comptroller of the Currency is satisfied that the entire capital and surplus are represented by good assets.

Fourth. That section 5160, as modified by the act of July 12, 1882, be so amended as to require that the bonds which every association must at all times have on deposit with the Treasurer shall be registered United States bonds bearing interest.

Fifth. That section 5192, as modified by the act of June 20, 1874, be so amended as to require all banks to keep on hand, or at some centre near their location, a larger proportion of their reserve than that now specified in the law.

The present provision, allowing a part of the reserve to be kept in a distant city, appears to be a survival from the system of redemption formerly existing, which was repealed by the act of June 20, 1874, and its maintenance seems inconsistent with the general policy of the laws as they now exist.

Sixth. That the act of June 20, 1874, be so amended as to make it evident whether banks need keep a reserve on Government deposits secured by bonds.

Seventh. That section 5200 be so amended as to render its application practicable in all cases.

It would appear that when in 1864* a limit was placed upon the accommodation which a national bank might extend to any person, company, corporation, or firm, for money borrowed, Congress had in view the then existing limit as to the number of national banks and as to the formation of new banks, arising out of the limitation upon the total volume of national-bank currency.

At that time the privilege of issuing currency was the most valued of all the privileges conferred by the national-bank act, and the limit upon this restricted the number of banks in each community; hence it was logical and consistent for the law to provide that this limited bank accommodation should not be monopolized by any small group of persons. Now, however, all limitations upon the total volume of national-bank currency have been removed, and to all intents and purposes the system has become one of free banking, open to citizens of the entire country, to any extent to which they may desire to avail themselves of its privileges; hence there does not appear to be any longer the same reason that there was formerly for the law to enforce a general distribution through the community of the amount of accommodation at the disposal of a national bank.

As a matter of fact, with the growth and extension of the system, banks, especially in the large cities, have had their business very much specialized, and such banks cannot continue to exist or remain in the system if they should now be held to a strict conformity with section 5200. The specialization of the business of the banks means, of course, their becoming identified with special lines in trade, manufacturing, farming, &c., and as in all such industries there has long been a tendency toward concentration in the hands of a comparatively small number of large houses, it follows that banks so situated must lend largely to particular firms or else lose their most important customers. Thus business necessity on the one hand, and the limitations of the law on the other, have produced, in many cases, habitual disregard of the law, and in other cases evasions of the law, all of which must be either ignored or tolerated by the Comptroller of the Currency, because the only penalty

*The limitation in the original act of 1863 was different and complicated.

now provided is forfeiture of the corporate existence of the offending bank.

While these reasons exist for modifying the law, at the same time it is of course important that some limitation should be imposed upon the amount that any bank should hold in the paper of any person, company, corporation, or firm, and that the limit should be such as can be effectively enforced by the Comptroller.

To this end I respectfully suggest the following:

(1) That the limit of 10 per cent. of the capital, in loans to one party, be extended so as to be computed upon capital and whatever surplus may be held in excess of the legal requirement of 20 per cent. of capital. (2) That this limit may be exceeded only in cases where a bank holds security of undoubted value, and which is not in any way dependent for its ready convertibility upon the borrower.

(3) That the penalty for violation of this restriction be such, in the discretion of Congress, as shall appear to be proportionate to the nature of the offense and such as may be readily enforced by the Comptroller of the Currency.

Eighth. That section 5209 be so amended as to extend the penalties therein specified for making false entries, reports, or statements, so as to make them apply to bank examiners or other persons in the employment of the Comptroller of the Currency, and also to all such acts done with intent to deceive the Comptroller of the Currency or any person in his employment.

The protection of banks and of those whose interests are in the keeping of the banks against fraud on the part of the bank officers invites the attention of Congress, both in the interest of general order and for the improvement of the banking system. In order that legislation deemed advisable may be framed, with reference to past experience, I have given in the Appendix to this report extracts from records in this office showing the causes of national-bank failures in all cases in respect to which such information is accessible.

Ninth. That section 5219 be so amended as to enable the national banks to obtain that practical protection against unequal State taxation which it was manifestly the intention of Congress to secure to them in this section.

Tenth. That section 5240 be so amended as to apportion the compensation for examination of national banks according to the aggregate investments in each case, rather than according to the amount of capital, and that provision be made for more frequent examinations than are now possible by adding to the amount paid by the banks a suitable amount to be paid out of the Treasury in order that supervising examiners may be employed.

Eleventh. That a law be enacted to the effect that any oath required of the officers or directors of a national banking association may be taken before any commissioner of a circuit court, or before a notary public having an official seal, or before any other officer using a seal, where such notary or officer is qualified by the law of any State or Territory to administer oaths.

There is a practical necessity for such an enactment; for upon an examination of the statutes, in the light of the decision of the Supreme Court in the case of the United States v. Curtis (107 U. S., 671), it appears that no provision has been made for giving legal effect to the oaths required of bank officers and directors, except in the one case to which the act of February 26, 1881, specially applies.

This act evidently aimed to supply an omission in the law, but inas