many of the state banks of that section were placed on a sound basis and have maintained their credit unquestioned to the present time.

Various measures have been adopted from time to time for the purpose of keeping bank notes good. The Suffolk bank system of Massachusetts required each country bank to keep a certain amount of specie on deposit with the Suffolk bank in Boston for the redemption of its notes, and bound the banks together for mutual support. The Safety-Fund act of New York required each bank to put into the hands of the State Treasurer an amount of specie equal to three per cent of its capital stock. The safety-fund thus gathered was held to make good the debts of any bank that might become insolvent. This made it a matter of common interest for the banks to watch over and sustain each other.

The Free banking system was introduced in New York in 1838, as a substitute for the method of granting special charters. This allowed any number of persons to form a banking association on meeting certain prescribed conditions. Under this system, the redemption of bank-notes was provided for by the deposit with a bank-comptroller appointed by the state, of stocks of states and of corporations and bonds and mortgages, the issue of each bank being limited by the amount of securities held on its account. The value of this security would of course vary with the character of the deposit. This system was adopted quite generally by the states west of New York and continued until the present national bank system.

Two Banks of the United States have place in our nation's history, each continued for a period of twenty years. The first, projected by Alexander Hamilton, was chartered by act of Congress in 1791, with a capital of $10,000,000. Its charter expired in 1811, and was not renewed. The second was chartered in 1816, with a capi

tal of $35,000,000. A bill for the renewal of its charter passed both houses of Congress, but was vetoed by President Jackson, and in 1836, it was closed as a government institution. Each of these banks rendered important service in the management of the national finances and as a bank of deposit, discount and circulation, helped to steady credit and to promote exchanges in all parts of the country. In the discussions concerning the re-charter of the bank, however, it plainly appeared what a political power such a corporation might become. The bribery, mismanagement and bold speculations with which the last bank closed its career, under a charter from the state of Pennsylvania, also clearly showed that such an institution might work mischief on a scale proportioned to its greatness. The people have therefore acquiesced in the decree which terminated its existence, and it is not likely that another bank of the United States will soon, if ever be organized.

Under the system of state banks, frauds and failures were frequent, entailing heavy losses on the holders of bills, and much distrust in business circles. Exchanges between distant parts of the country were thus embarrassed. For many years the premium paid in Wisconsin for New York money or drafts was from three to five per cent, adding so much to the prices of all goods brought from the East.

The existing National Bank system was established in 1863, by act of Congress, and the next year it was put under the charge of a bureau of the Treasury Department, the chief officer of which is the comptroller of the currency. Under this act, a national bank may be organized by any number of persons, not less than five, the capital in any instance, to be not less than $100,000,-except that in cities containing a population not exceeding six thou

sand, banks may be established with a capital of not less than $50,000. The capital stock in cities having a popu lation of fifty thousand must be not less than $200,000. Not less than one-third of the capital must be invested in United States bonds, upon which circulating notes may be issued equal in amount to ninety per cent of the current market value, but not to exceed ninety per cent of the par value of the bonds deposited. The notes officially certified are receivable at par in the United States in all payments to and from the government, except for duties on imports, interest on the public debt and in redemption of the treasury notes. They are redeemable on demand in lawful money of the United States.

Soon after this system was instituted, an act of Congress imposed a tax of ten per cent on the notes of state banks used for circulation after August 1, 1866. This, of course, excluded these notes from further circulation and most of the old state banks reorganized under the national system. The present bank currency of our country, therefore, consists of notes of national banks which are of uniform value in all parts of the country and the payment of which is guaranteed by the United States. The whole amount of these notes which could be thrown into circulation was at first limited to $300,000,000; subsequently it was raised to $354,000,000, but it is now unlimited. The amount actually in circulation, Nov. 1, 1877, was nearly $317,000,000. These banks receive deposits, sell bills of exchange and loan money at the rate of interest allowed by law in the states where they are located. For the circulating notes, this system provides all the security which the credit of the United States can give, but offers none for deposits and other liabilities except that all shareholders are held individually liable to the extent of the amount of their stock, in addition to the amount invested therein. In case of the failure of a national bank, a receiver may be appointed by the comptroller to wind up its affairs.

Private Banking houses exist in all parts of the country, which receive deposits, make loans and negotiate exchange, but issue no circulating notes. Some of these have gained a character and standing and extent of business fully equal to those of strong banks. Their credit rests upon personal integrity, wise management and large resources accumulated through years of devoted industry.

Savings Banks, for the most part, without capital, simply receive and loan deposits. It was estimated in Janu-. ary, 1877, that the savings banks of our country held deposits amounting to one thousand million dollars. The entire banking business of the country, at that date was represented by seven hundred million of capital and two thousand million of deposits.

The Liabilities and Resources of Banks under the present system, set down in distinct statement, will further illustrate the principles and usages of these institutions.

The Liabilities are embraced in the following items:

1. The Capital Stock, which is the amount paid in as the basis of business, and for which the bank is responsible to the several shareholders.

2. The Circulation, which consists of promissory notes, signed by the officers of the bank, payable on demand, and circulating in the community as substitutes for money.

3. Deposits, which includes all sums standing on the books of the bank to the credit of individuals, partnerships or corporations, that are payable on demand.

4. Balances due to other Banks. This is a form of deposits incidental to the necessary open accounts of banks with one another, but they deserve a distinct notice on account of a peculiar danger which attends them. The exigencies of business require that the small interior banks should all have funds deposited with leading banks in the

great centres of commerce to draw against. The banks of the great cities accumulate liabilities of this kind to a large amount. In any emergency, these deposits are liable to be drawn out so rapidly as to bring on or aggravate a commercial crisis.

5. Surplus funds or Reserves, held to strengthen the bank against contingencies. The national bank act requires each bank statedly to carry a portion of its net profits to such a fund until it amounts to twenty per cent of the capital. The reserve is really an addition to the capital, and belongs to the stockholders, enhancing the market value of the stock. Hence it is properly reckoned with the liabilities.

6. Undivided Profits and unpaid Dividends. As the business of a bank runs on, there is more or less of current profit undisposed of, and some dividends are uncalled for. For all these the bank must hold itself accountable. 7. Miscellaneous liabilities embracing little obligations of various kinds not classified.

The Resources of banks may be distributed in the following classes:

1. Loans. This item includes all that is due a bank from its customers for discounts and advances represented by notes or other obligations, payable from day to day as they mature.

2. United States Bonds deposited with the comptroller of the currency to provide for the ultimate redemption of the bank-notes. These are held sacred for that liability, but have a value more than sufficient to cover it.

3. United States Bonds and other stocks, bonds, etc., purchased and held for investments, that the means of the bank may be productive and at the same time more readily available than they would be if loaned to individuals. A portion of the Reserve is often held in this form.