Banks in the United States,
financial institutions comprising (1) National banks; (2) State banks; and (3) savings banks, consisting of (a) mutual savings banks; and (b) stock savings banks. These are general throughout the entire country. In addition to these, are (1) co-operative banks, common to New England, especially Massachusetts; (2) loan and trust companies, established in nearly all the large cities; and (3) building and loan associations, now represented in most of the States and Territories. The last three classes partake of some of the features of regular banking, especially in the reception of money on deposit, subject to call, and the payment of interest thereon. The first three kinds of banks only are here considered.
The first bank in the United States was organized in Philadelphia in 1780, and a Bank of North America was planned in 1781 and opened in 1782. The Massachusetts Bank was incorporated in 1784; that of New York was chartered in 1791, although, since 1784, under Alexander Hamilton's "Articles of Association," it had been doing business. Alexander Hamilton also originated a plan for a United States bank, with a capital of $10,000,000, three-fourths to be paid in United States stock, at 6 per cent., which plan was adopted and approved by Washington in 1791. The bank was reorganized in 1816 with a capital of $35,000,000, the United States subscribing $7,000,000, with interest at 6 per cent., but in consequence of a general financial depression, was, the next year, in great danger of failure. Congress refusing to renew the charter, a State bank, called the United States bank, was chartered in Pennsylvania, and eventually failing, the whole account was settled in 1856. The $28,000,000 deposited by shareholders was totally lost, while the Government realized $6,093.197 upon its investments of stock. State banks were afterward chartered in the interests of individual and dominant political parties. The charters were sometimes fraudulently obtained and currency issued to three times the amount of their capital, and, in 1814, 1837, and 1857, many of them suspended payment. A reform movement in bank currency was inaugurated in Massachusetts in 1825, and a "safety-fund" system, recommended by Mr. Van Buren, adopted in 1829. In 1838 the Free Bank Act passed the New York Legislature, which authorized any number of persons to form a banking association, subject to certain specified conditions and liabilities.
On Feb. 25, 1863, the National banking system was organized, but the act establishing it was modified by that of June 3, 1864. This provided for a National Bank Bureau in the Treasury Department, whose chief officer is the Comptroller of the Currency. Under it National banks could be organized by any number of individuals, not less than five, that capital to be not less than $100,000 except in cities of a population not exceeding 6,000; in these banks could be established with a capital of not less than $50,000. In cities having a population of 50,000 the capital stock could not be less than $200,000. One third of the capital was required to be invested in United States bonds, which were deposited in the Treasury for security, upon which notes were issued equal in amount to 90 per cent. of the current market value, but not exceeding 90 per cent. of the par value; and these notes were receivable at par in the United States for all playments to and from the Government, except for duties on imports, interest on the public debt, and in redemption of the national currency. On March 3, 1865, a act was passed by which the circulation of the State banks was taxed 10 per cent., which drove their notes out of existence.
Various laws have since been passed in relation to National banks. On March 14, 1900, President McKinley approved a new currency act, which, among other things, established the gold dollar as the standard unit of value, and placed at a parity with that standard all forms of money issued or coined by the United States. The bill also made a number of important changes in the regulations governing National banks. The new law permits National banks, with $25,000 capital, to be organized in places of 3,000 or less, whereas the minimum capital previously required was $50,000. It also permits banks to issue circulation on all classes of bonds deposited up to the par value of the bonds, instead of 90 per cent. of their face, as before.
More recent features of banking in the United States are the Oklahoma scheme for guaranteeing the deposits of banks, which Attorney-General Bonaparte nullified, as far as National banks are concerned, in 1908; the combined savings and insurance banks of Massachusetts, known as "Brandeis banks," established in 1908; the SCHOOL SAVINGS BANKS (q.v.) founded by J.H. Thiry, in New York, in 1885; and the POSTAL SAVINGS BANKS (q.v.), established by Congress in 1910.
Entry from Everybody's Cyclopedia, 1912.