1862-5] Change in the banking system. 571 fluctuations continued, there ensued a gradual diminution of such premium; but it did not entirely disappear until the resumption of specie payment by the government on January 1, 1879. Among other financial expedients adopted by the government, one of by no means the least importance was an entire change in the banking system of the United States. In the year 1862 there were in the loyal States about 1400 banks of issue, generally organised under the laws of the different States. They were without any national supervision ; there was no authoritative source of information as to their soundness ; there was no general security for their circulation. The system was subject to the grave evil of almost limitless counterfeiting, the 7000 various kinds of genuine bills being accompanied by about 5000 kinds of altered, imitated, or spurious notes. Secretary Chase, in his first annual report of December, 1861, proposed to replace these by a system of national banks, having for their principal features (1) a circulation of notes bearing a common impression and authenticated by a common authority; (2) the redemption of these notes by the associations and institutions to which they might be delivered; and (3) the security of that redemption by the pledge of United States stocks and an adequate provision of specie. The scheme found little favour when first proposed. It was generally opposed by the State banks, and only two prominent financiers at first gave it their hearty approval. But little by little the plan made converts. In his second annual report of December, 1862, Secretary Chase again urged it upon Congress, and after exhaustive debates it was embodied in a carefully drawn law, approved by the President, February 25, 1863. Under its provisions, banks depositing United States interest-bearing bonds in the Treasury might receive circulating notes, printed, registered, and countersigned by the Treasury Depart- ment, equal to 90 per cent, of the current value of the bonds deposited, which notes were made receivable in payment of all dues to the United States except duties on imports, and payable in satisfaction of all demands against the United States except interest on the public debt. A new office was created, that of Comptroller of the Currency, one of whose duties was to examine and regulate the condition of national banks, and enforce the redemption of their circulation through the sale of their deposited bonds. The details of the system were greatly elaborated by an amendment to the Act approved June 3, 1864. A still more important and, it may be said, decisive amendment was approved on March 3, 1865, which, under the constitutional power of Congress to regulate commerce and the value of coin, laid a tax of 10 per cent, on the amount of the notes of any State bank, or State banking association paid out by them after the first day of July, 1866. This tax compelled the retirement of all State bank circulation ; and State institutions generally transformed themselves into National Banks. In CH. XVIII.
