Deposit of bonds.

Upon the basis of its capital stock the bank performs the ordinary banking functions; that is, it makes loans, discounts notes, buys and sells exchange. In addition to these functions National banks have another not at present exercised by other banks-they issue National bank notes for circulation as money of the United States. The entire business of these banks is conducted under regulations of the National law, and they are subject to inspection by National officers.

When a National bank is organized it must invest a sum of money equal to at least one-fourth of its capital in United States bonds. These may be purchased at any time from a broker. The bank must deposit them in the Treasury of the United States; but they are still the property of the bank and it receives the interest from them. The bank will then receive from the Comptroller of the Currency, National bank notes equal in amount to the par value of the bonds deposited. The president and the cashier of the bank sign each note, and they may then be loaned or paid out for any purpose in the ordinary course of business. The bonds constitute the security for these notes. A National bank may fail; that is, its depositors may never receive back their money; but the holders of National bank notes will lose nothing so long as United States bonds are good security. For if the bank cannot redeem its notes in lawful money according to its promise, the Comptroller of the Currency will sell the bank's bonds and thus obtain money with which to redeem them. This is the reason why we never hesitate to receive one of these notes even though the responsible officials of the bank may be entirely unknown to us.

The advantage that National banks seem to have in being able to draw double interest on the amount invested in bonds is much lessened by the following facts: (1) Banks must have a deposit

interest on

banks and

bonds.

in the United States Treasury for the redemption of their notes, National
which bears no interest. (2) Their circulation is taxed one-half
per cent.
(3) The bonds are above par, and consequently the act-
ual rate of interest is less than the nominal rate. (4) Other fees
and charges are exacted by the government.
For these reasons,
and because National banks are subject to stricter inspection than
banks organized under the laws of most states, private and state
banks are constantly being organized in competition with them.
The number of National banks in July, 1901, was 4,178.

The following kinds of money are now full legal tender: all
gold coins, silver dollars, United States notes (with the exceptions
noted), and Treasury notes of 1890. The gold and silver certifi-
cates and National bank notes are not legal tender.

weights and

The clause by virtue of which Congress possesses power "to coin money" also gives it authority "to fix the standard of weights and measures." It was only Standard of during the last session of the 56th Congress, in 1901, measures. that a law was enacted giving full effect to this grant of power. The only standard previously adopted by law was the English Troy pound; all other measurements of weight, distance, and capacity were based upon standards fixed by European governments. Standard thermometers and measures based on the metric system came from France, while standards of electrical measurement were German. Millions of dollars were spent annually by manufacturers, scientists, and others in obtaining standardized instruments from abroad. A law of 1901 established a National Standardizing Bureau in the Treasury Department, and appropriated money for a laboratory at which the standards used in all the applied sciences will be kept. A director, a physicist, a chemist, and their assistants will exercise the functions of the Bureau for the National, State, and municipal governments, for educational institutions, and for individuals engaged in pursuits requiring the use of standardized instruments.

SUPPLEMENTARY QUESTIONS AND REFERENCES.

1. What things have been used as money besides metals? What qualities of gold and silver have made them the common money metals? Ely, Outlines of Economics, 142–143; Laughlin, Elements of Political Economy, 69–72; Walker, Political Economy, 102-104; Encyclopedia articles on money and coinage.

2. a. Weigh a five dollar gold piece on a druggist's scales; weigh five silver dollars. What is the

ratio of these weights?

b. Put a silver dollar in one side of a balance, and one

dollar in subsidiary silver coins in the other. What is the result? Why? See an account of the monetary laws of 1853. (References in question 14.)

c. Balance an old coin against a new one of the same denomination. Is the former worth less than the latter? Coins become abraded and yet pass at face value except in international trade. Coins shipped abroad are weighed to ascertain their true value.

3. The present ratio was fixed in 1837. By the law of 1792 the gold dollar contained 24.75 grains of pure metal, and the silver dollar 371.25 grains. What was the mint ratio at that time?

4. Calculate the ratio between the total weights of the gold and silver dollars. Calculate the total and fine weights of the other gold and silver coins.

5. What is the value of an ounce of gold? Of a pound? If you are "worth your weight in gold” what is your value?

6. What is the present market value of silver? How many grains can you buy for $1? What is the market ratio of gold and silver? What is the value of the silver in a silver dollar?

7. No nation has at present a bimetallic monetary system. What nations have the single silver standard? The gold standard? What is meant by international bimetallism? (The history of the Latin Monetary Union furnishes the best example of this.) Encyclopedia articles on bi

metallism; Laughlin, chapter 27; Walker, pp. 345–355; Bullock, Introduction to the Study of Economics, 289–300; Andrews, An Honest Dollar, chapter 2.

8. Under the act of 1890 the government purchased 168,674,682 ounces of bullion for $155,931,002. What was the average market price of silver? What ratio does that represent?

9. Can you explain fluctuations in the relative values of gold and silver in the chart on p. 210? Construct a chart in which the value of silver is represented by a straight line, and the value of gold by a broken line. Does one chart tell the truth more accurately than the other?

10. Explain fluctuations in the value of United States notes (chart, p. 213). Construct a chart representing the

premium on gold by a broken line.

11. The space required to store 1,000,000 silver dollars is 250 cubic feet. On April 30, 1901, there were in the Treasury 436,485,494 silver dollars. How much space was necessary for their storage?

12. On July 1, 1901, the total amount of money in circulation in the United States was $2,189,567,149. The population was estimated at 77,872,000. Calculate the per capita circulation. How do these amounts compare with the per capita in other countries? See newspaper almanacs. 13. What positions were taken on the money question by the political parties in the last Presidential campaign?

14. The following books contain accounts of our monetary history: Knox, United States Notes; White, Money and Banking; Noyes, Thirty Years of American Finance; Taussig, The Silver Situation in the United States; Andrews, An Honest Dollar; Bullock, Introduction to the Study of Economics; Laughlin, Political Economy; Report of the Secretary of the Treasury, in Abridgment of President's Message and Documents, 1895-96, 187-246. (A valuable account, containing several official reports.)

15. Statistics of coinage, value of silver, production of precious metals, etc., may be found in the Statistical Abstract; Finance Reports; Treasury Department Circulars, No. 123 and No. 143; Reports of the Secretary of the Treasury in Abridgment of the President's Message and Documents.

Who are citizens?

CHAPTER XX

OTHER GENERAL POWERS OF CONGRESS

I. POWER OF NATURALIZATION.

NATURALIZATION is the process by which a foreigner becomes a citizen. The first section of the XIVth Amendment declares the following classes to be citizens: 'All persons born or naturalized in the United States and subject to the jurisdiction thereof, are citizens of the United States and of the States wherein they reside." The Dred Scott Decision, given by the United States Supreme Court in 1857, was based on the principle that a slave who was the descendant of a slave could not become a citizen according to the interpretation of the Constitution. But the Civil Rights Act of 1866 declared that these persons were entitled to the rights of citizenship. Could this Act of Congress be enforced so long as the decision of the Supreme Court was unreversed? All such complications were settled therefore by the definition of citizenship in the Amendment. The section has been interpreted to apply to "white persons and persons of African descent." An Act of Congress in 1882 expressly prohibits the naturalization of Chinamen. Naturalization has also been denied to natives of Japan and of Burmah. But the Supreme Court has decided that a child born in the United States of Chinese parents is a citizen.*

Previous to the adoption of the Constitution, the individual states had the right to determine their own

* United States vs. Wong Kim Ark, 169 U. S., 649.