The affairs of the national banks are managed by a board of not less than five directors, elected annually by the stockholders, as in the case of other corporations, except that all directors of national banks must be American citizens, and own at least ten shares of stock. Stockholders are under the "double liability" obligation, i. e. every stockholder is liable for all of the debts and liabilities of the bank to the extent of the amount of the par value of his stock and as much more besides'.

At least one-half of the capital stock must be paid in before beginning business and the balance in five equal monthly installments. The amount of the capitalization of the bank is also controlled by law, and depends upon the population of the town or city in which the bank is to be located. In cities of 3,000 or less population the capital must not be less than $25,000, in cities of more than 3,000 and less than 6,000 the capital must be not less than $50,000, in cities of more than 6,000 and less than 50,000 the capital must be not less than $100,000, and in cities of 50,000 or over it must be not less than $200,000. A bank with a capital of $150,000 or less must deposit with the Treasurer of the United States government bonds equal to one-fourth its capital. A bank with a greater capital must deposit at least $50,000 in bonds. These bonds may be used as a basis for circulating notes or not, according to the option of the bank. No bank is compelled to issue notes.

A national bank may issue circulating notes to the amount of 90 per cent of the par value of the government bonds deposited with the Treasurer of the United States.* The Comptroller furnishes suitable notes, in blank, in denominations of $5, $10, $20, $50, $100, $500 and $1,000, and these when signed by the officers of the bank are ready for issue over the bank's counter. Bank notes are receivable in all parts of the United States in payment of taxes, excises, public lands, and all other dues to the United States except duties on imports and interest on the public debt.

*This was the original provision of the law, but by the Act of 1890 the limit was raised to the par value of the bonds deposited.

Each national bank is required to keep on deposit with the Comptroller of the currency a deposit equal to five per cent of its circulation, as a fund for the redemption of its worn out or mutilated notes. When notes become worn, defaced or mutilated so that they are no longer fit for circulation they will be replaced with new notes by the Comptroller. The old notes are then "macerated" or destroyed by the process of grinding them to a pulp. Whenever the redemption of notes for any bank amounts to $500 it is called upon to replenish its deposit.

Any bank desiring to reduce its volume of circulating notes may do so by paying into the United States treasury either the notes themselves or a sum of lawful money with which the Comptroller may redeem them, and a corresponding amount of government bonds will then be released from deposit and returned to the bank. To prevent any sudden or serious contraction of the currency of the country, the law prescribes that not more than $3,000,000 of notes shall be retired by all of the banks in any one month. Of course no bank can withdraw bonds below the minimum required to be deposited irrespective of circulation. Certain enumerated cities in various parts of the country are denominated "reserve cities," among which are New York, Chicago, Boston, Cincinnati, Baltimore, Albany, Cleveland, Detroit, Philadelphia, St. Louis, San Francisco, Milwaukee, Louisville and Washington. The banks in these cities are required to keep on hand a sum of money equal to 25 per cent, of their deposits. Banks in other cities are required to keep a reserve of 15 per cent., but three - fifths of this may consist of deposits with banks in reserve cities. The five per cent, redemption fund on deposit with the Comptroller may be counted as a part of the reserve. When a bank's cash falls below the reserve limit, it is forbidden to increase its liabilities by making new loans or discounts, or to declare further dividends until the cash reserve is restored. Failure to restore the reserve may subject the bank to forced liquidations at the discretion of the Comptroller.

The safety of the banks is guarded by the law through a number of wholesome restrictions, among which are, that no real estate acquired under judgment decrees or mortgages may be held for more than five years. Not more than one-tenth of the capital of the bank may be loaned to one individual, corporation or firm, directly or indirectly, nor may any bank lend money on its own shares, but they may be taken as security for a debt previously contracted in good faith. Unearned dividends must not be declared. If the capital is impaired by losses, the deficit must be made good by an assessment on the shareholders if necessary. One-tenth of the net profits must be annually added to the surplus fund until the fund shall amount to 20 per cent, of the capital.

Every national bank is required to make not less than five reports of its condition each year to the Comptroller, verified by the oath of the president or cashier and the signatures of at least three directors. In addition to this special reports as to dividends and earnings are made each half year. Reports are usually called for a prior date, so as to give bank officials no opportunity to patch up affairs. As a further safeguard, bank examiners are employed by the Comptroller, whose duty it is to make a thorough examination of the affairs of all national banks, inspect books, securities, assets and liabilities, and report the results of such finding to the Comptroller.

The Comptroller also has charge of the settling up of the affairs of failed national banks. He appoints the receivers and fixes their compensation. All money received for the assets of the bank is turned over to him and he pays out dividends to creditors. The Comptroller also declares the bonds held for security of circulation forfeited, and gives notice to the holders of all notes of the defunct bank to present them at the treasury for payment.