JOURNAL OF BANKING, CURRENCY, AND FINANCE.

Taxation of net or gross deposits of banks-Position of the banks-National banks, their capital, circulation, etc.-Returns of the banks of New York, Philadelphia, and Boston-Foreign bank returns, etc.

THE question of taxing the deposits of our banks has been under discussion the past month-the Treasurer, Mr. Spinner, claiming that the tax should be on the gross and the banks that it should be on the net deposits. We observe with satisfaction that in consequence of the explanations of the Committee of the Banks that went on to Washington, the dispute has been satisfactorily adjusted. This tax will be computed hereafter on the net deposits as was the plain intention of the law. Had the tax on gross deposits been enforced it would have imposed on the banks of this city an extra burden of some half a million of dollars, and what is of more importance, this tax would have been very unequally distributed, falling with crushing weight on such institutions as have the accounts of dealers in government securities. It must thus have curtailed much of the bank accommodation these dealers have been accustomed to receive and could not but have checked their business. The extent of the injury inflicted on the injury inflicted on the Government finances from this source alone during the operation of funding the floating debt would have been very poorly compensated by the comparatively small augmentation of the revenue involved; while the irritation of the public mind by the derangement of business would, in times like the present, have been highly damaging.

We have said that the obvious intention of the law is to compute the tax on the net deposits and not on the so-called gross deposits. A few words will make this clear. The tax is made payable by banks on their "average deposits." Now let us take the case of Jones and Smith, Wall Street dealers in Government securities. This firm to-day place in bank one million of dollars in checks and other funds and draw against this amount nine hundred thousand dollars, leaving the balance to their credit $100,000. Yesterday, and for a long time past, as we find on inspecting the bank ledger, the result was much the same. Sometimes the amount of business done is two millions, and, occasionally, not more than half a million; but the balance to the credit of Jones and Smith, after any given day's business is always about $100,000. Now it is clear that if we want to know the average deposit in bank of this firm, $100,000 is the amount at which we should state it. The large snms put into the bank, and drawn out again during the day, form really no part of the assets, or available funds of the bank. This institution has no control over a dollar of these funds. It makes no charge for managing them, and merely acts as the disbursing agent of the dealer in receiving them and paying them out. Now to tax the gross deposits of the bank would be to tax these sums from which the bank receive no benefit, and would compel the bank to pay for the use of money which it really does not use at all or enjoy any control over.

It makes no difference as to the principle of this affair to say that Jones and Smith's account in the bank books on the day appointed by law for making the

Government returns shows a balance in their favor of $1,000,000 instead of $100,000; because the books are not posted up, and cannot be posted up till the next morning, when the outstanding $900,000 of obligations will come in through the Clearing House. The latter sum is not in the hands of the bank as assets; it only lies there in trust for the persons to whom it is owing, and appears daily in the deposit accounts of these persons in some other of the Clearing House Banks. It is, therefore, plain that to tax the gross deposits is to charge the duty twice over; for it would compel two different banks to pay taxes for the same sum of money on the same day.

In some quarters it has been imagined that the city banks would be favored more than the country banks, if it were permitted to the former to report for taxation the amount of their net deposits. From what has been said, however, it is plain that this is a gross mistake. A country bank, from the nature of its business, can post up its books at the close of business each day. The distinc tion between net deposits and gross deposits is important only if Clearing Houses are established, and even there it would cease to exist, were it possible to make the clearings and to complete the entries in the books at night before the close of bank hours. This arrangement, however, would be found impossible in our large cities, where the volume of transactions is large; and it would seriously disturb the established methods of doing business with no compensating advantage. Mr. Spinner in receding so promptly and so cordially from the position he was supposed to have assumed, has only added another to the nume rous existing proofs of his ability and faithfulness in office.

We do not wish it to be inferred, from anything we have said, that we object to the imposition on the banks of their full fair share of taxation. These institutions derive great profits from the issue of circulation, and from other privileges conferred on them by law. They are, therefore, under special obligations and are willing, we believe, to pay any equitable taxes that may be laid upon them. The sole objection to the tax on gross deposits, which we have been discussing, is that it was not equitable.

The following is an official statement just issued of the apportionment of National Bank circulation in the various States and Territories, made under section 21 of amendment to currency act, approved March 3, 1865. We add a column showing the circulation that had been issued to the banks on the 1st of October, 1865, also obtained from official sources. It will be seen that several of the States have already exceeded the amount apportioned to them:

Under what authority or on what pretext this large over-issue has taken place we canot undertake to say. Very likely it will be made the reason or excuse for an attempt to extend the law and authorize the issue of another fifty or one hundred millions of currency.

The bank statements of the three cities show no very important changes. In New York a large amount of specie was withdrawn, so that on the 10th of February there was on hand over six and one half millions less than on January 13th. The month closes, however, with a return of about four millions of this loss due to the Government sales of gold, while at the same time the legal tenders fell off from 68,000.000 to 61,000,000-being used, in great part, to pay for the gold purchased. Below we give the bank returns of the three cities during the year:

The returns of the Boston Banks have been as follows:

The following instructions have been issued to National Banks:

TREASURY Department,

OFFICE OF COMPTROLLER OF THE CURRENCY,
WASHINGTON, Friday, Dec. 15, 1865.

The following instructions are issued for the guidance of National Banks in mak ing their reports to this ffice. The books of this Bureau are so arranged that the several items and accounts correspond with the "forms" prepared, and all variations from the prescribed forms in making such reports will increase the labor and multiply the liability to error

In the preparation of these "forms," it is the intention to secure strict conformity with the law.

REPORTS GENERALLY.

Banks will furnish their reports upon the latest forms supplied from this office, and be prompt in forwarding the same. Reports will be expected from associations fully organized, whether they have commenced business or not.

The penalty prescribed in section thir y four of the National Currency Act will be duly enforced in all cases of failure to comply with its provisions.

The receipt of reports will not be acknowledged, but in cases of non-receipt due notice will be given.

The proper revenue stamps must be affixed to all reports and statements, or they will be returned.

Affidavits to reports and statements must be made before a notary public justice of the peace, or other officer duly empowered to take acknowledgments of deeds.

QUARTERLY REPORTS.

I Notes and Bills Discounted.-This item should include only discounted business paper. Money deposited with the Treasurer or any Assistant Treasurer of the United States, not subject to sight draft, should be included among "Other U, S. Securities."

II. Suspended Debt.-All paper past due, upon which interest has not been paid for a period of six months, as defined in section 38.

III. Indebtedness of Directors.-Loans made for the use or benefit of directors, and for the payment of which they are primarily responsible.

IV Overdrafts,-The amount of overdrafts must be stated as such and not deducted from the deposits.

V. Premiums-Premium or interest paid on United States bonds and securities should appear under their appropri te heads, and not be included in the face value of

the same.

VI. Balances due to and from Banks. When unable, for lack of space, to insert the names of banks and bankers, and the amounts due to or from them, exhibit the same on schedules marked A B, C, and D, and report the aggregate of each schedule in its place, referring to each by its designation.

VII. Bonds and Securities-All honds and securities, whether State or national, should be entered at their par value, without regard to premium or inte est (See Premiums) No bonds should be reported as Deposited with the United States Treasurer to secure circulating not s," or for other purposes, until the the Treasurer's receipt for the same has been received by the bank

Bonds in the hands of government, to be deposited on bonds paid for and not received, may be reported with "other United States Securities."

VIII. Specie. Specie should be reported at its precise amount, without any regard to the premium it may command.

IX. Capital Stock.-When the payments on original capital stock have not been fully made and certified to as prescribed in section 14 of the act, or when a bank is preparing to increase its capital stock, but has not yet obtained from this office the certificate of the Comptroller specifying the amount of such increase, and his approval thereof as prescribed in section 13 of the act, such payments should not be reported as capital stock paid in but should be so entered on the report as to show how much of the capital stock has been officially acknowledged, and how much has been paid for after receiving this acknowledgment.

X. Surplus Fund.--The provisions of section 33 must be complied with, and the requisite amount carried to "Surplus Fund."

XI. Circulating Notes.--The total amount of notes received from this office must be stated, and all on hand, whether signed or not, so entered

XII. State Circulation Outstanding.-This item is intended only for banks converted from a State to the National system, and having circulating notes of the old State Bank still unredeemed.

XIII. Lawful Money Reserve.-In this connection the Comptroller desires to remind the banks that the provisions of the act, in respect to the maintenance of a reserve, are explicit and absolute; that they cannot be disregarded without an open violation of law; and that it is his duty to see that the reserve be properly maintained. ITEMS TO BE PROTECTED BY "LAWFUL MONEY RESERVE."

1. National bank notes in circulation.

2. State bank notes in circulation.

3. Individual and United States deposits.

1. Specie.

THE LAWFUL MONEY RESERVE SHOULD BE:

2. All United States legal-tender issues, including the interest bearing legal tender

notes.

3. Balances in approved associations, in cities named in section 31, due to banks not located in said cities, to the extent of three-fifths of the required reserve of fifteen per cent.

4. Balances in approved associations in New York, due to associations in any of the cities named in section 31, to the extent of fifty per cent of the required reserve of twenty-five per cent.

5. Clearing-house certificates, under section 31 of the act.

6. Balances due from the Treasurer or any Assistant Treasurer of the United States, payable on demand.

It is necessary that the reserve, authorized to be kept in National Banks, should be in banks selected and approved as redeeming agents.

PUBLICATION OF REPORTS.

Each bank must publish its quarterly reports, (see section 34,) and transmit to this office proof thereof, either by forwarding a copy of the paper containing the same, or by a sworn statement of the publishers or their agents. In such publication, the &ggregate only of the several items due to and from National Banks and other banks and bankers need be set forth

MONTHLY STATEMENTS.

Monthly statements should exhibit the average of "loans and discounts,” of “ specie," of "other lawful money," of "deposits," and of “circulation,” (national) since the last monthly return; the amount of "State circulat on outstanding," (of converted banks), and when made by banks not located in cities named in section 31, should further state the precise amount of balance due them by their "approved redeeming agent."

To ascertain the average of any particular item for the month, it will be sufficient if the weekly footings of the items are added together, and the sum is divided by the number of weeks, instead of adding the daily footings and dividing by the num ber of days.