They
were originally issued during the civil war, and are promissory notes on
the part of the government, and as such constitute a portion of the debt
of the government. They are paper, which of itself is of no value, and
no coin is deposited in the Treasury which they represent, as in the
case of the gold and silver certificates. They thus cost the government
nothing, and, as they are made legal-tender, and paid out by the
government, they were just so much clear gain to it. At first they were
not redeemable, i.e., exchangeable for coin at the Treasury, but since
1879 they are, and are therefore just as valuable now as any other form
of money, though formerly worth much less than their face value. One
hundred million dollars in gold is kept on deposit in the Treasury for
their redemption.
5. _#Notes of National Banks.#_--This is the one form of money that is
not issued directly by the Federal government, but through the agency of
what is called our "National Banking System," which may be thus
described: A national bank can be organized by any number of men,
provided the capital stock of the bank is at least $100,000. One-third
of the capital must then be invested in government bonds and deposited
in the United States Treasury. The bank may then issue notes to the
extent of 90 per cent, of such deposit. Such notes are thus amply
secured by the deposits with the government.
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