Muscatine weekly journal. [volume] (Muscatine, Iowa) 185?-1890, 1859-06-17
VOL. X---NO. so.
For the Journal

For the Journal.
Mr.. EDIroR:-I have noticed in your pa
per of the 9th, an article from the Chicago
Money Reporter, entitled "a Clearing House
for Chicago" which seems, SO far as it relates
to the currency Of Illinois, to be of the right
stamp.
| have lately came to the conclusion, that
but small portion of the people who circu-
late the money of the banks Of Illinois or
Wisconsin, in this State, fully appreciate the
system of banking, that sends afloat such
large amount of irredeeinabe paper. As the
article above referred to has explained the
foundation of the Illinois banks, (Wscon-
sin has precisely the same system,) permit
me to carry out the idea contained in that
article little further
All the banks of issue in the States of ILL
nois and Wisconsin, are what is known as
Free Banks, for which stocks of the different
States are deposited as security for the ulti.
mate redemption of their notes. A half
dozen sharp, financial gentlemen in Wall st.,
or very likely in Chicago, who perhaps, have
not a dollar either in real or personal prop
crty free from execution, club together and
borrow of friend, who by the way has
taste for adding an honest dollar to his stock
in trade, when an occasion presents itself,
the sum of, say $780, 900 worth of State bonds.
With this start they organize bank any
where in the State. The most inconvenient
out-of. thew place, being preferable. They
deposit the bonds with the State Auditor,
who issues them batch of bank notes there.
on. The notes are sent to different cities and
sold to banks who promise to circulate them
at from to per cent discount for coin and
tern exchange, they pay the friend who loan
cd them the bonds, and on account of their
promptness in this transaction, the friend
loans them another batch of $50, 200 worth
of State bonds, which is again deposited with
the Auditor Of State, and more circulation
issued thereon, and SO they continue on until
they have an actual circulation out of from
four to five hundred thousand dollars, and
the whole cost to them is the difference be-
tween the currency and the coin or eastern
exchange they purchased of the broker, say
from to 2 per cent. They keep no banking
house open to redeem their notes, they have
no habitation, only name, but they assure
the public all the time that they have for ev-
cry dollar of circulation out, dollar in State
stocks deposited with the Auditor of State,
to redeem their dollar, and if that is not good
enough security, it is not their fault,-they
have complied with the law. But where are
their profits?
Their profits consist of this: According to
the charters of the States of Illinois and Wis
consin, creating these banks, they are allow
ed the interest accruing on the State stocks
deposited with the Auditor. which is paid
semi-annually, and Amounting on the capitalo of
a bank of $500, 900, to tie snug little sum of
$50 900, all coming into the hands Of the
proprietors of the bank, of course:
So you may easily account how so many
fast gentlemen who keep fast horses are sup
ported about some of our cities, Chicago for
instance, who have no visible means of living.
1t may be true, the ultimate redemption Of
these notes are cared for. But does this kind
of currency satisfy the wants of our business
men when can it be converted into specie or
eastern exchanges Not till the bank has
gone into liquidation and the Auditor of State
redeems it. But why, according to the char
ter, do not our business men compel them
to redeem or go into liquidationy For tho
reason, that our business men cannot take
the time nor afford the expense of hunting
up every wild cat bank located at cross roads
and the most inaccessible points throughout
the State, to compel them to redeem small
amount of currency they may have ON hand.
The Illinois and Wisconsin banks, too. are SO
numerous and have out such large circula-
ton, that it not unfrcquently happens, that
a man doing an ordinary business in this city,
every day the circulation of
from 50 to 100 different banks, in Illinois and
Wisconsin. Moreover, the banks are allowed
ten days grace after presentation of their
notes, and our business men have immediate
use for all their funds and cannot afford to
wait these hard times half that time.
Now, it is very probable, that the ultimate
redemption of the notes of the dffernt banks
in the aforesaid States is well provided for
Lucky if it is so !! But it does not always
happen so. When the Indiana Free Banks
went into liquidation, it was found there was
not sufficient funds on hand to redeem all the
outstanding notes in the hands of innocent
holders. 1t may prove SO in Illinois and
Wisconsin. For Judging from some recent
disclosures in Illinois, am disposed to be-
lieve that even in tight places, they arc not
more honest than their neighbors in Indiana.
But, admit the fact, that they all will be
redeemed, is not such a circulation heavy
tax upon our business community? They
may be redeemed next year or the year after
or IN five years, so may many notes, judg-
ments, and book accounts be paid to many of
our business men who have such owing them
within less than six months, and how would
it DO for our business men to attempt to Gre
ate circulating medium out of the notes and
of their customers ? These notes
and accounts will be paid sometime, the
most OF them after harvest, if the crops prove
good. So will Illinois and Wisconsin be re-
deemed probably! What is the ditferences
They arc all promises to pay, but no one
ready to pay.
But fear am getting rather lengthy-I
will conclude at some future time.
FINANCE,