Daily union and American. [volume] (Nashville, Tenn.) 1865-1866, 1865-12-09
UNI0N&AMERICAN
The Financial System---A Popular View
0ur Ruusks

4 SttE Ast<siaASs
To the Editors Of the Evening Post:
The greatest financial blunder we have
made III all our troubles is, doubtless the
| tegal-tender act. Had it never been passed /;
had the Government simply paid all it
could, and given promises to pay for the
liabilities it could not meet, funding its
debt at the market rates Of interest from
time to time, it is easy to see that our ma
tional debt would now be far less than it is :;
that the whole business of the country would
be on a sounder basis; and that our national
honor would be higher and purer before the
world.
The next blunder in magnitude and in its
evil effects is our national banking system
This is so directly opposed to the true in
terests of the country, in so many and so OBJ
vious ways, that it is difficult to speak of it
in measured language yet it was doubtless
founded by one of the ablest of our states
men and jurists man personally of pure
character and eninently adapted to the
higher position he now holds, though his
failure was so complete and so sad, as Sec
rotary of the Treasury, that history will
probably do but imperfect justice TO his
| powers.
/ Now let us suppose that, instead of this,
the Government had issued additional
greenbacks to the extent of this bank cir
| culation. We should thus have borrowed,
| trithom interest, the three hundred millions
/ on which we now pay coin interest to the
banks, saving some eighteen millions in
coin to the Treasury per aflnum. And be-
| sides, We should have deprecated our cur
rency far less than by the banking system.
| Thus such an issue of greenbacks, though a
desperate measure, and productive of the
| evils which we have already considered
would have been far better than that of our
present national currency"
The only plausible argument in its favor
is that so harped on by official papers, that
it produced market for our bonds. And
so ii did, to the extent of the three hundred
millions in question. We have seen, how
| ever, that it would have been simpler, and
| less injurious to business and to our national
| credit, to borrow this,money without interest,
| by issuing greenbacks, than by borrowing it
at high rates of interest and still initiating the
currency as much as if we paid more. The
| simple statement of the question is this:
| The Government, having to borrow, stands
| in dread of two evils; if it issues currency,
| its credit suffers by initiation and the rise of
| gold; if it sells bonds at the market rate, its
credit suffers chiefly by the heavy interest it
has to pay, and, temporarily, by the Excess
| sive supply of the bonds in the market. Now
| the new banking system is most ingeniously
| contrived, so as to combine in full all the
| evils of both methods We borrow the sum
needed, and at once both increase our interest
dues as much as if we sold the bonds alone;
! and initiate the currency as much as if we
| only issued greenbacks.
| Rut tho wropo 1onn ~ ol1r Moody Traa eT1ry
| is but the beginning of evils in the system.
We see now what we ought to have seen in
| the beginning, that these banks are the nurses
of all speculation, and the bane of all sober
| business. They feed and stir the fiery de-
| sires of all classes for excessive and impos-
sible profits. They are thus doing more
| than the direct issues of the Treasury them
| selves to make faro bank trade, and to
| demoralize the industry of the nation. But
| all objections to them may be summed up in
| one word-they are false. There is no truth
in them. Their issues are promises to pay;
| they are redeemable in promises to pay of an
insolvent Government; and the boosted Sc
| curity for their redemption is the deposit of
| other promises to pay of the same Govern
ment. 1t is hollow edifce of credit poised
on nothing. How long can it stand?
Consider the future of these banks. The
| present suspension of payments by the
| nation must end in one of the two things, re-
| sumption of payments or utter bankruptcy.
| In the latter case It is plain that
the banks are gone. Their capital is in
bonds which become worthless. Their
circulation is irredsemable. Other proper
| ty, such as real estate, railroad or mining
| stocks, goods of all kinds, &C., remains of
| value; the capital invested in these banks
| becomes nothing. But suppose the Govern
ment to surmount its difficulties and to pay
| its debts. The first step must be to bring
| the currency near to specie stondard, and
any attempt to do this necessarily precipi-
| tates the price, in Currency, of the bonds,
which are the capital of these banks and Sc
cure their circulation. If, then in order to
pay off this circulation, the bonds are offered
for sale, this will only hasten their decline.
| Thus every step of the Treasury toward re-
! sumption of payments tends to destroy the
security of these issues and impair their val
| ne. And any near approximation to a specie
| basis, within many years, would doubtless
| sweep away majority of the national banks
of the country. / have yet to hear of one of
| them (save few in this city which have
been forced into the system against their
| will that is making preparations to meet
| the threatened storm, by anchoring itselfup-
on large accumulation of real money or
its equivalent.
Nor is this ALL 1t is impossible that
currency like this should obtain the conf
| dence of the people so f1ly as that issued
| by the Government And as this is not a
| legal tender, the least beginning of distrust
in the community wosld drive home these
notes. demanding redemption in greenbacks.
Such movement as this, once begun, would
| be apt to result in decided panic; and espe-
,.ially so if the Treasury should attempt to
carry out its measures Of contraction, and
| SO make greenbacks scarce. And how could
the banks obtain the greenbacks to redeem
their bills? Not by drawing on one anoth-
er, since all would need them alike. Only,
then, by the sale in open market, of their
bonds. A panic of this kind would speedi-
| ly force upon the market enough of these
bonds to terrify other holders, and produce
a great fall in their price. 1t is well known
| that the price of Government bonds has
more than once fallen two per centum in as
many days from sales by banks on which
the Government has drawn for its balances.
| This is but a symptom of the fall We are in
danger of, which must occur 50 soon as the
public distrust which the system deserves is
directed toward these banks.
This leads US directly to the most iniqui-
tous part of the system, in practice, that
| which makes these banks depositaries Of
public money. An average sum of certainly
not less than thirty millions, the property of
the United States, lies continually in these
banks as a part of the deposits" ON which
they. do business They loan this money
and make dividends of the interest; they
redeem their notes, sustain their credit, and
make their profits by the use Of it; while
the poor and failing Treasury is paying eight
and three-quarters per cent. interest, (six
per cent in gold) to It's creditors for the use
of it; nay, while the Government is post
poning millions of its obligations, in order
TO avoid seeming increase Of its debt, and
while the patriot soldier is waiting half
naked and the heros widow starving for
want of the long-earned pittance it is 50 un-
ready to pay
The Treasury dares not draw out these
balances, lest BY so doing il not only lower
the price of its bonds, and make insecure
the whole bank circulation, but also make
money scarce and interest high for the
Treasury itself is now bank Of deposit on
a large scale, and has received from the peo-
pie hundred millions Of dollars in interest,
/ e. L. ii I1x-se ynfiro Tho