The Portland daily press. [volume] (Portland, Me.) 1862-1921, 1865-09-16
HOW A BANK CAN LOAN MORE MON.
-aN hf EY THAN IT HAS

This question has been answered by YOUR
correspondent T. FL. E. by the assertion that
seem to be entirely ignorant of the first prin-
ciple zofbankny, and that first principle he
stated to be that a bank profit is not simply
in issuing bills, but in the ability to use the
proceeds of their own notes by re-inve5ting"
We would ask the gentleman how large the
profits of bank would be that issues no bills?
and why do banks issue bills, if there is no
profit in it? And as to the second part of his
proposition, the reinvesting process, by which
a bank pledges its Government Bonds, an
makes that pledge a loan, as wen as the MON
ey it gets from the Government on the pledge
of its secarisic,, I m ist coaies5 that it is a
new doctrine to me. And yet it's by this sort
Of hocuspocus, that the writer makes the loan
$2,75o,O00, when from it should be deducted
sS650000, the amount of Government Bonds,
which the bank has pledged for its circulation
of $466,000. l have yet 20 learn thai such a
pledge, in order to obtainmoney to loan, is a
Ioan, or what right bank has to publish it as
such, thereby misleading the public. have
now got thus Ear with the banks statement,
that its real loan is but S2,1OO,0O0, which is
based upon the deposit of 81, 10000, circula-
ton Of $4,000, and surplus profits 100000,
which makes a total Of s2,sS6.00O, from which
deduct the realloan Of s2,1oo,o0O, it leaves, as
stated by the writer $4,000, cash on hand, to
meet the enormous deposit of $1,771,0O0, most
of which the writer says is loaned Now, is
it possible, a well managed bank, which adj
NIT the 1st National Bank to be, wonid have
on hand but s235,oO0. to respond to legiti-
mate deposit account of $1,770,9o0, proper
ton of less than one dollar to seven of its in
debtedness to depositors? Suppose a call
should be made in one day upon the bank for
one quarter Of Its deposits, say $4I0,000, where
would the 1st National Bank be, with but
$685. 900 to meet the call? i would here sug-
gest another first principle of banking to your
correspondent, which he Seems to have over
looked, andlby which the deposit acct. may be
swelled to 81 santic proportions, a principle in
augrated BY many banks on changing from State
banks to National banks, to wit, Keeping aAoat
all the circulation of the defunct bank in adj
dition to their circulation from government
/ win venture to deduct from the deposit ae-
count 100000 currency of the deftlnct Inter
national Bank, which assume makes up
part OF the deposit account Of o, NC, 900. I
can then account for the fact that bank
can loan more money than it has to loan
VIII I. 81. E., that being the definite article,
tell me definitely, by what right the National
Bank loans, and circulates notes of the defunct
International Bank, and also the amount of
that circulation? and why, being so circulated,
it Is not included in their bank statement, IN
der the item of circuiation9 I admit that
other banks do the same thing, but where is
their authority? What does the gentleman
think Of this first principle of banking, which
IL overlooked in the bank statement, and by
him? As to the rise and progress of the LIST
National Bank I know little and care less. No
doubt it Is a wonderful Institution, but why
not follow the example Of other banks in the
city, not blowits own horn through the pub
icpress, butquietly publish its advertisements,
'waen required in the course of its business
and that without comment? ssA E. H. T.