The New York herald. [volume] (New York [N.Y.]) 1840-1920, 1867-10-23
Letter from Jay Cooke the
Banker.
The Origin Of the National Bank
Ing System.
THE PRESENT POSITION OF THE BANKS.


tent
H. What is the character Of the national bank cur
Seucyi
III. What Is your reply 70 those who claim that the
government could and should the eighteen millions
Of annual interest paid the United States bonds
deposited by the national banks their circua
tion by retiring the three hundred millions Of national
bank notes, and issuing like amount Of grsenbacks
~. What IL the present position Of the national
v. How and wherein is the national banking system
superior 10 the old United States Bank the State baak
VI. why should tho national banking system be per
Il strange that such lack OF information to
prevail Az over our land ana We
are convinced that II the system were better understood
by politicians Of all parties they would cease endeayor-
ing 70 damage by drawing into the vortex Of polt
national banking system from the beginning, have
qures believing that your replies 70 them viii furnish
much Of the information needed BY IN: people Very
President First National Bank, saDdusIy.
President Second National Bank, ssndusky,
10 JAY Cooke, Gibraltar, Put Bay, Ohio
Reply of Jay Cooke.
GrBRALrAR, PUr-N.BAy, Ohio Oct IT, 1857.
GENTLEMES-Your favor Of the 1lth inst. is received .
and il complying with your request far As am able,
do so the more readily because regard tho national
banking system standing upon it, merits and
in any sense party question. With you, deeply
greet the mistaken opposition to this admirable system of
finance manifestng itself many quarters, and
canuo. but believe that those Of both parties who
apparently most antngon site TO the national banks
they had gwen as much thought to this great subject
its importance demands would be among tho foremost
defenders oil system which, trust Is destlned to prove
i.seif wse and benehcent-a permanent basis for
future pr sperty. shall attempt to answer your ques-
tions In the order In which they in your letter.
L-oRIGIN or THE NATIONAL BANKING SYSTEM.
Up to 1868 our paper currency consisted OF the notes
Of banks chartered BY tho several states-each State
having laws liar TO itself for the establishment and
government Of It's banking institutions There was no
attempt uniformity bank legislaop the banks Of
those Of another. In the banks held
furnish reasonable evidence Of sOlvsncy while in others
the currency was left 70 take care Of ITSELF
after their own interests a. best they could
Che banking systems Of New York, Ohio. and possibly
on ns 0n Des 70 ns
par in all Of the countr the notes of each BANK
had different rate OF discount and the notes Of the
country at tho Same time. The currency OF State
although good at home often rejected uncurrsnt
tween the East and The West the North ana the South
expensive and vexatious enailing constant loss upon
n: business men o. every section The notes q
judges and rendering unsafe for ost people 70 &C.
local banks unless accompanied w guarantee without
consulting expert Failures were frequent and dis.
astrous the less usually falling first upon the bill hold
srs who were least able to bear it, Il was Impossible
TO tell what banks were sound and what ones were on
the brink Of c,s oa1k 81 The whole system vas
was nlled with apprehension. more chaotic and un.
satisfactory financial condition could not we'll be
imagined.
At such . time, and under such clrcumstancss the
nation was engaged In suppressng great rebellion, and
m n
empty hostllities were in progress and pubic conf
dence IN tie fnanc al situation was At its lowest ebb:
The governn emit could mot to any extent avail itself OF
tion Of the noble rssponsesof the New York. Pnlade
nrst nifty million loan, tho Secretary Of the Treasury
sought IN vain for that concert Of action and
necessary to meet his daily increasing wants The
only manner In which the old system could have been
mad even temporarily available would have been By
gran log the Safe banks the widest OF ISSUE
thus flooding the country with irredeemabe aud, to
great extent, unsecured paper currency, which long
before the close Of hostties led to financial
dssster and lapse; for only would the then
istinE banks have greatly increased their circulation
but hundreds Of others would have been established 10
profit by the confusion OF the timea This OF
banks would naturally have been greatest in those
States where greatest license Of prevailed
and where there fewest checks irresponsible
banking As the only means Of bringing financial order
out OF chaos giving the country safe and uniform
currency OF restoring the confidence OF the people, and
ABOVE ALL OF furnishing the snews OF war; govern.
ment originated organized and pu, in successful opera
tons which did much TO enable the nation TO meet .ts
enormous expenditures, fight the war to victorious
cn Sc and which s remans-onc OF the nobest fruits
OF cur great struggle
The plan thus devised and put in operation was
designed as temporary expedient to meet great
emergency and die with II, but meant b. per-
manent 6nanciai system, which should only
strengthen the nation during . costly war; but also
benefit the people through manv years OF peace
Before introducing system It was necessary
remove the DID, and the latter induced leave the
field partly In consideration Of the beneficial features OF
nd ~ I'M ulsiou
rights and PRIVILEGES were proered by tho government
TO the old banking corporations II they would sur
render their State charters retro their circulation ana
organize under the uniform plan nov known a. the
National banking system. Where these inducements
force applied in the shape OF . special the
circulation OF all State banks One Of those conditions
On which the State banks surrendered Their charters
and conformcd themselves to the na'ioDai plan, was
the pledge from tho government that they
should be permitted to certain amount of
htng notes Particular mention Is here made OF this
one condition. Of the change from the old system the
new, because from Il is drawn tho chief argument OF
the opp nents OF the national banks and also In order
that The condition mentioned may al the outset appear
N s true character OF the OF
te'Neen the national government and the old banking
The change from the old plan TO the new was rapid
and complete The immsdate results Of the change al
though important You'd measure, NAV he sketched in
single sentence:Ii swept from existence . currency
which was At once monars IN appearance unstable IN
value and, with few EXCEPTIONS insecure In character
and substituted therefor Uniform in feature
every where equal In worth and safe As the republic
itself
II secured for the government immediate and much
needed loan OF three hundred millions or bank capital
and established throughout tho country sixteen hun
dred efficient and responsible agents for the
tation and dissemination or other and far ereater oans
am glad OF this opportunity Of BEARING witness TO the
fact that not only negotiating the FIRST ve hundred
and fourteen million loan OF nvetwenties, but more
particularly In the subsequent negotiation Of the eight
hundrcd and thirty millions OF seven-thirties the
country was largely indebted 10 the national banks
for the prompness with which the national Treasury
supplied with sorely needed funds. And the late
soldiers OF the Union army should understand that at
time when their monthly largely in arrears the
money not only for their but for their subsistence
even was raised through the active and earnest co6pe
ration OF these same national banks.
oh was the origin OF the national banking system.
CHARACTER or TVS NATIONAL BANK CURRENCY.
The notes OF the national banks possess element
required 10 good circulating medium. Az already re-
marked they arc Uniform appearance every wncre
equal In value and just public and private
credit combined can make them.
rate, ffnftv In