Memphis daily appeal. [volume] (Memphis, Tenn.) 1847-1886, 1867-08-16

nelgnDOfs Will indorse his note for moth
ing, has occasion to use q thousand dol
lars and horrows 1t at the bank, givlne
bis note thus Endorsed. Nov what doei
he get for it? Money? No: he get,
merely the notes of the Unadilla banh
for the same amount. 1t is an exchange
Of the notes OF a solvent far
mer for the notes Of an insOl
vent institution. But, waving thG
undiselosed insolvency, let US pro
ceed with our analysis. 1t is obvious
that the transaction Is d mere exchange
of credit; the farmer exchanges his
credit against that of the bank and
pays seven per cent. for the difference,
when his own credit is so perfectly good
that his responsible nelghbor indorseE
his note for nothing. The bank takes
seventy dollars for doing what the in
dorsing neighbor freely does without
compensation /; the indorser certifying
the credit Of the borrower 10 the bank,
and the bank, in turn, certifying 1t TO
the community by putting its own notes
IN the place of his 1t is an illusion 70
suppose that the bank lends him money ;
| Il only lends its own credit. Ifthe bank
was organized on a specie basis, and paid
specie on demand for its notes, the case
would be varied, for the next day, or
within the next ten days, the notes
might come back for payment, and the
loan would thus become a loan of money,
and not merely of the banks own credit.
When the national banks thus exchange
notes with their customers, giving their
own notes without interest for the notes
Of their customers with, they are limited,
it Is true, to the issue of such notes as
they have deposited bonds for in the cur
rency bureau at Washington. But those
deposited bonds yields the bank precisely
the same income that similar bonds do
to private holders. The banks are no
more entitled to bonus from the COM
munity for owning this kind of property
than are the innumerable other owners
of the same kind Of bonds. But while
other holders of bonds are content to get
six per cent, toe banks receive thirteen,
six from the government and seven from
the community, or rather, the whole
thirteen from the latter, the government
being merely an agent for collecting the
six per cent. from the community.
When men perfectly solvent and in
good credit pay ths banks for a mere ex-
change of credit, it seems q still greater
absuTdity if we find out, as ws do in the
case Of the broken banks, that the credit
really good for nothing A man eX-
changes his own solid credit against that
OF al iDsolvept bank and pays seven per
cent. for the difference And the ena-
bling OF our eitiZens to do this is the in
calculable blessing bestowed upon them
by the creation of the nstionsl bank sys-
tenn!
1t may be said that although the sys-
tenn may ruin the depositoFs and fleece
the customers of the national banks, IL
nevertheless perfectly secures the bill
holders. But even this Is not entirely
true, although it must be conceded that
bY borrowing this feature of the New
York banking system, which it sup.
planted, it gives as good security as hold
eTs Of the notes of broken banks can ever
expect. When there comes general
crash of these unsafe institutions, and
scores Of them are compelled to wind up
Al the same time, so ms0y Of the iepOs-
tied boBds will be thrown upon the mar.
ket that, in q forced sale, their price will
sink to low figure, snd spectators will
reap reach harvest st the expense OF
the bill holders.
From the Chicago TlmeSl
The disastrous failure OF the Unsdills
national bank is perhaps only premon.
itOTy symptom of the financial crash
which, every citizen feels, is impending
over this eo4Btry. The crash may not
arrive this year, or neTt; yet that it will
come, no one enteFtAins rational doubt
Oar whole financial system Is q fs6ric
without a foundation. Here and there.
speculation dislodges the loose quiaksand
that has sustained a column . and the
arch, so unsubstantially supported, tum.
Dles down. Other and disconnected
arches may not be affected thereby: but
another will fail, and another, until, by
and by, tie Ehols fabric will come down
with crash.
The roUtenness Of the whole national
bank system is illustrated in the case Of I
the Unsdilla bank. Tue liabilities of !
that concern are variOusly stated at from
half million TO million; while its as
sets, il is said, will be insufficient to pay
ten cents on the dollar. This refers to
5tnsr creditors than those who hold its I
pictured promises to pay. Its issues I
probably are somewhat better secured, ]
by the bonds which the Law requires I
shall be deposited in the national treas !
1ry. These bonds constituted probably |
about all the capital the bank had. The |
money to purchase them may have 1
been borrowed, or the funds of depOsitors |
may have been used for that purpose |
so that, in reality, the bank, when its |
le5tS were paid, may have had no capi. |
tai at all .T. I
That bank shoasiE be able to gain 4
public confidence upon foGBGG.;on no Z
more substantial than this may appear /
to some slow. going old fogies, (
vino still suppose that to carry on the I
business of Gsnking requires money. The |
time when it did require money was /
before Mr.. Chase invented our wonderful ,
national banking system. Under that !
system, all a man needs 10 establish the /
biggest kind Of q bank is a face to borrow,
and an indispositiOn to pay. The system |
Is rotten TO the core, aud is as certain to |
collapse as bubble is when the shining I
surface is pricked. Its only question |