The evening telegraph. [volume] (Philadelphia [Pa.]) 1864-1918, 1867-12-26
National Bank Notes.

IRON me ~ T. World
We clip the following from the Tribune
"As ereenback is n United states note, and
not the note OF bank, IT, lacks one of the ele-
ments esse ntial to the safety of any banking
sVstem i'm which the notes are to be passed Into
circniatiop in discounting the notes of private
parties. viz: that the notes shall be issued at
the risk Of the bank, not ofthe Government"
By 'fhe safety Of any banking system, " the
Tribune evidently means the security for the
redemption of paper money loaned to the COM
munity by the banks. But how is the security
of national bank note better than the
security for a greenbackl We suppose the
Tribune would say it is better because only
the Government is responsible for the green
backs, while the property of the bank issuing
it is liable for the note. The idea is, that both
the property OF the bank and the resources of
the Government are pledged to the holder Of
the notes, who has thus a double security.
This is fanoiful. The security of the holder is
neither greater nor less, but precisely the
same, whether he possesses greenbacks or
bank notes. His sole recourse is to the Gov
ernment in both cases. The property of the
bank is no security to him; it is only a security
to the Government, which pays the circulating
notes OF bank failing TO redeem them.
When bank fails the Government redeems
its notes at once without waiting to dispose of
any of the bank property. 1t is presumed
that the deposited bonds will in most cases be
ample to reimburse the Government: but if
they should prove insufficient, the Govern
ment has a prior and paramount lien on the
other assets of the bank. This being the law,
the Tribune's argument breaks down.
1t seems to us a more honest proceeding
for bank to loan actual money, which has
cost it something, than to receive interest
from the community on its own notes, which
cost it nothing. Why should a wealthy far
mer, who is so solvent and solid that his
equally wealthy neighbor indorses his note
for nothing make mu tual exchange of pro-
misses to pay with a bank, and pay the bank
seven per cent The farmer is just as good for
all his liabilities as the bank is for its Why then
would there not be as much equity in the
bank paying him seven per cent. for the pos
session of his note, as in his paying seven per
cent. for the notes of the bank 1t is as far
from my house to yours as it is from yours to
mine. Why are not the farmers promises to
pay entitled to be treated as money just as
much as the banks?
The answer will be, that the bank promises
to pay on demand, but the borrower not till a
stipulated day. and the seven per cent is a
compensation for this constant liability. This
is in fact the only real difference; the solvency
of the parties being equal, and the things ex-
changed being as like as a bushel of wheat
raised on one farm is to bushel of wheat
raised on another. So long as specie payments
remain suspended, and what is called the
loaning of money is the mere exchange of
paper promises against other paper promises,
why should the knots of men who compose the
banking associations have this great advantage
over their fellow citizens? If, under such cir
cumStances, there must be an income from the
circulation of promissory notes, the profit
ought to be fairly distributed among the whole
community Tho only 1,ranfioab1a oI M
distribution is to confne this advantage to the
notes Of the Government, thus saving to the
people what is now taken from them by the
banks in the mutual exchanges of equally
valuable promissory notes of equally solvent
parties.