The Portland daily press. [volume] (Portland, Me.) 1862-1921, 1868-03-05
The Financial Situation.

TO ESTABLISH A NATIONAL CURRENCY.
3. The National Banks repay in ta1es all
the interest they receioe on the bonds depos-
tied as security for their circulation. This
proposition was first put forth by Mr. Jay
Cooke in plea for the National Banks,
which has been extensively circulated. 1t
was subsequently adopted by Mr. Hulburd,
the Comptroller of the Currency, and reduc-
ed to calculation, which has received the
sanction of Secretary McCulloch in his annu-
al report, and with slight exception has
been certified as correct by Senator Morrill,
of Vermont, one of the ablest and most con-
servative inanciers in Congress. And vet
its fallacy seems to this writer so manifest
as to excite surprise that it has so far escap.
ed anything like a general and accepted ex-
posure. Here is the calculation as stated by
Mr. Comptroller Hulburd: r,fs s1.
The national banks are compelled by law to
| hold constantly in reserve a certain per cent
| age of their circulation and deposits in United
| States legal-tender notes. The amount thus
| held permanently in reserve is never less than
$150000,000, Generally about $3.50, ,0O0, ,000,) and
is gratuitous loan to the Government. The
DankS SeU no interest on IL. 16 is so mucl Ol
| their capital unproductive, invested in non
| interest-bearing notes of the Government.
The ease may be stated thus:
The banks have loaned to the Government
| as follows - t--F.'.-. .+.f
| For bonds deposited to secure their
circulation, bearing six per cent. in
| Bearing five per cent, 10000, 900
Permanent reserve OF legal tenders, 15O, 600, ,00C
Totalloan to the United States, $3.50, ,OOe, ,OOC
For which they receive is7o
Six per cent interest on $3.50 900 900 $4,000, ,OOC
Five per cent. interest on S9o,000,000, 45OO, 900
Total, m $40. SOC, ,Oo(
| But they refund in taxes, -- 16,000,0C(
Leaving, $3,5oO, ,OO(
which the Government pays the banks
for loan of $490,00O,000-a little less than
three fourths of one per cent.
There is still another aspect of this case:
The banks are held rigidly accountable fol
the interest they receive on money honestly
loaned 10 the Government when it needed
money, and they claim credit tor the money
loaned to the Government without interest
They hold these $50, 100000 in obedience t.
| the mandates of the law, while money is worth
| TO them six per cent. Ihey therefore give the
Government the use of the money; that is tt
| say aea-rya a J seleH g
| Six per cent on $150, ,00O 900 non-nter-
| est-bearing Uni, ed States notes held
permanently in reserve, $4,000 90
They pay in the shape of taxes, Is 1000, 90
Total S25 900 90
They receive interest from the Govern
ment 100000
Z. Leaving, r-aai r.s $500, 90
which the banks actually pay as bonus t
the Government for the privilege of circulating
their own notes.
There are certain obvious aspects of thi
calculation which teud to throw suspicion o
its fairness. The five per cent. bonds al
reckoned as of equal value with the six pc
cent, whereas they have always rated {
from to 10 per cent. lower. The rermaner
reserve of legal tenders is not part of the loa
to the United States as will be hereafte
shown. The interest received is credited {
gold rates, while the taxes paid are charge
at currency rates. Making the proper corre'
tions the statement will stand thus: ~
90,00O 0
Total, ...i .aIlaf ss4O, 10