New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1869-02-02
RATES or INTEREST.

Gen. Buffers main plea for the adoption OF
his iredeemable paper, is the low rate of in
terest at which, he~alleges, it will cause money
to be loaned. Cheap capital would be an
incalculable blessing to the country, and
we shall hail rs q national deliverance any
plan which will even tend toward it. We
need not argue that no currency would be
cheap ~ which abolishes our coin rev
enue,-'sat suppose this error were eilmin-
a.ed i,aE. nc plan Ii the reminder carried
out would it provide q currency which would
be loaned mt lower rates of interest 7
Gen. Buffers idea is, that under his cur
rency whenever money were wanted
by merchants and others under such
circumstances as at present lead them to
apply to banks or individuals, and get their
own notes or those Of their customers dis
counted, "the rate of interest would rise"
l. c. above the six per cent. in coin payable by
the Government on the bond, and the bond
holder TO secure the higher rate of interest,
i. G., the excess over the six per cent. which
he would receive by holding his bond
would return his bond to the Treasury
and would allow the Government to deduct
3 Gj-100 per cent. per annum from the interest
on the bond for the sake of the excess over
six per cent in coin which the bOndholder will
he able to obtain from the person to whom he
loans the currency. AS a system Of relief to
the money market, there arc several objections
to this.
1. The currency can only be obtained from
the Treasury by bondholders; whereas the
business men who want the loan are never
bOndholders: if they were, they could get not
merely ninety per cent, or even par, but from
10S TO ia per cent. OF the face of the bond by
selling it ut current rates in open market
.. The currency cannot be obtained from the
Treasury in exchange for the class of securi-
ties to which commerce gives rise, VIZ, notes,
bills OF exchange, mortgages, &C., which are
the only securities on which merchants borrow
in the ordinary course of legitimate business.
g. There would have to intervene, therefore,
between the Treasury az the lender and the
mercantile class as the borrowers, the same
third cass-bankers or bondholders, who would
have the bonds to deposit with the Treasury,
and who would be able to ascertain the ade-
quacy of the commercial securities offered by
the merchant, and willing to risk the currency
on mercantile loans Without this, there could
be no elasticity TO the currency, nor any means
by which, as Gen. Butler desires, it should ex-
pand and contract with the wants of trade and
traders.
4. AS the bondhOlders profits on the loan
would be limited to the excess of the six per
cent. coin interest, equal at present to 81 per
cent. currency interest, on an amount at least
ten per cent. greater than the amount loaned,
the minimum mt which bOndholder or banker
could loan currency to merchant under this
plan without loss would be nine per cent. if
there were no risk on the loan. But as the
bOndholder has really made two loans, and
thereby incurred two risks-one in his original
loan to the Government represented by the
bond deposited with the Treasury, and the other
in his loan of the currency received thereon to
the merchant, secured by the merchants notes
and bills-it follows that the bondhOlder or
banker must get for his two loans two distinct
rates of interest: 1. c., he can only make
the loan at double the ordinary mar
ket rates. If current rates are or
10 per cent? he must get IA or 20 per cent,
as the case may be. For this, he gets only
Q 35-100 from the Government. He must charge
the remainder, II 65-100 in the former case and
II 65-1OO in tho latter, to the borrower. As
these rates of interest violate our usury laws
the bondhOldors would charge an additional
for the increased risk of loss through
them. Besides. they would have to charge
for the time they might be compelled
TO hold their currency awaiting opportunities
TO lend it. We do not see. therefore, that Gen.