The evening telegraph. [volume] (Philadelphia [Pa.]) 1864-1918, 1869-01-27
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The National Banking Act-PrOpOsed
Amendments.


Amendments.
From the N, Y. Times.
The bill to amend the National Currency
act, adopted by the Finance Committee OF the
Senate, is good as far as it goes. 1t enables
the Comptroller of the Currency to exercise q
more effective check upon bank management,
by leaving the precise period at which he shall
call for returns subject to his discretion.
There can be no doubt that under the present
system the public are periodically treated to a
series Of cooked acoounts-oorrect statements,
perhaps, of the state Of business at the date Of
their preparation, but conveying an incorrect
idea of its general condition or of the average
characteristics of bank management. For the
managers, having specific contingency to
provide for, are enabled so to shape their
transactions as, at the present moment, to
convey an impression of regularity and
strength not warranted by their ordinary posi-
tion. This evil the measure now introduced
obviates, by investing the Comptroller with
authority to select the time in each quarter at
which the banks shall severally report their
affairs. The cooking process will, therefore,
be impossible, because no manager can know
in advance the day for which returns will be
required. And the knowledge that they may
be called for any day will necessarily lead to
greater caution, and TO a more general avoid
ance Of reckless or illegitimate business. The
change will be no annoyance or embarEass-
only these are entitled to consideration.
Further to provide for the security Of the
Government, banks that may be selected as
repositories of public money are hereafter to
be required to lodge with the Treasurer of the
United States bonds to an amount exceeding
the amount Of the deposits; and penalties are
provided for cases in which the ACQUISITION or
retention ,of deposits is obtained, or even
sought, by corrupt means. The effect of the
amendment will be to terminate the bargain
ing by which weak and speculative concerns
have contrived to obtain the use of the public
money, and to exact from actual repositories
stronger pledges of financial ability and sound
management than are at present possible.
Another important feature of the measure
relates to facilities until now afforded for the
locking up Of currency. With the meaning
OF this process the business community were
made painfully familiar before the Erie con-
spirators were dragged into the courts. A
handful Of speculators, in league with two or
three banks, succeeded in producing disas-
tro1s monetary stringenoy by withdrawing
from circulation and depositing in bank vaults
large amounts Of currency, which for the time
served as collaterals. Experience on that
occasion showed that under the law as it is
the money market, and all the interests
reflected there are at the mercy of unscrupu-
lous combinations, which, with the help of
banks, may at will make money scarce or
relatively plentiful. The danger cannot be
wholly averted so long as we have irredeem-
able paper for the circulating medium; but at
least the completely of banks may be rendered
hazardous and improbable. The Senate bill
does this by prohibiting loans on greenbacks
or national bank notes as collateral, and by
declaring void loans or contracts based thereon.
The point is also covered by bill reported
from the House Banking and Currency Com
mittee, whose provisions seem stringent
enough to render evasion impossible. The
transaction is treated as a misdemeanor, pun
ishable by fines so heavy that neither specu-
lators nor bank managers could be unmindful
of their lesson.
To make the Senate bill thoroughly effec-
tive, q section should be added remedying the
abuses to which the system of certifying
checks irrespective of the sums at the credit
of the persons making them has given rise.
On no point has the Comptroller spoken more
emphatically or with more obvious propriety.
Referring to the New York city banks, he de-
clares in his last report that an enormous
fictitious capital is created by means of cer-
titled checks which, he adds, "by an inge-
nious arrangement, after being traded on
the street, are finally traded back to the
banks that issue them, without materially
increasing or diminishing the cash deposits"
The practice is 80 entirely at variance with
sound principle, and is so evidently fraught
with peril to the whole banking fabric as now
reared, Lnat ltS CONTINUANCE OuBnL uOL
to be permitted. Mr.. Hulburd's re-
commendation is that national banks be
prohibited ''from certifying checks to
be good which are not drawn against
actually existing cash deposits standing to the
credit of the drawer when the checks are
made and presented" An accompanying
proposition to forbid the payment of interest
on bank balances is probably open to some
difference OF opinion, although the practice
involved unquestionably tends to foster stock
and gold gambling, and to encourage the
Withdrawal of capital from industry and trade.
The use of certified checks on the plan pur-
sued does not however, admit of any justif-
cation. 1t is fraud and falsehood; it is
hazardous to the banks that tolerate it, and
it operates as practical initiation, deranging
values, and keeping at fictitious prices the
securities in which the more reckless specu-
lators usually deal A measure purporting to
amend the National Currency act, and to
prevent a recurrence of transactions which
have brought danger and scandal upon bank
management, will be singularly defective if il
leave this misuse OF certified checks un,
touched.
nplm0r and Wells