The New York herald. [volume] (New York [N.Y.]) 1840-1920, 1869-12-05

fork thus saving the expenses and profits hereto.
fore paid 70 then correspondents: aud they would
have ne satisfaction OF knowing that their reserve
ri-ket IN Wall street specuations or used In man.
nsr detrimental 10 the public interests.
INTEREST on DEPOSITS AND CALL LOANS.
II IL common saving among bankers, when
speaking OF governmental supervision .slake care
OF the currency, make that ~ secure possible,
AZ far practicable business should be left
free ami unframmellei; out IN this country the bust
ness o. issuing circulating notes - 20 involved with
the lending OF money; the ability 10 redeem on de-
mand Il - dependent the amount OF reserve kept
on hand and the character OF tho loan that Il s I'M
possible % spnI salesaards 70 the currency, WIN,
% the business OF lending. II . bank pledges Its
caps ~ tins deposit OF bonds for the redemption OF
~ circulation. must 50 use that circulation not
lose ~ invest u as TO have 1t coming hack with
proGt; must Use u iud.ciously and safely 80 that
the government. In de,ega,ing the power 10 issue
notes has the right 70 prescribe the conditions upon
winch they shall be issued. II harsh unnecessary
N the conditions are wise and wholesome they
should be honestly observed. In prescribing rules
reference saouid bs had 10 the object be attained
institutions charter 10 carry on the business OF
banking does not giye power 20 buy and sell real
estate 70 ship g0Ccs 10 foreign port or 10 engage
IA promote any speculative operation. The bust
hess OF banking properly conducted IA Just sure
and Just safe any other business; but IL must
be confined 10 It, proper and legitimate sphere.
In the case OF an incorporated banking association
~ powers are prescribed IN rs chartev The law for
the organixa OF national banks tednes their
powers with precision They are empowered TO cx-
ercise under the act, IAN such incidental powers as
sha &c necessary 70 carry on The business OF bank
ing Dy dIscouEting ana negotiating promissory
notes drafts. bills OF exchange aud other evidences
Of deot by receiving Deposits BY buying ana selling
exchange, coin aud bullion; by loanlng money on
personal security; by obtaining, issuing aud circu
latina notes &c.-from which II VIII be seen taat
national hanks are authorized, among other things
10 receive aeposlts;" that Ia when money Is
bronghI 20 them they are authorized to receive H.
They are not no ever authorized 70 hire deposits
ana tue law does not contemplate that they
should solicit loals under the guise OF de
posits by the offer 10 pay interest on them This
practice, however prevails extensively; and a.
though bs impllcaion toe law forbIds it. the pro-
hlbtiOn IA not sufficiently explicit or positive TO
ng ,,s sns spa nearly \. ,ss ,s
banks keep balances In New YORK. which by law
constitute portion OF Their reserve. The ofer Of
large portion Of their on deposit In New
YORK the law viii allow. Banks In the leading
ny o. ~ ansg o. 'n a
New lorx; and all other banks permitted 10 keep
three-fiiihs Of their reserve there.
deposits. they must, OF course. use them; ami
a. they are payable on demand they must be
Sroser. ana ' Operators IN stocks and soa Men en
ga.ed In trade cannot ordinarily ahord TO borrow
money which they may be called upon to refund At
IL il. moreover, Q prevalent opinion In the larae
cities that large call loan good thing for bank
TO have-thai IL MAKE. q BANK strong, and BANK Of
ncen EXHIBIT with evident satisfaction . large pro.
portion OF their loan payable on demand. And
whyt Money loaned oa call u loaned at Q
specified, and therefore cannot be more profit
abe. The truth n they have Q large deposit,
wnsa a. nsy are NAMING that e
get something for the use or their money, but are
AFRAID 10 give time, aud so have TO lend on call al
low rates. They know their weakness In this respect
and feel obliged to foruiy. fne Notifications are,
perhaps. the best possible; but n there were no
against Perfect immunity nom danger Is better
than the strongest fortifcaton against an ever I'M
The most Objectionable feature OF the whole trans.
action, however, lies In tho fact that the faculty.
with which large loans can be effected. payable
mercia paper Is only done al nigh rates or i de
ciined altogether. fosters speculation Paragraphs
lise the following may be found IN The money art-
"Money was fairly active on call nj six 20 seven per
cent; commercial paper very duh: prime names ten
per cent to fifteen per cent" which means, money
Tor speculation, SIX TO seven per cent; money for
trade ten TO fifteen per cent.
Gail loans are necessity, when interest Is paid on
deposits Competition Tor the accounts OF country
banks has led 10 the payment OF interest The New
York BANKS see and deprecaie the evils Of the prac
end to it; but there win always be one or more
banks which see their opportunity in suen an effort
and VIII refuse 10 come into any arrangement an
tended TO put stop ~ IT. The fact that tho re.
serves or The country hawked on the street and
are rendered aud used Tor speculation IS sufficient
ground for an Interference OF the law.
INTEREST. TAXES AND PROFIT
A bank that has ITS capital invested IN Interest
bearing securities upon deposit OF which II obtains
IN issue OF circulating notes-wnch notes are 10 be
used In its banking operations as money-can afford
10 lend Its money NJ lower rates OF interest than
bank that issues no notes for circulation, but lends
It's capital directly TO Its customers The bank with
circulation derives portion OF Its profit from the
Interest on It's securities, and portion IRON its GUS
toners; while the bank without circulation derives
all It's profit from its customers. The delegation by
the government to banking associations OF The power
to issue notes 70 circulate as money therefore, mas
tendency to lower the rate OF interest aud TO fur
nish cheap money to the business community
That this Il actually the case win appear upon
vestgatiOn. The Incorporated bank, doing business
and issuing circulation under the authority Of the
government, Il uniformly regarded as the most reii-
aDe and reasonable source Of accommodatlen ~
pending upon the active Use OF ms capital Tor his
p.ont. mus, charge a much higher rate OF interest
OF course, that the deposits OF the two insn-
tutlons are equal. bank With 100000 capital
II has bearing SIX per cent
eau lend that $4,000 at seven per cent ana yet
realize profit OF $l2 80 on its capital Tue private
banker lending his capital Of 100000 directly, must
charge his customers twelve per cent realize the
same profit az the bank. The merchant and tne
tradesman know this aud expect 10 pay about that
difference for the use Of money when their neces-
stiles compel them to resort TO private bankers or
brokers.
boon upon the business public by enabling II TO
borrow money IT moderate rates OF Interest
the banks were deprived Of their circulation during
the coming year by act OF Congress- the rates
at which money could be borrowed In most sections
OF the country would be nearly doubled. The as
sumption by the government Of the sole power TO
issue circulating notes would In nowise furnish
relief The UnIed states can get its notes iuto CIR
culatiOn by paying them out for Its expenses ana
payment OF It's debts. Not being able 70 do bank
Ing business however, 1t cannot lend them as q
bank can, but would have TO pay them out 10 Its
creditors. and, 10 the end, the notes would come
into the hands Of capitalists, VINO would lend them
to the people at high rates OF interest.
Taking the country a. a whole. government and
people as one the profit gained BY the government
on the issue OF Its own n0tes-0r, TO use ex-
preston In common use, the amount saved by the
use OF Its own notes a. loan without Interest
would not compensate for the additional tax upon
the business OF the country caused by the advance
In the rates OF interest which would DO likely 70 fol-
low such o change In the circulation.
The amount loaned by the national banks 10 the
business interests OF the country VIII average about
$780, 600; and for every addition OF per
to the Of interest OF not less than 900 600
would be imposed on the business OF the country.