The New York herald. [volume] (New York [N.Y.]) 1840-1920, 1870-12-06

charged on the Dk OF their bad debts. The result.
however, may he regarded as upon the whole sats'
factory. Very thorough ana riQid investigation mas
been made by skilled accountants. commissioned as
examiners into the mode Of doing business, char
acter OF the management and condition,
ana The value r the sssets OF the banks
tanned that the bills and notes discounted are,
10 a remarkable extent based upon bona Hde trans
actions, while the accommodation loans uni
iormy safe and well secured. The required
by law 70 oe held, 20 secure the payment OF clrcua
non ana deposits, are as rule kept on hand, and
the general average OF such reserves Is ordinarily
considerably above the amount required
The limitation OF loans TO one.tenth OF the paid in
capital, a most wholesome restriction, Is In large
majority OF banks carefully Observed ana the
loans are almost uniformly well distributed. In very
lew Instances are the directors allowed IL monOpo.
fered.
Complaint il made from time 10 time and from
various localities. that borrowers are compelled TO
pay more than the legal rate OF interest for money
and doubtless the complaint IL well founded. On
Tins question there IL practical suggestion
that may be prontaDly considered. II the interest
on the bonds deposited To secure circulation ana
the use OF the circulation and deposits At the legal
rate OF interest, will not enable banks to pay taxes
expenses and divldends equal to NJ least the cur
rent value OF money where the bank ~ doing busi.
ness the legal rale VIII he transcended, The bank
viii wind up. Ihs NAV safely be taken for granted.
An attempt TO compel the nstituuon 10 keep within
the limits under such adverse circumstances will
result In forcing II into liquidation. In cases
evil complained OF Is caused by the high tax
alton imposed by State authority. faxes enter into
the cost OF production, ana are paid oy the
commodity. Formerly, when the bank circulation
issued and the business OF the country was
transacted by institutions incorporated by State Ne
gislatures valuable lnlmunltiss IN the way OF ex-
emption from taxation were granted, in order that
the banks might be able to furnish money to Dor
rowers at reasonable rates, ana In most or the
States the legal rate or interest was
fixed with direct reference to the privileges
granted. capital invested In banks was pract cally
exempted from taxation, IN return for which immu-
nifty the banks were expected and required to lend
money at certain specified rates OF Interest while
lend money BY special contract az much higher
rates. The rates established for banks under the
conditions referred 10. sim continue, ard sonqnt
10 be enforced. brt the Immuniues which enabled
them TO observe these rates have been taken away
The privilege Of issuing circulating notes Is no more
valuable as franchise, under federal authority,
than 1t always has been under State authority. The
fair estimate OF the average percentage OF pront
on circulation Will not much exceed Ave per cent,
and this is just about the average rite OF taxation
paid by national banks; that the profits derived
from the business oil banking depend mainly upon
the true basis OF banking Crcuation-that IL
money or It's representatives. the creature OF the
government, anu u 70 oe relied on as = source OF
The history OF banking In the older ana weather.
countries Of the world furnishes abundant evidence
| as to the truth OF this statement.
The reports OF eghty-one joint stock banks or
Great Britain OF their operations during par; OF
the year 1869 illustrate the stated Leaving out
the Bank OF England, which furnishes the great bulk
OF the circulation used IN the United Kingdom, tho
banks reported employ aggregate capital exceed
Ing A2 600 900, and their net profits for six months
| OF the year 1859 were ssmewhat in excess OF
93 7ooo oo or at the rate OF about nine per cent per
annum. Reports OF sixty-twe banks for the six
months succeeding the period embraced In the FORE
gong statement show capital Of over $50. 1000.
with dividends averaging i've and three.quarters
per cent, and net profits not divided equal to one
per cent, together making the net profits or the
sXty.two banks, whose reports are published at tue
! rate OF thirteen aud half per cent per annuIn.
! In the United States the accumulation OF cash
capital mp small AS IN al new coa ,n
transaction OF active business and for the develop
ment OF the resources OF the country. The amounr
OF deposits, therefore, or money at rest, Is small
| comparison with the actual material wealth OF tho
country; but II IL continually on the increase and
| by It's aid the national banks enabled To bring
their earnings up TO average that has hitherto
proved satisfactory 10 their stockholders. In view
Of all the facts however, IL seems desirable that the
old relation between the rate Of interest and the
rateof taxation established and observed by rly
ali the States in which banks oil issue were author
ICED, should not be entirely ignored with regard to
national banks, and inasmuch as the power OF the
States over the national banks in these two impor-
tant particulars IL exercised only with the consent
or the general government, 1t would be wise pre-
caution for Congress to fix such limitations a.
damaging legislation.
Allusion has been made in former reports to the
custom OF paying interest deposits by national
banks. The practice existed long before any ma
tional banks had an existence and they only con
lhuo W 40 WnaI nelr predecessors ala before Them
ana what bankers everywhere consider themselye-
compelled TO do
The use OF other peoples money in the shape Of
deposits, without interest or at low rate int
rest, has come TO 1e considered cardinal necessity
OF modern banking. There wiz always be those
ready 10 accept lis custody, all the RISKS ana
pay interest for Its for margin OF profit rang
ing from one to three per cent IL is not always the
| strongest wealthest bank banker who Is WI
ling TO pay the highest rate for this Of other peo-
pies money. Ordinarily, Judging of banks az OF IN
dyiduas the one most In need OF money offers the
greatest Inducements TO deposors. In theory
the custom is dangerous, 10 practice IL Is
not always safe; but. nevertheless it IS SO
observance that any sweeping enactment pro-
! hbiting the payment of interest on deposits by
national banks would be cvaded in some way, tho
banks would lose their deposits. There are scores
Of banks and bankers, not subject to the control or
ton as over the discontinue OF an enemy yet there
Is enc point that should be guarded. The reserves
OF the whole country are held to large extent In
Boston, New York, Philadelphia and other large
cities. These reserves should be protected. They
should be placed under such restrictions rs woul,l
obyiate all necessity for their by the depository
bank. II the institutions owning these reserves
cannot afford TO allow them to remain unemployed,
80 that they may be In reality what they are m
name, relief should be afforded IN some other way.
IL Is or vital importance TO the country that no por.
ton of the percentage which the law requires ban
10 hold as a reserve on circulation and deposits
should be loaned out, subject 10 the ylclssudes aud
fluctuations OF men and property. There may TO
prosperous and easy times for years; there may
come a day when upon the ability OF a single
bank In New York city 70 pay the deposits OF its
country bank correspondents-'heir feserves-wil
depend the safety OF the whole country. the banks
OF New York city have paid a. interest deposits,
during tne year ending with the 3oth OF september.
the sum OF 81. 546,830 10; the Boston banks,
S5ss.272 IS; the Philadelphia banks, Sll9,00I 4
while the aggregate sum PAID by all the banks that
allow interest ON deposits Is s6.4s6,172 60. These
large sums indicate the wide prevalence The prac-
tice under consideration and the difficulty that
would be experienced in any attempt to erect It's
entire abrogation. II by any means, however. the
moneys ned IN the large cities, constituting the
serves or the country banks can be exempt from
the operation or this custom, the main point, aud
the In which. above all others, the cntire public
is Interested Will be gained.
The further consideration OF this subject Is s-.b-
! mtted to the wisdom OF Congress.
The necessity for SEINE arrangement by which the
notes or national banks may be assorted and re.
turned 10 the several banks OF issue for redcmpt on
Is becoming more and more apparent az the dun
Guilty OF dealing with the worn and mutllated notes
now In circulation Is experienced. The arguments
contained in former reports In favor OF general re
deemng agency In the city OF New York VIII not bs
repeated or extended on the present occasion. The
conviction Is expressed, however that n the banks
were authorized to establish institution OF then
own for that purpose. owned controlled ana man
aged In their interest, they would find 1t greatly u
he uraH M do