The evening telegraph. [volume] (Philadelphia [Pa.]) 1864-1918, 1870-12-05

of the Government, already prevails, a'thoughit
was and etill is, supposed that one or more gold
banks might be established and successfully |
conducted 10 each of those cities en- the Atautic
seaboard where q considerable foreign trade is
carried on, and In which q certain amount of
business is necessarily transacted upon a specie
basic. III all the business of this kind that is
carried on in the cities of Boston, New York,
Philadelphia, and Baltimore could be concen-
trated In one or two banking inr'itutions in
each Of those cities, its extent would undou1t-
edly warrant the employment OF very respec-
table amount for Its exclusive accommodation.
DBsTRU6TroH OF MUTnATED MOTIFS.
Since the organization of this Bureau to the
let day of October, ultimo, circulating notes
more or less worn and mutilated have been
returned by the banks, to be destroyed by burn-
inI, to the amount of $50, ,597, 5lS. OF this sum-
&17,04s,1l9, or more than one-half the total
amount, were returned during the last year.
The rapidity with which the national bank notes
are becoming unfit for circulation, and are being
returned for destruction in order that they may
be replaced by new, Is constantly increasing,
requiring constantly increasing force OF clerks
20 attend properly aud promptly to the as1ort-
ing, counting, registration, and final burning of
the notes.
THE OPERATIONS OF THE NATIONAL BANKS
throughout the country during the last year
have been characterized by prudence aud ex-
emption from disaster to an unusual extent.
The profits have not been so large as in former
years, owing to various causes, among which
may be noted the decline in the premium on
gold, reduction In the amount of transactions
in Government bonds and consequent falling off
In commissions, and the fact that owing to the
general shrinkage in values which has taken
place, the banks generally have realized their
losses and have charged off the bulk of their
bad debts The result, however may be re-
gardsd as, upon the whole, satisfactory Very
thorough and rigid investigation has been made
by skilled accountants, commissioned as
examiners, into the mode of doing
and the value and condition of the assets of the
banks during the year. and it has been ascer
tanned that the bills aud notes discounted are,
toa remarkable extent, based upon the bona
fde transactions, while the accommodation
loans are uniformly safe and we'll scared
| The reserves required by law to be held to
| secure the payment of circulation and deposits
average of such reserves is ordinarily considera-
| bly, above the amount required.
The Limitation of loans to one-tenth OF the
paid in capital, most wholesome restriction,
| lie, in large majority of the banks, carefully
| observed, and the loans almost uniformly
| well distributed. In very few instances are the
directors allowed to monopolize to any consider
able extent the facilities offered.
THE CIRCULATING FRANCHISE.
The privilege of issuing circulating notes is
DO more valuable as franchise, under Federal
| authority, than it always has been under State
authority. The profits derived from it are CON-
| monty over estimated. a fair estimate of the
average profit on circulation will net much ex-
| ceed five per cent, and this is just about the
average rate of taxation paid by national banks;
| SO that the profits derived from the business of
banking depend mainly upon the amount of de-
| posits, which after all constitute the true basis
of banking. Circula.ion-that is,Smoney or its
| representatives. the creature of the Govern
| ment, and is to be relied on as a source of pro-
fit only in the rudimentary stages of banking
The history of banking in the older aud
wealthier countries of the world furnishes abun-
dant evidence as to the truth of this statement.
The reports of 81 joint stock banks of Great
their ODeratiOQS n
year 1869 illustrate the fact stated. Leaving
out the Bank of England which furnishes the
great bulk of the circulation used in the United
Kingdom, the banks reported employ an aggre-
gate capital exceeding f42 900, and their
net profits for six months of ths year 1869 were
somewhat in excess of e3, zoo, 900, at the rate
of about nine per cent. per annum. Reports of
62 banks for the six months succeeding the period
embraced in the foregoing statement show a
capital of over ESQ, 600 000 with dividends
averaging five and three-quarters per cent, and
net profits not divided equal to one per cent;
together making the net profits of the 80 banks,
whose reports are published at the rate of thir-
teen and half per cent. per annum
BANKING BUSHES IN THE UNITED STATES
in the United States the accumulation of cash
capital is comparatively small. As in all new
countries, nearly the entire capital is required
for the transaction of active business, and for
the development of the resources of the coun-
money at rest, is small in comparison with the
actual wealth of the country; bat it is continu-
ally on the increase, and by its aid the national
banks are enabled to bring their earnings up to
an average that has hitherto proved
view Of all the facts, however,
it seems desirable that the old relations between
the rate of interest and the rate of taxation
established and observed by nearly all the States
in which banks of issue were authorized, 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 important
particulars, is exercised only with the consent
of the General Government it would be q wise
precaution for Congress to fix such Limitations
as would prevent unwise, unfriendly, or other
wise damaging legislation.
Alluson has been made in former reports t
the custom of paying interest on deposits by
national banks. The practice existed long be
, fore any national banks had an existence, an(
they only continue to do what their predeces
sors did before theLl, and what bankers every
where consider themselves compelled to do
) The use of other peoples money in the shape
of deposits, without interest," or at a low rate o
interest has come to be considered cardina
necessity of modern banking. There will
always be those ready to accept its custody
assume all the risks, and pay interest for it
. use, for margin of profit ranging from one t
. three per cent.
1t is not always the strongest or wealthies
bank or banker who is willing TO pay the highes
rate for this of other peoples money
. Ordinarily, judging of banks as of individuals
e the one most in need of money offers the great
r custom is dangerous; in practice II is not Away
safe, but nevertheless, il Is so thoroughly en-
!. trenched ia its position by long observance
l that any sweeping enactment prohibiting tn
payment of interest on deposits by nations
n banks would be evaded in some way, or tn
: banks would lose their deposits. There ar
n scores of banks and bankers, not sut
d ject to the control OF Congress- VIII