The New York herald., 1873-12-04
The Presidents Recommendations on the
Subject of Banking and Currency Con-
sidered from the Standpoint Of
the Real Estate Market.
A POINT IN EQUITY.
What Constitutes Free Banking and Peoples
Currency - Presidential Reticence and
Congressional Recklessness
A Fair Warning.

weeks ago OF possible revival OF animation IN the
real estate market, even before the spring, does
not show much sign OF iruition. Although the
panic, which brought with 1t suspension oil DEAL
tngs here as elsewhere, is over, 1t has left behind
1t legacy Of ideas in respect to reforms IN our
banking and currency systems, vaguely suggested
or definitely projected that require to be worked
out to a solution or rejection before new enter
prises in respect to real estate operations, in
deed In most other departments OF business ac-
tivity, can be safely entered upon. And nowhere
else will the issue OF these purposes Of reform re-
meet more directly than in this market. Not even
the stock market, which, after all, is subject
to local and personal influences than answerable
to general principles, has much interest in these
grave financial problems, with which Congress Is
called upon so suddenly to deal, as real estate.
Take, for example, single point recently the
subject OF heated controversy among the banks
themselves In this city-the subject Of denuncia-
tory paragraph in the Presidents Message and
matter of dispute among some or our soundest
financial thinkers
THE PAYMENT BY BANKS OF INTEREST ON DEPOSITS.
What. it will be asked by some, has matter OF
that kind to do with real estate We answer,
Much. The payment OF interest on deposits by the
New York banks has the effect OF attracting to this
city large amount OF capital which, either itself
or by letting loose other capital furnishes the
means OF much OF that costly Improvement that
has so enhanced the value OF real estate here from
year to year. 1t likewise helps to stimulate real
estate investment by the which 1t gives to the
money market. AS well ask, Would the establish
ment OF postal savings bank us suggested by the
Postmaster General, affect New York real estate
We answer, again, Most undoubtedly, If it prove
success-both New York and Brooklyn. Look at
many long rows of handsome residences in both
cities-whole blocks Of brown stone fronts. DO
you know how they were buiits BY money obtained
from savings banks, which thus seeking the highest
security for their depositors, benefited them also
in thus encouraging building enterp ise, procuring
reduction OF rents, and, in increasing the taxable
value of property, lighter apportonment OF taxa
tion. Change the present savings bank system,
which, whatever flaws may exist in it, is sound one
in the MAN, for the postal system, and where will
the accumulated savings gop Into government
bonds not subject to taxation and be thus with
drawn from usefulness as completely as If slowed
away In an old stocking or in the vaults Of safe
deposit company. Truly,
GOVERNMENT ASKS TOO MUCH,
and had better be reminded OF its more legitimate
duties Let 1t attend more closely to that which
Is paramount-the preservation Of the national
honor; and the people themselves will md time
and opportunity to save their pennies without It's
aid. But to return again to the subject ofthe pay
ment OF interest on bank deposits. AS Congress
will doubtless be moved to prohibit this practice
by enactment, thus adding another to the many
shackles they have placed around banking under
the National Bank act, and as real estate owners
have direct interest IN the result-as has been
shown abOve-and have right to be heard
this subject, it is worth while to examine on their
behalf wherein the equity lies. First and most i'm
portant in this relation are the inquiries
WHAT CONSTITUTES BANKING
What its functions and what are its relations to
the community wherein 1t existss And in seeking
answer to these queries IL is but just and proper
that we should go to that country which almost
II not positively, the first to bring the system OF
banking within the government OF sound economic
principles, but which has likewise by experience
tested and tried these principles until 1t is In a
position to speak authoritativey upon their value
Price, of Mr.. Bagehot's Lombard street.n lays
down the following In recent number OF Fs'dSer's
transferred, ana not OF coin, or cash or bills, ex-
cept as machinery. Deposits are debts due for bor-
rowed money BY & banker, winch he possesses in
ne has granted oans.n This he proceeds to Illus
trate BY an example for which is here substituted
9. doing business in !, dry goods, iron
aggregated them $4,000, which, not having wing
any use for, they take 10 their several
banks Of deposit for safe keeping. This is one
transaction. Il, and are merchants having
payments to make who have plenty OF goods, but
no ready cash, to meet such payments They, or
",
Offering note OF hand, payable in 30 80 or 90 days.
request loan thereon, for which they are willing
to interest IN the shape Of These
their money for certain length OF time, or, If they
do others OF their deposltors, ]. and X, will
to meet A, b and C's demand, loan the funds
OF A, and to L, + and G as above. SO A, ana
q. having made profit out OF their business
transactions which leaves them a surplus OF lunds
they are not prepared Immediately to employ, loan
1T to L, and @, who have expended all their cash
IN fnnE nf
cotton or grain and need funds to meet their
rent expenses: In this case the dry goods, iron or
transportation oil meeting the expense OF
handling their cotton or grain to f. and G, the
bank being an ntasa whose reward or
This is
BANKING PURE AND SIMPLE.
No money need pass in the transaction. A, B and
may have been paid by check which they de-
posted in the bank. L, + and draw on the bank
for the amount OF their bills, which they are in
formed have been discounted. These checks meet
at the Clearing House, where they are placed
against the other and the balance placed to the
credit Of the bank to which 1t belongs Meanwhile
A, and have a credit at their bank for the full
amount OF their deposit which the bank owes
them, while Il, and are debtors to their banks
respectively Tor 80. 60 or ~ days for the amount
they have borrowed.
Just here comes the application. Have A, q and
any claim upon or right TO share in the profit
which the banks make by l0aning their funds to IL
and q? Or Is there any principle which would
prevent the banks granting A, and q share In
such profit to induce A, u and @ to continue so to
use them as their agent in turning 10 profitable ac
count their temporarily unemployed IundsS Surely
1t would seem as II this were a matter that rightly
belongs TO the bank and It's depostor as individual
parties to q contract, to be regulated wholly by
mutual agreement and Is
NOT WITHIN THE PROVINCE OF LEGISLATION.
Inc restriction sought TO be imposed upon banks,
oi noI paving interest on deposits Is OF the same
nature, In different sense as the Usury law. Only
dTawDack 10 legitimate competition In trade and
sImulus 10 ilegltimate enterprise.
The subject OF currency reform IL also one which
comes WITHIN tne province OF writer upon the
CONDITION OF the real estate market at the present
time, an0 the chances Tor the future to consider
~ has been already shown under this head in the
HERALD now unjust TO the real estate interests OF
the country, taking those represented here "a a
sample, would be any EFFORT at forced resumption.
any attempt TO- bring about BY legislation an
agreement between Inc present paper and the
such an effort or attempt must necessarily result
IN failure furnished no guarantee against its ini-
tiat0n. The recent panic has, however since
intervcned to prevent such dangerous experi-
ment that could only be attended with severe loss