The New York herald., 1873-11-25
CREENBACKS.
Report of the COmptrol-
Ter OF the Currency.
Free Banking, Monopoly and the
National Banking System
Our Present Currency Contrasted with That Of
the Old State Banks, Whose Bills Were
Always at Heavy Discount
wAsHnGroN. d. G.. Nov. "a, 1878.

currency contains tnc l0uOWlnB on the SuDJeCJ OF
ree banking:-The restraining law Of the State OF
New York. act OF April Il. 1918, provided that 1t
shall not be lawful for any person, association OF
persons or body corporate, from and after the 1st
day OF August next, to keep any ONCE OF deposit
for the purpose OF discounting promlssory notes
for carrying on any kind OF banking business or
operations which Incorporated banks are au-
thorized by law to carry on. or issue
any bills or promissOry notes az private
bankers, unless thereunto specially author
lied by law. This law patsd the whole
banking interests OF the State in the hands OF few
chartered institutions and was in its effects
grievous monopoly. Most OF the States OF the
Union organized by special act OF the Legislature
trust companies, savings banks and other cor
poratons. The Bank Of England and the private
banks and JOINT stock banks OF England organized
prior to 1874 possess the right to circulation
No such right has been granted to other organiza-
tons since that year. All such favored institutions
are monopoles but 1T cannot De said that the
national banks of the United States are monop-
olies in the same sense OF the word.
The organization OF national banks mas, from the
beginning, been open to all, and, until the amount
of circulation authorized by Congress was ex-
hausted, all applications with proper endorse
ments certifying to the means and character OF
the applicants for the organization Of such institu
tions, with circulation, were considered and
granted, and the aggregate OF circulation for
which applications now on file in this office,
she consideration OF which has been postponed,
does not exceed $4,000, 0OO That the banks which
we're nr6t organized were profitable to their
shareholders is conceded, and it Is cause OF
congratulation that the surplus earnings OF those
years are husbanded in the surplus fund OF more
than Sl2o, Ooo, 600 as protection to de-.
times OF panic and disaster The statistics we pre-
sent show that the earnings OF the banks OF late
much less than the earnings and dividends which
the shareholders OF manufacturing, railroad, and
other corporations realize from the capital in
vested.
II the national banking system. under which
two or more national banks Nave been organized
In almost every city and thriving village IN the
Union, and where the earnings Of business men
and the savings OF the people can be deposited
with greater degree OF safety than under any
previous system, Is In any sense monopoly.
1t is not the Iault OF the system, but an
evil which arises from the existing state OF the
currency and it is believed that the national bank
ing system is in every sense less monopoly than
any national system OF banking ever before author
cause 1t is supposed that large profits are derived
from the privilege OF issuing circulating notes.
which was limited in amount The act OF March
IL 1870, authorized an additional issue OF
$34 900, 900 OF national bank notes, but the whole
amount has not yet been issued. chiefly Tor the
reason that in the States 10 winch the amount was
assigned there is but little profit in the Issue OF
such notes. as VIII be seen hereafter. 10 the erro-
neous belief that large profit accrues from circu-
for what is termed free banking may be to large
extent attributed.
has been seen, prohibited individuals and assocla-
tlons from carrying on the business OF banking
without first Obtaining special charters rom the
Legislature. This law was repealed about thirty
years after It's passage, not without encounterlng
bitter opposition. In the year following the re-
peal. the general banking system OF the State or
New York was authorized system based on the
deposit OF securities, with redemption at fixed
rate OF discount: and it Is probable that the term
.free banking originated, TO a large extent, from
the TACT tnat 1t superseded the monopoly which
preceded 1t.
The phrase Gree banking.r however as now
used, Is not clearly defined, for there Is nothing in
this country to-day more Tree than banking. Every
individual association OF individuals throughout
the country has the right to negotiate promissory
notes, drafts and bills OF exchange; to receive de-
security and to transact almost every kind OF busi
ness pertaining to legitimate banking There is
little doubt that the term "lree banking by many
persons is understood to mean the unrestricted
issue of bank notes TO any association OF persons
organizing national bank and deposting the
persons who have given any considerable
attention to this subject who would be willing to
advocate the unrestricted issue ol national bank
notes to the amount OF the public debt. IL is
PROBABLE that more satisfactory definition of Tree
banking would be an issue or paper money which
should be promptly redeemed at the commercial
centre OF the country.
classes-first, an unsecured circulation, redeema-
ble at par by the bank its agent at some desig-
bile Mt It's own counter at par, and at the CONNER,
cia centre at fixed rate OF discount: and, third
circulation exchangeable at par for lawful
money at Its own counter, and Dy It's agents APP
pointed for that purpose.
The currency OF the New England States pre-
vious to the fair example OF the first class
That system was generally Known as the Suffolk
system because the suffolk Bank at Boston COM
PEELED the redemption Of the notes OF the New
England banks at It's own counter at par. The
system, however was not free but monopoly, as
banks could only be organized under special char
I.,ta rf r,<y
England states. This circulation was not required
TO be secured by any deposit pledged for that pur
pose anu the failure of the banks in some ol the
New England states, which not tnffequently hap
pened, almost always resulted in great loss not
only TO the creditor but to the bill holder
The suffolk Bank at Boston forced the redemption
OF the notes a par at its own counter by system
OF asserting and returning the notes to the place
OF issue, bu. the same notes were invariably at
discount OF one-eIghth per cent in New York
The notes OF these banks were therefore neither
safe nor exchangeabe at par or coin at the chief
commercial centre.
The New York State system OF lree banking is an
example OF the second class of currency and II is
probable that the more thoughtful advocates OF
what Is termed Tree banking propose tnat circula-
ation shall be issued and redeemed under the
National Currency act, upon similar plan. Tax.
ing IL for granted that advocates OF fres
banking base their arguments upon the
success OF the system authorized in that state by
the act OF April Is, 1885, II may be well to contrast
the condition OF the currency and OF the pubic
debt at the time OF the Inauguration oil that
system at the commencement OF tue war and at
New YORK nrst Issued was secured by stocks oi the
different states and by bonds and mortgages de-
posted by corporations with tue Comptroller OF tho
state. subsequently by varioas amendments the
law was so changed as to provide Tor the issue ol
circulation based entirely upon the bonds Of the
United states and of the State OF New York,
and that was the basis at the time OF
the breaking out OF the war. At the time or the
inauguration OF the SYSTEM the debt OF the United
States was sl0,434,. ri. and all these bonds we're
above par In ine market. In 1860 the funded deot
OF the United States was s44.97i,O62. The laws
thorlzing the issue OF circulating notes were more
numerous than the States aud Territories OF the
Union, and the rates OF discount in The New York
market upon the bank notes issued and IN gen.
era circulation varrsl from oIe.eghth of
one per cent to one and one-half per
cent discount whA many bank notes
that had local circulation were quoted
at rom D TO 10 per . cent discount. The
notes OF the New lWk and New England banks
only circulated thr0gyhout the whole Union, ike
the national bank cuTfency OF to-day. The funded
debt OF the United. states to-day is 40 times the
amount OF the debt III 1860 Then the United states
Issued coin only as-currency. Now, the national
bank notes and the legal tender notes are about