The Ottawa free trader. [volume] (Ottawa, Ill.) 1843-1916, 1874-07-11
aNILLyN0Ss RANKING LAW.

Banking under rnc National Banking Sys
tom. rs we have undertaken ON former occa
sons to explain, is not as profitable as many
- people imagine, The common notion is, thai
all IA man or company owning say SloooW
!. of goversmcnt bonds, on which they draw .
per cent interest in gold, need do is to depos
r il them in the U. s Treasury, and thereupoi
: 100000 of grecnbacks will be issued TO them
4 which they can loan out at 10 per cent, thus
e realizing some IA per cent or double interest
on their capital of 100000 invested in bonds
} But this is very superficial view indeed
The actual case is about this: A company
j propose to start national bank of say Sl00,
600 capital The first thing to be done is to
raise $4,000 in cash to buy 100000 o! five
} per cent bonds. Upon the deposit Of these
bonds in Washington the company or bank
obtains 100000 in bank notes. Then the
bank must deposit 5 per cent OF these in
Washington leaving $S5, O00 of which anoth-
er reserve is to be kept in the bank, leaving
say $4,000 to loan at such rates Of interest
and on such security AS can be obtained !;
from lUC DlOCCCuS VI "Hlth biiS Duuh ihuSi
pay an annual tax of / per cent besides state
and local taxes, generally about per cent
more The case then stands about like this:
The bank realizes, from interest on 100000
bonds deposited, 5000; by loaning $4,000
at 10 per cent, $4,000; total $4,000; from
which deduct tor tax and other unavoidable
expenses, $4,000, leaving $4,000 net, from an
original investment of $4,000 to purchase
the bonds. There are certainly many ways
in which money can be turned to better nc.
count in the west.
One of these ways is to bank under local
state laws, by which the government tax and
all this deposit of security and reserves is
avoided But in Illinois, it will be said we
have no banking law. Such has doubtless
been the impression but The fact, at least un-
til the 1St inst, was otherwise When, in
1867, the legislature of Illinois affected to re-
peal every vestige of the free banking law OF
ms state under which the huge stumptal
'obbery was perpetrated, tappcars the repeal
)nly went so far as to cover the clauses Gov
ring the issue and redemption of circulation.
All the other privileges of the banks were left
intact, with the privilege Of organizing banks
except banks of issue still in force. This
act seems not to have occurred to the au-
horities at Springfield until, in January last
me John G. Short, of Vermlllion county, of.
cred to file in the Office of the secretary of
tate articles of association Of the Danville
Banking and Trust Association capital $500
90. He was informed tn at the articles could
ot be filed, as there was no law authorizing
he formation of banking associations. He
;as prepared for this objection and at once
nferred the officers to the free banking act
n page 1863 of the Revised Statutes of 1858, {
nd the repeating act on page rs of Gross
tatutes, volume 1. A comparison Of the acts
bowed that banks of deposit, with liberal J
rivilcgcs as to buying and holding real cs.
tie, &c, &c, could be formed the same as
etore
When the revision committee were complet.
u their work last winter the fact OF the eN. I
tence of such a law was brought to their
Dtice, and they put into their bill a repeating L
,ction, but carefully so worded as not to eff. s
ct the repeal until the first of July, mean a
me keeping dark The result is, as stated L
y Springfield correspondent of the St G
ouis Republicans, that h
During the last few days OF June the secre. /
Try of states etfice was flooded with papers i
, be filed for the creation of banks, and c
bout forty were brought into existence. The
apital of these banks range from $4,000, to /
100000. Their privileges are very broad, L
nd their franchises are, as a veteran banker |
this city declares, more valuable than a +,
ational bank franchise. There is no doubt
one of these charters will be sold out to banks
lready established, but enough will remain |
plague the people with their chartered
rivileges for the next half century.
A special value will attach TO these char !
rs now that a strong political movement is
n foot TO deprive the national banks of the :
rivilcge of issuing bills, the only really ;
privilege they gam from the gov (;
rnment. Take from them the circulation, r
nd there is not one national bank in IA hun. 4,
red that would not eagerly exchange its ma. 4,
onal charter for state charter like the +,
bove and pay handsomely for the privilege. c
| |.
Speaker Blaine has availcd himself of the
pportunity afforded him by his renomina- /
on for congress to write letter and put In ,