New-York tribune., 1875-05-14
A DANGEROUS DEL USION.

year from all the National Banks, are of value
in more respects than one, yet it is certainly
true that vast majority of those who see
them find them perfect engmas, while very
few of those who think they do see through
the items, interpret them correctly. For exam
pie, we observe in one of the leading journals
of the West, the following unfOunded infer
ences drawn from the official report lately pub
lishcd "The fact that the National Banks
"haye an undivided profit of over $50, ,0OOO 900
"tO exhibit within eighteen months after the
"panic of 1878 may be taken to prove two
"things: The national system has produced
"more conservative and durable banking than
"was brought forth under the Old-fashiOncd
"wildcat' regime ; and the country itself has
"grOwn beyond the tolerance of such loose
"and irresponsible methods of banking bust
"ncss as prevailed in the last generation"
The form of the statements which the Ma
tiOnal Banks are required to publish is, for
the general public, needessly complex and ex
tended, and the information given must be
condensed into fewer items, if it is ever to be
attended to by those for whose benefit it is
given. The elements wanted are these: On the
debit side of the account, Q) the amount of
CD the Indebtedness to depositOrs and others I;
on the credit side, (D the aggregate of loans,
discounts, stocks and other debts due the bank,
and (5) the cash on hand These five items, by
dividing and subdividing, are multiplied to
over 80 in the present form of statement,
and most of this expansion is worse than USE
less to the ordinary man of business For
thirty years the Bank of England has pub
lished weekly statement in the simple form
We have indicated, showing on one
side the deposits and circulation, and
on the other tho loans and specie.
For greater simplicity the capital paid in is
left out of the account, being permanently i'll
vested in consOls, and by emitting the capital
and an equal amount OF cOnsOls, the entire
statement of the Bank is compressed into four
items by the fluctuations in which the COM
parative sOlidity of the Bank at different times
may be determined at a glance. The weekly
statements of our city banks are also given in
very simple form.
The difference between the total Of circula-
ton and deposits, as the debts of the banks
are named, and tho total of the loans and
specie, is called in England the Crest" and
this remainder, or "Rcst," appears in the
statements Oh NdtlOHdl DdllhS
two divisions of "Surplus fund" and "Undi-
"yided profits" The distinction between
"Surplus fund.- and "Undividcd profits is
merely technical, they being merely two names
for the same thing. The latter subdivision
is sometimes mistaken for real profits. The
nature of this REST" or surplus fund, is very
clearly defined by Albert Gallatin, in his
" Considerations on the Currency and Banking
"System," published in 1881: "It will be
"easily perceived that what is called the Sur
" MUS and sometimes the Reserved or Con-
tingent fund, is nothing more than that mh'ch
balances the account, or the difference between
&" the debts and credits of the banks; and
" that. i'm order to be enabled to repay, at
" the expiration of the charter, to the stock
I" holders the full amount of their stock, that
" fund or difference ought in every sound bank
"to be sufficient to cover all the bad
"debts and all the losses which may
"be incurred on the sale of the various
"stocks held by it, and of its real estate"
The real profits of the National banks and the
ultimate sOvency of each and all of them
depend upon the sovency of those who are in
debted to them. Leaving the Government
bonds ont of the account and emitting the
large sums which the banks owe to each other,
the aggregate amount of their loans, discounts,
real estate, stocks, mortgages, and bonds,
other than those of the United States some
what exceeds one thousand million dollars
The aggregate of their surplus funds and un
divided profits is considerably less than one
fifth of that amount Not merely the profits,
but the solvency of the banks are subordinate
TO the soldity Of the loans and discounts, and in
regard to that point the published statements
do and can give no information. Against the
contraction of bad debts the National bank sys-
TEN, contrary to a prevalent opinion, affords the
owners of bank stock and the creditors of banks
no protection. The Government might as we'll
undertake to ascertain the family secrets of
the bank presidents and cashiers as to attempt
to guarantee the sOlidity of bank loans and
discounts, or, in the words already quoted,
to produce conservative and durable bank
"ing" Conservative and durable banking can
only come from wise and conservative men.
Time alone can test the soundness of
our banks. There can be no more
fatal, no dclusion more pitiablc, than to depend
upon q bureau at Washington to supply wisdom
and integrity to the ten thousand bank officers
of the United States. Publicity may be and
undoubtedly is check on some of the abuses
of banking, but that is very different thing
from what many persons expect of the Bank
act Heaven itself has not prevented men from