Nashville union and American. [volume] (Nashville, Tenn.) 1868-1875, 1875-03-04
HOW TO RAISE CAPITAL FOR A
STATE BANK

STATE BANK.
We republish this morning an arti-
Gle from our city contemporary on State
finances, recognizing the fact that the
people are rapidly reaeting the con-
clusion that they must look to the local
government to supply what is deficient
in the financial system and policy of
the general government, in spite of
unconstitutional Congressional enact
ments." One apparent difficulty in the
way issuggested by the following pas
sage in the course of the article:
If we are to fall back upon a State
currency, then confidence in that State
currency would have to be established.
The State could not well raise the
requisite capital for banking by the
issuance of bonds sold at half their
face value. To go into the money mar
kets with its paper, to borrow green
backs or coin, It would first have to
make good its credit by promptly hon.
oring its paper already out.
Our contemporary thus forcibly con-
dennis the folly of those who would
tamper with the credit of the State, at
the very time that we have most need
Of it. 1t is the poor man who needs
credit, not the rich; it Is IN times Of
general depression, like the present,
that the State needs it-not when all
goes well with US. The late Comptrol-
Ter, while recommending the sale of
bonds to establish a State Bank and
making his calculations as to the prob
able sale Of such bonds, says, in his
official report: II take it for granted
that the Legislature Will not violate
the faith, honor and credit of the
State, now pledged for the payment of
the principal and interest. Should I
be mistaken IN this expectation, can
not tell how valueless Tennessee bonds
and Tennessee credit mfg become"
The plan of the late Comptroller was
to issue S5,OOO,OOO Of six per cent.
forty year bonds. In order to secure a
high price and ready sale, he proposed
to pledge not only the faith, honor and
credit Of the State, on which all out
standing bonds are based, but also to
pledge the assets Of the bank itself,
setting apart the profits Of the bank,
first, fer the semi. annual interest on
these new bonds, and, after the lapse
of a suitable time, providing a sinking
fund from the same source to meet the
principal. In virtue of these ad-
dittional guarantees, it is be-
Ieved such bonds could be
sold for ninety cents on the dollar, re-
alizing the sum Of S4,5OO,0OO for hank.
ing capital Under the old and safe
rule of issuing three for one, this
amount would justify an issue Of
SI3, 50O,G00 circulation. In thepresent
dearth of bank facilities throughout the
State, we might safely calculate on
keeping 100000 Of this circulation
IN active employment. By limiting
the banks rate Of accommodation to
six per cent, it is probable that the
entire amount could be permanently
and Proftably employed to enliven our
commerce and industries IN field and
shop.
Taking the lower estimate Of Sl0,-
100000, the earnings of the bank on cir
culation alone at the rate Of six per
cent, would be 100000. To this we
may add, in the way of discounts,
premiums on exchange, etc, S25O,0OO,
making the total annual earnings Of
the bank SS5O,O0O. From this must be
deducted 100000 to meet the annual
interest on the five million dollars of
bank bonds, leaving S55O.OOO-less the
Of running the institution
to be turned into the State Treasury for
the relief of tay-payers.