Litchfield enquirer., 1875-11-18
Banks and the Currency.

our currency should continue part in banl -nakes and paEki RsreaAhAaksa as at present, whether the greenbacks should be retired and their place should be taken by banl notes. or whether the privilege of circula ton should be withdrawn from the banks, are questions that have seemed to us mat. ters of doubt.
 The privilege of circulating some eight hundred millions of dollars which the convenience of the country requires as 6 currency. in demand notes paying no in terest, is certainly very valuable privil ege. Before the war this privilege was enjoyed by the various state banks which furnished'a currency, often 90 badly SC cured as to occasion just suspicion of its soundness, and always liable to heavy dis. counts between states lying at distance from each other. During the war the gov. ernment assumed part of the privilege of furnishing currency. the remainder it took from the state and gave to the na. tional banks. This national bank circula tion is ,unquestionably vast improvement, on the former system, of state banks. All the bank notes now in circulation are thoroughly secured, and they circulate without discount throughout the whole country. Unquestionably the national oank is vast improvement on the old state bank; and any retarn to system of state banks of circulation would be an ab- surd blunder. The only question is whether the public interest would on the whole be subserved by withdrawing en tirely from all private corporations the privilege of furnishing a paper currency, and substituting therefor a currency of national notes.
 To appreciate some of the consequences of this step let us consider how banks make their money. Let us suppose bank started ten years ago with $l0O,OO0 capi- tai. This capital was invested Tn 5 per cent. U. 5. bonds. On deposit of these bonds the government allows the bank S90, ,Oc0 in pills for circulation. Most of this currency Is loaned to borrowers and it net the bank say per cent interest on the whole Then .lepositors constantly keep large amounts on deposit in the bank. Q proportion of which the bank can always loan ont. On it's SlO0. 900 capital, therefore, each bank, organized when the national banking sys- tenn started, might perhaps have Q gross income of 15 per cent. But to thIs prom ising financial outlook there gre at present many practical drawbacks. The govern ment bonds on which the bank circulation is based are at premium. It would re quire perhaps sl15, 900 to buy the bonds pn which S9O. 900 in circulation would be allowed. There is a heavy government tax on banks, and, in case of redemption, percentage of capital must be invested in coin for redeeming the notes of the bank, at its counter. or in some business center, or at both places. These deduc- tiOns, with the necessary drawback of off, ',ers' salaries, banking house, and other large unavoidable expenses, greatly re- duce the profits of banking. With free banking. capital at the West. where mon- ey commands high rate of interest, seeks other forms of investment and it may we'll be doubted whether at the East capital would at present find the starting of new banks profitable form of enterprise. Such being the case. the practical effect of any sudden withdrawing from the banks of their present privilege of circulation would be the winding up of at least half, and perhaps three-quarters of those Insti- tutions now existing. The disastrous ef- feet on business of the general calling in of loans, and of the general sale of securi- ties which would probably result from a warfare on the banks in these hard times, would seem to render such a course ex- tremely impolitic, and one that no sane government is likely to undertake.
 The ideal paper currency of'a republic, nevertheless, would seem to be currency of government notes, redeemable in specie We have never been able to see why the people should not have the privilege of furnishing their own currency. It would greatly lessen the burden of a public debt because it would place large proportion of it in position where no interest wou d have to be paid on it. It is on this &C., count that we should object to any plan of resumption that should retire green. backs and substitute bank notes therefor. By such course some four hundred mil. lions of the public debt on which we are now paying no interest would be changed to form of indebtedness that would re. quire the payment of interest. An addi. iional burden would thus be thrown on the people, and additional privileges would be given private corporations which have 10 moral right to any such privileges. Nc lOubt such would be the plan of redemp ;ion advocated by the banks, if indeed the,
 lesire redemption; and this has been the weak point of most of the schemes pro posed. On the other hand. the genera withdrawal of their present privilege O circulation which, if we comprehend thei
 views, is threatened by the InAationists
 would injure the business of the countr, Ear more than any lessehing of the publi, burden by substituting nOn.interest pay
 ng for interest-paying government secur
 ties would help it. Such time of gener Il business stagnation and financial stag
 lation and financial distress would seen
 the worst possible opportunity for remod
 leling so important a feature of our inan
 ial system as that which has iron
 time immemorial given the privilege o
 paper circulation to the corporations whicl
 nave control also of the matter of dis
 counts 9 -
 If We are not mistaken Resumption i
 delayed by the selfshness of two. di
 .metrically opposite financial interests l shat of the caultalists who wish to rafir