Oxford Democrat. [volume] (Paris, Me.) 1833-1933, 1877-08-28
From the Lewiston Daily Journal
National Banks.

20, rSmhfkluR Luhl AuIhuuth Aiueo'h,
Salmon p. Chase and William Pin Fes-
sender were the projectors OF the sys'
ten, the object of which was TO give The
pcople a safer and moro convenient
banking system, aud at the same time
Strengthen the public credit by making
the interests of banks Identical with
these of the nation. They took it for
granted that the experience OF all COM
mercial nations had showed the necessity
of circulating banks No commercial
country has ever got along without them,
and none ever will.
4 national bank may be organized by
auy persons who desire 10 do so, on
making application To the Comptroller OF
the Currency and deposi,ing United
States bonds with the Uuited States
Treasurer as security for the public. A
hundred men, tor example, each owning
= II. 900 United States ! per cent. bond.
or having the money TO buy these bonds
at others. unite IN establishing bank OF
500 600 capital. They send their bonds
10 Washington, and the government Is
sues to them $40 900 in notes, but IT
qpires them 10 deposit At Washington
~ 500 OF this in greenbacks as a IL
cvmptlon iuad and 10 make certain other
reservations which in connection with
the requisite balance all together amount
% about SIS, 900, leaving about SO, 600
Tor actual loan. We are speaking OF
what new bank could do on the sup
position that we have returned 10 Spe-
cis basis. Ii the bank be an old one,
which accumulated surplus during
Flush tunes" and Instead OF dividing II
has continued TO use the surplus tor
loaning, as many old banks did. then OF
course it's real capital is forty or fifty per
cSRt. larger than the nominal capital.
The bank provides itself with necessary
rooms and extensive safes, aud offers
such security that merchants doing bust
ness ind il 70 their advantage to keep
tbeir current receipts there and draw
them by check as wanted. Toe bank re
lies on what it can make By loanlng such
portions OF its average deposits as ex-
perience shows will be safe, as cOmpen-
Sa;ion Tor the care OF this money; and
the merchant who wants sale depoSi,
Tor MS balances on which he may draw
al any moment. is glad to make this al
raogement. Il Is a transaction wholly
apart from any essential feature OF q
national bank, and may Is well be car
ned on by private individuals IS by u
bank.
The new bank thus organized on
specie basis proceeds 10 business, and on
the supposiiion that Il makes no bad
debis-which is OF course imp1sslJio,-it
VII receive say 5000 per annum Tor
loans and $4,000 Tor interest on bonds
deposited. What it receives for caring
Tor the balance OF business depOsiiorS de-
pends on location and the convenience OF
merchants. la large cities the deposits
aye usually s. much or more than the
capital; in the c)untry Il is very small.
When bank has average deposits equal
10 hall lis capital. 1t Is regarded Is large
outside OF the great commercial centers;
oilener il is only one fourth. But what
ever IL may be, it Is never sale TO loan
more than halt OF il, as all OF Il is simply
s. temporary deposit; aud IN times oil
financial pressure not moro than one
fourth. II our supposed bank realized
- 800 from the use OF deposits and drafts,
IL would 30 well. Altogether, therefore.
the receipts OF our new bank are Sll 200
Toe bank or shareholders will pay mu-
inequalities ~ least , per cent. on lis
capital, or : per cent. on lis loanab!e
circulation. and the national government
l per cent. o. actual. and l Il on loan
sole circulation, and - OF per cent. on
deposits amounting 10 about $500.
equivalent 20 nearly = per cent. on
lOanab!e capital. II the bank is an old
one, and tue bank has 4 surplus. the tax
will be mOre-in fact on many banks IS
equivalent TO more than ) per cent Of
the 'oanable circulation. The expense
OF carrying on the bank will be 81 least
1000 This will leave say . coo, or
per cent as the ret profits OF the share
holders, on the supposition that they have
made no losses. But SIS the shAroh JldsrS
would have received $4,000 interest on
their bonds without going into the bank
Ia business, they have made only 5000.
or = per cent. for all their trouble and
risk OF losses. Ga a specie basis. no
bank can DO better than this unless Il is
iavorablY located in large city. and has
unusually large deposits. for il will be
seen that circulation affords little profit.
Indeed the circulation OF national banks
has been reduced lhir;y-iour millions the
the past two yeas, Tor the reason that no
profit could be made on il. Old banks
with 3 surplus accumulated in Flush
times. would apparently do better. be-
cause they also loan their surplus.
This explanation OF the working OF
lfn m
the proposition 10 abolish these ins.itu-
tons and substitute greenbacks. There
are two obieciionS-hrst. that experience
shows that il is unsafe 10 trust 50 grave
a matter as the issuing OF paper currency
10 the whlms Of political majority
which will Judge Of business wants by
political necessities; whereas under the
national banking system the currency
will expand or contract with business
laws according 10 business wants. Sec
Ond, that even If il were safe, the gov
eminent would lose rather than profit by
the substitution. Banks now pay the
people tax which. on the lowest basis
is equivalent to more than 1 per cent. on
their loanable circulation. Suppose the
government abolish banks. then this tax
is OF course lost, as the bonds would pay
no tax. Tnen government must keep on
hand say one-quarter or oue-ihird as
much gold as it issues in greenacks 10 re-
deem such as are presented, in order to
keep them at par. Thus it will pay in
terest on coin equal to per cent. on the
volume of currency issued, Llaking the
taxes and interest on gold held for re-
sumption at least per cent. But all
that government will save by issuing
hnnl.r al nrnhnnnri.,rr Ahnr,, Inr