New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1877-11-22

their CAPITAL in some States three-fourths OF
it, and in some States less. Now, all banks
issuing circulation are compelled to keep on
hand. deposited with the Treasurer OF the
United States, a capital exceeding the AMOUNT
of circulation permitted. Thus, every note
issued is absolutely securcd no bill-hoider
can lose a dollar. In order TO bring about
this very desirable change, from system
which cansed bill-hoders loss OF many
millions every year, to one which secures them
against all loss. it was necessary to offer some
inducement to banks to keep idle, as security
for their notes, a sum exceeding the amount
of those notes. This was done by proYldihg
that the capital thus held as security might
draw interest as bonds of the United States
BY this plan, the United States secured TJOO'-
OOO 600 of borrowed capital, at time wheh
it needed all that it could get. by the con-
tinuance of the system, the United States IS
provided with a constant loan of $33G,O0O,-
900; in case of the abandonment OF the sys-
tenn. il would be compelled TO find other pur-
chasers of its bonds to that amount.
Inasmuch as the greater part OF the capital OF
the banks was loaned under the old State laws
and in some States the whole of it, at very much
higher rates of interest than is paid on Gov
ernment bonds, the people pay for immeasura-
blv greater security and convenience only the
difference in interest received by the banks.
In 1861, with 1920, 100000 of capital, the
banks kept outstanding 500, 100000 Of cir
cuation, and loaned 1887 100000 more than
their deposits On the LIST of October, 1877
with $479, 800 600 of capital, the National
banks had outstanding 5000, 000,0 OF circu-
L.
more than their deposits. The dullest NINA
can perceive the increase of security, and 1t Is
not difficult to see that the State banks OF 1851
actually loaned larger proportion, ana Obtained
a larger interest on every 500 OF their capt.
tai than the National banks are now permitted
TO loan or obtain. In more prosperous times,
the National banks may receive little larger
interest than the State banks did; in dun
times the requirements intended for the pro =
lection Of the public cut down their profits
precisely when the public safety requires from
them some sacrifice of profits TO prudence. AS
a consequence, in dull times the banks surren-
der their circulation rapidly. This not one OF
them would do if it could make more money
by lending its circulation as National bank,
its camtal being retained az security, than IL
could make by abandoning its circulation ana
lending ITS capital. The surrender Is conclu-
sive proof that, in these times, the mere lend
ing of capital without circulation is more
profitable than the lending of circulation, cap
ital being held in reserve. But the question Is
whether, if permitted to lend the entire capital
and q circulation in part representing 1t, as
thew were under the old State laws, and would
be, if the National system were abolished, the
banks would make more money than they now
make. OF tins, il seems there can be no rea-
sonablc question. In accepting the require
ments of the National Bank Act, the banks
have sacrificed some part Of their profits for
the sake of greater security for the public and
themselves. Any overthrow of the National
banking system will bring back the old plan
of State banks, for the constitutional power
of the States to charter banks OF issue has
never been questioned. Some States will GER
tainlv charter banks, and others will be quick
" compelled by commercial necessities to do
likewise. Then we should have larger profits
to bankers, and therefore, of necessity, larger
burdens to be borne by the people, but smaller
security both for the people and for the bank
ers themselves. In what respect would that
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