Grant County herald. [volume] (Lancaster, Wis.) 1850-1968, 1878-10-31
THE HERALD.
a Mares nest among the National
Banks.

Banks.
The popular fable that the fool
killer does sometimes put in an APP
pearance and do honest execution is
delusion. Nothing of the kind
takes place and therein lies Donnel-
ly's only hope of election. Now we
are moved TO make these remarks
because fiat newspaper called the
Advocate, published some W b ere. bu.
whose opinions are redeemahle no.
where 10 the coin of truth, has re-
Gently again circulated the old, ex-
ploded and absurd falsehood. that a
national bank organization, having
with It's original capital, purchased
and deposited ia boz Dis with the
treasurer OF the United States ard
drawing It's quantum OF circulation,
less ten per cent. cen go on invest
ing the currency so drawn ia other
bonds, and with these bonds receive
other currency, abatiDg only the ten
per cent. each time, till the minim d M
Is reached in an amount too small! to
the further requirements of The bank
ing law. The Advocate illustrates
this mares nesG by an exhibit of a
pretended bank. with capitol of 81
600, 900. which, drawing first $780,
600, in currency, proceeds to rein>
vest It twenty-nine times in bonds,
receiving currency each time in d.
m'nisbing rate, and in the end re-
rowing interest on over SO 900 600
in bonds. with no other real outlay
than the original one million capital.
Ii it were really possible that this
thing could be done, the national
banking system would have long
ago been blown, as If by nitro gly-
cerine, into nonentity. But as we
have an honest inquiry from Fill
more county as to an answer to this
Hypothetical monstrosity, we again
undertake to give it. Did it ever
occur to our correspondents to inquire
if such transaction did ever actu-
ally take place? Ard If it did not.
there must be some good reason why
il did not. We take pleasure in stat
ing from the highest official author
itv, that nothing of the kind ever
took place ; and the probable reason
why is, that the law has so hedged
the operation of the national banks
as to render it absolutely impossible.
In the first place. the originators of
the national banking system, recog-
Inizei the importance of publicity,
wisely provided for securing it to
the utmost possible extent. Five |
times year to the comptroller must |
they account in detail, for all their
transactions, and publish the report,
also in their local newspaper The |
Operations are not shrouded in mys- |
terry. Under no other Baking sys
tenn, and in no other country, was |
such wide and thorough publicity |
ever required, 1t is a guarantee
against improper management.
When the supposed 100000 in
bonds has been deposited with the
treasurer and the 100000 in curren-
cy has been issued, that currency
must be accounted for FIVE times in a
year in open published reports That
currency must reappear in loans actu-
ally made with lawful assets. 1t be-
comes the working capital of the
bank, without which there would be
no bank, 1t must be perfectly mani
fest to the most stupid, that if the
100000 currency so received be dele
gated to the purchase OF other bonds
the bank must at cnce close, or would
Immediately be closed by the author
ity OF the comptroller Of the currency.
1t would be no bank at all; having
no capital it would carry on no bust
ness. Moreover its officers would
have committed perjury and be the
subjects of criminal prosecution. The
very moment a bank receives and is
sues its currency it has imperative
duties involving the redemption of its
own notes, Now if the bank 60 on
purchasing bonds and issuing curren-
cy it would soon be involved in an
endless maze of difficulties about the
redemption Of its ever increasing vol,
ume of notes. Then it has other stat.
ute duties, jointly with other banks,
which render such diversions &C its
currency practically impossible. The
moment its currency is out that mo.
ment it is drawn into the machinery
of the national banking system,
caught in its meshes and becomes an
integral cogwheel in the structure
and, under the supervision of the law
the most searching ever yet instituted
the bank can commit no unlawful act |
which would not at once announce it.
self from inevitable necessity. We
merely glance into this labyrinth to |
show the complete and absolute i'm |
possibility of carrying on such a |
scheme, even in the very nature of
things. But the framers of the ma.
tional bank system did not leave this
thing to the natural barriers which |
alone would prevent it, but they
placed a positive prohibition in the |
law itself which was intended and has
been construed to cover the whole |
case. The national bank act, sec, s.
203, II. S, reads az follows:
No association shall, either directly or indi- |
rectly, pledge or hypothecate any of its notes
Of circulation, for the purpose of procuring |
money to be paid on its capital stock or to be |
used in its banking operations or otherwise;
nor shall any association use its circulating |
notes or any part thereon, in any manner or
form to create or increase its capital stock.
AS no such scheme was ever &C.
complshed or sought to be accom-
plished 10 the history Of our present
national banks, and as in the very ma,
ture of the machinery it is absolutely
impracticable to execute it; and finsl-
ly, as it is absolutely prohibited by
law, made and provided for the case
we hope this nefarious fat lie will