Ellsworth American. [volume] (Ellsworth, Me.) 1855-current, 1878-09-05
Misrellaneons.
The National Banks.

nal. vii, be found interesting TO those who
desire TO understand more fully the subject
OF our National Banks:
/. ". lcgal tender nofs 10 Le usei as cur
TcEcV, trdS ever issued ~ tlIs Government
from the adoption OF the Constitution down
10 l>62. but all permanent paper money
was always issuc'i by banks. The fOun-
ders OF the Government. after the Rcyolu-
ucnary experience with continental cur
reucy, set their faces strongly against haV-
ing the Government attempt 10 do the work
OF a bank of issue. on the ground first. that
there would be too much risk OF los
through unfaithful ofiicers; second. too
great danger that redemption would not bc
faithfully maintained; and third. al entire
absence. In a currency dependent on parti-
san ma briiles 10 Congress, OF thar frxibii-
liy Which can alone De obtained through
banks that respond IN the demands OF bu.i-
ness. The great men OF our nation. from
Hamilton sni Madison. 10 Jackson and
webster were opposed 10 anything OF the
Kind
TAc H1tior1i baHEing sysfcra simply
took Ns glIoc - ihs STAT tIAE system
W hcu the war broke. out aud for years pre-
eedius. all the paper currency of the oouu-
try was issued by banks chartered by thif-
ty-dye different Statc.: aud 40 one thought
OF suggesting that Il coud be issued by
Government Even In Jacksou's day. the
couf.ct was not between bank aud Gov
crnmeht issues. but between State bank.
ard ono NaiioIal bank. These state banks
were weak their bills generally unsecured
rs any deposit OF bonds with public au-
I thofifies. and uucurrent outside of the
Stale 10 which the bank was located; they
were allowed 10 issue notes TO twice the
amount OF their capital, aud there was 10
I efficient restriction on their issues even
I within this limIi 10 provide a market tor
: nlted States bonds. and make the bank.
directly interested IN the maintenance Of
the Government credit, and also 10
strengthen. unity and improve paper cur
rrncy. Secretary Chase devised the nation
al banking system as substitute for the
+ state bank system; and after considerable
! opposition from bankers. who realized that
1 the State system was more profitable, the
3 Secretary and President Lincoln succeeded
I IN carrying the national system through
I Congress. and giving the people bank notes
\ perfectly secured. current In all parts of
I the Union. and so guarded aud restricted
/ that no bank could issue over ninety per
7 cent. oi it, notes. because every note i
4 first furnished in blank bv the United
States Comptroller aud then signed and is
| sued by the bauk.
] II t1e iftf tcStyH ~ 81. Nft'Aets 4Fte.
LiarolH aud the other stItesmes. trh0 carried
Us through The todr. that The Nfionll Bank
currency should BE- fhs permanent IIpcr mon
ey Of the country, and that The greeaIdeks
| should Be only temporarily used. sec. Chase
I 80 declared In his report, and Senators
| Sumner, Fessenden and Other statesmen
| reiterated the declaration.
1. Bank notes cannot disturb The stand
ard of rdlHe and cause he currency % fuc-
igdts dHi drire coin out Of circulation as L.
). Hot.s haze done, for the reason that the
greenback i legal tender and hence be-
comes the dollar Of accounts, while bank
notes are not legal tender. and In the ab-
sence of legal tender government paper
can pass for only what they will bring In
coin. and thus do not disturb the specie
standard or prevent the circulation of coin.
The moment q bank note depreciates every
body knows IL. and acts accordingly; but
when the greenback depreciates il deceives
the people by still calling itself dollar.
Bank notes are redeemable either in coin
or greenbacks, and when government
makes the -reenback convertible into coin
bank notes become practically redeemable
In coin. either at the bank in Boston or New
York or at the L. S. Treasury. Ifuwere
proposed that government should Issue
notes like bank notes. and even instead of
/
be a very different question. And II in adj
dition TO this some plan could be devised
10 make the volume respond to the wants
of business, and not 10 the wants OF dema-
gogues in and out of Congress. some of the
serious difficulties OF an exclusive govern
ment paper money would be removed.
s. BdRking is as free and open as any
other business. and necessarily responds dc.
curqtely to business demands. Every per-
son Is as free to go into the banking busi-
ness as he is into manufacturing. trading
or farming. A State bank which required
a legislative charter. and the national sys-
TEN until 1875 when it was opened to all,
might have been called monopoly: but Il
national bank which now only requires an
application TO the Comptroller and Il de-
post of bonds by anybody. is absolutely
free; and this freedom 10 enter into or
withdraw from banking, makes the volume
of notes accurately respond 70 the demands
of business.
6. Baking under the free national syS-
tem cannot pay larger profits than other tusi-
ness. Necessarily banking business that
is open to everybody cannot pay more pro-
fits than other kinds of business do, be-
cause as soon as it does men rush into 1t
and bring down the profits. The fact that
within two or three years banks have been
surrendering charters or diminishing their
circulation, Is proof that il is already un-
profitable. The report OF the Comptroller
shows this, the average bank surplus of
"a per CT. accumulated and undivided in
flush times, has fallen OF since 1875. show
ing that banks have been Obliged to make
up some of their dividends from old profits.
From the latest report OF the Comptroller il
appeared that the net earnings Of the banks
Of the country, including the Interest on their
bonds. for the year ending Sept. l, 1877. ,eere
only 8 2-3 per cent. on capital and surplus.
and the diridends Cpdrtly out Of surplus only
trife orer per cent. from uhich Is n be
deducted per cent. municipal tdodtton paid
by shareholders. ledring only per cent. en-
elusive Of taxation. The showing for the
current year will not be SO favorable.
No new bank started within two years
can now make more than four per cent. ex-
elusive Of taxation. Gross income per
cent from bonds Gas most new banks have
only 4 per cent. bonds. and old banks only
l-2 and 5 per ct. bondsD about per CT.
interest On capital from circulating notes.
as the loansble notes of Dank are only
three -fourths OF the capital (l5 per cent.
being in the redemption fund and reserves y
and from deposits not more than l per
cent. on capital. as banks outside OF the
great cities rarely have on the average de-
posits TO the extent Of more than 25 per Ct.
OF their capital, not more than half OF
which can be loaned. Total income of .
new bank 10 per cent. Expenses, Govern