Burlington weekly free press. [volume] (Burlington, Vt.) 1866-1928, 1878-09-06

The strongest argument used by those who
are in favor OF substituting greenbacks for
the national bank circulation is that the
government would save the interest on the
bonds which the banks now hold For. it is
argued, if the banks were not allowed to
issue any other circulation they would have
to sell their bonds for greenbacks. and the
bonds being cancelled, all interest on them
would be saved. 1t is very true that when
bond is paid it ceases to bear interest. but
the fact does not apply any more forcibly to
the bonds held by the national banks than to
those held by individuals. 1t does not fur
nish any reason why the government should
force the banks to sell their bonds more
than private holders. The government can
save no more money by forcing the banks TO
sell their bonds than it can by forcing pri-
waite holders to do so. In fact, if that is to
be the consideration, it is easy to demons
trate that it cannot save so much. For from
the circulation of the banks for which it
holds bonds as security it derives one per
cent in taxation, while the banks also pay
tax of one-half per cent on deposits and one
half per cent on the capital in excess of the
amount of bonds held Now from the bonds
held by individuals it derives no revenue
whatever, and Of it is good policy to force
any holders to sell their bonds for green
backs, the government would make more 10y
calling upon private holders, by the full
amount of taxation which the banks pay on
circulation. As measure of economy,
therefors we think the scheme is failure nj
the start.
But, apparently, ii is not what the gov
eminent might make by the operation so
much as it is what the banks make on their
circulation, which is the cause of the clamor
against them. 1t is considered that they
are favored too highly because they get inter
est on their bonds and have the privilege in
addition of getting interest on the circula-
ton which is based upon them. But it is
well to state the matter fairly, and see if
they do not make some return i'll compensa-
ton for the privilege BY depositing
surplus of ten per cent in bonds they get
their circulation, but they have TO pay one
per cent for it. How is it with the private
holder of bonds lie may deposit his
bonds with any good banker and let their
face value by payment, at the present time,
of about three per cent interest. This is
about the difference between the privileges
of the two kinds of bOndholders, as far as
getting money is concerned. But this
should be remembered as showing differ
ence in favor of the private bondholders.
He is not subject to government supervision
in the conduct of his business he does not
have to make returns OF the condition of his
affairs five times year at his own expense
and, furthermore, he does not incur the on
erous taxation, State and national. which the
banks have to pay for their privileges. The
great privilege which the national banks
derive from the government is that OF circu-
lation, and for that they pay directly one
per cent, and also pay to the government in
other taxation over ! per cent more, making
over 24 per cent. Last year, on n circulation
of S3l6, 40. Ill. they paid i'll federal taxation
Sc, 99S. 926.15, to say nothing OF the State
taxation, which the year before brought up
the grand total of taxation upon the banks
to Sl6. 1T,Sl9. Verify, II they have priyl-
leges they have to pay something for them
But, notwithstanding the fact that the
bonds held by the banks are not taxable by
the terms of their issue, are they not, in fact.
taxed All that q bank possesses, its capital,
its circulation, its surplus, its profits acquir-
ed or expected, are all included in the GER
tificates of its shares. Everything that it
owns, including its bonds, are represented
in the certificates which constitute the title
of its owners And these are subject to To-
cal taxation on their market value, The
whole value being taxed, it is difficult to see
how the parts which constitute that value
can escape.
Again, it is well to remember that the |
national bank system, with all its privileges |
and advantages and all its burdens and OBJ |
legations, was not asked for by the banks. |
1t was only entered into on the earnest solicit |
tation. almost the compulsion of the govern |
ment. Through their establishment the |
government found a market for its bonds not |
open to it otherwise. The bonds were taken |
by them on the same terms as other purchas- |
ers while the mere privilege OF banking and |
the issue of circulating notes was one which |
they enjoyed previously under less exacting |
terms. The privileges which they now en- |
Joy under the national system were freely |
offered to them, and, We have said before, |
was urged upon them. Under its provisions, |
each national bank was authorized to con-
tlnGe business as Il banking corporation
twenty years from its organization, unless his
franchise should be forfeited by u violation
OF the act, or unless it were sooner dissolved |
under the provisions of its articles of associa-
ton, or by its stockholders. What good
reason can the government now urge for |
changing the provisions OF their franchise
The interest on the bonds held does not
constitute sufficient reason, rs We have
shown. The fact that the banks We're po-
tent agency in aiding the government when
ii was in sore distress cannot be urged as a
reason, and about the only one that survives is.
that the privilege of circulation, though cost
ing the government nothing, is OF value
to the banks Is such reason worthy of
respect ?-B0ytOa -iduertissr.