The New Orleans daily Democrat. [volume] (New Orleans, La.) 1877-1880, 1878-08-17
BANKS AND THE CURRENCY.

under the circumstances, All objectionable
one This eminent exponent Of jay Gould g
peculiar notions Of finance says; "Ihe nation
al banking system Is especially distinguished
from all other banking systems which have
ever existed In this country by the fact that 1t
requires an absolutei security to be deposited
with the government for every bank note is
sued. and hence there has never been q dollar
of bank note currency lost to the bill-holder."
The Tribune is evidently profoundly igno-
rant OF the law under which the State banks
of New York were operated previous to the
imposition Of the ten per cent tax on their cir
culation which law, we believe, still remains
on the statute book Of that State. and has be-
come imperative only because Of the tax,
which caused the discontinuance of the State
banking system. # we are correctly in
formed the statute of New York was taken
from that adopted by the State of Louisiana.
and is almost verbatim copy Of our law.
The statute Of Louisiana was carefully pre-
pared by Chief Justice Eustis and Edmond J.
ForstaIl. the representatives OF the Hopes
and Earrings. assisted by q number Of the
abest lawyers and flnanciers of this State-at
that time prolific in great men, both In law
nnd finance and 1t stands to-day the best,
most secure and comprehensive banking law
In this country, and remains a shining monu-
ment to the sagacity aud information Of It's
trainers.
This law entrusted to the State Auditor the
engraving and printing of the circulating
notes of these banks. He was required TO
countersign, number and register all such
notes as they were issued and to stamp upon
their face the words, Secured by pledge Of
public stocks
All bankers or corporations operating under
this act were required to subscribe O. capital
stock Of not less than 100000. which was to
be secured by "bonds OF evidences Of debt of
the United States; bonds of this State and
other public securities specially named in the
statute, which were to be deposited with the
Auditor. and taken by that official at their
market value" only, but never above their
face value. and all to bear not less than per
cent. In case Of the depreciation of the secu
rites in his hands, the Auditor WAS directed
to retain the interest until the securities re-
covered their full value, and further to re-
u,lire an additional deposit Of bonds to make
up fully the original security.
From this 1t will be seen that "the national
banking system is not especially distinguished
from all other banking systems which have
ever existed in this country, by the fact that
It requires an absolute security to be deposit
ed with the government for every bank note
issued
The securities required Of the national
banks are by no means comparable, either in
value or stability. to those eEacted of State
banks under the Louisiana law. The national
banks have but one security-United States
bonds-and are allowed to issue 30 per cent of
their nominal face value In current notes. No
provision whatever is made for the luctuation
In market value Of these bonds, and the ma
tional bank circulation, AS matter OF me-
cessty, follows the rise and fall of these Sc
curities. The national banking system aims at
nothing beyond making the value OF the bank
currency keep an exact relation to the value
Of the public securities. This Is compare
lively but poor security, commercially speak
ing. 1t makes private fortunes follow the
vicssit,ldes of the finances Of the State with
which they are identified, beyond separation.
This by no means satisfies the demand of
commerce. which is not limited by geograpl-
ica and political lines. but extends all over the
earth, fourishing most where least tram
eled by local regulations or connected with
local finances. History affords abundant ex-
amples Of the richest and most prosperous
commercial people living under bankrupt
governments. We will not have far
to go for examples. Suppose, for instance,
that the commercial finance Of Chicago was
made dependent upon the public securities OF
that city What would have been the result
some months ago, when the city government
was absolutely threatened with suspension
because it could not obtain the means of pay
ing its necessary daily expenses? The same
might be said OF this city. and even of New
York. and almost every large city in the
Union. A war or a continuance of the present
distressful financial system might reduce the
United States to q similar strait and then
what becomes of the national banking sys
| TEN? And through it. what ruin and distress
| must overcome private individuals end al
commerce and industry?
| The aim of the banking system is far differ
| ent. It provides for a stable, fixed and certain
value for the issue of the banks established
under it, value which will withstand every
vicissitude save the 'wreck of matter and the
crash of worlds" The securities of these
banks are examined and appraised from
month to month, and are kept up to the full
| value of the notes in circulation. and thu
securities are increased and the notes retired
by State official in order to maintain the
| face value of the circulation.
| This is what we call stable currency" ant
the proof of 1t is that the paper of these banks
commanded premium before the war all ovel
the continent, and withstood the ravages O
civil war better than any other in the country
The aim of this system, like that OF TIN
Bank of England, upon which it is modelled
is to create q standard of value more trust
worthy even than gold. Indeed, it does no
recognize gold as a trustworthy standard a
all. During the late war-measured by tn
prices of twenty of our great staples golt
varied more than any of them except cotton
Jevons, measuring gold by the prices of NOR