Watertown republican. [volume] (Watertown, Wis.) 1860-1906, 1879-09-17
NATIONAL BANKS.
Are They an Expensive and Oppressive
Monopoly?
The Policy of Substituting Greenbacks
for National Bank Notes.
Speech of Thomas NJ. NichoI at
Green Bay, Wis.

The most important single financial issue be-
fore the country is the bank question. II we
are ever TO have flood of lrredeemable or
Stat currency, the first step toward it will be
the destruction Of the National Banks, and the
adoption of the theory that the government
shall issue all the money. 1t is not at all I'M
likely that we may witness great political con-
test on this question before many years. The
Greenbsck party everywhere demands that the
banks be abolished and their notes substituted
with greenbacks, and a large part OF the demo-
cratic party is committed to the same doctrine.
The grounds of this demand is that the banks
are a dangerous and expensive monopoly. And
this is the question we are to examine tonight:
ARE NATIONAL BANKS AN EXPENSIVE MONOPOLY?
A monopoly is some valuable privilege held
by one or g few persons with such conditions
that others can't enjoy it, and that offers no
chance for competition, But the National
Banking law offers no special praU1teges. 1t Is
open and free to all there Is not person III
the country who has any capital large or small,
but that may have that capital invested IN the
banking business if he desires. Any num-
Der of persons not Jess than five can organize
new bank any where, by complying with the
law, and compete with those already in exist
ence for business profits. Any person can pur-
chase the stock of any bank at its market val
ue There is no element of monopoly or special
privilege about National Banking. The law
from the first Disseminated against large lnstl-
tutlons to prevent them from monopoizing
the banking business in any community. Banks
with not more than half a million dollars cap
ital could have a circulation equal to 80 per
cent. of their capital. But If their capital was
from half millien to million dollars they
could only get so per cent, from one to three
millions rs per cent ;sand if over three millions
only go per cent. And the law was SO amended
July 18th, 1870. that no bank organized since
that time can get more than half a million dol
lars of circulating notes, thus utterly prevent
ing the combination of large amounts OF capt.
tai in one institution. The bank law not only
does not establish a monopoly but it makes
banking monopolies impossible.
ARE THE BANKS EXPENSIVE?
It is charged that the banks are expensive on
account Of the interest on the bonds deposited
to secure their currency, and it Is claimed that
this expense could be saved by the substitution
of greenbacks for bank notes. The persons
who make this charge and claim seem to for
get that the government borrowed certain
amount of money and issued bonds for it, snd
that the interest on these bonds would have to
be paid if no National Banks had ever been Or
ganized. Allowing bonds to be deposited to
secure bank currency does not increase either
the principal or the interest of the public debt.
On the contrary it indirectly reduces both. If
this plan of providing a currency had not been
adopted more greenbacks would have had to
be issued and that would have been an increase
of the public debt for greenbacks In the shape
OF United States notes are as much part OF
the debt SIS the bonds and were SO considered
at the time of their issue. And to have in-
creased their issue say $500, 00O 900 during the
war would have caused further depreciation ;
increasing prices and the cost Of living to the
disadvantage of the poor people and increasing
the cost Of all army supplies to the great disad-
vantage Of the government. The banking law
gave currency without increasing the govern
ments Obligations and thus strengthened the
public credit, and instead Of increasing the ex-
penses of the government, the banking system
became at once source OF revenue on account
of the taxes paid by the banks. For example :;
the Comptroller in his report for 1877 shows
that the banks paid to the national government
the previous year in taxes $7,076 097. The
same year they paid state, county and local
taxes amounting to $9,777, s19-a total of $16,-
T77.9 The interest received on bonds by the
banks the same year, was ST., 587, 972. So that
the interest received by the banks that year.
only exceeded the taxes paid by the banks by
the amount of 1910, 153-or less than two cents
year for each person in the United States.
The banks don't appear to be SO 80 very expen-
sive after all.
DO NATIONAL BANKS MAKE DOUBLE INTEREST?
One of the popular charges against the banks
is that they make double interest"-the inter
est on their bonds and on their currency. But
this double interest represents their gross in
come, and out Of it must be taken all expenses
anu LOSSES, 1nClO0QG TO their business, before
we can know what the banks nlGEe-taXes, In
surance, salaries, officers and clerks, incidental
expenses and losses. The item Of losses alone
bad debts-last year was over twenty-foul
million dollars, and year before last it was over
nineteen million. The net profit of the Ma
tional Banks last year only averaged five and
one-tenth per cent. on the capital invested.
SOME ADVANTAGES OF THE BANKS.
They give an absolutely secured currency
uniform in all parts Of the country. Compare
this with the currency Of the old state banks
poorly secured-liable TO "break' any time
wouldn't pass away from home except at ruin
GUS discount-easily counterfeited etc., etc
Under that system the people lost 5 per cent
of the average amount of currency in circular
ton each year by the failure Of banks, for whe1
bank ''broke" its currency was worthless.
This item alone amounted to about ten mil
lions Of dollars per year. Under the present
system there has never been dollar of loss Of
this kind, and it also furnishes the best secu
rity against counterfeiting that has ever beer
devised.
SECURITY FOR DEPos1ToRs.
The National Banks also furnish greater Sc
curity to depositors than any other system eve
did. The total loss that oil creditors Of all tn,
national banks have sustained since the begin
ming of the systemic years-is only Sc, 415,
423. The loss 10 the depositors of five stat,
banks that failed in the city Of Chicago durin,
the years 1877 and 1878 was 3,819, 500; ant
the loss to depositors of savings banks in tn
State of New York during the last three year
was over $3,OOo,OGO. So that the nations
banks not only giyea good currency but create
protection to depositors than any other bank
ing system ever devised. Why is this? Be
cause the law prevents the organization O
banks without actual paid up capitol. and the
the Treasury department keeps such clos
watch on the condition ef the national banks
compelling them to make quarterly reports, an
special reports whenever asked for. and maxim
them submit to examinations at any time, tina
it is almost impossible for bank to become in
solvent without the department knowing it i
time to protect depOsitors.
DIFFICULTIES IN THE WAY OF ABOLIsHING NJ
TIONAL BANKS.
The banks cannot be abolished without th
most shameless violation of national faitl
Each bank is chartered for twenty years, il
charter to be revoked only when it violates th
law. The first charters were in 1858 none
them will expire before 1888 and the charter
issued during the present year will not expil
till 1899. Yet it is proposed to pay no attentio
to the conditions of these charters and revol
them at will. And it is proposed also to tax