The Portland daily press. [volume] (Portland, Me.) 1862-1921, 1879-09-18
The A B G of Finance.
The Money Question Made Clear.
IN. Y. Tfibune.1
XVII

| NATIONAL VS.. "wMD-cAT' BANKS.
We have in use two kinds of notes. The
United States notes are fixed in amount But
the National bank notes may increase or de-
crease in volume as the business in any part of
| the country requires. This, then, is the only
elastic part of our paper money, and yet men
want to abolish it. No other part of our cur
rency has this faculty of adapting itself to
| merely local needs. Gold comes or goes when
| the trade of the whole country requires more
or less. Lcgal-tenders or gold, if more are
wanted for the business of any town, county or
| State, can be drawn only from other places by
| borrowing Or by competition in selling pro-
| duets But National banks can be started
| wherever men who have means learn that
| such banks are needed, and can increase or re-
| duce their circulation at pleasure. If the
| farmers have large crop, the bank can take
| out more circulation if more is needed lend its
notes ON the obligations of men who buy and
| move the grain, and look with confidence for
return of its notes when the grain has been
sold to consumers. In like manner local bust
ness of almost every kind may supply itself,
through the bank system, with such currency
as it really needs and may thus be free from
tant cities In n'order to invite capital to engage
in banking at every place where there is need
| of it, the National system gives some profit
| the circulation thus employed for local wants.
Yet this system, strange to say, the very men
| who complain of lack of currency wish to
| break down. Strange to say, the very men
| who think there is not currency enough are
those who object most loudly to the profits
which invite men of means to put on more
currency.
1t is pretended that the "banks," having
common interest, will act together to contract
the currency, and thus increase their profits
by every fall in prices" If this is so why do
they put out any notes at all? Small crops of
wheat cause high prices, and high prices Of
wheat help the farmer. Therefore, will not
that Gigantic monopoly, the farming inter-
est, barn all the wheat, or feed it to the hogs,
in order to put up the price? Small crops and
high prices do not help any farmer unless he
has crop to sellA We may be sure that he
will not destroy his own grain in order to make
grain more scarce and help others to get high
prices. So with the banks; it helps them to
have money scarce only when they have plen-
ty to lend. Each bank might wish that some
other bank would.make money scarce, but not
one will deprive itself of money to lend in or
der that others may make larger profits. Any
contraction, too, which causes disaster, hurts
the banks by breaking their customers. Some
fail, owing the banks, and cannot pay what
they owe. The National banks have lost
$64, 1l9,415 i'll bad debts charged off within the
last Jhfee years. Otler customers lose money.
so that they have less to deposit, and conse-
quently theIbanks get less to lend. Bad times
for the country are bad times for the banks In
1870 the National banks gained IL per cent ON
their whole capital invested; in 1873, less than
half as much, 3 14-100 per cent To say that
the banks will bring disaster upon Others in
order to help themselves is sheer nonsense.
What workman, in order to better his condi-
ton, will set on fire the factory which pays him
wages?
m is said that tho Notional hanl,s for,, ..o
powerful and dangerous monopoly" Nothing
can be more absurd. These banks are not one
in interest, as has been shown. Find fifty
bankers, and you find fifty different opinions.
National bankers are of all parties and of all
shades of opinion as to finance, and it has nev-
er been found possible to get a tenth of them
to act together There are 210, 600 stockhold-
ers in National banks, but more than half of
them own $1,000 or less of the stock EACH and
war upon them as 20 class is largely war upon
women and children. Banking is a monopoly
only as farming is. A man who cannot get
land cannot be a farmer, and a man who can
not get money has no right to be banker.
But the real objection to the system is that it
prevents men who have no money from issuing
swindling notes as bankers. Have the people
forgotten how they were robbed in old times by
"wild cat banks? The National system is so
guarded that it is safe for the people For
that reason it is hated by the men who want to
swindle the country once more by starting
banks without money, and putting out worth
less notes without restraint.
Any set of men can start a National bank
who will do it honestly and have the means to
do it safely. But the restraints of the
law are meant to protect the people,
and the system we have is the best
in the world. The bankers are obliged to
pay in and hold three times as much capital in
proportion to liabilities, as the 216 banks of
England and Wales put up to protect their
creditors. Sworn returns and strict inspections
are required here; the lack of them in other
countries it is confessed, exposes the people to
greater danger During sixteen years all the
loses to all the creditors of National banks
amount to only Sc, ,415, ,4a3. But a single bank
in Great Britain recently failed with loss to
creditors of S26, 6,000,000 The old State banks,
as all know, used to fail by the score, involv-
ing rich and poor in heavy losses. In one year,
1871, banks lhaving a capital of S67 ,036, ,265-
more than one-fifth of the entire banking capi-
tai in the country at that time-failed with q
circulation of 81, ,577 1852, and in nearly every
instance the whole capital was lost. In almost
any year of disaster, it is safe to say, the loss
to creditors of the old State banks was greater
than the loss to the creditors of all National
banks in sixteen years. 1t costs something to
make the system so safe. Policemen and fire.
engines, for the protection of life and property,
cost something also. But it would be much
more sensible to abolish them than to permit
knaves to start banks and issue notes without
restraint
None deny that the banking system has
saved the people many millions by its safety.
None deny that perfectly safe and uniform
currency, of the same value in every part of
the land, is of very great benefit. But those
who assail this system, in order to revive the
State Banks, haYe no idea what that change
would COST 1t has been shown in Article Nv
that the tax paid in the rate of exchange be-
tween the West ard South and the East in
the years before the war, was not less than or
II per cent. on the whole value of goods trans
ferred and payments made. If that value is
only "a, 100000, the cost of returning to the
- I tnI 400 nDo
100000 yearly But it is generally believed
that the amount of exchange drawn each year
is already over So, 100000, and it is rapidly in
creasing AT the past rate of growth, the do
mestic commerce will double in ten years. On
a yearly movement of S10000,000, the cost of
substituting thirty-eight kinds of paper, some
bad and some good. for one uniform and safe
currency, will be from 500, 100000 to S150,OO0,
600 yearly. 1t is for the long future that men
of sense will build The State bank system
would infict an enormous tax, even now, upon
the producers of the West and South, with no
real benefit to anybody, but in years to come
that burden would become much greater than
the interest on the whole national debt. Grow
ing every year, with the domestic commerce,
it would soon become so vast and intoerabe,
that no man would dare to oppose return to
National currency.
Compared with the great saving in the cost
of exchange, which is more than S50,O00,OO0
yearly already, or with the saving in smaller
losses to the people through failure of banks in
single years of disaster, the cost of the National
system is Insignificant. No one claims that it
is as much as the entire interest ON bonds de-
posted for circulation, now less than $16,500r
900. But that sum is less than one-third of the
saving in cost of exchange alone. That the
real cost of the National system to the people
is less than one-sixth of that saving will be
shown hereafter.
The Pistol in America.