Burlington weekly free press. [volume] (Burlington, Vt.) 1866-1928, 1879-08-29
Value Of the National Banking System.
FROM THE ADDRESS BY COMPTROLLER OF TIE
CURRENCY John JAY KNOX AT THE BANK
ERs' CONVENTION.

FROM THE ADDRESS BY COMPTROLLER OF TIE
CURRENCY John JAY KNOX AT THE BANK
RRs' CONVENTION.
The. National banking system has now been
in operation for nearly sixteen years, and it
is surprising how few amendments to it it has
been found necessary to make since the re-
vision of the original act of 1854. 1t is COM
paratively an easy task to prepare banking
law for a single State, but it is quite another
thing TO draw one which shall be suited to
the varying conditions of great country
composed of forty different States. 1t can
not be denied that the workings of the pres
ent law have been admirable, and that its re-
suits have exceeded the most sanguine eX-
pectatiOns of those who favored Its passage
Its successful operation is acknowledged not
only in this country but elsewhere. The
English financial journals are full of discus
sions upon bank reforms and many of the
most prominent of our National systems are
zealously advocated by them.
\ bill has been recently introduced into
the House OF Commons-a copy of which
Woodworking such features of our law
as the auditing or examination of the &C
counts of the banks, of limitation of indi-
vidual liability of shareholders and of the
amount of lloans permissible to any indi-
vidual or corporation.
The leading financial journal of England,
the London Economist, has suggested that
the principle be adopted by the joint stock
banks, giving security to their circulating
notes by the deposit of government bonds,
which is substantially the system of the
Bank of England. There is no doubt that
the question Of bank reform is to become one
of the principal topics of discussion both in
and out of Parliament. during the next few
years.
The old system of banking with branches
in so many different and remote places is
sure, sooner or later, TO be discontinued and
Il more compact and uniform system will be
established in England and in her colonies.
Correspondence has been opened with the
Bank Department of Washington by many
of the different South American States and
by bank officers and residents in Canada who
look with favor upon the principal features
of our system, and even Japan has a system
of National banking modelled after our OWN,
which | am informed by the Japanese Min
lister is working to the satisfaction of that
government.
There are in this country S53 State banks
and 2,S56 private bankers, who choose to
remain such in preference to entering the
National system. The profit arising from
upon banking capital of $780,
900 will not average mort than $500 or 5000
and il is easy to understand why
there is no particular inducement for well
established banker 10 subject himself to the
woke of legal restrictions imposed by the
Bank act for this small amount of compeu-
satiOn.
Yet | have rarely met with private
banker, or with an officer of n State bank
who did not acknowledge how greatly the
business Of banking has been improved since
The National Bank act Was passed and |
never met with one of either Kind who
desired that the system should be over
thrown
There are no doubt many persons. particu-
larry In the Southern States, who believe that
upon the ruins of the National banking sys-
em could be again built up the old State
'ysteuls with the right to issue currency
'qual at the very least to the amoun, OF
'apital invested and without security of any
>ind being given therefor, and who also ex-
lect that the old notes of exchange prevalent
IL the old times will again return for their
benefit and profit. The wisdom of many of
he prominent features Of the National bank
ng system, such rs those relating to reserve,
security for circulating notes, publicity, eX-
limitations and Others is generally acknowl-
dyed.
MIR. Knox, in closing, deprecated the at
empts made 10 abolish this system, and de
med the florid statements respecting the al
eyed enormous profits of the banks, affirming
hat there was not an average of two per cent
'roft on bank circulation when based on 4
'cr cent bonds. Instead of IA net profit of
81, 600 900 per annum. the National banks
eceived not more than $500, 600 on their
REGULATION, and the net amount OF interest
aid by the Government TO the banks upon
hat portion Of their bonds which equal the
REGULATION returned To them was only So
81, $50 nine and one half millions OF four
er cent bonds are deposited Under
he present currency system il WAS
ecessary for the Government to
old only a small amount of coin for redemp
ON purposes, US the banks, State and Ma
onal, hold 50 large Il proportion of the legal
'nders as a reserve fund, but if Govern
lent should issue all the currency the banks
'ould hold com as a reserve, and Govern
tent must necessarily hold an increased
mount for the redemption fund. lie deem
| it impractiCable to substitute lnited States
ptes for bank notes, and argued that for
ANY reasons it was desirable TO continue
oth.the National and State banking system
lie closed by predicting prosperous future
" banks