New-York tribune., 1879-09-16
THE \ b C OF FINANCE.
XVIII.
NIEnITS lE IIIE NAIINN IL NAEKS

trey safe tAp banks are required 10 own and dr-
posit with tie United States Treasurer. for 100000
Ii notes issa,l. 500 OO0 III United States bonds;
10 keep at ali haeS $4,000 m lcgal-teEders on d'-
posi-. against $50. .uJ0 ~ bank notes is-n,d fund
for tleir redemption AID to subait to strict in-
spcction and restraint. How thcn are men vino
have c4pltll ,n .urcj a. % into h.Iking wherever
there IS a locl n,ed? They ar, allowed 10 s-ue
ana lend So. 900 in notes. while they oraw interest
on the bonds worth 100000 which toy own.
Tbi, j. holly denounced giving the banks Gouhle
interest" ihtir money. Bui the OhJect-tO secure
with perfect safety banks ard currency enongh iof
the business O. each locality IL rap dly Towln-
oolutry--is often iorEO Post offices are opened
jy Gre hunlIci and pos;-,0ates established. When
tie business does AOt pay Is yet. would II be wise
20 shut NJ all such oflcssl The deacig Is bOrnc by
the Nation, because postal facilities, even tor new
s9arsely settled districts, axe necessary to the
general welfare AMI prosperity. To deny them be-
cause o the cost woall bc injury not only 10 the
people there. bat TO hc millions dswherc, VINO con
stanty necl TO reach such places by mall If the
local bank, COS something Go ,hey not also render
a great public service. 4. Tho NatcT-piD' which sup
ply pure water to whole town also cost SOME
thing. Should they be torn rD! 1t would be quite
as sensible n TO ab0l III the National btnAs because
they gain some p.ott in supplying Il safe currency
tor local needs If men want pure water instead OF
poisonous stnif from the ditchcs. o. pure currency
instead OF the knaysh wildcat money OF old tines
they must pay The cost.
Is the cos 100 large The profits Of the National
bauis are So small that many retiring from the
systcin aud 49, jl7. .3C3 more of circulation has
been gwen up by banks than has been issued to
banks since January 1879. " The proof oithe puo-
ding is the eating" Il the issue Of notes pays the
men who have tried H. why have the banks surren-
dcred 50, SOC. 600 of their circulation! Farmer
or hacksmiths, who are getting rich III any place,
are never in haste to sell their farms shops and
10 get ont o. the business there. Again there are
now IN exist nee SJ3 state and .. 500 private banks
which refuse 10 come into the National system and
issua notes, though they could IL they chose. III
tho profits are too great if the system is really
burden. L tie banks gain more than fair return
for the services rendered how is it that other banks
and bankers do not make haste to come into the
system aui to share its proiitsl The truth Is, rs
the Official reports have proved, that the average
gain Of National banks b. their circulation IS less
than per cent yearly. In many places it is much
less AMI IN many there IS 10 gam whatever.
isorten Thought that banks and other bond
holders ranuDduly, because their property is not
taxed But every dollar invested in bonds - taxed
at ,1o outset. The JaX IS paid IN the price. jones
wants ta icut firm. AID the rent is $1,000 for the
ycar # hc pays o.. taxes. amounting 10 200. Bnt
larc1o lotu.ratout the taX.' just such bar
gain is made by every man who buys q bond exempt
from taxation; he pays more lor the b]-d because
II is exempt. When Che average t1x is per cent
ataxed SIX per cent bond wiz sell .og 100 more than
au un.ax q lour rcr cent bond. iu reality, Govern
mant collects from tAc buyer at tho outset. al tho
ta iiat hc would b, expected TO pay as long as the
bond ruls oa thc money invested in it. other pr
SOL al property OF an kinds escapes taxation BIT
not dollar invested in United states bonds has
escaped or ever can escape.
The double interest " gives grief only TO mon
who never pay any il. The men who do borrow
money and pay interest make 10 complaint, because
thoy know that thy pay only single interest at
t.c usual rate. II Jones borrows $1,000 90 bank.
hc pays uo iaorc thau if L. bad borrowed from lis
regAbor smith. How is hc Ihe worse oil, then, for
tie tact that tie ba.k also owns bonds VINO
DAYS The extra charge Not the people. for they
pay .i'y one interest on ,he money borrowed by
their agent the Government whether the bond IS
owned By the bank or not. II tic banks lad never
bo,n formed the men who started them woula have
arig.t To- prrcs d. the same interest Oh the BONDS
thcy own .hati, now paid them as bank. The
Nation has borrowed their money. The bonds be-
long 10 them. and the inter- 81 must be paid to
,heri or 10 some other holders. Thus the Nation
loses nothing aai the private borrower loses
nothing; in fact, he gains, for II the
bank had not been started lie would not
hqve been able 10 borrow the money N all.
The very object IN starting the bank was to supply
money for lending where there was not enough be-
fore The case Is really simple. Brown, The
workman, must have 500 to pay Black the store
keeper He goes to his friend White. the farmer,
who has saved money. But White says hrye
lent all my money mortgage Tor year. but
Black Will take my due-blli the same as cash. and
I 3D.. int. o.f is ella
DAYS interest willingly, for the due-bill is the
,alne as money 70 him. Black takes it gladly, for
be- knows that White is good, and has money in
vested. And Wh,tc, having lent his money to one
man. lends his credit to another. and gets interest
oi both The bank has credit because it has lent
money to the Nation and holds its bonds. Backed
by that security its due-bilis good and 1t lends
those 10 men who need them.
The old State banks used to get much larger
double interest" than the National banks,
because they loaned many more due-bulS IN
proportion to their capital. They wcrc not Obliged
70 keep a part of their capital idle for the
protection Of the public. On 100000 capital
they could issue 100000, or often 100000 III
notes sd could lend both the capital and the notes
l. anything to be gained by going back to system
which enabled banks to get more double interest
ON the same capital If the National banks are
burdens, though allowed to lend only SoJ,oOO III
not . on 300 600 of capital, the State banks were
twice as heavy burdens, for they often loaned
5000 900 in notes on the same capital 1t was as
if Farmer White had pnt out due-bIlis Tor two or
three time, as much as he was worth. What other
banking system shall prefer! he banks Of Great
Britain and those of Canada can lend more notes
ON given capital, and thus can draw double
interest on a larger sum, than the National banks
Men who want bank facilities and circulation. for
the benefit of iorai trade really pay less for the
Lall!-. in nrnnnrIInn ID flclr