Daily Kennebec journal. [microfilm reel] (Augusta, Me.) 1870-1975, 1879-01-17
From the New York World.
Governor GarcelOn and National
Banks,

Governor GarcelOn and National
Banks.
The democratic Governor of Maine de-
nounces legal-tender greenbacks as uncon-
stitutional things of which he desires speed
ily to see an end. and he also crticises the
national banking system in way to entitle
his criticisms to consideration.
The criticism can be best appreciated by
those who will reflect for a moment upon n
few of the prominent and rather familiar
features of our present national system
Whenever an association desires to begin
tain amount of Government bonds, say
$40 600. at the market price, deposits them
in Washington and finally receives only sS5,-
800 of issuable notes, since 3 per cent. of 500
600 is retained by the Treasury for redemption
purposes and the security of individual hold
ers of the notes. Another fixed percentage
of deposits must he kept in reserve by the
bank for the protection of depositors. With
these perfected arrangements and an iron safe
warranted to be burglar-proof Though as to
the possible giving away of the combination
to janitor nothing is said in the law the
new bank opens in Maine for business. The
first applicant, we will assume. is a lumber
man, who has sold his logs for $4,000,
PAYABLE in sixty days, the obligation of
which payment Is secured by the note of
the purchaser. The lumberman, who needs
the cash Immediately with which to pay
his own debts and to open new enterprises,
offers to sell the note to the new bank,
or rather to exchange it for the bills of the
new bank. The offer is accepted on con-
dition that the lumberman will indorse the
note and pay the bank certain sum as
6 per cent. interest for the sixty DAYS
which the note has to run. The bank
thereupon pays out for the $4,000, less
interest. its new bills just received from
Washington, and when the note natures
other bank bills are returned to the bank
with which its own may be retired. This
is a very primitive and rural transaction
which we have described for as a finan-
cial centre the bank instead of paying its
bills over its counter to the lnmberman would
inscribc credit for the sum in his favor on
its books, against which he would draw his
checks, and it might be that no bank bills at
all wonld be used in the whole transaction
Indeed, the affair might have been arranged
with private banker or a Maine savings
bank, and then the currency of neither could
| have been employed for neither issues any
currency. But in the case of the national
| bank. why should it not exact interest of the
| lumberman if it gives him symbol of coin
Immediately available money in exchange
for the note Of the purchaser of the lumber,
which was not immediately available? And
how are the burdens of ''the people" in
creased by such transaction?
Governor Garcelon makes a solid answer
when he says that the nation pays per cent.
interest on the 100000 of bonds which the
/ Il IL =
the same time in Maine the bank NAV be re-
ceivng per centum in addition on the SS5-
500 Of bank notes which it received for the
deposited bonds. That is no doubt true
But the price which the bank pays is. first, a
national tax on its circulation, deposits and
capital, and State tax to whatever amount
the State of Maine sees fit to infict on its
| shares: and, secondly. the bank submits to a
national official inquistion into its business
and its discount paper which no English bank
would tolerate for day. and to numberless
restrictions and penalties. The compensa-
ton, whatever it may be worth, which the
nation receives is a bank currency of uniform
valne from Maine to California. this currency
being convertible into greenbacks and these
again into coin on demand; a steady holding
by the banks of about one-fifth of the
Government bonded debt. and also the
| holding back from redemption, for the bene-
fit of Mr.. Sherman's plan of resumption, OF
nearly one-fourth of the national greenbacks.
If the bank pays too little and the nation re-
ceives too little, then, instead of violating the
Constitution by issuing more Government pa
!, per money to get rid of double interest why
not endeayor to enact that the interest on the
, deposited bonds shall go not to the banks but
into the public Treasury
+ But let us look little decper into the
double or treble interest which Gov. Gar.
celon intimates that national bank in Maine
, receives. II gets 4 per cent. on its bonds and
6 per cent, on its discounts. Tha,
would make a sum total Of only 10 per cent
um If all the bank notes were loaned. But
what do the statistics exhibit as the aetna
outcome of national banking in Maine durins
the fiscal year 1873? The State had seventy
two national banks in operatian on this ba
sis:
Capital $40 $50 .OO6
Bonds in Washington at par 9,626, 25(
Circulating notes $3.50 80
!, Federal taxes 1856,
T State taxes 240, A:
Percentage of taxes 33 per Ct
We have no means of ascertaining the per
centage OF Maine banking profits, but If VIZ
take all New England this will be the result
Ratio of dividends to capital SO per ct
Ratio of dividends TO capital and
surplus 5b per RI
Ratio of earnings to capital and
surplus SO per ct
= Surely that can scarcely be said to be doub