Sacramento daily record-union. [volume] (Sacramento [Calif.]) 1875-1891, 1880-08-14
SECRETARY SHERMAN ON TIE MA
TI0NAL BANKS.

on Hnanclal topic, TO De read at the
Bankers Convention, Secretary Sherman
prepared letter in which he reviewed the
history of the National Banking system in
very interesting and instructive manner.
In view of the wild nonsense that has been
and still is talked and written about the
National Banks, this quiet statement of
facts is seasonable. The Secretary has
done well also in recalling to public recol-
lection the state of the currency which
the National Banking system superseded,
for if anything could convince the people
that the new methods are preferable to the
old description of the latter will do so.
In the time referred to all the paper cur
rency was issued by State Banks, and one
of the peculiarities resulting was that
nobody could ever tell with any
certainty what the currency he held
was worth. There were all sorts of dis
count on all sorts of paper. The money of
one State was often not good in another.
Exchange was high, risks were constant,
and everybody was continually mourning
losses through the failures of wildcat
banks whose notes had been scattered
broadcast. Mr.. Sherman gives specimen
of the old condition of things He says
g In 1887 the notes issued by the banks in
"the New England States were at dis
"count of from one to one and half per
"cent. Those of Georgia were at dis
"count of three per cent. in January of
that year, and at twelve per cent. in
"July. The notes of the Michigan banks
svaried in different periods in that year
g from two and half to fifteen per cent.
'sTo the banks of every State there was a
different rate at different periods, and
the country merchant who had bills
g to meet in New York could not tell be-
g fore he left home how much money
would be required for the purpose; nor
"could the mechanic, paid in such cur
rency, calculate in advance the shave
&c on his wages to which he would be SUBJ
"jected." In fact confusion worse con-
founded reigned throughout the country,
and it was only through timely executive
order prohibiting the United States Treas
ury from receiving any paper money, that
the Government was saved from enormous
losses when the inevitable crash came.
The establishment of the National Banks
did away with all this loss and confusion.
1t gave the people a paper currency
resting on Government securities, and
redeemable in, Treasury notes which
through the resumption of specie
payments have been raised to gold
par. Through this banking system also
the Government has been enabled to
effect those triumphs of skillful finance,
the funding operations. by which saving
of interest to the amount of $50, 600, 900
year has been accomplished. The
National Banks further afford safe and
trustworthy gauge Of the demand for cur
rency, for their issues rise and fall only in
response to the requirements of trade, and
no political speculations or fanciful theories
interfere to disturb their balance. The
elasticity of the system in this respect is
one of its greatest advantages. When
trade is brisk the National Banks increase
their issues. In dull times they contract
them. Their own interests guide their
operations with certainty, and thus suffi-
cheney of currency is always available,
and undue initiation is avoided.
But for the help afforded by the Ma
tional Banks the public debt could not
have been funded as it has been. They
have materially assisted the Government
also in effecting the resumption OF specie
payments, and the only point in which
they have thus far failed to meet expecta-
reserves which it was hoped they would
be in position to effect, thus distributing
the specie basis through the country, and
relieving the United States Treasury to a
great extent. AS regards the interest
paid on the bonds on deposit as security
for their issues, and which is one of the
favorite points of attack by the fiat.money
folks. it is sufficient to say that this
is much more than offset by the saving
of interest consequent upon refunding, for
the success of which operations the credit
must be largely given to the banks. Those
who clamor for the substitution of treas
ury notes for national bank issues do not
appear to realize that if the Government
issued the whole currency of the country
it would be compelled to keep in reserve
from $3.50, 600, COO to $500, ZOO, 600 in coin,
| and that the interest on this reserve fund
would be from $40, 600, 600 to So, 900, 900
annually, at four per cent. 1t follows
therefore that no saving would be effected
by the proposed change, while on the
other hand the whole burden of main
tanning the stability of the currency
would be thrown upon the Government,
| dt OuCc eAC AAoAo VI AiANASiuA
crises, and enormously increasing the
work of the Treasury Department, and its
expenses. But the truth is that those who
denounce the National Banking system do
not really desire that the Government
should issue the only money. 1t has been
sufficiently demonstrated that the Interior
purpose of the raid en- the National Banks
is to secure the repeal of that clause in the
United States statutes which prohibits the
issue of State bank currencies. The South
has long wanted restoration of the old
State wildcat banking system, and a
similar desire exists in some parts OF
the West. Greedy spectators and
broken down financiers would like
to revive the condition of things
which existed in 1887 and previously. The