New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1881-02-08
FINDING AND THE NATIONAL BANKS

1
and the Housr, there is likely to be sharp
struggle over the old fiftk section of the
Funding bill as it came from the House
1t is OF the utmost importance, therefore,
that the meaning and effect of this section
should not be misunderstood. Nothing but
grave miscOnception of its nature and cOnse-
Quences can account for the fact that some
wel-meaning men still favor tie retention OF
this section. Assuredly it cannot be their de-
| liberate intention to make the banking system
| Se9ker than it is, or to expose the Industry
| and commerce of the country to greater dan
gers through that increased weakness. Yet 1t
must appear, upon close examination Of the
provisions in question, that they are calculated
| to have precisely thai effect.
1t is proposed, for instance, to require each
National bank to keep constantly on deposit
| United States bonds amounting 10 OnC-third
of its capital, whether it can make
profitable Use OF the corresponding cir
culaton or not Men who advocate this
provision forget that the banks have power
to reduce their capital at pleasure. Already
they are greatly tempted to do so by the ex-
cessive taxation to which banking capital is
subjected. This is peculiarly the case in the
great commercial cities, where the profits of
circulation are light, aud where the taxation
is especially heavy Banking capital amount
ing to many millions has been withdrawn
during the past few years, especially in tits
city, and all business men know that <ble
system has not thereby been rendered safer
or more able to meet the needs of the country.
Impose an additional unnecessary and purely
| vexatious burden, and it is certain that the
| banks would retire still more of their capital.
| In short, if bank could not prOfitably Use
more than $180,000 circulation, and had
| capital OF 100000 instead OF locking up
| $4,000 of Its money i'll bonds not needed
| to protect its circulation, it would simply re-
| duce its capital to 100000.
The bank hating members imagine that, if
they curtail their capital, the banks would be
compelled to reduce their business, their
loans, and their profits But they are utterly
mistaken. Men who know that bank is ably
| and safely managed will continue to keep
their money in its care. whether it has large
or small capital. his is not mere theory.
Seven banks in this city have reduced their
capitals largely since January, 1879. In that
month, the aggregate deposits IN these seven
banks amounted to 500. 455. 800 in January,
1881, the very same banks, with largely re-
0urtU CdDltdi, HOlu utpObltb W
| $37, 557, 300. Instead of having less money
| to loan, these same banks have many millions
| more. and their loans were actually increased
| nearly as much as their deposits. Certainly,
this is not healthy tendency. 1t is for tho
interest of the whole commercial and manu-
featuring community that the banking opera
tons, upon which the prosperity Of every
other interest depends, should be protected
by as large a capital as possible. And yet
unwise legislators have acted as if they wished
! to tax the capital OF the banks out Of exist
ence.
This and other provisions of the fifth section
of the House bill are aimed especially at the
banks of this city. In the whole country the
ifty-six banks which hold less than one third
of their capital in United States bonds lack
SIS, 1929, 745 III bonds 10 make up that proper
ton. But eighteen banks in this city alone
lack $5,S49, 1927 in bonds to make up one
third OF their capital. Either they must put
that amount of. money into bonds bearing a
low rate of interest. If this section should be-
come law, or reduce their capitals i'll the
aggregate $17,547,9S1. Is thcYe any reason
to doubt which course they would tskes But
is il desirable that the banks of this ciy,
which hOlf reserves for the commerce and
industry OF the whole country, should he made
weaker by the w1thdrawal of that amount OF
capitalf
In this respect, as in many others, the cOer-
Give policy would prove suicidal and foolish
Ill the last degree. The country cannot coerce
or drive, or bully, or bulldoze its banking
capital, but has every reason TO encourage an
increase of it. Ii the shareholders Of great
bank here find that the taxation or other re-
strictiOns are too 0nerOus, they can at any
time cut down their nominal capital
to the smallest amount permitted by
law, put the rest of their money
into private accounts as deposits, and proceed
to lend it without any Of the restrictions which
ill-informed Legislators Ary attempt to
Impose. Or they my Withdraw from the NJ