The Indianapolis journal. [volume] (Indianapolis [Ind.]) 1867-1904, 1883-12-05
The NntinnaIR Ranks.

| The National Banks.
The national banks hold as security for cireu-
lation, 1852, S77,3 800 of United States bonds, a
reduction of SO, 613, $50 during the year. They
hold S201, 1877, ESQ of United States 3 per cent
bonds as a basis OF circulation. All the latter are
likely to be called for payment during the next
four or five years, unless the surplus revenue of
the country is diminished. There is little or no
profit on circulation based upon aud Ala per
cent. bonds, at the present premiums therefor.
continued payment of 3per cents will proba-
bly, result in large reduction of the bank circu-
latiOn, unless some counter stimulus is applied.
Many propositions have been made to that end.
The national bank act at first provided for the
issue OF circulation equal To 80 per cent. OF the
current market value, but nos to exceed the par
value, of United States bonds bearings per cent.
INTEREST," and the Subsequent act of March 3,
1865, limited the circu atiOn to $345, 100000, to
be Issued in the same ratio 10 capital, upon
and per cent. bonds Since then the rate of
interest upon bonds, and the profit OH cireula-
ton have decreased. With that decrease, the
ratio of circulation issued upon the actual or
market value of bonds has also decreased. until
it is probable that, without helping legislation,
loss, instead OF gain, will ensue from uepositing
bonds security for circulation.
The holder of bonds can borrow m oney In the
market upon :hem as a pledge, at IS per cent.
upon their market value There is a discrep-
aucy with this, In the requirement. OF the law
that 500 only of circulation shall be issued upon
bonds, snme of which have market value of
ST. % This asks a margin of $32 as security for
circulation, instead of $40, it at the start
of the system. The workings of the system
show that if from the beginning 800 of circn-
latiOn had been issued npon $40 Of bonds, no
loss would have accrued to holders Of the bills of
inselvent and failing banks, though there might
have been loss TO general creditors, who must
have depended upon assets substited for bonds
released The aggregate capital of the
national banks which have failed
during the last twenty years was about twenty
millions. If upon the bonds held as security for
the notes of those banks, circulation had been
issued for the full par value, and there had been
Il an1ir - = tINa n1,,o
rites. still, the whole loss would not have ex-
ceeded one million of dollars, which would have
fallen upon creditors, and not upon bilhoders,
so long as the bonds were assets in the hands of
receiver, Moreover, gain accrues TO the
government, by law, from the nOn-redemp-
| tiOE OF naiiopal-bank notes. They have
| 1t is estimated that from 1 TO t12
per cent, or for that period about $4,0O0,o0
will never be brought in for redemption. The
sum will be In excess of any possible loss that
can threaten the government from authorizing
any Issue of circulating notes at 90 per eenr.
upOn the market Yane of bonds deposited By
law, If bonds held by banks decline in value be-
low the amount OF circulation issued, the Comp
trolier may demand additional bonds or money
| to equal the disparity. Moreover, all the assets
of the banks and the individual ability of the
stockholders can be exhausted before the bill
holder or the government suffers loss
These remarks are PREDATORY TO the recon-
mendation about to make, of mode of
keeping national bank notes in circulation with
cut loss to the banks thereby, and with safety
to the government and the bill holder. In all
| that have to say, assume that the national
| bank system is now adjudged 10 be constitu-
tional creation of the legislative power and
that the country has acquiesced in 1t as such;
that it is looked upon with favor by the greater
part of the people, and that there Is almost
universal desire to continue the Circulation of
| these notes as convenience and benefit which
| it would irk us to be without.
The public mind is naturally turned to the in
qury: How shall the national bank notes be
kept in circulation: what shall be taken n safe
foundation therefor, and yet be so low in price
4 hatf han Il oar al ia n mn dam RiFs
or what can be proposed which will give to the
banks safeguard against loss in taking and is
| suing circulating hottest am not in favor of
any thing but the Understanding obligations of
| the United States government. To go abroad
for the securities of other states is to go out of
our political and judicial Jurisdiction, and SUBJ
ject ourselves 10 the hazards of their intestine
| cemmotion, of their International conflicts, of
possible hostility to this country, ami of going
| before strange tribunals as perhaps, an unweI-
| come sutton. The sound policy of many of the
States of the Union is, that trustees and other
like tiduciary persons, who more immedi-
ately under the hand and guidance of the SOW
ereignty, shall not place their moneys in securi-
ties whose habitat is in other Jurisdictions, not
| even In those of sister States. In a large de-
gree is that fitting policy in this great mat
ter To rely upon the debts of the States, is to
look to basis not much more permanent
than that which the United States bonds
now offer, and one which will call for scrutiny
ana investigation not easily to be made, aud
which, If fully and fairly made. are likely to ex-
| cite Jealousy and other i'll feeling. To take the
obi legations of municipalities and other corpor-
ate bodies is Of ike impracticab ility and result
and is also to rely upon the gooo faith, prudent
conduct and solvency of debtors, over whom
the government has but little. If any, direct and
efficient control. To take security on real estate
Is TO launch of uncertainty and fraud
that is sure to wreck the advehturer. Other
propositions have been made which are reduci-
Bile some of these categories, and need not be
specially considered. There other PROPOSE
tons, the vertebra idea of whichis the creation
of new form of public debt. A plausible one
is, for the government to offer new bond, of its
ow issue, at low rate OF interest, TO run long
period, in exchange for its four per cents. and
! fOur-and-a-half per cents, allowing such rate
| of premium upon the latter, but lower than th 1t
at present ruling, as would induce the holders TO
surrender them and take the new; and to make
this security for bank circulation. doubt not
that this is feasible. In that way q holder of
tours or r-and-a-halfs could capitalize the
premium allowed on his bond, and draw
interest at the new rate on that as well as on
| the principal, whereby there would DE an in
ducement to exchange rather than to hold, or,
in the present difficulty OF desirable reiDvest-
| ment, to sell I am persuaded, from the official
| experience of last year, that capital is ready
ana willing to take, at a low rate OF interest all
the united States bonds that can reasonably be
issued, provided they be at long time payment
| OF principal The lower market value which
they would have, upon their first issue at least,
would bring them within the range of profitable
purchase by those VINO were not holding the
tours aud f0nr-and-a hafs with which to make
| exchange. On the other hand. the premium for
exchange, to be allowed by the government,
may be put at sueh a figure, and still be apt to
innuce exchange, as that by the time fixed for
the redemption CT IH6 new UOldS, the uiHefenc6
in the amount of interest reserved on the fnurs
| and fourand-a-halfs, and that paid on the new
bonds will have egualltd the amount OF preni-
um allowed in exchange. Should this project be
favorabiy considered details can he furnished.
| Yet am 80 averse to recommending the crea-
ton of another or a different public debt, that,
| as great as are, in my judgment, the
advantages of the natieHal-bank euation,
in safety, in uniformity Of value everywhere
and in ptfer matter of convenience and conf
dence, look upon such project as a 1ernier
resort rather recommend. and SO | do, that
| the internal-revenue tax upon circulation be
taken off IN whole or i'll part. This Is l per cent.
per annuIn.
f." The tax yields annually about S3. 900,