The Baltimore County union. [volume] (Towsontown, Md.) 1865-1909, 1884-05-10
BANKING AND TAXATION.

A well known Baltimore merchant wrote to the
cashier of one of the prominent banks ofthat city,
asking some information on the subject of bank
ing, &C., and we have been permitted to publish
the reply, which is as follows:
BALTIMORE, February 25th, 1884.
Your letter of 23d inst. received this m, but
have been so busy as not to be able to write
until now, 81 p. M, and must do SO hurriedy and
not as satisfactorily, fully so, as l could wish.
The slip you enclosed as to the dividends OF six
banks in London, I think is probably correct in
its high estimate, and it is quite with regard to
average dividends of National banks, for 1 have
in measure verified it by looking at Comptroller
Knox's tabulated statement of dividends from
1869 to 1882 inclusive. The highest average semi
annual dividend in that period was in 1859 of 5.42
per cent. The Average for semi-annual dividends
for March, 1882, was 4.33 per cent; for Septem-
Der, 1882, 4.40 per cent; making, in the slip,
for the year a total of S.73 per cent.
The great disparity in dividends arises chiefly,
if not exclusively, from two causes, which favor
the English Especially London) banks. They are
the amount of capital relative to deposits, and tax
alton. While especially the London banks have
large capitalists pounds to our dollars, or
as five to one-yet the deposits are much greater
in proportion Tin London banks) to capital than
is the case with US. Moreover, they do not keep
the average reserve of money that National banks
do here; and this has always been considered
very weak spot in London joint stock banks when
a crisis is at hand. In another point, singular as
it may appear, we are more conservative in bank
ing here than in England. l refer to the COM
mon and almost universal custom there on
the part of banks to allow interest to depositors.
Consequently, as an incentive, producing a much
greater aggregate of deposits, and at the same
time causing weak spot in the banks by greatly
extending their discount lines reducing their re-
serve, &C., but at the same time, the capital is
fred amount, greatly increasing the profits or
dividends on the capital, provided no financial
crises arise, aud then their losses are sometimes
tremendous.
Now in this country it is very markedly the ex-
ception to receive deposits interest Chat being
regarded as belonging to another department of
banlsins-savings banks); but chiefly in New
York city it is more or less prevalent with banks
their daily balances in of 5000 or So 000
The result has been that some of the banks there
declare very handsome dividends. The First Ma
tional of New York has been remarkably success
full in this respect. That bank in 1882 declared
quarterly dividends of 10 per cent, 40 per cent
for the year, on capital of 100000, and has
surplus and undivided profits of more than So, $780,
900. This is extraordinary in an existence of,
say, twenty-five years. 1t is very common for it
to have 10000, 900 to $4,000, 900 of bank bal
ances and individual deposits of 900 be-
sides. The most successful bank, however, take
it all in ALL is perhaps the Chemical of New York,
with a capital of $500, O00-surplus and undivided
profits, SO, S55 0O0-andi in 1882 declared bi-month-
ly dividends aggregating 100 per cent. for the
year. The par of its stock is 500. In 1882 81
600 per share was bid and 2,105 asked. The
Chemicals business is almost the reverse of that
of the First National, N. Y, having indiridual
deposits Of ten, twelve and more millions, and
bank balances of two three millions-not allow
ing interest to banks in the country for their daily
balances. Of course it is more conservative
mode of banking than the First Nationals, as
bank balances are likely to be very heavily drawn
on at any time, and bank paying interest for
them must use them by lending them out. The
stock of the First National is 500 par; bid in
1882, $500 per share; being, saving the Chemical,
very much higher than any other bank stock in
New York.
The deposits in 1883 of the nine most important
Joint stock banks in London Bank of England
not ncluded) was $50, 900, 600 sterling, $780,
00O, 900, against all the National banks of New
York, Boston, Philadelphia and Baltimore, $685.
900 900 on capital stock of more than Sl30, 0O0,
900 and $47,O00,0O0 of surplus. Some of these
nine English banks declared dividends of IA per
cent. for that year.
One more point-taxaton--upon which must
be brief. Until last year, when the U. S. tax of
per cent. on deposits was abolished, the COM
bined tax on this bank (both new and small as to
capitaD was for National, State and municipal
per cent. per annuiu oh It's caPilal- 'h"h
half of the rate of discounts averaged for some
few years past. A tax on deposits debt as
fuctuating as a ground-rent would be on quick
sand-was never exercised by any other govern
ment than this. Think of it, facing one for their
debtsi Now while am not able to give you the
figures for taxation on English banks, yet I have
reason to regard it as very much less there than
here.
have written more than purposed, still find
I might have, had time permitted, given you some
other items by way of comparison, &C., that you
might deem desirable. But I have already writ
ten enough to tire you. will be pleased to hear
from you at any time upon banking matters when
you may think that can be of any service.
Yours truly, =