The Kenosha telegraph. [volume] (Kenosha, Wis.) 1860-1888, 1886-12-03
The CURRENCY.

Another Chapter from Comptroller Tren-
holm's Report-The Needs of the Ma
tiona1 Banks-TroubIe in Store for Those
Inclined to Conform to the Law.
WASHINGTON, Nov. 29.-Hon William L,
Trenholm, Comptroller of the Currency, In
concluding his annual report, says: The
present financial prosperity of the country
induces the expectation that the funded
debt will be paid of as fast as the bonds
mature, and, in consequence, a question has
arisen as to what change should be made
in the National bank system in order
that it shall not suffer deterioration or de-
struction upon the withdrawal of the sup
port upon which it is based by the present
laws, which require every bank before be-
ginning business to deposit a certain
amount in United States bonds The
payment of the 8 per cent bonds,
the maturity in 1891 of the AZ
per cent. bonds, amounting to $3.50, 000,-
600, and in 1907 of the per cent. bonds,
amounting to nearly $73S, 000, 900, have COM
bined to produce a prospective scarcity in
the securities available to the banks as
basis for their corporate existence, and this
is reflected in the advance of these bonds to
a premium so high that every day their
enforced purchase becomes more and more
enormous. Banks now holding per cent
bonds, and newly organized National bank
ing associations are forced into the market
as purchasers of the 4 per cent or the Az
per cent. bonds, and this constant demand,
in connection with the prospective scarcity
already referred to, sustains and tends still
further to elevate the premium on these
bonds.
As the time approaches for the payment
of the ~ per cent. bonds it is reasonable
to expect still greater demand for the 4
per cents, and it is a question of serious
Importance whether the banks can afford
to hold or to buy per cent. bonds after
1891. In the present age all business men
try to anticipate future conditions
and to provide well in advance
against unforeseen contingencies, hence it is
to be expected that the banks will not wait
until the approach of 1891 to shape
their policy with reference to the continued
holding of high-priced bonds. For this
reason it is not too early now to consider
what legislation may be proper to remove
this element of future uncertainty from
the notwithstanding system, and, looking
to the possible consideration of this subject
by Congress, l respectfully submit the fol-
lowing statement of the question as it ap-
pears from the point of view of finance oc-
cupied by the Comptroller of the Currency:
The fundamental principles underlying
every banking system established by law,
whatever may be its forms, must neces-
sarily be: First, that banks promote the
general welfare of the community, and,
secondly, that the particular system estab-
ished by law is the best obtainable under
the conditions prevailing at the time and
place. These postulates, therefore, under
lie our National-banklng laws.
The first postulate will not be questioned,
since no people in modern times have ever
risen to civilization or maintained their civ
ilization without banks; and, least of all,
can it be questioned in this country where,
besides 2,S68 National banks now in opera
ton, we have over 5000 State banks, saw
ings banks and private banks and bankers,
whose operations extend into the minutest
qualifications of the employments and re-
sources of our 60,000,00J of people The
second postulate involves the question
whether the present National-bank system
should be preserved, and if so, whether it
is good enough as it is or whether it can
be improved.
If the system could be preserved purely
as one of deposit and discount there would
ment in favor of bestowng upon its preser-
walton immediate ana careful attention, but
it is doubtful whether the banks would find
sufficient inducement to remain in the sys-
tenn without enjoying some privileges as to
the issue of currency, and it has been ques
toned whether there is power under the
constitution for the charter of National
banks except as instrumentalities for a
money circulation. 1t follows, therefore,
that any legislation directed to the i'm
provement and permanent establishment
of the misunderstanding system must in
clude some provision for the maintenance
of a National-bank circulation, while, on
the other hand, it appears that what
ever position attaches to them as banks Of
issue and under our system of government
nothing can be regarded as permanently
established until it has obtained the support
of Well-settled public opinion 1t is evil
dent that the problem now to be solved is
how to remedy the currency features of the
National-bank system so as to obtain popu-
lar approval of them.
Objection to the present National-bank
currency appears to be comprised within
three classes-namely, first a general OBJ
lection to paper money in any form; second,
an objection to National bank notes based
upon the assumption that they take the
place of an equal amount of paper money
that might be issued directly upon the
credit of the Government; third, the OBJ
lection that currency determined in vol
ume by a definite percentage upon depos-
tied securities of high value can never pos
sess the fexibility and elasticity of volume
which are the chief commercial advantages
of a bank currency in any form.
Against these objections it is answered:
First, that the question as to having paper
money at all is not at present a practical
one because it is evident that our people
will have paper money in one form or anoth-
er, and that of all forms of paper money of
which we have had any experience the
present Nationalbank currency is the least
Objectionable, even to those who think that
all such money should be avoided Second,
that while bank currency based ON Gov
ernment bonds and redeemable in green
backs may be considered as a kind of Gov
eminent money, on which the banks are
getting the profit, yet without this privilege
or some other equivalent to it the National
bank system could never have been estab-
lished, nor can it now be maintained, and
that this is the cheapest price at which the
people or the Government could have got
any banking system so good in all respects
and so valuable as this has proved to be.
Another argument is that the Govern
ment must pay interest upon it's bonds
whether these are held by the banks OF not,
hence the profit to the banks on these
bonds has been obtained without charge on
the treasury; while on the other hand, if
the banks had not been offered sufficient in
ducement to invest in these bonds many
more of them would have gone abroad
at lower prices, and the country, az
whole would now be so much the worse off.
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