Daily Kennebec journal. [microfilm reel] (Augusta, Me.) 1870-1975, 1886-11-29
THE NATIONAL BANKING SYSTEM,
Annual Report OF William =. Trenholm,
Comptroller OF the Currency.

Congress with the following remarks on
national banking -ystpm.
The problem in '63 was how to bring the
banking capital Of the country TO the support
OF the treasury, and it cannot be douoted
t1al the banks then had in their power 10
exrct from the government concession far
more valuable than those granted them
Even those moderate concessions have long
since lost all elements of monopoly. and the
act of June 20, 1874, actually took away
500, ,00O,0 900 of circulation. partly from bank.
0rgtn'z ID during the war in order 10 give
the privilege of issuing that sum to the banks
10 the states that were cut off by the war
from access to the national banking system
"a measure entitled to honorable considera-
tion because at that time those states were
without sufficient political iuf ience 10 exact
a snare IL this valuable privilege, and the
then existing bank were strong enough to
have made successful resistance mad they
been selfshly inclined.
The last vestIge Of monopoly was swepG
away By the act of Jan. IA, 1875, which
created free banking system throughout
the United States, and supplemented by the
act of July l3, 1882. brought its benefits
within the reach OF even small communities.
Under sanction of these laws the national
banks become nume r0us widely distributed
and intimately identified with the varied in
terests by which our entire population liter
ally obtained their daily bread, but during
the same time a rapid reduction oi the fund
ed deot OF the government has been intr)duc-
ing into every basis of the system an ele-
ment OF stability which nows hampers its ex-
tension, impairs its usefulness and even
threatens its continued existence, while there
is still great areas of our country IN which
natural resources are awaiting Development
by just such means as these banks might be
made to supply.
The present financial prospects of the
country induce the expectation that the funded
debt Will be paid of as fast as the bonds ma
ture and in consequences "a question has arisen
as to what changes should be made in the
national bank system in order that it shall
not suffer deterioration or destruction upon
| the withdrawal Of support on which 1t is
based by present laws, which require every
bank before beginning business, 10 deposit a
certain amount of U. S. bonds. The pay
ment OF B per cent. bonds, the maturity in
1891 of 44 per cent. bonds, amounting to
nearly $3.50, ,000,0 900, and in 1907 of per
cent. bonds. amounting to nearly S73S, 900, 900
have combined to produce prospective scar
city in securities available to banks, as a
basis for their corporate existence, and this
Ii
premium very high that every day their
enforced purchase becomes more and more
onerous. Banks now holding 3 per cent.
bonds and newly organized national banking
associations are forced into the market as
purchasers of 4 or 41 per cent. bonds, and
this constant demand, in connection with the
prospective scarcity already referred to, sus
tains and tends still further to elevate the
premium on these bonds. As the time ap-
proaches for the payment OF A per cent.
bonds it is reasonable to expect still greater
demand for per cent. bonds and it is n
question of serious Importance whether bank,
can afford to hold or buy per cent. bonds
after 1891.
1t is not too early now to consider what
legislation may be proper to remove this sle-
ment of future uncertainty from the national
banking system, and looking to the possible
consideration of this subject by Congress
respectfully submit the following statement
of questions as it appears from the point OF
view officially occupied by the comptroller of
the currency.
The fundamental posulates underlying
every banking system established by law,
whatever may be its form, must necessarily
be:
First-That banks promote the general
welfare of the community, and second, that
u particular system established by law is best
obtainab.e under the conditions prevailing at
the time and place. These postulates there
fore underie our national banking laws;
First-The postuate will not be questioned
since no people in these modern times have
ever risen to civilization or maintained their
civilization without banks, and least of all
can it be questioned in this country, where,
besides 2,6SS national banks are now in oper-
bands, and private banks and bankers, whose
operations extend into the minutest ramIfica-
tlons and mpioyments and resources of our
60,000,000 population.
Second-The postulate involves the ques-
tion whether the present national bank sys-
TEN should be preserved, and if so whether
1t is good enough as it is or whether it can
be improved.
The national currency act of Feb. 18th,
1868, was controlled as to its purposes BY
paramount necessity of inducing banks and
other capital SITS to become purchasers of
government bonds under conditions that
would give basis of solid statute to the cur
rency than being paid out in immense vol
ume under pressure of military exigencies,
hence the consolidation of these banks into
the national banking system, adapted to
commercial and industrial needs, appears
only As subordinate incident in the general
scheme.
As early, however, as the year 1864 it was
perceived that the general welfare of the
people would be promoted by giving greater
cohesivene>s and method to the system re-
ga!aed more espe cially in its banking than in
the currency features, and from that time to
this the effort oi legislation has been to sub
ordinate issuing of currency to more import
ant functions performed by banks as nstitu-
tons of discount and deposit. The effect of
this legislation and its wisdom are exempt
fed in the present high credit and consequent
wide commercial usefulness of the national
banks.
If the system could be preserved purely as
one of deposit and discount, there would
probably arise almost universal sentiment in
favor of bestowing upon its preservation i'm
mediate and careful attention. but it is doubt
ful whether the banks would find sufficient
inducements TO remain in the system without
enjoying some of the privileges as to the is
sue of currency, and it has been questioned
whether there is power under the constitution
for the charter of national banks except as
instrumentalities tor money circulation. 1t
follows therefore that any legislation directed
to the improvement and permanent establish
ment of a national banking system, must in
clude some provision for the maintenance of
national bank circulation, while on the
other hand it appears that whatever opposi-
ton exists to national banks attaches to them
mainly as hanks of issue and uudar our aus