The Indianapolis journal. [volume] (Indianapolis [Ind.]) 1867-1904, 1886-11-29
A Calm and Dispassionate Statement of the
Arguments For and Against the Privileges
to Which the Banks Are Entitled.
Indiana Democrats Hunting Available
Congressional Candidates for 1888.
The Apache Surrender Will Not Be Inyesti-
gated, and the Matter Will Rest in Its
Present Condition Washington Notes.
TEE NATIONAL BANKS.
Comptroller Trenholm States Both Sides of
the Circulation Question.

troler of the Currency, while discussing the ques
tion of national bank circulation, says:
Banks now holding per cent. bonds, and
newly organized national banking associations,
are forced into the market as purchasers of 4 per
cent. the Al per cent. bonds. and this constant
demand, in connection with the prospective
scarcity, sustains and tends still further to ele-
vata the premiums on these bonds. AS the time
approaches for the payment of the A per cent.
bonds, it is reasonable to expect still greater
demand for the per cents. and it is question
of serious Importance whether the banks can af-
ford TO hold or buy per cent. bonds after lS9l
In the present age all business men try TO an
ticipate future conditions and to provide
well in advance against foreseen contn-
gencies; hence it is to be expected
that the banks will not wait until the approach
of 1891 to shepe their policy with reference to
the continued holding of high-prced bonds.
For this reason it is not too early now to con-
slider what legislation may be proper to remove
this element of future uncertainty from the ma
tional banking system, and, looking to the pos
sible consideration of this subject by Congress,
| respectfully submit the following statement of
the question. as it appears from the point of
view officially occupied by the Comptroller Of
the Currency:
"The fundamental postulates underlying every
banking system established by law, whatever
may be its form. must necessarily be. first, that
banks promote the general welfare of the COM
munity, and, secondly, that the particular sys-
TEN Established by law is the best obtanable
under tho conditions prevailing at the time and
place These postulates, therefore, uuderie
national banking laws. The first postulate will
not be questioned. since people, in modern
times, have ever risen TO civilization main
tanned their civilization without banks, and least
of all can it be questioned in this country, where.
besides 1858 national banks now in operation,
we have over 5000 State banks, savings banks,
and private banks and bankers, whose opera
tions extend into the minutest ramifcations of
the empoyments and resources of sixty
millions of population. The second postulate
involves the question whether the present ma
tional bank system should be preserved and, if
so, whether it is good enough as it is, or whether
it can be improved
''The national currency act of the 18th of Feb
ruary, 1868, was controlled. as to its purposes by
the paramount necessity of inducing the banks
and other capitalists to become purchasers OF
government bonds under conditions that would
give basis of solid yalne to the currency then
being paid out IN immense volume under the
pressure of military exigencies; hence the cun-
solidation of these banks intc~a national bank
ing system, adapted to commercial and indus
trial needs appears only a5 a subordinate coin
dent in the general scheme AS early however
as the year 1864 it was perceived that the gener-
al welfare of the people would be promoted by
giving greater coheSlvenesS and method to the
system, regarded more especially in its banking
than in its currency features, and from that time
to this the effort of legislation has been
to subordinate the issuing of currency
to the more important functions performed by
the banks as institutions of discount aud de-
post. The effect of this legislation and its wis
dom are eXemplifed in the present high credit
and the consequent wide commercial usefulness
of national banks. If the system could be pre-
served purely as one of deposit and discount,
there would probably arise an almost universal
sentiment in favor of bestowing upon its pres
ervation immediate and careful attention but
it is doubtful whether the banks would find
sufficient inducement to remain in the system
without enjoying some privileges as to the issue
of currency, and it has been questioned whether
there is power, under the Constitution, for the
charter of national banks except as instrr-
mentalities for money circulation. It follows.
therefore, that any legislation directed
establishment of the national banking
system must include some provision for the
maintenance of national bank circulation
while, on the other hand, it appears that what
ever opposition exists to the national banks at
taches 10 them mainly as banks of issue and
under our system of government nothing can be
regarded as permanently established until it has
obtained the support of wellsettled public
opinion. Hence it is evident that the problem
now to be solved is how to remodel the currency
features of the national bank system SO as to OBJ
tain popular approval Of them.
Objections to the present national bank cur
rency appear to be comprised within three
classes, namely: First. general objection to
paper money in any form; second, an objection
to national bank notes, based upon the assump-
ton 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 thar currency determined in velume
by definite percentage upon deposited securities
of nigh value. can never possess the fexibility
and elasticity of volume which are the chief
commercial advantages of bank currency in
any form. Against these objections it is an
swered:
"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 another. and that of
all forms of paper money of which we have had
any experience the present national bank cur
rency is the least Objectionable, even to those
who think that all such money should be avoided.
"Second-That while bank currency based
on government bonds aud redeemable in green
backs may be considered as a kind of govern
ment money on which the banks are gettiug the
profit, yet without this privilege or some other
equivalent to it, the national bank system
could never have been established, 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 sys-
tenn 30 good in all respects and so valuable as
this has proved to be. Another argument is that
the government must pay interest upon its bonds
whether these are held by the banks or 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 inducement to invest in
these bonds, many more of them would have
gone abroad at low prices and the country, as a
whole would now be so much the worse off,
''Third-That the want of hexibility in the
currency and of elasticity of volume are conse-
quences arising from the scarcity of bonds and
the high prices to which they have risen, and
that this could not have been foreseen nor pro-
vided against in the original acts. but may now
be remedied by proper legislation.
''These objections, and the answers to them,
are stated without comment They seem worthy
OF consideration. Some suggestions have been
made to me as to new legislation on this subject,
which, togesAer with such conclusions as ] have