The Wichita daily eagle., 1891-10-21
NATIONAL BANKS.
Senator Sherman Explains the Law and
Answers the Calamities.
MANSFIELD. o. Aug. IA, 1891.

MANSFIELD. ". aug. II, ICoI.
Editor Toledo Blade.
Your letter of the 18th requesting me
to answer the statements made by the
| Peoples party that the United States
loans money to the national banks at
one per cent, is received.
/ have read the printed slip enclosed.
and it seems TO me so faliacious that a
child could answer it. National banks
are authorized to issue their notes-not
the notes af the United States, but their
corporate notes-to circulate as monev
only by those who are willing TO take
them They stand like any other note
issued by a corporation, having no legal
tender quality and resting upon the con-
fidence of the holder based upon the Sc
curity furnished. In order TO make
them absolutely safe the United States,
itself debtor, evidenced by its bonds
outstanding, requires each bank To Sc
cure its circulating notes by a deposit of
greater amount of these United States
bonds. Nor is the organization of a
ba k an exclusive privilege, bu 1t l.
one open TO all citizens Of the United
States upon the same terms and condl-
tions. These bonds are not the property
of the United States as the para graph
assumes, but the debt of the United
States, held and Owned by individuals.
The stockholders have to pay a very
large premium on them. They are the
debt of the people, considered the high
est possible secursty. They are the pro-
perty of the bank, which, like any other
ho der, Is entitled to the interest as it
accrues. These bonds are deposited with
a designated officer in trust, to collect
the interest and pay it to the owners Of
the bonds, but to hold the principal as
a security for the outstanding notes of
the bank. The government pays moth
ing 20 the bank except what it would
pay to any other holder of these bonds,
the interest as it accrues. But the
United States levies upon the bank a
tax of l per cent. on its circulating
notes, partly to reimburse expense in
CURED by the government printing the
notes in order to have the most ample
security against counterfeiting, and
also a tax upon the corporate fran
chise granted by the government TO
the bank. How any sane man can re-
gard this transaction as a loan by the
United States to the bank is beyond my
comprehension. Whatever may be said
of national banks or the policy of sup
planting them by some other form of
circulating notes this can be said of
them, that the system has been the most
successful banking system ever devised
by man. No one has ever lost a dollar
on the circulating notes of any national
bank, and the government has paid
nothing to them except the interest that
it would pay to any other creditor upon
its bonds.
The business transaction which the
Peoples party invites the United States
20 embark in is to loan anybody who can
furnish the requisite security United
States notes, the aggregate amount of
which is not fixed. No provision is to
be made for the payment of these notes,
but they are to circulate as money, with
out redemption or promise of redemption.
When issued they are simply an IRE
deemable paper money, precisely similar
in character and form to Continental
money and the French assignats, or
more recently still, the Rhode Island
money issued at the close of the revolu-
tionary war by the Peoples party of that
day. Very truly yours.
JOHN SHERMAN.