Savannah courier. (Savannah, Tenn.) 1885-1979, 1891-02-19
A BANKING SCHEME.
A Proposition to Abolish the
Present System.
Three Thousand Governmental Banks as
a Substitute-They to Loan Money
to borrowers at the Rate of
Four Per Cent.

In an interview with representative
of the Chicago Inter Ocean;
Why occasional money stringency?
Because through numerous bank and
other failures people become frightened
and hide their money. Two causes have
combined to produce recent failures.
One has been the late era of real es-
tate speculation in the vicinity Of large
cities, initiating values to a point that it
had to stop. The other has been the
steady diminution ofmoney through the
contraction of National bank currency.
Ten years ago the National bank circu-
lation was $S62, 100000. One year ago
it was 5000, 600. To-day it is about
$500 900.
Why do National banks contract their
circulation? The National bank law
enacted in 1868 and 1864 made it obliga-
tory upon the bank company to loan
one-third of its capital to the Govern
ment, upon which it was granted a
charter to do business for twenty years
and issue bank notes to the extent of
80 per cent. of loan to Government. As
Government bonds in the beginning of
this system paid per cent interest in
gold, and gold yielded 40 per cent. pre-
MUM, banking was very profitable.
Latterly, as the Government will pay
no more than per cent. interest, banks
are unwilling to loan it money. They
prefer not to issue National bank cur
rency, but would rather take other peo-
ple's money on deposit get full interest
for all they loan, and be free from the
annoyance of Government bank inspec-
ton; consequently they are gradually
withdrawing the currency they have is
sued from circulation.
But, it may be said, if the Government
could give encouragement why should
not the present bank system be contin-
ued? Because our National debt is be-
ing too rapidly extinguished to allow
the present system to be perpetuated.
Banks that have proven the most relia-
BILE, and have been of the greatest serv-
ice to the people, have been those init
mately connected with the Government;
have been founded on Government ne
cessities, when the Government had a
large debt and had to borrow. Thus
the Bank of Venice, founded in III,
owed its existence to the imperative
necessity that the government borrow
money. This bank, under government
control, was the admiration of all Eu-
rope for 600 years, and only ceased its
existence on the overthrow of the re-
public in 1907 by the revolutionary army
of France.
The Bank of England, established In
1894, was organized as means through
which to borrow money from the peo-
pie. The government had been paying
from 20 to 40 per cent, on money, which
was difficult to get at that. William
Paterson, London merchant, con
ceived the idea of organizing com
pany to furnish $4,000, 1000 to the gov.
ernment as permanent loan, fol
eleven years, at per cent. interest
Subscriptions to the entire stock were
taken in ten days after the books wer,
opened, and from that day to this the
loan to the government has been about
equal to its capital, the bank company
obtaining their profit from their bank
notes in circulation and their deposits
The government supervision over the
bank has been such as to give entire
confidence, SO much so that the bank i:
allowed to issue $75, 900, 900 in excess o.
it's gold deposits. This bank should bt
maintained, and will be, as the peoples
guardian of the public debt of England
which is SO, 400, 100000.
In contrast with the benefcent serv
ice rendered the people, through The
Bank of England, was the disastrou'
consequences to the people through the
failure of the Bank of Glasgow, which
went down in 1878 owing the people
$33, ,0O0,OO bank officials, free from
government control, having squan
dered its funds and misrepresented it
condition for years before its failure.
The unreliable condition of banks il
the United States is well illustrated il
the fuctuating values of paper none.
from 1910 to 1960-banks without Gov
ernment control. The war came on
the Government found it necessary t,
borrow, and then was inaugurated on
National bank system, which, unde
Government supervision and inspection
has served it's purpose with comparativ
safety to the people. With the extin
guishment of the public debt, however
which is down to $s50,000,0 900, the pres
ent National bank system must b
changed.
The defects in our present system ar
the following:
/. Even perfect as our National BAN
system is the failures had been so nu
merous as to cause loss to depositor
In National banks of S50O,000 annual
for twenty-seven years prior to 1875
while the loss to depositors in othe
banks was over $40, 900 per year dun
ing the same time. The great numbe
of bank failures of late is not onl
taking the hundreds of thousands fror
suffering bank depositors and putin
the same into few hands, but none
stringency compels many millions of al
nual loss to the people from bein
obliged to sell property at sacrifice
while the enormous interest whic
borrowers are compelled to pa
In the money crisis is anothe
loss of many millions to the people
2. The present system is one of favor
itism. The man so fortunate as to d
business at bank can have accommC
dations, while the farmer, Offering ST
curity worth twenty times the none
required, can not get dollar from th
bank, but is compelled to pay an extr
per cent. above interest, in order to boz
row.
8. The unequal and very high rate
of interest in certain portions of tn
country, especially in the newly settle
regions, is great burden to the poe