Abilene weekly reflector. [volume] (Abilene, Kan.) 1888-1935, 1891-02-05
A BANKING SCHEME.
A Proposition to Abolish the
Present System.
Three Thousand Governmental Banks ss
q Substitute-They to Loan Money
to borrowers at the Rate OF
-Four Per Cent.


has been for some years engaged in
farming at Prospect Park, Ill, and,
from a farmers standpoint, he gives
the following suggestions on banking
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 point that it
had to stop. The other has been the
steady diminution of money through the
contraction of National bank currency.
Ten years ago the National bank circu-
lation was $780,, ZOO, 900. One year ago
it was 500, 900, 900. To-day 1t is about
s1s0, 200, 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
W uO DuSlucSS 1OI IWCAIJ JCdAo
and issue bank notes to the extent OF
90 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-
pies 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? : Iuse 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
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 1897 by the revolutionary army
of France.
The Bank of England, established in
1894, was organized as a 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, a London merchant, con-
ceived the idea of organizing a COM
pany to furnish 100000 to the gov
ernment as a permanent loan, for
eleven years, at s per cent. interest
Subscriptions TO the entire stock were
taken in ten days after the books were
| opened, and from that day to this the
loan to Tie government has been about
equal to its capital, the bank company
1 OOIdAAA4LB IACAA AAOAlS II ClA1 lA4CA1 OdL1h
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 is
| allowed to issue S75, O00, 900 in excess of
its gold deposits. This bank should be
maintained, and will be, as the peoples
guardian of the public debt of England,
which is IS, 400, 900, 900.
In contrast with the beneficent serv-
ice rendered the people, through the
Bank of England, was the disastrous
consequences to the people through the
failure of the Bank of Glasgow, which
went down in 1873 owing the people
S33, 600, 900; bank officials, free from
government control, having squan-
dered it's funds and misrepresented its
condition for years before its failure.
The unreliable condition of banks in
the United States is well illustrated in
the fuctuating values of paper money
from 1910 to 1S60-banks without Gov
ernment control. The war came on;
the Government found it necessary TO
borrow, and then was inaugurated our
National bank system, which, under
Government supervision and inspection,
has served its purpose with comparative
safety to the people. With the extin-
guishment of the public debt, however,
which is down to $3.50, 900, 900, the pres
ent National bank system must be
changed.
The defects in our present system are
the following:
1. Even perfect as our National bank
system is the failures had been so nu-
merous as to cause loss to depositors
In National banks of $500, 900 annually
for twenty-seven years prior to 1879,
while the loss TO depositors in other
banks was over SO, OOO, 900 per year dur
ing the same time. The great number
of bank failures of late is not only
taking the hundreds of thousands from
suffering bank depositors and putting
the same into few hands, but money
stringency compels many millions OF an
nual loss to the people from being
obliged to sell property at sacrifice,
while the enormous interest which
borrowers are compelled to pay
In the money crisis is another
loss Of many millions to the people
Q. The present system is one OF favor
itism. The man so fortunate as to dc
business at bank can have accommo
dations, while the farmer, offering Sc
curity worth twenty times the money
required, can not get a dollar from the
bank, but is compelled to pay an extra
per cent. above interest, in order to Dor