The enterprise. [volume] (Wellington, Ohio) 188?-1899, 1891-07-01

that was put out in '63 and '64, when Unit.
ed States rs we're below par, and which
made.it possible not only 10 float the bonds
but in after years to refund them on 4
per cent. basis into bonds which now CON-
mand 120 in the market and have sold In
1890 as high as 100. We now question
the wisdom Of the 'perpetuation OF this
system In order to fairly Judge and
compare this system with tbst of free
banking, will briefly review the history
OF state banks prior to the national bank
1t was the practice CT the different
states in the union TO issue notes payable
in specie on demand, previous to 1888, by
acts of local legislatures, which were easy
to obtain. Under this system the issue Of
paper currency became practically unlim.
tied. People seemed to think that they
had found the panacea for all financial
ills in the paper mill. Inevitable bank.
rupcy and ruin followed. The secretary
of the treasury in 1920 reports, "Disastei
and distress throughout the nation" In
1884 the trouble was iucomparatively
greater; in 1887 every bank in the union
including the United States bank, stopped
payment. In 1888 the best managed
banks, with capital, resumed payment in
specie. In 1880 and 1910 another crash
came. The bank notes in circulation
amounted to $l4O,OOO,OOO and In 1912 they
dropped to $s3,OO00OO The disaster and
injury resulting to society are still too
well.knvwn to need repetition.
After this, new schemes were devised,
such as deposits of security. purchase of
state bonds, deposits Of stock, bonds
and mortgages. The circulation secured
by state debt was the best None Of this
circulation was, however, paid in iull.
Much Of II was never paid.
The expense OF collection, Le., e.,exchange,
under the old system in 1850 was not less
than from per cent. to ~ per cent. Un-
der the national banking system the cost
would be SIC. on 800 covering transac-
tions Of sll ,OOOOOO,OOO eastern states lc.,
western states 20c.) II this were restored
there would be an increase cost 10 ex'
change, alone, Of SsO,0OO,0OO.
In 1857 another crash came, commenc-
ing with the failure Of the Ohio Life and
Trust company, and all the banks In the
United States stopped payment. This re-
suited in the passage Of general bank
ing act by the government. When the
war began there were $20O,0OO,0 900 Of pa
per money tbree- fourths issued by the
loyal states). and $275,OOO,0OO Of coin in
circulation. The government borrowed
$50, 100000 of eastern banks and issued
demand-notes therefor.
In 1862 the government authorized the
issue Of $l5O,OOO,OOO more, and all this
was made legal tender except for duties
and customs. Here the nation commenc-
ed TO navigate unknown seas land contin-
ued until the resumption Of specie pay
ment) Then Il was that coin went out Of
circulation; and as treasury notes not
based on gold in the treasury went out,
gold rose 10 a premium, as high, or nearly
so as II did 10 South America In 1690-9l-
280, | believe, was the highest
In 1868 and 1854 the acts now In force,
creating the national banks, were passed,
founded In time Of peril as an arm Of the
treasury systam, for the purpose Of hand
ling the national debt, upon which their
was based. And by this plan
over $500 ,OOO,0 900 OF government bonds
we're sold directly TO the people, upon
which sound currency was based. The
national banks were required 10 place
government bonds on deposit with the
treasury and permitted 10 issde currency
TO the extent Of 90 per cent, the amount
that each bank might issue being determ-
incd by lis capital stock and location.
They we're obliged to pay ! per cent. duty
or tax on their circulation TO the govern.
ment, and all expenses Of engraving. etc.
In the light Of the twentyeight yeuls
that followed the adoption OF this uni
form, orderly ana secure system Of hank
ing, | think that we must admit that their
mission h~ been one OF relief TO the peO.
pie and Of security TO the depositor and
holder Of their notes II has also inspired
degree Of confidence not attained by any
Of lis predecessors.
In the pauic Of 1878 very few national
banks succumbed. II was Of little copse-
quencC to the holder OF n national bank
note whether the bank Issuing Il Jailed or
not, for be was secured by the bonds de-
posted with the United States treasury.
II was clearly demonstrated that the
national hanks could and would, and sure
Iy did, protect it's circulation. A system
of exchanges snd collections, for cheap
ness, security and promptncss was imme-
iiately established throughout the coun-