The Vermont watchman. [volume] (Montpelier, Vt.) 1883-1911, 1892-08-17
Secretary Foster on State Banks.

The recent speech of Secretary of the
Treasury Foster at Vermillion, Ohio, dealt
largely with the relative merits of state and
national bank note issues. It was an able
and convincing presentation of the subject,
and in view of the increasing demands from
many democrats for a return to state banks
and the plank of the Chicago platform
which calls for repeal of the tax ON state
bank notes, it deserves careful coming.
The secretary reviewed the condition of the
circulation prior to 1860 and described at
considerable length the panics OF 1914 1887
and 1857, and the disastrous results that
followed each. The arrangement of the
paper currency" he said, was the impor-
tant factor in each of the three revulsons.
The trouble was always preceded by Pc
Rod of great prosperity. The people were
growing rich. They desired to grow rich
faster. To this end they substituted for
legitimate enterprise wild speculation, in
which they were aided, and, indeed, often
led, by such of the banks as were untrem-
melted by restraining laws. Had the banks
confined their issues of paper money to the
proper needs of trade and industry, the
panic in each case would doubtless have
been less intense and the recovery from de-
preston more rapid" He gave an inter-
esting account of the war circulation and
the means used by the government to raise
money to carry on the contest and said :
The system Of issuing bank notes was rad
ically changed by the bank act of June 3,
1864. The notes issued by state banks
were not uniform in value, even at home,
while very few banks were so widely known
as to give currency at par to their notes at
any considerable distance from the place of
issue. traveller passing from one state to
another or even between distant points in
the same state, was compelled to provide
himself with coin, If he would avoid the
vexation and loss incident to this condition
An extensive and prosperous business,
known as understanding, grew out of this
state OF the currency, and the loss usually
fell upon those least able to bear it. But bad
as was this condition, it was far worse in
times of panic. Then the suspension of
specie payments by the banks still impaired
the value of all bank notes, and in many
instances completely destroyed it. There
is no doubt that variable values of bank
circulation before the war increased the
cost of living and diminished the wages of
all classes, and that none were benefited
thereby but the banks of issue and those
whose occupation was understanding. There
was another feature of the state bank cir
culation that was productive of loss and in
convenience. Each bank had its own
plates engraved in a high or low style of
art, according to the means or caprice of
the bank officials. Hundreds of designs,
good, bad and indifferent, were therefore in
existence, and only an expert could distin-
guish counterfeits from genuine notes. This
increased the tendency OF the notes to re-
main within narrow circle and at the
same time added to the opportunities of
profit or fraud in their circulation. The
rate of exchange on New York upon the
best Ohio paper money was about three per
cent. Since the establishment of the ma
| tional banking system there has been no
| trouble such as marked the era of state
banks. The notes of our Ohio national
| banks are good in every state of the Union,
| and the notes of the national banks of other
| ofata 1lxyY in h,,as
ness Of te-shaving is unknown, and the
counterfeiter is promptly detected in his
work. The suspension or failure of ma
tional bank has absolutely no effect on its
notes, because the United States bonds de-
posted in Washington are ample security
| for their redemption at par"
After detailed description of the resump-
| ton of specie payments and the history of
recent silver issues, Secretary Foster said
" The increase OF gold in this country and
| the increase in silver coins and certificates,
| together with the issue of treasury notes of
1890, have added to the volume of money in
circulation in the Unites States since July
l, 1879, The enormous sum OF 1898, l26, 1893.
There has been, however a decrease in ma
tional bank notes of $154, 500, 06l, caused by
the redemption and purchase of our bonded
debt and the resulting high price of the
bonds still outstanding. This not only pre-.
vented new banks from taking out circula-
ton, but has prompted many of the old
banks to give up their circulation and sell
their bonds, it being more profitable fol
them to do this than to continue the notes
in circulation. The net increase in circula
ton since 1879 is 1888, 3l7 ,532 The profit
arising from national bank circulation has
been greatly exaggerated, Taking the
present price of four per cent bonds as
basis, viz, 116, the annual profit on the cir
culation which may be obtained upon de
post of 100000 in bonds in $523S5. Ii
other words, national bank having cir
culation of $4,000 in notes makes JUS
S52385 more than it would make If IL wer,
private bank and had no circulation Thii
is less than one-half Of one per cent on tn,
is based upon the supposition that the banl
loans ita aYailahla funds at six nar cant. L