New Ulm review. (New Ulm, Brown County, Minn.) 1892-1961, 1892-04-27
'UR NATIONAL BANKS,
Hon. R. G. Hor Of Michigan discusses the.
Subject.
Government Loans no Money to Banks.
The Sub Treasury scheme.

4 -
the amount of its capital stock. If its
capital stock is 100000 it can have
| 100000 circulation in its own bills. If
its capital is $500, 200 it can have $780,
GOO circulation. That is the rule in the
matter.
do not know that there is any limit
to the circulation of any bank provided
that it has government bonds to deposit
as collateral security for the final pay
ment of bills. As a rule, banks seldom
have more than 100000 capital. Penn
sylvania has about $40 National banks.
and $50 of them have only 100000
capital or less. There are 100 banks
there with from 100000 to $5OO,OOO
capital, and 10 with capitals of from
100000 to $2,000,OOO. There is one
bank with $s,0oo,0oO capital, and it can
issue, if it chooses, bank bills to the
amount of 81, 100000. AS matter Of
fact, however, there is so little profit in
circulation now, that some few banks
are actually retiring their circulation,
When any National bank deposits
100000 of government bonds, for in
stance, with the treasurer of the United
States to secure the payment of its own
bills, it can get from the government
800, 900 of such bills. Those bills are
not money until they are signed by the
officers of the bank. Then they become
'spromises to pay by the bank and not
by the government.
So long as the bank is solvent and re-
deems its own bills, the government has
nothing whatever to do with their re-
demption. The government holds the
bonds simply as a collateral security, to
insure the people against any possible
loss by a failure of the bank to redeem
its circulation. The bonds are all the
property of the bank, and the bank col
lects the interest on them. If the bank
should fail, however, the government
would sell the bonds at the highest mar
ket price and would deduct from the
proceeds of such sale exactly the amount
of outstanding bills of the bank. The
balance realized from the sale of bonds
would be turned over at once by the.
government and would be used to help
pay the other debts of the bank.
When bank has failed, its bills are
all sent by those who hold them, not to
the bank, but to the government. The
Recommendations them, with the money
it has retained from the sale of the bonds,
and then destroys the bills. Itmakesno diff
amount of bonds and bank de
posits, it canneverf get over 90 per cent of
their face value in bank bills for circula-
ton; and no bank is permitted to deposit,
for circulation, any more bonds than the
amount Of its capital stock It may take
less than 80 per cent. of such bonds in
bank bills, but it can never get more
than that amount.
again repeat that it is a mystery to
me how farmers or any one else should
think, that it would equalize the burdens
Of the whole people to have the govern
+ Is +. t
ment to collect or borrow, from the
whole people, money for the purpose of
loaning it to any class of its. citizens at
2 per cent. a year or for any other rate
of interest. If the government collects
such money by taxes for the purpose of
loaning it to the farmers at 2 per cent. a
year, what right has it to refuse to loan
it it to any other people, who will give Sc
curity, at the same rate2 II it collects
the money from the entire people, for
the purpose of lending it, why should it
not lend the money to any person, or
corporation that desires cheap money,
and can furnish ample security. [ un-
derstand that the men who favor this
scheme tell us that they would not have
the money raised by taxation for such
loaning purposes, but they would have
the government simply issue greenbacks
for that purpose. But that is only an
other form Of borrowing money from the
entire people for the purpose Of loaningg g
it. Every greenback is a promissory
note of the government-that is, of the
entire people.
| Prom1ssory notes should never be is
/ sued by the government except to meet
its own necessities. Had there never
Ibeen any civil war, had not the expenses
Of the government for years exceeded al
possible revenue by enormous sums, NJ
one would have ever dreamed Of issuing
a single greenback. The people shoult
;. tJolx4 j, IT,