Delaware gazette and state journal. (Wilmington, Del.) 1883-1902, 1892-10-13
TAX ON STATE BANK ISSUE.
The Reduction an Act of Justice to Com
inunities Which Do Not Own Govern
ment Bonds.

IL correspondent Is ln1OTIlleu tndt Tue
issue Of notes by state banks is older
than the Constitution. The Bank of
North America and the Bank Of Massa-
existed before the Federal Con
stitution was formed, and there is no
placed by the Constitution
upon the power Of the states to grant
to state banks. 1t was so held
by the Supreme Court in the case of
Briscoe VS.. the Bank Of Kentucky. That
decision declared the power to charter
banks belonged to the states as an Incl
dent of sovereignty. The Democratic
party, as the defender of the reserved
rights of the states, has long favored a
reduction of the tax of 10 per cent upon
the notes of state banks, imposed by the
act OF March Sd, 1865, and reimposed by
the act Of July LIST, 1866. The object of
the tax of 10 per cent was to compel the
state banks to buy government bonds
and become national banks, since the
ownership Of government bonds is pre-
requisite to the issue of notes by national
banks. The purpose in fact was to
force the withdrawal of state bank notes
by making their circulation Improbable,
not because they were not sound cur
iNhNlA Wv DtNuuSt iHt GOHNtESlpH vi
state banks into national banks would
create large demand for government
bonds. In the case of Veazie VS.. Fcnno
the Supreme Court reversing former
decisionsl held that Congress could
restrain by its act the circulation Of
state bank notes. That decision, how
ever, like other recent decisions, was
dictated by political considerations, and ii
expressly conceded the right of the peo-
pie to demand the return to the state
bank system. The volume Of national
bank notes in circulation is by law pro-
portioned to the amount of government
bonds held by the national banks.
Bonds being very high, some of the
national banks do not issue notes, find
ing such issue Improbable. AS tho
national debt is paid of the banks are
compelled to surrender much of their
circulation. The volume of national
bank notes is rapidly decreasing. On
October lst, 1880, there was 1000 ma.
tlonal banks which held United States
bonds TO the amount of 1857 100000 as
security for their circulation and had
S3l7 100000 of notes in circulation. On
September 25tl, 1891, there were 3,G71
''tNA'SA''AA S'Alhs lAi tsN llllltuSt-Dlll
their holding of bonds 10 secure circula.
ton had fallen to $3.50, 100000 and their
notes in circulation were but Sl31 300.
900. Evidently this is contraction of
the currency which it may be desirable
lo prevent if safe means may be found.
The total Understanding debt Of the
United states on July lst, 1880, was
Sl,723,003, 100, but on August 31st, 1892,
the total Understanding debt aggregated
but $685. ,0S0-a great shrinkagc Of
the basis upon which national bank
notes are based, 1t is evident that if
government bonds continue to be paid
oil at anything like the rate of the last
twelve years there will soon be none of
them left to base the notes upon. Ii
will be borne in mind that the govern
ments obligations are not all of Il kind
to be available for the use of the national
banks. At the close of August last, for
example, there was Il government debt
of S3i0,65S,574 that bore no interest.
There were in the hands of the public
certificates and treasury notes to the
amount of S6l5,455, $50, against which
the government had in its vaults as an
offsets cash to an equal amount. OF
the total liabilities of the government,
aggrcgating, 81 ,5S2,6S1,949, but $685.
OBJ $50, as already stated, bears interest,
and is, therefore, of Il character to be de-
sired by banks as a basis for circulation
There is undoubtedly a pretty general
demand for some sort of safe circulating
notes to take the place of national bank
notes us the latter are Withdrawn. Some
of our most conservative financial Jour
mails have recently advocated the repeal
Of the 10 per cent tax and the revival of
state banks. There is u partisan cry that
the notes of such banks must necessarily
he bad, but that cry fails to take account
of facts. Under efficient Federal or state
inspection the notes of state banks can
be made perfectly safe. The wild cat"
banks Of GO years ago were, il is noted .
in wild cat" communities New states
frontier life, &c, favored "wildness''
generally. The conditions NOWADAYS
favor more conservative methods. BIt
as Mr.. Cleveland well saws in his letter
of acceptance, "whatcyer NAV be thn
form of the peoples currency national
or whether gold, silver or paper
lit should be so regulated and guarded
by governmental action or by wise and
careful laws that no one can be deIuded
as to the certainty and stability of its
value 1t is objected that the notes nj
state banks would not be suitnbln fnt
interstate commerce; that they would be
suhinct Ia discount outside ~, 800,
whore issued ~ mi III ans,.as !;
made that state bank notes would bc