Wood River times. [volume] (Hailey, Idaho) 1882-1915, 1892-09-12
SOME FACTS As TO NATIONAL
BANKS. .

Hostility to the national banks il
one OF the cardinal dogmss Of the
Peoples party, and plank demand.
ing their abolition has always been
prominent in their platforms.
This hostility seems to be predicated
upon the supposition that they can in
ve.t their capital 10 government bonds
At par, and get interest on them, and
issue an equal amount in circulating
notes which they can also lend and
so get double interest. But this is
very far from being a correct states
ment of the case.
The facts are that since the close of
the war government bonds having
some tire to run have always been
at considerable premium, except the
late issues Of 2 per cent. bonds upon
which the interest amounts to almost
nothing); and this premium dim,n.
ishes at the rate of about per cent.
per annum, causing that much loss to
the holder For instance, United States
4 per cent. bonds due in 1907 are nov
worth about Is per cent. premium.
They will be redeemed at par in Is
years, hence it is manifest that the
present holders are bound to lose a
little over per cent. per annum
on them. This practically reduces the
rate Of interest to less than 3 per cent.
per annum.
The privilege Of issuing currency
may be end often is a source OF loss
instead of profit to the bank; and
where money is worth as much as 9
per cent. interest it is bound to in.
volve q loss if used.
To illustrate: Suppose a bank puts
its whole capital of, say, $50, 900 into
bonds to secure circulation. This
would buy, at l6 per cent. premium
s43, lob in 4 per cent. bonds upon
which it could only issue 80 per cent
Of their face in circulating notes. The
law requires 5 per cent. OF the circus
Ia.ion to be kept at Washington all the
time as redemption fund, and Is
per cent. OF the circulation and de-
posts to be held in reserve ali the
time.
This reduces the actual circulation
20 per cent, and will only leave $751;
725 for the bank to loan, besides
whioh the government levies semi>
annual tax of j.! OF l per cent. upon
the oircu' alton issued.
Assuming money to be worth 10
per cent. interest the account would
stand thus at the end Of year:
OR.
By interest ON $3i ,72b for one year at 9per
BY interest on saslO5 government bonds at
Total interest received by bank "a, 600
DIR.
TO per cent. depreciation govern.
. ment Donos. ACKNOWLEDGEMENTS l
TO per cent. tax on $3l.725 circula-
uon...'.'...'...... 3l7- 749
Net amount interest received on $780,
which is fraction ever s per cent.
Now if. instead Of getting any cir
the bank had loaned out its
whole capital at 0 per cent , 1t would
rave this to show:
interest $4,000. onr year. at er cent "a. 500
SUI by INDUCING IN circulation 1t only gets g. SCI
Aud loses the difference ..s GAG |
10 that at the end Of the year it would
'e $639 better off without any circus
alton than it would be with all the
circulation it could get.
If instead of per cent. bond the
REGULATION was based upon 2 per
ent. bond it is manifest that the / |
'er cent. tax and the loss Of interest
n the 80 per cent. of deduction from
oauable funds would more than de
troy all Of the interest on the bonds
If this circulation business was as
'ro6tahle as imagined. all OF the ma
ional banks would have IS much of it
S possible; whereas, in fact the banks
10 not average over rs per cent. o:
he circulating notes that they might
ssue, and many Of the largest ones
UGH as National Park Bank of New
York, capital $4,000, 600, and the
first National of Chicago, capital
Is 900, 900, have no circulating notes
It all.
A FEW ADDITIONAL WORDS.
The article entitled "Some Facts