Barbour County index. [volume] (Medicine Lodge, Kan.) 1880-current, 1892-03-16
GOVERNMENT BANKING.

by John NJ. Bachelor, of New York
City, but for private reasons it has
never been pub ished up to the
present time We will adhere to Mr.
Bachelors anguage as closely as pos
sible in the following description OF 1t:
This government branch banking plan will,
when adopted, save the people, the railway
companies. manufacturers merchants, and all
borrowers of money considerably over S3O0OOO,-
900 year, which is now paid by money bor-
rowerS to lenders of money, and which to-day Is :
a drain to that extent, without due compensa-
ton, upon the industrial progress OF the nation
All this benefit NAV be obtained without any |
increase in the volume OF money which is now /
In circulation, and without causing any change /
in the present system of conducting business /
affairs, except money lenders would be obliged /
to invest their money in the industries of the /
country instead of charging interest for its use
The census reports say that thirty-seven thou !
sand million dollars is now loaned TO the people |
and indus tries of the country at rates rangfrg .
from four to over twenty per cent. interest, ali
upon what may be classed as frst-class security
Taking this figure for basis, the cost To The
people for the of this money is over twenty
two hundred million dollars each year, taking
the average rate OF interest at six per cent,
which is too low If inaccurate. So in saying
that over $500, 600 900 per annum could be saved
by the adoption of the following plan the esti-
mate is considerably under the probable facts.
The plan is this: Let the government buy out
our banks of discount by paying in full for their
resources, and at the same time engage the ser
vices of the bank officers and clerks in charge,
for life or during good behavior. The purchase
of these bank resources would require about i've
thousand million dollars, if these same reSour-
ces were not available as cash when obtained;
but ii is not proposed to buy any which
are not good cash, and so guaranteed by
their present owners all these banks could be
bought out without any more money in circula-
ther on.
1t is well known among banking experts that
when bank pays out money, within a short
time thereafter another bank receives it, now
if this other bank pays back what il receives to
the bank which paid the money out, an eQuilib-
rum in balances is restored.
If this process is continued among all these
banks at the end of any one day, one week or
month, the average amount of money in the
hands of each bank is the same as the start.
Which means, what one branch bank pays out
another receives which receipt is practically
the same as if the paying bank had the money
it paid out shortly after returned to ii; thus the
paying bank would get the credit OF having
made loan without the use of any money. The
only money which would be used in a system of
this kind would be that which is required to
compensate for the delay which occurs between
when a bank pays out money and when another
bank receives it. This would be less under the
new system than under the present, for the
simple reason that balances between all these
branch banks might frequently be adjusted by
telegraph, more or less obviating the enormous
amount of money transfers which-now require
| q large express service.
| If the government could purchase all the
banks of discount in one day, no more money
| than we now have in circulation would be neces-
| sary for the purpose: but as this is not prac-
ticable, il is suggested that a sufficient num-
Der of certificates of Indebtedness be printed by
| the government for such purpose-say, to be on
the safe side, three thousand million dollars in
| amount-and in such sums as would permit
them being used in general circulation, while at
| the same time heing full legal tender for all
| dues, both public and private, and whenever any
! such certificates again come into the hands of
the government let them be des troyed, after the
| method OF the bank of England in this way
| only new certificates would be issued And
| when the process of buying out all the banks
| of discount complete, no more such certifi-
| Gates need be issued, and fast as those out
| standing could be obtained by the government
| they should be destroyed
Thus, after all the described banks once got
| into the hands of the government and the de
scribed certificates have been destroyed, the
| present amount of money in circulation would
| permit over six times as many loans to borrow
| ers as the present system, because the money
would be used over and over again. In fact, six
| times much is not the limit by any means.
1t is impossible to set the limit in figures, but
it would be exactly the sum which is consumed
by the delay between when one bank pays out
| money and when anOtner receives II.
| Another great advantage this new plan would
| afford is the security it would yield depositors
for all deposits would have the governments
guarantee. This is no small matter when the
| numerous bank failures in different parts of the
| country are remembered. Among the national
| banks alone for the year ended October 81, 1891
| these failures embraced p; adding thereto the
| failures of all other banks, the number exceeds
| 80; which failures and the consequent losses to
| depositors. as well as the great losses and in
1 IL
lays of having their money locked up when re
| ceivers were put in charge, would be ended under
| the new system.
| In the case of the certificates OF indebtedness
| above alluded to- it should be said that the
| proposed 81, 600 00) 600 issue would be only tC
| have them on hand in order to be provided fol
delays in buying out the banks; but it is within
| the bounds of reasonableness that only few
of them would have to be used, perhaps less
| than 500 100000 And should any bank OF dis
| count decline to sell out to the government the
matter might be quickly adjusted by the gov
ernment opening rival establishment across
| the street. The old bank could not do banlline
twenty-four hours against such competition.
| The main advantage Of the new system woulC
be all money borrowers could for good banlzins
| security, obtain all the money they want at cost
This cost in our large money centers might b,
| less than one half OF one per cent. per annum
which figure is reached in this way: The larg,
London banks frequently announce that the
| Will allow interest On QeDOSltS WlInin One-llal
of one per cent. of what they will discount mer
, camille paper for; which means that Londol
, banks find paying profit in loaning money a
one-han of one per cent interest. This couclu
sion is TO be inferred, else they would not b
likely TO do it. Then one-half Of 'one-pcr cent
on a business OF loaning money, If the y3lum
is large, ought TO more than cover costs; il suc
loans were s25 o00,0Oo year, onehah Of one pc
cent. would be SI25, 900
bank expenses with the bad debts addes
s7sg N. hot Tlesfx 81
cost is, including all bad leans, let such co.
only be charged, fer all excess of Charges a5ov
! cost is usury. It might cost banks In eouatr
districts little more than in the large cities,
: one-fourth or one-half per cent. more; but Q
, each branch bank would have its own expense,
/, | Independent Of all the other branch bans8, le
l each bank support itself.
3 All tAe4e branch banks should be more fTg
| quently visited by bank examiners than Is i
| practice to-day, and the same bank examine
should not be permitted to visit one ban
| twice in succession Such examiners shou,
make their visits in rotation and, II praci abb.
= be even more thorough than at the .prese-
time. This programme carried ont would /;
sure honesty and publicity; which latter pa
| ticuiaf is the life Of good finance, Then IS II
officers and clerks in charge are there for life {
q good behavior, ii is not reasonable to suppos
: that there would be any more dishonesty unde
a this new system than under the old, even IL :
much
AZ first sight this plan may have look {
= socialism OF course, all forms OF governme,
a are soeialistic In principle, but, as a gover
q ment is deemed necessary under our preser
conditions, the best we can do is to limit its a
z tivity TO such occupations as cannot in the nj
IS ture OF things, be done in behalf of the who
- people solely by means of individual ente
: prise.
Ia no instance is government eontroi mo,
necessary than in matters of money This IA
+ has been beaten into US by some pretty seye1
Il experience during the history OF this conntr-
h so today outside of the banks and those
;, their pay. one hears no advocate in favor of "a
Ing the control of the currency out OF the han.
ii the government and putting it in the han,
Of private parties. Upon due reflection. :,
same rule will be found 70 hcid 4, - s-1'