The Democratic advocate. [volume] (Westminster, Md.) 1865-1972, 1892-11-26
The Repeal of the Tax on State Bank
Notes.
The Baltimore sun.


A correspondent is informed that the
State bank plank in the Democratic plat
form criticised by Republican orators during
the campaign Just ended proposed merely the
repeal of the law which imposes a tax OF 10
per cent. on the notes issued by State banks.
This tax was imposed 10 stop the issue OF
State bank notes in the interest Of the national
banking system. The idea was to make a
market for government bonds by allowing
only banks holding government bonds TO issue
notes. This idea, helped hy the tax ct - per
cent on State bank notes. was successul.
The national banks bought government bonds
to base their circulation upon and State bank
notes were taxed out of existence. There
are objections to this. One is that in being
deprived of the use OF State bank notes the
people are deprived of useful local currency
which expands and contracts according to the
varying needs of the people. a second OBJ
lection is that government bonds are not the
only solid security upon which to base the
issue of notes. there We're issues OF good
State bank notes-good AS gOld-long before
government bonds were made the only lawful
security. A third objection is the ineiaStc
quality of the national bank circulation.
This circulation does not expand when there
is increased demand for money with good
GOllaNeIdl.
such times, with the result ofproducing huan
cial panics. Some inanciers have called the
EXISTING national banking system "a regular
cyclone breeder. 4 fourth and leading Oh
lection to the existing system is that the
national bank notes are steadily decreasing
in volume, owing to the redemption OF the
bonds on which they are based, and must
after few years disappear altogether. On
October |, 1881. there were ,, l32 national
banks, with an aggregate circulation OF $50,
200, 600 On October l, 1891, there were
3. 677 national banks, with an aggregate CIR
culation af S13l 100000. Evidently borrow
ers, however good their collateral, find the
national banks diminishing by nearly sZno,-
000 900 the volume of currency with when
they may be accommodated. II the govern
ment continues to redeem its bonds, the Si5l,-
200, 600 of national bank notes in use IN NC
tober, 1891, will, within ten years, have dis
appeared althogether.
1t was with this inevitable contraction OF
the currency in view that the Democratic
platform, seconded by the leading financial
journals oil the country, favored the repent
of the 10 per cent. tax in order 10 permit
again the issue, under proper restrictions, OF
State bank notes. Before the civil war there
were State banking systems that were as safe
for the note holder as the national system Is
and great deal more elastic. There were
other State banking systems that were unsafe
wild cat" The proposal is to sanction the
issue of State bank notes, but under such
regulation aud rigid inspection that their
notes will be perfectly safe. Under such 4
system banking facilities will be, il is thought,
brought within the reach Of the people 70 a
greater extent than at present and the volume
of currency will expand and contract, accord
ing to the varying needs of borrowers with
good collateral, much more freely thSn now.
In word, the change from the Ralora!
banking system, which is inevitable will also,
it is believed, be safe and advantageous.