The Bennington banner. [volume] (Bennington, Vt.) 1858-1894, 1892-09-23
LOCAL BANK NOTES.

F. H. Draper in the Boston Journal,
writes: "For the benefit of the young
voters who have no practical knowledge
of the currency of local banks, l would
say that to-day the currency of Canada is
quite similar in its character to the
currency of the days of State banks. The
small denominations are issued by the
Dominion Government; the larger bills
by the local banks in the different
Provinces. Having only local status,
the condition of the different banks is
not generally known in the distant
Provinces The result is that while
bank may be in good condition its circu-
lation is subject to discount away from
the immediate neighborhood of the
bank. Thus, merchant leaving British
Columbia with bills of the banks there
has to get them exchanged at Toronto
or Montreal, paying discount Even
the bills of banks in the near Provinces
of Nova Scotia and Quebec do notreadily
pass. A traveller in that country has to
be careful or he will receive bills of
banks that have failed, and which are
worthless. This has more than once
happened to the writer. In fact, United
States National bank bills pass more
readily than do the bills of the local
banks. The remark often heard is:
That bill may be all right, but don't
know anything about the bank
81 can hardly conceive of any one de-
string to infiict such currency upon
the United States, and the party that has
no better issue than that must be in
bad way. AS this is matter which
affects us all too much cannot be said
against it,"
Commenting editorially on the above
the Journal says: "There are two
things to be noted about the Canadian
system. The first is that though it has
been safeguarded as ingeniously as the
legislators of that country can devise,
the public is not absolutely protected
against loss. The second is that the
knowledge of this fact gives huctuat-
ing value to the bank notes of the several
Provinces and entails annoyance and
often positive loss to those whose deal
ings are between the different parts of
the Dominion.
GAS stated, Canadian banks are local
not Dominion. There is a general Sc
curity, however, thrown about them
which was wanting in our State bank
system. Under the law they are per-
mitted to issue notes to the amount of
their actually paid-in capital. In
operation this means that if over one
half of the proposed capital has been
paid in the notes issued cannot exceed
that amount under certain fixed penal
ties. These notes must be of the larger
denominations, as the smaller ones are
provided by the Government itself. The
notes thus issued constitute first lien
upon the assets of the banks. In ad-
dition, if the assets do not cover the
deficiency, in case of failure, the stock
holders are obliged to pay over any un-
paid part on their shares and are liable
for assessments to the full value of their
stock. That the system protects the
holders of the notes in large measure
was shown by the fact that in the big
failures following 1871 the losses to the
public on account of these notes were
not large. But system is no stronger
than its weakest point That there were
losses showed that it was possible for
what we regarded as the closest restric-
tions to be avoided. 1t threw an un-
certainty over the issues of banks whose
conditions were not known to those to
whom the notes were offered.
The practical result of this is that the
notes of the banks of one Province pass
at discount in distant one. Notes of
certain of the New Brunswick and Nova
Scotia banks are accepted at face value
at Montreal Certain of them are so re-
ceived at Toronto. The same is true of
some other provincial issues. But it is
true of only part of them, and then of
those in close proximity. 1t is question
of knowledge and confidence in indi-
vidual banks. AS an outcome through
all the exchanges is system of dis
counts which is both annoying and a
source of individual loss. The difference
between the operation of such system
and our National one is clear. A So note
here passes for S. whether it bears the
stamp of Maine or California. In
Canada its value is question of latitude
and longitude"