St. Paul daily globe. [volume] (Saint Paul, Minn.) 1884-1896, 1893-07-13
CHILD ON BANKING.
THE WASEcAR TfKES A SHOT AT THE
60HD0cRAcK.
NATIONAL BANKING LAWS.
However, Are Not His Long Suit
National Banks-Some Inter.
esting Facts Concerning State
Banks

WASHINGTON, July 12.-"Pat' Child,
the able but decidedly cranky editor of
the Waseca Herald, has always been a
free coinage man. and has written great
many strong articles in favor of that
side OF the question. but in late issue
of the Herald he has made grave error
regarding the profit derived by national
banks from their circulation. In this
article Mr.. Child says:
The secret of the present gigantic eff
fort of the. bOndocracy to demonetiZe
silver is this: Under our national bank
ing law (see act of June 8. 1864. and
acts amendatory thereby any five bond
holders may organize bank. and. upon
depositing with the comptroller of the
currency not less than $4,000 in United
States bonds, may receive 80 per cent of
such bonds in national currency or bank
bills, which they may loan at 10 per
cent interest in Minnesota. These
bonds are not taxable and draw inter-
est at from 4 to 6 per cent Every
banker having $1,000 to thus invest can
get interest on $1,000. The people pay
him interest OH his bond of $1,000, and
those who borrow and use his 1900 in
amount. 1n other words, the national
have out at interest 95,0O0-s50,000 OF
1t free from all taxation"
why Not More Banks.
If the clever Wasecan Is correct in
his statements there would be no nation
al banks so unmindful of their interests
as to neglect to make as large deposits
of bonds as possible and thus place
themselves i'll position to reap the gold
en- harvest offered them by the govern
ment. But Mr.. Child knows that there
are any number of national banks that
do not avail themselves of the currency
privileges of the national banking laws,
while i'll the increasing number of state
banks in Minnesota is found the best
possible proof that there is no such
bonanza in banking under the national
bank laws as he has attempted to show.
The state banks in Minnesota, under
the excellent state banking law, greatly
outnum0er the national banks, and are
just as solid. The state offers no bonus
TO state banks, and so there must be
some reason for the preference of local
capitalists for the state rather than the
national system, Mr.. Child must know
the reason for this preference. and,
while the national banking system may
be far from what is desired, it is wrong
for him or any other man to attempt to
so mislead the people.
Bonds Are Too High.
But there is no such profit in a ma
tional bank circulation as Mr.. Child
claims. The large appreciation in the
value of United States bonds. the basis
of circulation, the reduction in the rates
of int I'm -;
have made circulation improbable, as
is shown very forcibly by the decrease
in the circulation of national banks
from 1862, $50, 1874. Sept. 80, 1882, to S172,-
1876, 610 Oh June 30, 1892. In the annual
report to congress, made last December
by Hon. A. ID. Hepburn, comptroller of
the currency, the reasons for this con-
dition of affairs are set forth clearly and
fully. Mr.. Hepburn says III Sss ssissN
The volume of national bank cir
culation would have been much more
contracted but for the fact that all
national banks. whether they take out
circulation or not, are obliged to own
and assign bonds to the treasurer of the
United States in trust interest bearing
bonds of the United States. and in case
their capital is S150.O00 or less, to the
amount at par of one-fourth their cap
ital stock. If the capital exceeds $780,
600 they are required to have on deposit
in the treasury not less than $50. 900 in
bonds. Being obliged to own these
bonds, to measurably lessen the cost of
carrying such high-priced securities,
they take out circulation"
Facts and Figures.
But there is something better than
the above in Mr.. Hepburn's report. For
the benefit of all who desire to know
something of the workings of the ma
tional banking laws. and especially
those who cherish the impression that
the government is giving a little pro
lection" to the national banks, the
| comptroller prepared several problems,
showing the profits in circulation on the
basis of the different classes of gnYern-