Belmont chronicle. [volume] (St. Clairsville, Ohio) 1855-1973, 1893-06-29
The National Bank System.


There is no discrimination, and there
can be no monopoly. Because of an
impression that there is not enough
money per capita in circulation to trans
act the business of the country there is
a demand for an increased circulation,
but on this point we shall not dwell at
present.
The public should understand and ap
preciate the fact that National banks
are largely Disseminated against, instead
of being favored by the laws of Congress.
A National bank is required to deposit
U. s. bonds as security for its circulation.
For this it receives 80 per cent. Of the
par value of the bonds in circulating
notes, but the bonds cost ITO or more,
at this time averaging ITO. In addition
it is required to deposit per cent. of its
circulation with the Secretary of the
Treasury for the redemption of its notes.
Thus it is, it has but SIS cents in circula-
on bonds and deposits that cost s1.l5, or
thereabout. This does not pay the
banks, and hence the large decrease in
the circulating medium of National
banks.
There is now outstanding in National
bank notes nominally S172,000,O00, but
really only Sl49,000,000. This is the
measure of the contraction in National
bank circulation. There has, of course,
been an increase in silver certificates and
Treasury notes, while greenbacks have
neither increased nor diminished. 1t is
now proposed to abolish the tax on State
hanks in compensation for the abolition
of the silver purchasing act, under which
fifty millions year in circulation is
issued.
The abolition of the tax on State
banks, it is held, would lead to large
increase in circulating notes. What
would be the character of these notes?
Some years ago Jay Gould advocated
this scheme in order to create market
for railway bonds. The manufacturers
of State and municipal bonds would also
favor such a scheme. The question is,
however, whether such scheme would
secure circulation compared with that
of National bank notes. The latter are
absolutely secure, and are equal to gold
not only in this country, but in Europe,
for they are unquestionably protected
by the deposits of U. S. bonds, for which
the Government stands sponsor, and
which it redeems, whether the bank of
issue is solvent or insolvent. No matter
what may become of the bank, its notes
are good. There never was better paper
money than this any where in the world
A famous financior of England once
said of it that England would be elated
if it could have system like ours
This complimentary tribute to our finan-
cial system should not be forgotten OF
disregarded.
The people say they want more paper
money. The way to get it is to author
ize the establishment of State banks,
the issue of which shall be based upon
State, railway or municipal bonds. How
is this security to be valued? Who is
to be responsible for such circulation?
These questions must be considered
carefully. Spectators in railways would
be enabled to issue bonds more freely
| if there should be market for them es-
tablished through the organization OF
State banks. The same would be true
of States and municipalities, and so, in
stead of having U. 5. bonds as security
for circulating notes, there would be in
Vulnerable kinds of bonds for security
| We have always contenGed that this
system of banks led directly to "wlld
cat" currency, such as was in circulation
during the fifties. The present genera
ton of business men may have forgotten
them, but the "old heads" can refer with
| feeling to the days when bank notes
were of uncertain and shadowy value,
and when those who held them did moi
sleep well of nights. This character OF
currency was never boarded. Now al
classes of currency, including silver
certificates, are locked up in safe deposit
vaults or hidden away in trunks an6
stockings to guard against possible dis
aster. Gold is not boarded, neither is
silver. 1t would be blessing to the
country if timid persons would lock uE
silver instead of paper money, but they
are careful not to do that. There is moi
any demand for silver dollars. OF more
than four hundred million of these
coins, there are not more than sixty
million in circulation.
If an increase in paper money is ab.
solutely needed, the way to get it should
be through the National bank system
Politicians propose to abolish the tax OF
State banks. 1t would, if carried out
open the sluice gates for the increase OF
State banks. Their circulation would
be secured by State, railway and munic-
| ipal bonds, and if bank should fail
the holders of its notes would be com
PEELED to wait until the securities could
be converted. If, under the National
bank system, Congress would permit the
issue of one hundred per cent. on the
par value of the U. S. bonds deposited,
and abolish the five per cent. fee now
required. the National banks would be
enabled to issue sufficient amount of
currency to meet all the legitimate de-
mands of the Nation.
1t may be asserted that ''the Govern
ment is paying its debts" but is it not
about time that an end should be put
to this sentimentalism about the pay
ment of the National debt? Would it
not be better to authorize the issue of
new bonds, to run many years, bearing
a low rate of interest, for the purpose of
stopping the tax upon the people who
are now compelled to pay six or eight
per cent. for money for the payment of
bonds that can be placed for two per
cent? Besides, these bonds would afford
an opportunity to secure an enlargement
of National bank circulation. 1t would
not entail any monopoly, for, under the
the National bank system, monopoly is
impossible, because any set of men can,
as said before, organize National bank,
provided they have the money, purchase
bonds and issue circulating notes. This
certainly would be better for the country
than the establishment of State banks,
the credit of which would scarcely
extend beyond the limits of the State in
which they were chartered. There are
4 49,