The herald., 1893-08-06
A UNIFORM SYSTEM OF BANKS,
A Valuable Paper on a Finan-
cial Theory.
The Present System of National
Banks and Its Creation.
rhe Governm ent Should Have Control
OF All Federal Banks-The Fiat
Money FaiIscy-Outlines of
= Good Idea.
IBy Jefferson Chandler.]

by Jefferson Chandler.]
The power OF the federal government
10 establish bank was sustained by the
supreme court OF the United States in
the early history OF the country. This
power was not among the enumerated
powers found in the federal constitu-
tion. but was declared to be incidental
merely. and therefore exposed to contro-
versy between strict and liberal con-
structionists OF the constitution. Public
sentiment shrunk from the interpreta-
ton of the constitution, and the bank so
established disappeared.
The present system of national banks
came into existence as temper ary
device for floating the national debt.
They were improvised instrumentalities
for raising money to carry on the war;
they we're not designed to be perma-
nent; they will, by their constitution,
cease when the function for which they
were created Is performed; they will
disappear with the extinction OF the
national debt; they displaced state
banks by the legal preference given to
them, and will themselves be displaced
in turn by state banks at the end of
their career, unless q new and superior
system be provided. The constitutional
power of the country over money is at
present chaotic. The federal government
has the exclusive power to coin money
and to regulate the value thereof. The
states have power to make gold and
silver coin legal tender, and have power
also to establish banks. As the consti.
tuition now stands the power to coin
money and to regulate the value thereof
and to make the money coined a legal
tender, and to establish banks, is di-
vided between the federal government
and the state governments. This d.
vision into fragments of power over
money permits arrangements Of values
and produces lack OF uniformity in the
laws in respect thereof and of the value
OF the currency itself. This condition
was realized before the war. Under the
constitution as 1t now stands the states
are not permitted either to issue cur
rency or bills of credit themselves or to
have the power to give conclusive legal
tender character to the currency or bills
issued by the banks they create. State
banks, by reason of the lack OF constitu-
tional power in the states to insure their
solvency and make them impregnable,
are exposed in time of panic to two
perils. First, the bill holder will hasten
to the bank to redeem his bill in coin !;
second, the depositor will withdraw his
deposit. State banks, though wisely
and honestly managed, are left exposed,
by lack of power in the states to protect
them, to every wave Of distrust that
sweeps over the country. Progress has
been so great since the old state banking
system served the country, and the pub
lie has become 80 accustomed to the
supremacy of the federal government
over interstate commerce and the
general business interests of the
whole country, that it ia impossible to
turn the current of public favor back to
q system OF banks which seems to be
outgr0wn, and which at best is in its
nature perilouH. If this be 60 a new
system must supersede the old. The
waystb this is quite simple. That pro-
vision of the constitution of the United
6tateswhich empowers congress to coin
should have added thereto the following
system of banks" Congress could
and inadequate system with uniform
new system, whatever currency the
government authorized could reach the
people. The currency 30 put out would
never be distrusted, inasmuch as it
would have the advantage over state
bank currency of being constitutional
and therefore never doubted. The gov
ernment could, and should, having COM
plete jurisdiction over the subject, pro-
vide that all banks Incorporated under
federal law should have government
director, whose duty it should be to
make frequent reports of the condition
of his bank to the secretary of the treas
ury, and who should be held personally
responsible for the honest management
of the bank. The government should
also guarantee the depositors from loss,
though primarily holding the stock
holders. This would not be an unreas-
enable liability on the part OF the gov
ernment, inasmuch as 1t would have
supervision of the banks at all times and
knowledge Of the solvency of the stock
holders, while the depositors would not
have such supervision and knowledge.
There is no communism in this. 1t
does not involve personal liberty, the in
vasion of which by the government
leads towards communion; but 1t ie q
mere business regulation introducing
into disconnected and unsound money
system the principles of stability and
security. Money, its quantity. of what
coin composed, its distribution Of value,
the stability of banks, all depend upon
the intelligence and wisdom of the gov
ernment. People, compelled, under the
laws of business, to have intercourse
with government institutions are en-
titled to rely supon the soundness of
such institutions and upon their honest
management. The government ad-
mits this duty and liability under the
present system. 1t provides bank ex-
aminers, by which it acknowledges the
duty resting upon it to discover and ar
rest the insolvency and mismanagement
of the banks which it creates. Tho ex-
ercise of the power of supervision we'll,
is not more communistic than to ex-
ercise it i'll. The citizen, driven by the
rules of business to rely upon institu-
tions created by the government, should
not be required to bear the loss result
ing from the intirmities of such institu-
tions. Fewer banks suspend at the
present time from actual insolvency or
dishonest management than from public
fright. The government has the power
to control these and should exercise
this power.
Neither would there be any serious
risk to the government in the matter. A
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