People's party paper. [volume] (Atlanta, Ga.) 1891-1898, 1893-01-27
THE BANKING SYSTEM.
DEMOCRATS AND REPUBLICANS
GETTING TOGETHER.
They Differ as to Plans, But Agree
in Scheemin TO Furnish the
Currency.

PHILADELPHIA, Pa, Jan. 12.-The
seventeenth session of the American
Academy of Political and Social
Science was held here this evening
in the large hall of the Drexel 1nsti-
tute. The topic of the evening was
@National VS.. State banks Of issue"
Papers had been submitted to the
academy on this subject by Hon.
Horace White, editor of the New
York Evening Post; by Hon. W. l..
Trenholm, of New York, ex-Comp-
trolIer of the Currency; by Hon.
M. D. Harter, of Mansfield, Ohio,
and by Hon. A. S. Hepburn, present
Comptroller of the Currency.
The discussion had significance
far beyond a mere debate, as the
first three gentlemen are known to
be intimate advisers of President
elect Cleveland in financial matters,
while Mr.. Hepburn represents Mr..
Harrison's administration.
Mr.. White presented the leading
paper of the evening, which was
discussed either impromptu or in
briefly written papers by Messrs.
Trenholm, Harter, Hepburn, and
others. The views advanced are of
peculiar interest at this iuncture, as
they undoubtedly represent the lead
ing tendencies which will make
themselves felt in the approaching
struggle in Congress and in the
country at large on this issue.
Mr.. White gave a sketch of the
good and bad systems of banking
aKexisted before the war. In the
fc. er category were the State Bank
OF shlj6na, the Louisiana bank law
.tof ~, and the Suffolk bank sys-
/ tenriof Massachusetts. The govern
ing ;noiples of all these was that
Tue noaks assets should redeem the
cir6ql4Sing notes. This was, in the
speak4's opinion, the true theory of
banki3g because any system which
takes dilligent care of the assets
will always take care Of the circula-
ting notes. That it is entirely pos
sibl9 to have such bank system and
to have it enforced continuously was
proved by these three splendid ex-
amples.
Continuing, Mr.. White said:
The bad systems that existed before
the war were the free banks, more
especially of the Northwestern States,
which were copied after the New York
system of Issuing notes on securities
lodged with public officer. The losses
to the public from this kind Of banking
were enormous. They were large even
in the State of New York, where the
securities were more closely scruti-
nized, and where better systems of
banking prevailed. The free bank sys-
te II was a step backward in the evolu.
uon of banking, because it absorbed the
banks capital before its doors were
opened for business, The buying of
bonds by bank is really buying its own
notes. Instead of this it's capital ought
to be applied at once to the discount of
commercial paper. After the bank has
bought its notes from the government al
the rate of $l.10, no more of them viii
be taken out by the public or will be
kept a moment longer than those issued
on the plan of the old State bank OF
Indiana or by the banks of New Orleans
before the war, which cost nothing.
While this is true, the security of the
noteholder is the paramount considera-
ton, and 10 liberation should be given
to any system which fails in that par
ticular or puts the noteholder in jeo.
pardy.
Mr.. White thought that the sys-
tenn of banking on bond security
was destined to perish soon because
all the securities, fit to be used for
this purpose, were fast disappearing.
He said:
The national bank system could be
preserved and improved, however, by a
veryA slight change in the present law,
viz: Out Of the present tax on bank
notes constitute a safety fund to be
lodged in the Treasury, the amount of it
to be COMPUTED by actuaries, taking the
national bank mortality Of the past
twenty-five years as a basis. Let the
government continue as now to be re-
sponsible for the notes and let it con-
tinue to hold as now first lien on the
assets and on the personal liability of
the shareholders for its own protection
all the other parts of the national bank
law to stand as now. Whenever the
safety fund reaches the ascertained
amount let the participating banks with
draw their bonds and sell them If thew
choose. There have been only SIG 0O0,-
geo of failed bank notes under the
national system since it was started
twenty-six and half years ago. A
safety fund of 100000, replenished
out OF the tax from time 10 time, whoul6
have been abundant to redeem all failed
bank notes. The same statistics show
that the assets of these failed banks
realized nearly $44, 900, 900, or nearly
three times the amount of the notes.
Upon these assets the government, under
the safety-fund plan, would have held a
first lien.
The safety fund plan of banking was
tried In New York in 1929, and the sys,
tenn continued thirty years. By an acct
dent in framing the law in the first
instance the safety-fund was made ap-
plIcable to all the debts Of failed banks.
instead of the circulating banks only,
as had been intended. Hence, when
some bank failures took place 1841, the
safety fund was seized upon by bank
depOsitors as well as note-holders. and
the amount was not sufficient for both.
but the statistics show that If the fund
had been limited TO note-holders only
1t would have sutficed to redeem on de-
mand every failed bank note as long as
the system lasted. This must be con