The Indianapolis journal. [volume] (Indianapolis [Ind.]) 1867-1904, 1894-01-02
THE STATE BANK TAX
How the "Wild-Cat" Institutions
Were Wiped Out Of Existence.
Controller McCulloch's Report and Sub
sequent Legislation by Congress
Repeal of the Tax.
Special to the Indianapolis Journal.

for many years. to-day gave your CORE
spondent an interesting review Of the State
bank question. Indianiaus had much TO do
with the history Of the ten-per-cent. tax, ana
for this reason and the additional fact
that the subject viii come before Congress
soon. Mr.. Smiths remarks are of peculiar
interest. He says:
In his annual report to Congress on the
state of the finances. made Dec. 9, 1864 (sec-
ond session. Thirty-eighth Congress,l re-
ferring TO the report OF Controller OF the
Currency McCulloch. made under Section
81 OF the national currency act, secretary
Fessenden said.
"Tho statement exhibits a large and
rapid increase, and demonstrates the pop
ularity OF the system. The rapid and eX-
tensive conversion of State institutions of
established character. conducted through a
long series of years by men or recognized
financial ability. into banks organized un-
der the new system. could not have taken
place unless after full ana careful consiG-
GRAFTON as to its safety and superior adj
these advantages may be rather TO those
individually interested than TO the COM
munity at large. the reply is. that a single
uniform currency, possessing the same
value throughout the whole country, has
been too long a general object of desire to
"If to this great and obvious good be
added the benefits TO government, III It's
financial operations, OF being freed from all
the uncertainties and embarrassments aris-
Ing from a currency over which IL can eX-
ercise no control, the advantages OF any
admit of no debate. The Secretary was not
among the first to approve the plan
be receiving the popular sanction. Time
and observation Of its enectS have, now
ever, convince MN N h 5nad [ne Sys sonnd pr 13t
ciples, and is entitled 10 all the benefits or
a fair trial: and it is quite apparent that
the good TO be hoped cannot be fully real
tied so long as another system. at war with
the great objects sought TO be attained,
shall continue TO exist, unchecked ana un-
controlled.
while. therefore. the Secretary would
not advise the adoption or untrlendIy or
severe measures. likely TO embarrass the
business of the country, especially when
the indications are so favorable that the
merely local character, he is yet of the
opinion that such discriminating legislation
should be had as will induce the withdrawal
OF all other circulation than that issued I'M
der national authority at the earliest prac-
ticable moment"
Nov. Is. 1864. stated that there were on
that day in existence under the national
currency act 5S4 banks, with a paid-in cap
circulation of sec. 100000 After presenting
some details and statements in regard TO
the conversion OF State TO national banks,
the Controller presented objections to the
issue of circulating notes by the govern
ment, stating clearly and with great force
the danger of excessive or overissues be-
yond the needs of commerce and trade,
thereby enhancing prices and inducing
might be so reduced as TO embarrass bust
ness and precipitate financial disasters.
MCULLOCH'S RECOMMENDATIONS.
Touching the subject of regulating the
volume Of the currency by preventing ex-
cessive issues of State bank circulation,
Controller McCulloch said:
"As long as there was any uncertainty
I'm regard to the success Of the national
banking system or the popular verdict upon
its merits and security, L did not feel at
1offnn o0nfncf State honkC III &c for lOn-
gress to determine If there is any longer
a reasonable uncertainty on these points,
and If the time has not arrived when all
these institutions should be compelled ito
retire their circulation.
1T Is indispensable for the financial sue
cess of the treasury that the currency OF
the government. This cannot be the case
as long as State institutions have the right
TO hood the country with their issues.
AS a system has been devised under
which State banks, or at least
rs many of them as are needed,
can be reorganiZed SO that the government
can assume a rightful control over bank
note circulation, IL could hardly be con-
sidered oppressive If Congress should pro-
hibit the further issue of bank notes not
authorized by itself, and compel by taxa
ton (which should be sufficient to effect
the object WITHOUT being oppressive) the
withdrawal of those which have already
been issued.
My own opinion is that this should be
done. and the sooner it is done the better
IL Will De ION the banks themselves and
for the public. AS long as the two systems
are contending for the field although the
result of the contest can be no longer doubt
fuD the government cannot restrain the
issue o. paper money, and as the preference
which is everywhere given to n national
currency over the notes of the State banks
indicates what is the popular Judgment
in regard to the merits of the two systems,
there seems TO be no good reason why
Congress should hesitate TO relieve the
treasury of a serious embarrassment and
The npOnll 0f an unS1ficfantnrV oirCylla-
tion."
Mr.. McCulIoch had been an employee and
officer Of the State Bank of Indiana from
1873 to 1851. and president of that bank from
1857 TO 1868. On May 9. 1853. he was ap-
pointed Controller of the Currency under
the national currency act, and resigned
on March s, 1865. to become secretary of
the Treasury, succeeding Secretary Chase.
The State Bank of Indiana has the envia-
BILE record of being the only Western or
southwestern bank that did not suspend
in the crash" or panic Of 1887, nor did
It suspend in the crisis of 1857. Under the
superior management of Mr.. MCCuIOch IL
paid annual dividends averaging from -
TO II per cent. annually. and also returned
To its stockholders nearly double the orig
inal investment when 1t wound up at the
expiration of its charter in 1854. For the
100000 invested the State received i'm prof
its over S,5O0,0C. These facts are stated as
illustrating the difference between the two
TO the, war, the ''other side
being known as wildcat" barN-
ms, WulCH Hdu us perfect development
Ia the adjoining state Of Michigan, "a ~uo~n
10y the History of Early Banks and Bank
ing In Michigan" by Ex-Governor and ex-
Senator Fetch. of that St9te.
On Feb. 6. 1860. Mr.. Morrill,, Of Vermont,
reported, from the committee on ways and
me-3s. a bill Oh. L. 74D 10 amend an act
entitled "A act TO proide internal revenue
10 support the government, to pay the in
tcrest on the public debt. and for other pur-
poses approved June so. 1864. When
mat Dill was under consideration,
In the of the whole. on
Feb. 10. Mr., Hooper. of Massachusetts. ga
member or the ways and means comnitteel.
offered an amendment providing that i'm lieu
OF existing rates Of duty on circulation.
there should be levied. after July 1. 1865. a
duty OF one-quarter of 1 per cent. each
month upon the average circulation issued
lr any bank. etc, and after Jan. /. 1866. q
duty OF one-half OF 1 per cent. and that
whenever the outstanding circulation of
any bank. etc. shall be reduced TO an
amount not exceeding 3 per cent. OF the
chartered or declared capital, said circula-
ton shall be free from taxation" There
was also "A provision as to the circulation of
State banks converted 10 national banks or
assumed by national banks.
Mr.. Hooper stated that this amendment
had been prepared with great care 10 carry
out the recommendations OF Secretary FEES
sender and Controller OF Currency McCuI-
loch I'm their last annual reports. and that
It's object was TO put n tax upon the cir
c~ulatiOn of the State banks which had been
converted into national banks. or which
had gone out OF existence and their circula-
should be sufficient 10 put a stop to their
circulation. the object also being TO bring
about one system OF bank paper throughout
the country.