The old Abe eagle. (White Oaks, Lincoln County, N.M.) 189?-189?, 1894-05-31
SHORT CHAPTERS ON MONEY.

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During this period of wreck to finan-
cial institutions, some of the states un-
dertook to remedy the defects of the sys-
tenn generally in vogue. The plan
adopted by New York was probably most
worthy of mention, though in practice a
failure, as it furnished the suggestion
for the National system.
This plan was first the establishment
of 'safety fund" built up by tax on
the capital of the banks, this fund to be
used to redeem the notes of the banks
that failed. By this system the strong,
we'll managed banks were practically
made responsible for the obligations Gn
the form of notes. of the weaker and less
ably managed ones. This plan soon fell
of it's own inconsistency, and was fol-
lowed by another that experience showed
to be but little better. In this modifca-
tion Of the system the safety fund" was
in the form of stocks, bonds, mortgages,
and securities generally, deposited to Sc
cure the circulation of the banks much
as government bonds are now. But of
course the banks didn't fail when ''times
were good" and when they were "bad"
the securities could not be realized on.
The weakness of this form of security
was made clearly manifest in the great
panic of 1857. This crash was precipi-
tated suddenly, somewhat like that of
1873, by the suspension Of payments by
an extensive firm, the Ohio Life and
Trust Co., which did heavy banking
business in New York. This failure
gave a great shock to public confidence
and caused the failure of many smaller
banks. The New York banks which had
discounted mercantile paper and ad-
vanced money to the New York mer-
chants literally found themselves com
PEELED to face run from their deposi.
tors, who had withdrawn nearly half their
money from the banks within two months.
This caused q rapid calling in Of their
loans and advances and consequent
contraction of available circulation OF
about 30 per cent in two months. This
Of course was ruinous to many people,
merchants and others, who were caught
at disadvantage.
In this panic every bank in the United
States suspended specie payments.
There were S200000,000 Of state bank
paper outstanding at the beginning of
the war,
This was the final wreck OF the old
state banking system as banks of issue,
and brings us to the organization of the
present National banking system, which
will receive attention in u subsequent
chapter
The Government paper during the pc.
riod covered in this chapter was Issued in
the form Of interest bearing Treasury
notes. The first notes were issued dur.
ing the war OF 1912, for one year, nnd
generally Of the denomination Of Sl00,
These one year notes were issued in 1872,
10 and IA, the issue Of each year being
taken up by that of the next. Over $2s.
00J,G00 OF these notes were issued, and
bore interest at the rate Of 81 per cent.
They were payable to order, receivable
for payments to the government and
payable for public debts. The issue 1915
was made redeemable in nue years, pay.
able to bearer, convertible into bonds,
and non.interest bearing until 80 con
verted. They very soon disappeared
from circulation. as would be expected,
being either redeemed by the govern
ment and retired, or converted into
bonds.
The other Treasury note periods we're
during the panics Of 81 to 40, 81 to 'Gl,
and the war periods Of '4d to 4s and 81
to 'Gj. These notes we're generally is
sued for short times, rs temporary ex.
pedients, and bore interest Mt high rates
one issue drawing II per cent QS6D.
In the next chapter the consideration
OF coin will be resumed.