The times. [volume] (Richmond, Va.) 1890-1903, 1895-12-15
PLEA. FOR STATE BANKS.
WUy FfRNERS CANNOT BORROW
MOSEYIN yIRGINId.
The Want of Sufficient Banking Capital Is
the south's Greatest Trouble.
TEMPER Cent-Tax.
To the Editor 4 The Times:

iOilONlnB COnNtfAGtiOh DetWecn FARMER n
and Banker Il.
A. Friend Il. VIII you tell me why IL Is
that a Virginia farmer cannot borrow
m ,ncy from any bank in the State, on
his own note. secured by endorsement
Of another farmer, or By mortgage on
his land2
3. For many reasons. First, because
Of the general impression that farmers
are careless as 10 their credit. and do
not recognize the importance Of paying
a note the day 1t is due. Again, because
the note OF one farmer endorsed by an
other Is not supposed TO represent COM
mercial transaction. but constitutes what
is known as made paper and again,
even with real-esrlte security. the
prompt payment OK the note could not
be expected. because farms in Virginia
cannot be readily sold
A. But such was not the case before
the war Why has The credi, OF the
farmer so changed?
b. First because he has lost
his slave property. that had ready
convertilKity. Again, because with
slave labor the old system OF farming
was more profitable, and again because
there ~ not now sufficient banking capital
In the state 10 accommodate the mer-
chant and manufacturer as well as the
farmer. who is the last TO he accommo-
dated. because the one most careless as
20 his credit.
A. Why have we rot sufficient banking
capital in the state now?
y Because OF the National Banking
act. that prohibits state Bank circula-
ton, by taxing It 10 per cent. per aunum.
A. What brought about the tax Of ten
per cent on State Bank circulation?
h. The National Banking act was
passed during the war, 10 enable the
United States Government 10 borrow
money on its bonds, instead OF issuing "A
vast amount OF notes that would have
depriciatcd and Increased Incidentally
the Government debt.
A. How did that banking act enable
the Government % borrow money on It's
bonds2
II. The act levied tax Of 10 per cent.
OF all bank notes except those To be
issued by National Banks organized under
that act TO organize under the act, n
was necessary 20 buy United States
bonds. on which, when deposited with
the Government they could Issue % per
cent. Of notes.
A. Then it was forced loan from
the banks?
b. Exactly so, and yet so pro-
Htable that but little complaint was
made.
A. In what way was banking so profta-
Bile, under the banking act?
b. A bank with 10000 capital could bty
600 200 OF United States 6 per cent bonds at
par and issue thereon 10000 OF notes 20
lend out at per cent. say $1'iO0 interest
for a year, which with s6.yQo interest from
q
cent. 10 say nothing OF the profit from
deposits.
A. If banking is so profitable, then why
have we not a sufficient amount Of bank
ing capital IN Virginia, and throughout
the South?
u. Most OF the national banks IN the
South were organized soon after the war
while banking was prOniable. but the
capital was largely from The North, and
banks were established only at The inn
portant centcrs where they promised 20
be most profitable. There was no capital
al the Soutl. with which 20 establish
banks wherever wanted, and later on al
Southern capital Increased. banking was
800 longer tempting profitable United
States bonds were appreciating in value,
and the interest 10 be received from an
investment in them was 80 reduced as
TO make bank stock no longer attractive
10 capitalists. Hence banking capital has
not Increased in the South TO meet the
demand FOR II.
A. Do you think the need for more
banking capital in Virginia has dwarfed
agricultural effort as well as other enter
prises in the State?
g. IL has beyond question Capital
IS necessary 10 the profitable cultivation
Of the soil, as II is TO every business en-
no Il
i'm other enterprises Of the State building
up towns and cities. increasing the con
sumption Of farm products. the better
for agriculture.
A. But how would increasing the bank
ing capital OF the State enable the farmer
10 borrow money!
B. II banking should be made profita-
bic. banks would be established in agri-
cultural communities, wherever needed.
and the sober. industrious farmer, near
bv the bank, would be well-known 20 its
officers. and his credit would obtain FOR
him the advance he might need In an
ticipation Of his harvest
4. How would you Increase banking
capital?
y. II the 10 per cent tax should be
repealed or upon a test case, should De
pronounced unconstitutional Gas it doubt
less would be- by the Supreme Court OF
TN United States, the several State
legislatures would pass a general bank
ing act TO charter banks OF issue. The
currency might be secured by gold and
silver, and by all the assets OF the banks
under regulations 10 be watched by Bank
Examiners. A bank might be all owed 10
issue rotes for the amount Of its capital
provided one third of its capital be invest
ed IN coin, and remainder In negotiable
paper.
The profit Of hank might be roughly
estimated as follows:
canItaI 500. 100
Profit from circulation. $4,000
Interest on capital not invested
in coin. 1000
More than per cent. on 10000 $3.50
Assuming that the profit from deposits,
should pay the expenses Of the bank.
the prospect for 10 per cent. dividend
would attract capital. and especially so
II the legislature would exempt from
taxation all banks, and bank stock owned
by individuals.
A. Representatives from the agricul
tural districts would hesitate to exempt
capital from taxation?
r. Very probable, but the most in
felheept might he made 90 see that to
induce capitalists. 10 put their money
where IL could be loaned to the people,
would he as good service 70 the farm
ers as reducing the price OF fertilizers.
Money IS the greatest fertilizer, and II
made exempt from taxation when invest
cd i'm bank stock, interest could be re.
duced 10 borrowers OF money.
A. That seems very clear. Farmers
generally have not seen the matter in
that light.
u. Because the matter has not been