The herald., 1895-02-13
BANKING IN THE UNITED STATES

| As the Constitution authorizes Congress
to pass laws for the coinage of money and
to regulate the value of foreign as well as
domestic coins without specifically con-
ferring any other power, on the sub
iect of money, the question early arose
whether the Constitution conferred upon
| Congress the power to establish banks.
The Cabinet of Washington was divided
in opinion, Jefferson and General Knox
holding that Congress had no such au-
thority. Nevertheless National bank
was chartered and re-charted and made
the fiscal agent of the Government. 1t
trifed with the money of the Govern
ment and the interests of the people.
Nothing rendered General Jackson more
popular than his warfare upon the bank,
which resulted in its final overthrow.
The idea of National bank seems to
have been abandoned and for nearly
thirty years Congress made no effort to
legislate on the subject of banking or the
currency During that period currency
was exclusively supplied by state institu-
tions. Experience with them was I'M
fortunate to the country, for losses to the
people were frequent and large. The cir
culaton was expanded and contracted at
the will of the banks, though expansion
was more generally the practice as it was
to the advantage of the banks to food the
country with wildcat notes. Paper money
was of all grades of value from next to
nothing up to par with gold. The banks
having full control in regulating the vol
ume of circulation, dealt with the subject
in disregard of the public welfare, the
only consideration being to make the
largest profit for themselves.
Though there was no effort after its
overthrow to re-estabish a national bank
of any character, still the question of the
constitutional power of Congress to cstab
lish a bank or to regulate the currency
seems not to have been seriously ques
toned. Hence early in the war Congress
enacted a national bank law, under
which banks could issue notes guaranteed
by the Government. The chief object in
enacting that law was to make market
for the Government bonds. To induce
the taking of the bonds as a basis of
banking it became necessary to tax state
bank notes out of existence, that the ma
tional banks might have the whole field of
note issues to themselves. As the capital
was at first limited to $500, 900, 900, bank
note circulation could not exceed $780,
100000. The limit was finally removed, in
the belief that the banks would so regulate
the volume of money as to supply the de-
mands of the country. This was done !
after the demonstration of silver and |
when reduction of the volume of treasury
notes was in contemplation.
There are features of the ma
tional banking system which are
very satisfactory. They are that the |
billholders are secure through the guar
antee of the government, and the notes |
are uniform and circulable in every part
OF the nation without discount The ex-
pectation, however, that the banks would |
supply the country with sufficient vol |
ume OF money was not realized. On the |
contrary they contracted their circulation,
from 1882 to 1891 $3.50, 900, 900, or at the rate
of $40, 600, 900 per annum, which nearly off
set the expansion resulting from silver |
coinge under the Bland law. In all our ex- |
perience with banks of issue the results |
have been the same. This experience il !
Illustrates the importance of the Govern
ment retaining in its own hands the |
power to supply the country with money. !
To do this is prerogative and duty of
government, and it should never be dele
gated.
The abuses of the banks in dealing with |
the money volume have caused the |
growth of strong sentiment that there |
should be no banks of ISSUE and that the
Government itself should supply the cur
rency directly to the people. National |
bank notes are good because the Govern
ment guarantee is on them. The reasoning
is that it is just as well and, indeed, bet
ter that the Government should be the
principal instead of the guarantor, that
then the people can regulate the money
volume through directions given to the
Government, but if the power to supply
circulation is delegated, its volume will be
regulated by interested parties and to the
detriment of the public.
A