The Saint Paul globe. (St. Paul, Minn.) 1896-1905, 1897-07-21

able TO use 1t for the relief of the general
distress, but was compelled to be a constant
absorber Of cash, thus aiding in bringing ruin
to thousands of otherwise solvent business
houses, stopping consumption as well as pro-
duction, and depriving laborers Of employ
ment. The ordinary annual disbursements of
the government amount to the comparatively
inconsiderable sums Of from $3.50, 000, 900 to
$3.50. 900, 900. They are only four or five times
the disbursements Of an Armour & Co. or a
SWIFT q Co. They are a mere bagatelle, COM
pared with the aggregate disbursements Of
all the private and industry of the
country.
But such is the wickedness of the laws
which govern its methods, that the compare
lively insignificant commercial transactions of
the government require the constant possess
sion of more actual cash. more specie and
more paper money, than is available for use
in the conducting of all the other industries
of the whole country, including commerce,
manufacturing, transportation, mining and
agriculture. More gold, silver and paper
money is locked up idle and useless in the
treasury. from years end to years end, than
Is contained in all the national, state and
private banks, trust companies and savings
banks, and other institutions, which hold the
funds which uphold the credits which are
used as the principal medium or exchange for
all the private business of the country.
1t is my contention that all this enormous
waste of the use of money and all the dis
turbances to the industries of the country
transactions of the government is chargeable
to the existence Of the subtreasury laws.
They divide the use of the money Of the
country into two Independent
for the insignificant transactions of the gov
eminent, usurpfng the larger part, and one
for the enormous aggregate transactions OF
65, 900, 900 of individuals, who are thus COM
PEELED to get along with what there may be
left.
KEYSTONE OF REFORMATION.
1t is the fault of the system. 1t can only
be remedied by reforming the system. The
subtreasuries must give place &c a suitable
bank.
1t is the keystone of the reformation of the
finances of the country. With a properly
constituted bank the snarl of the flats can
be untangled. The silver certificates and the
silver can be disposed of and the gold reserve
of the treasury made available for the re-
serves of the banks and for the management
of the International exchanges, as we'll as a
reserve for the greenbacks.
In this connection the mind naturally in
quired as to the necessity of establishing a
special bank. Why not use the existing
banks?
The magnitude of the ordinary transactions
of the government certainly does not justify
the creation of a special bank for its uses.
Neither should such a bank be for the exclu-
s1ye use of the government. 1t should engage
in general banking, the same as other banks,
otherwise it would perpetuate the faults of the
subtreasuries under the misleading name of
a bank.
But there are at least three reasons why a
special bank should be created.
If the government should undertake to deal
with the ordinary banks its deposits would
have to be divided pro rata between several
thousand banks, scattered all over the coun-
try, which is impractieable, or there would
be continual strife between politicians, con-
t1nual charges of faVoritiSm, etc. This con-
sideration alone is a sufficient reason.
The second reason which presents itself to
my mine grows out of the foreign exchanges
All the other commercial nations have such
a bank, to which is delegated by a sort of
tacit consent or understanding the manage
ment of the foreign exchanges and the main
tenance of the gold reserves.
And the third and last reason which | will
mention is that the reformation of the bank
ing system, which constitutes an important
part OF the currency system, inasmuch as
bank credits furnish at least 80 per cent of
the medium of exchange, renders such a bank
necessary.
NATIONAL BANKING SYSTEM.
This leads me to speak Of the national
banking SYSTEM" so called, although it is
difficult to see with what propriety the ma
tlonal banks may be regarded as a system
The word system" is defined to mean: AN
assemblage Of things adjusted into a regular
whole; or a whole plan or scheme, consist
ing OF many parts, connected in such a man
neo as to create a chain of mutual depend-
encies." The national banks certainly are
not so connected. Each bank is a separate
local institution, subject to local conditions
and mlshaps of all kinds.
Its field is too narrow to make available the
principles of general averages, so we'll unds r-
stood and so highly regarded, especially by
insurance companies. In this respect it is
like a fire underwater, who should plant all
his risks in one city liable to be ruined by
a single local mishap.
Its local1Zat1on impairS it's usefulness mas
much as when a local mishap comes, like the
failure OF a locally important commercial
house at the very time when the remaining
solvent houses most require bank accommo-
dations, the local bank finds itself not only
unable to extend it's credits, but compelled to
call in loans. Thus, too frequently, are whole
communities embarrassed by the failure of
a single house.
And it adds to the peril Of the situation in
times, of financial distrust that in each local
1ty there are several such independencies,
each struggling to take care of No. l.
The fact Of it is a fact, as frequently
claimeO that the national banks have made
a good record for selvency during the trou-
bles of the last few years, seems to me to
be due to the sagacity of the management
rather than to the perfection of system.
Admitting, for the sake of argument. that
the record for solvency has been good, is
that the sole test of the system? What has
sueh solvency cost is equally pertinent. OF
course it is of the very first Importance that
the banks, which hold in their possession to
such a large extent the capital of the COM
merctal classes, should remain solvent, but
should remain solvent. And, an argumen
which only gives the statistics Of the num-
Der of banks which have remained solvent
without stating how many business houses
have been closed, their proprietors ruined
and their employees reduced to want by the
means which 1t was necessary to adopt in
order to maintain such solvency, is not. to
say the least, conclusive.
OF course it was the duty of the banks to
remain solvent, and there can be no doubt
but even greater distress you'd have result
ed from their insolvency, but. am not pre-
pared to give unstfnted praise to a System
which necessarily produced widespread in
dividual insolvency and almost universal
stagnation in order to avert the greater dis
aster of the insolvency of the banks.
ENGLAND AND SCOTLAND.
Up to a recent date the county banks of
England have been independent banks. while
in Scotland there has been from the first a
system Of banks. In this connection | will
quote from a recent publication by a distin-
gu-shed authority on banking:
Il have said that though a large number
of joint-stock banks sprang up in England,
this was in no sense the Scottish system of
Joint-stock banking, and I will now point
out the difference. Money has always a
tendency to accumulate in agricultural dis
tricts, where the supply exceeds the demand.
but in manufacturing districts the demand
exceeds the supply.
1.-THE Scottish system of banking is to have
a very small number of head offices in the
great cities, such as Edinburgh and Glas-
gov, but these have branches in all parts of
the country, both agricultural and manufac-
turing. Consequently the branches in the
country districts remit their surplus money
to their head office, which transmits it to
the manufacturing districts. All this is I'M
der one management, which does not con-
fiict in its separate parts. All the branches
are under the strict control Of their head
office. At the present time there are only
nine independent banks in Scotland, but
these have upwards, of 1000 branches plant
ed in every village in the country.
But English joint-stock banks and private
banks were separate and isolated establish
ments, managing or mismanaging their busi-
ness according to their own sweet will"
The same writer informs us that of the in
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