The Indianapolis journal. [volume] (Indianapolis [Ind.]) 1867-1904, 1897-01-13

N'N 80 ENtAh NAf 10 AlAQo
below what il would be able TO loan them
had 1t no right TO issue its currency notes
Is exactly the percentage that the currency
note bears 10 such notes. plus it's deposits.
In the period before 1850 the circulation I'm
the following agricultural States was as
follows: Indiana. 90 per cent. 10 IT'S loans
and discounts-to-day Is per cent. Vermont,
d per cent-to-day 2S per cent. virginia.
oil per ~cent-to-day old Virginia u per
cent: North Carolina. 20 per cent.-to-day
II per cent; Georgia. 40 per ~cent--to-day
Is per cent. OF course the amount of cur
rency that banks can issue In cities where
IL is Immediately returned 10 them is very
small. and in large MANUFACTURING cities IL
Is comparatively small. as the business In
those States is done by checks. In New
York city in 1850 the circulation was only
8 per cent. of it's loans and discounts and
to-day 4 per cent. In the State OF Rhode
Island. l9 per cent.-to-day p per cent. and
in the State OF Massachusetts % per cent
to-day 10 per cent. The circulation per
capita is also very interesting. The curren-
cy per capita before 1850 in Vermont was
$3.50: under the national system to-day it
is Sl0-St. In Virginia the circulation be-
fore 1850 was $l067; in old Virginia to-day
1T is only Sl.l4. In North Carolina the cir
is but a. cents. In Georgia before the war
IL was $3.50. and to-day il is 30 cents. In New
York city IL was sl0.2 before the war, and
to-day it is 1885. In Rhode Island. be-
fore the war. it was S1.62. and to-day IL Is
sI1O. In Massachusetts il was Sass before
the war. and to-day IL is $9.06. II justice
was done the currency per capita in agri-
cultural States would be as high to-day as
before 1860.
VI ~
1t must be remembered that If a bank
should decline to keep on deposit any part
of its loans and discounts and issue cur
rency instead, il would make the same
number OF dollars on its loans with the
same safety that it does under the prac-
ice OF to-day, for the reason that no
checks or drafts could then b. made upon
the banks. 1t would have TO redeem. when
presented. its currency notes precisely as
1t now redeems checks and drafts made
upon it that the CURRENCY notes take the
place of. The changes that have been
MADE. IN the advantages the people of the
country derived from the issuing of pank-
Ing currency from those before 1900, and
The present condItion OF banks as 10 their
currency as compared with The banks IN
Europe, issued with equal safety. Is little
realized. The great ana only advantage
that the people derived under the national
system Originally was IN making a market
~ the bonds or the government TO some
extent, but this even as disputed by some
OF our best nnanciers. The sure and tam
Sible advantages are:
First-Making the payment of currency
notes sure IN she case OF insolvent banks.
which, o. course, is of very great moment,
put this can be as surely done IN "A better
way.
Second-The official examination OF the
bank by competent persons. which has been
or greater advantage than is generally re-
aiized. While the examinations do not pre-
vent all bank failures. Ii Is reasonable to
suppose that they are few as compared
with what they would be were they sub
jected TO no official examinations.
Third - The requirement that "A proper
reserve shall be Kept, proportioned TO the
individual deposits in the bank. While
1t Is Il fact that reserves would be kept
by all prudent bankers were ii not le-
gally required. IL is still equally true that
the legal requirements exercise a very sal
utary influence IN the conservative man.
agement of banks. and here the advantage
of the national system ends. OF course, all
these features must be preserved. The
4 dfGa a va nfn ZOOS NJ tho national EEcfana 1c ar
now exists, are enormous, but unless its
hardships under certain circumstances
cam De be h alueSia fori r lls banks IsseG of tSis
country, with a proper system of issuing
currency. would make on their currency
the average rate of interest charged i'm the
country, which is probably 8 per cent. On
the thousand millions of paper now in cir
culation there would be 500 900, 600 i'm total
moneys now needlessly taken out OF the
customers of the banks and finally out OF
the pockets of the people III higher prices
for all the things they buy than would be
necessary to charge on money loaned. 10
pay the same dividends on bank stock,
were our currency issued as II is in Europe,
namely. against the assets of the bank.
Requiring all banks 10 invest a very large
part of their capital. and sometimes
I'm tine or Teple to secure u; IN eircuI S11os.
works great hardships and injustice
The high-interest localities of the South
the MISUNDERSTANDING law. Banks in that
locality have an equitable right to make
a profit on the currency issued In their To-
c~alities equal 10 the interest charged on
loans and discounts: that lis TO say. the
profits on circulation in 6-per-cent. locali-
ties should be one-half more than in 4-per-
cent. localities, i'm S-per-cent. localities
twice as much. and in 10-per-cent localities
twice and a half as much. while the exact
reverse is the fact.
CURRENCY FAMINE PANICS.
Again. there is constantly and needlessly
locked up i'm the United States treasury
millions of currency. with other millions
upon millions of currency aeedlessly con-
gested in the city OF New York and other
cities. Panics are also arising from "A cur
rency famine which is wholly inexcusable.
and would be impossible under a proper
system of issuing currency. Panics from
the fear of depreciation in coin are also a
source of hardship and enormous loss en-
tirely inexcusable.
The law also makes banks bond specu-
lators as well as attending to the legiti-
mate business of a bank. In doing justice
to the owners and beneficiaries of the bank,
mostly widows and orphans. who own the
savings banks, who again own the stocks
in these banks, they sell their bonds and
retire their currency when the credit OF
and the country needs the most currency,
and buy bonds when bonds are low be-
cause the credit of the country is ruined,
and issue currency when the country needs
the least currency. The national bank
currency in 1881. when bonds paid > per
cent. interest on their price, was <3l2,-
600, 900.
In 1890. when bonds paid 2.f5 per cent. in
terest on their price. the banks sold their
bonds and reduced their currency 10 S126,-
900. 600. In 1890, when the United States
bonds at their price paid an income of 245
per cent. the New York national banks had
i'm circulation only $3.500.0W in currency. ON
Oct. .. 1898. when bonds were sold at a
price paying 34 per cent. interest. they in
creased their currency TO 49, 800. 0OO.
Again, profits that can De made on cur
rency by banks in high-interest commune
ties and in communities where interest Is
low show the grinding injustice OF the law
as il now stands
In 1892 / secured from the actuary of the
treasury of the United States, so that the
figures cannot be rightfully questioned. and
again. i'm 1895. the figures which i Will now
present TO you, as to the profits that could
be made by banks in taking out currency
under various conditions. Bonds are con-
stantly varying in price above or below
par and. therefore, the proht on currency
varies widely.
Buying bonds iu 1892. when the country
was in a normal condition and the price or
United States bonds normal. the profits on
was all i'm circulation in a 1 per cent. To-
cality. was .942 per cent. In a 8 per cent.
locality. $50 per cent; in an S per cent. lo-
cality. only .09e. and there would be an
actual loss in "A 10 per cent. locality OF l.5ss
per cent.
Using the 4 per cent. thirty-year bonds
which the government sold at l0i.5 because
OF a ruined credit. i'm a 4 per cent. locality
the banks could make 2O6 per cent; In a 9
per cent. locality. LII per cent: IN an ; per
cent. locality. 135: in a 10 per cent. locality,