The Wichita daily eagle. [volume] (Wichita, Kan.) 1890-1906, 1898-04-30
Must Issue Paper Money.

/ of Spain:
Given an unrestricted command over
printing press, and a government can be
| financed long after the conditions have
outwardly become desperate. Spain is in
/ this position, and il is foolish to speak of
| her as bankrupt and financially impotent.
| On the contrary, she still has the means Of
obtaining funds, and the instrument for
rendering these means available is the
| Bank of Spain. The remarkable constitu-
ton Of this bank deserves some study.
! for its position is almost unique IN IMAM
| cial experience.
| This bank grew out of reorganization
! by government in 1857 OF certain existing
and well-nigh moribund banks 1t was
| local IN influence and in few years has
| become little else than a land bank, its re-
sources being nortgaged to the state on
! the security of the national property, IN
| return for which mortgage notes were
| issued as circulation. The revolution or
! 1868. dethroning Queen Isabella. aided the
bank. as the new government came to de-
pend upon its assistance and In return
conferred upon it exclusive privileges,
making it one great Bank of Spain. This
| transformation was accomplished in 1874.
and was intended to consolidate the ma
tional funds, to establish a uniform cir
culating medium secured by a metallic re-
| serve. and to aid commerce by discounting
commercial paper. From a Madrid bank.
whose notes never circulated outside OF
the capital grew a national bank. with
notes circulating throughout the PENN
| sula.
! 1t was essentially corporation to aid
| the financial management Of the kingdom
! The minister OF finance, Echegaray, un-
der whose administration this change was
! effected. wished to place restrictions TO
! the demands on the new bank by the
state The loans were to be infrequent,
and always secured by collaterals running
for short times and readily convertible
| into cash. Under the older institution the
| bank was more than once placed in 1eop-
ardy by the treasury; but the new al
! lance of bank and treasury was to be
discreet" one highly advantageous to
our public finances and very profitable
| for the bank" The connection was made
! too close. for the bank had in a single
year become servant Of the govern
ment farming It's revenues and gradually
monopolZing all state finances.
! The capital was fixed at SIS. 300. 900 in 1874
| but was increased by one-half in 1857
| The administrative council is chosen by
the shareholders, subject to the approval
of the king, and this council recommends
| to the king two assistant governors. The
governor holds his appointment from the
! king and even the manager OF branch
can be chosen only with the royal appro-
val The management Is thus assured TO
! the state. Under its original charter the
| bank could issue paper money to nVe
| times the amount of its capital. A reserve
In specie of one-fourth the circulation out
standing was required, but one-half Of
! ioh d
than the banks paper. In 1891 the govern
ment fell into difficulties. and required of
the bank a permanent loan without inter-
est of an amount equal to the full capital
of the institution $2s, $50. O00), a violation Of
the law of 1874, which expressly stipulated
that the bank should make loans to the
state only upon good securities. readily
| turned into cash. This single transaction
constituted a loan to the state or the en-
tire capital Of the bank, not penny or
which could be repaid till the charter ex-
pired. In return for this advance or loan,
the charter was extended to the year 1921,
and the limit to the note issues was placed
at 5000, 10000
Whatever Independence this bank had
enjoyed was destroyed by this loan, Cor its
resources were now to heavily mortgaged
to the state to make it other than an ad-
junct to the treasury. The bank manages
all the funds of Spain, accounting Tor
them every three months. If the state
revenues are not sufficient to meet eX-
penses, the government pays interest 10
the hank for the difference or II the diff
ference is large, issues temporary notes
(pagares bearing interest. But the bank
navs nothing for the use of any surplus
the state may have deposited with it, The
foreign and domestic debts are managed
bv the bank for a consideration. and all
foreign PAYMENTS are passed through II.
1t has enjoyed the profits from the tobacco
monopoly. and the direct taxes on land and
industries have been turned over TO 1t
as q guarantee of the loans made during
the Carlist troubles. In fact in whatever
light II is examined. the connections DE-
tween bank and treasury, even before 1884
were SO many and 50 close as to make the
two practically identical.
Since 1894 the financial operations OF the
Spanish ministry have still further alb
sorbed and even monopolized the actlvi-
ties Of the bank. No bonds supported by
q pledge Of the revenues OF CUBA couid
find a sale in any money market OF Eu-
rope, for it was readily recognized tnat
such a pledge was of the highest uncer-
family, little better than no pledge at all.
1t could only appeal TO the gam pier on Iof-
efrn exchanges, who was willing to take
any risk Even at home the market was
reluctant to absorb the ever-mounting is
sues Of bond, so the bank took the secur-
tiles at a rate which yielded handsome
profit to itself, and gradually passed them
on TO the Spanish public. With every
new loan thus financed, the bank counted
upon good profits. and It has gteauy oene-
hted by the treasury necessities. But the
time came when bonds issued on the Gu
han revenues were no longer salaole, ana
remained in the tills OF the bank. Inc
additional pledge of the customs revenue
Of the Peninsula was made, and opened
I'm new market for Spanish loans: but
every dollar was made through the bank
and the state required of II immediate ad-
vance on the bonds deposited with IL
Since the outbreak OF the Instruction IN
Cuba the cost has been borne oy the span
lsh treasury, for the colonial treasury was
a fiction, and the Spanish treasury mas
been little more than the bank OF spain
OF the $3.50. 900 900 in Spanish customs ponds
issued. one-half has been taken BY the
n,,tl,o ara The other half Is held by the
bank as security for advances 10 the gov
eminent.
Had ,r not been for these government
.rsns.c,,ors the bank would have Jared
bsdly fl It's balance sheets As II was.
ia year 1897. so trying 20 all Spanish
economy. proved a year Of exceptional
nrof, 20 the bank. \ dividend Of s7.2c9.o oo
equivalent 20 "a per cent on the CAPITA.
YVES distributed among It's Shareholders
In 1879 the rsts Of dividend was z. per
cent and In 1895 II was 70 per cent II any
conrIusion IS TO De drawn from these ts-
res II e that the state uses the credit
Of the bank 20 market its securities, out =
obliged 20 pay usurious rates toE tae Aa-