The Indianapolis journal., 1898-01-26

ton (bank note issues) opens a wide field
which time viii not allow me fully to COW
er. / cannot dismiss it. however, without
presenting in a concrete form, and by the
mode of Illustration, the economical differ
ence which can be perceived to exist be-
tween these three forms of paper money,
namely: Direct government issues; secured
bank notes as at present by law permitted,
and notes issued by banks against their own
assets in hand In the year 1886 the city of
Chicago was Incorporated. 1t had a popula-
ton Of six thousand The postofice had
come. the general store had come, the
blacksmith shop had come, and the many
forms of industrial activity were in evil
with hardy pioneers from the further East
and from the old world and more and more
the little city became the market where
products and wares were offered in ex-
change. About this time there appeared
thrifty young ScOtchman. by the name OF
George Smith, who established bank un-
der his own personal name. He quickly per-
ceived the delay, Inconvenience and loss to
industry and trade through the lack Of
recognized medium of exchange. His own
capital was small, and though brought
with him in the form of money and quickly
loaned out by him to his dealers, it did not
adequately meet the increasing need of the
ever-growing community.
done to relieve the situation had our pres
ent financial methods, as they relate to cur
rency been then in vogue. Could he or the
community have imported greenbackS for
their common use2 Undoubtedly they could.
had they possessed some form of capital
which they could have sent away in ex-
change for such greenbacks bur capital
was precisely what was lacking. 1t is al
ways lacking in new and rapidly develop
ing community. Note this, also, that if by
drawing greenbacks from elsewhere they
had supplied their needs, they would, by so
much have disturbed the before existing
equilibrium between goods and the medium
of exchange at such points from which the
greenbacks were Withdrawn.
HOW THE NEED WAS MET.
Gould not the need have been satisfied
by national banks with their present privi-
lege of bank note issues? No; because ma
tional bank notes require, as a condition
precedent to their issue, an investment of
capital in United States bonds largely in
excess of the amount of note issues which
are permitted, and, as before stated, capital
was precisely what was lacking to meet the
development of that phenomenal city.
Neither greenbacks nor national bank notes
would have been promptly and fully avail
able to meet the need of the situation. This
ought easily to be preceived. Well, was the
need met, and how? Yes, it was met in a
roundabout, clumsy fashion. in this wise:
George Smith did not have much capital
but his character and ability soon recog-
nized, gave him unquestioned credit He
acquired a bank charter previously issued
by the State of Georgia, which authorized
the bank to issue its notes to circulate as
money without any particular limitations
or conditions, as | now recall the facts.
The printed notes of this Georgia bank had
no natural 2xchangeable power in Chicago.
Nevertheless, when across them had been
stamped this formula, This note will be re-
deemed in gold at the office of George Smith
in Chicago they became endowed with the
power of a general exchanges ability.
These notes Mr.. Smith loaned to MEM
bers of the community in exchange for their
notes to him, and to the average of two or
three million dollars over a period Of many
years these notes performed in the commu-
nifty and adjacent country all the functions
of exchange which gold or silver could have
performed There was always good security
behind these notes in the hands of George
Smith. The notes went out and came in
the tide of things which came into his di-
rect or indirect control when he issued the
notes rose and fell in volume. After twenty
years more of great service, involving
great care and gteat responsibility, for
which he was properly well rewarded, he
and in the exercise of his proverbial Scotch
caution, he settled his affairs. redeemed
every outstanding obligation, and left to
other banking institutions, then quite nu
merous, such share of the great business
he had established as they could respect
lively secure.
in the way of approval Of the exceptional
method used by Mr.. Smith in uttering the
notes in question but in order to present a
comparison which will help US to see. that
however economical or expensive green
backs may be to the government agency IT
self: that however safe they or the ma
tional bank notes may be to the holders
thereof. bank note currency, properly
guarded issued against the general assets
of the issuing bank, may be superior to
either in their service to Industrial COM
munities, especially to communities in the
earlier stages of development, where capital
is deficient and productive industry is ham,
pered through the lack of an effective COM
mon medium of exchange"
AS soon as Secretary Gage had finished
he left the hall to attend the banquet of
the Commercial Exchange in the Hotel
Walton.