The herald., 1898-12-06

| itors Of an insolvent bank.
''Second-No system is inherently fair
which creates preference OF the note
holder over the deposit-holder in the dis
tribution OF the assets of an insoivent bank.
| "Third-In none of the older countries,
to the success of whose uncovered note sys-
TENS we are referred as tending to justify
the experiment in this country, is the note
holder by the law preferred over the de-
posit-holder in case of insolvency of banks
of issue. Canada, with its thirty-elght cen, cen,
| trail banks of issue, as compared with 36OO
scattered national banks in this country,
| furnishes the only exception to this rule.
| "Fourth--The necessity OF the preference
under any such system in this country to
give security and credit to the notes; demon
strates that it is the depositors of the coun-
try, and not the banks, upon whom the
great weight OF the guarantee OF the note
issue must fall.
"Fifth-A fairer system would provide
that when receiver took charge OF an IN
solvent bank he should not first pay into
the general redemption fund held by the
government an amount derived from the as
sets of the bank sufficient to pay the note
holders in full before paying anything 70
that pro rata share of the proceeds derived
from the assets which should go to the note
holders, not as preferred creditors, but as
creditors in the same class as deposators.
The tax upon the solvent banks for the
, currency privilege should not then, be Inn
tied to not exceeding one per cent per an
mum of their annual note issue, OF IN any
other amount, but should be made. sutti-
ciently large to provide fol. the dehclt'
whatever it should prove to be.
''Sixth--If, under such a system, OWING
to the causes to which we have referred, the
tax upon the solvent banks would be SO
large as to render the issue OF such cur
rency improbable and unattractive to the
banks, it would be demonstration OF the
radical difference in the environment and
condition of our banking system as com
pared with the more centralized and older
systems of Europe 1t would be demon.
straton of the fact that under the proposed
legislation. while the banks would take the
profits upon the circulation, the depositorss
would take the bulk of the losses. 1t would
| be conclusive demonstration of what we
believe to be the fact that, under our bang
| ing system as at present organized, the ao-
solute saftey of notes secured only by COM
mercial assets and issued to the extent, pro
posed in these plans can be secured only oy
resort to a grave injustice upon deposHors.
which cannot be justified upon any grountAs
OF public policy. - e r,oororsd
notes as this proposed, providing for pref
erence of the note holders over other cred
itors. would interfere radically with the more
important functions of national banks TO
which the non-issuing function is second
ary and subordinate. This would be against
public policy and would operate against
| banking in the smaller communities, and
in the Western, Southern and Central por-
tions of our country. :,
"Eighth-The government OF the Unteo
States is not in such straits in connection
with its present currency system as to COM
u ! int ,,loD of rYlrrpncV changes
by which it in effect sells extended and valu-
able currency privileges to the national banks
of the country in exchange for assistance
| from them in meeting its present govern
mental currency obligations payable IN gold.
"Ninth-If the present conditions OF gov
ernmental currency demand reforms, to Sc
cure which will entail cost, it is better foi
the government, as the representative OF all
Z, the people, and under all the circumstances
connected with our banking system. to pay
an ascertained and exact cost direct than TO
endeavor to evade it by granting extensive
currency privileges to banks which OF ne
cesisty must reimburse themselves from the
community and the depositor class for any
cost which they incur in assuming the bur
den of gold redemption or maintaining the
credit of their notes"
The COMPTROLLER states that up to and in
Guiding October 81, 1898, there have been or
ganized 5l5l national banks, % per cent OF
which have been placed in voluntary liqui-
dation, and less than 7 per cent in the charge
of receivers. At the close of the year there
were in active operation 1898 associations
with authorized capital stock of S624, ,552, 1876
The outstanding circulating notes of the
| banks on that date amounted to S239 ,546, Isl
of which $2l0,0 ,456 were secured by bonds,
and the remainder-S29,5 800, ,S25-by lawful
money on deposit with the Treasurer OF the
| United States for the account of liquidating
and insolvent banks, and those reducing
circulation. The circulating notes outstand-
ing are 1852, III in excess of the amount on
| October 81, 1897. During the year there
were organized SO banks with total capital
stock of S9,665000. The number of banks
| leaving the system during the year by vol.
untary liquidation was SO, one of which was
subsequently placed in the charge of re-
ceiver The capital of the 6S banks which
| liquidated amounted to Sl2, 500 900, and the
circulation to 81, lS495S The combined cap
ital of the insolvent banks was 81, ,2O0, 900.
The Comptroller is required by law to
publish in his annual report statistics rela-
tive to banks chartered and operated under
State authority. He says that the returns
| from institutions of this character to the
number of 5l45 have been received, and in
addition, statements from 75S private banks
and bankers. The aggregate resources of
| these institutions amount to 4,63l 1923 1857
| loans and discounts, S2,4S0, ,S74 1860; capital
stock, S37O,073, 1888; and deposits, s3664, ,797,
| 296. The total banking funds of national
banks, as shown by reports on July IA, 1893,
and other banks at date of latest returns
amount to STAG, ,355, 1858, an increase since
1897 of 1894 4,02S, sos.