Delaware gazette and state journal. (Wilmington, Del.) 1883-1902, 1900-01-04
FARMERS INTEREST IN BANKS.

Two recent numbers Of Sound Cur
rency. ny L. Carroll Root, secretary Of
the Reform Clubs Sound Currency
Committee, and formerly assistant TO the
INDIANAPOLIS Monetary Commission,
deal with the banking question from o
somewhat new, but very important point
Of view. The first is entitled Deposit
Currency. In it the author shows
how bank deposits subject to check
constitute the main currency of all the
larger business of tho country. He
demonstrates ooncluslvely that these
deposits are bank currency just MS truly
as bank notes are, the two being only
different forms which bank credit takes,
and being similarly created in the
operation of discounting the notes Of
the banks customers, and both per-
foming all the Offices of currency where
used. MIR. Root shows what are some
of the considerations which have made
the note form of currency more accept
able for use in country districts and at
the same time have resulted in decided
preference for the bank deposit as the
main currency for use in the cities and
the distinctly commercial communities
In the second pamphlet, entitled
''The Farmers Interest in the Banking
Question:" the, author develops this
point further, and shows how, because
OF it, the restrictions which our laws
have placed upon tho Issue of bank
notes In excess Of those put upon the
use of deposits amount to a practical
discrimination against the use of hank
notes and in favor of those whose cur
renoy is deposits, and is thus a dis
elimination against the country in favor
of the city. tG
The most important of these restric-
tions are the special taxation CT bank
notes and the requirement for invest
ment in United States bonds TO. be de-
posted as security for their issue. Be-
cause CT these restrictions the use of
bank notes by those whose habits and
convenience require that form of cur
reno THAT is by the farmers and the
population Of our agricultural sections
generality has been made expensive,
while the commercial and financial
classes, who do not care to make use
of notes, but whose business is best
and most conveniently done with de-.
posits, have been left free to use their
own particular form OF currency with
out restrictions or burdens This
naturally and necessarily produces
higher rates of interest in country dis
tricts, MS the author shows by series
of concrete Illustrations. He takes,
for example, typical city bank of
500, GOO capital with Sl50,000 of de-
posits. Its condition would be repre-
sented By the following balance sheet:
ASSETS.
Loans and discounts S212 500
Cash reserve (25 per cent?. $1,000
Total....... $3.50, 900
LIABILITIES
Capital. .................. ...........s 500, 900
lIeposlts.... s...................... 100, 900
lOtal.......s $2hO. 600
With $1,000 expenses, this bank could
earn a 6 per cent dividend upon it's
capital If its loans were made at an
average rate of S. IS per cent.
Contrast with this tho situation of a
typical country bank under the exist
ing system. In order to furnish its
currency in the form needed by its
customers, Largo part Of it must be in
the shape OF bank notes, instead of all
deposits, as in the city. Take, as
before, bank of 100000 capital, with
$3.50, 900 demand liabilities 800, 900. Of
which are notes and $50, 900 deposits.
II is necessary under the present ays-
tenn that the bank should buy 500, 600
of United States bonds, to be deposited
with the Treasurer at Washington.
These at present prices would cost
about s112,500. This will leave the
bank, after keeping out cash reserve
of s37, 800 az before, only S1OU, 600 for
general loans and discounts. Its con-
dition will be as represented. by the fol-
lowing balance sheet:
ASSETS. -
United States bonds .Sll2. 500
Loans and discounts, ............... 100000
Cash reserve Us per cent?, 81 500