The Indianapolis journal. [volume] (Indianapolis [Ind.]) 1867-1904, 1901-12-05

equal under the best possible conditions to
seventy hundredths OF l per cent. on its
capital stock and perVersely enough the
present system works to reduce the advan-
taSe in those regions where bank notes are
the most useful form in which bank credit
can be extended to the borrower. Where
the rate Of interest is per cent. the adj
vantage or profit is seventy hundredths of
! per cent; where the rate of interest is
per cent. the profit falls TO thirty-one-hun-
dredths of ! per cent.
In comparison with this statement ii
may be well TO show the advantage or profit
under system modified as suggested. the
result has been carefully worked out by the
government actuary and is as follows IN
a locality with the interest rate at per
cent. there would be profit OF 2.OS per cent.
provided the whole circulation could be
kept out all the time. If only 80 per cent
OF the limit allowed could be kept in circu-
latlon the profit would be LIZ. In a per
cent. locality under like conditions as TO
average circulation outstanding the profit
would be 235 and LA, respectively, and in
an per cent. locality the profit would rise
to 3.S IL all the circulation could be Kept
out or 2.2O If only Is per cent. of the limit
could be utilized. Thus, quite contrary to
our present system. bank notes could be the
better employed in those regions where
bank notes are most required for the peo-
pies use. Yet under conditions any
where would the advantages be sufficient
10 organize banks with a view 10 the profit
on circulation alone. Where capital is
scarce and interest the highest the induce
ment would be the greatest, but the ability
necessary to induce banks organization.
The advantage of circulation as proposed
would be helpful to sustain bank where
deposits must be small, and thus the two
cooperating would doubt bring the
benefits of a bank to localities much in need
of the services bank renders
Again, IL will be alleged that the Sc
curity furnished by the proposed guaranty
fund would be inadequate; that bank fail
ures would soon exhaust it's supposed pro-
lection and losses would sooner or later.
fall han IL hold fz
important matter and all reasonable
doubts in this particular should be
moved. The proposition involves the con-
trfbut!on OF one-eighth of 1 per cent. an
nually on the capital of all banks which
may avail themselves of its provisions.
WHAT HISTORY SHOWS.
I'm order to get some data on this point
and to bring the light of experience to
bear upon it, a careful analysis of the his
tory of national banks for the last thirty
six years has been made. A hypothetical
tax of one-eighth of l per cent. was
charged against all the national banks
from their organization to date, and the
amount so accruing was passed TO the
credit of the imagined guaranty fund. AS
individual banks from time to time have
actually failed, ii was assumed that had
these banks enjoyed the privileges above
proposed they would at the time of their
failure have had outstanding the full
amount CT notes allowed. The guaranty
fund was then charged with the difference
between the value of the securities held
by the treasurer of the United States I'm
trust and the face amount of their out
standing notes. Afterwards the guaranty
fund credited with the amount which
would have been realized by the treasurer
had he received the same percentage in
dividends upon his claim for the guaranty
fund the final liquidation of the banks
showed was paid to depOsitOrs. The result
of this shows that all note holders would
have realized the face value of such notes
without any delay; that the guaranty fund.
instead IF being exhausted, would have
steadily grown. and that on the 1st of jan
uary of the present year there would have
been an unused surplus 10 the credit of
the guaranty fund of S27, 421, $50. This dem
onstration, drawn from past history, fur
nishes better evidence OF the entire suf-
ficiency of a guaranty fund, 10 the end de-
signed, than is usually enjoyed In human
affairs when II is sought in any direction
to guard against the contingencies of the
future.
There is one more objection which will
be advanced-the only one that in my opin-
ion possesses any real merit, 1t will be af-
firmed that, with our system as IL is
banks constituted independent units scat
tered over the land. with no general ef-
fective control anywhere lodged, with no
principle of coordination or cooperation
the note-issuing function should be quite
prohibited except upon absolute security,
with ample margin deposited in advance.
1t might be broadly affirmed that while
this weakness continues 10 exist banks
should create no liability. either TO note
holders or depositors, and in what is said
under the head of banking | have argued
that to this general weakness there should
be addressed an appropriate cure
THE best that can be said under present
conditions is that If our system be de-
fective IL is much better than none Banks
are as essential in the business AFFAIRS OF
the people as railroads and ships are es-
sential in the transportation Of cOmmodi-
ties. The note-issuing function, within. the
limits of entire safety Is as legitimate and
as serViceabe TO the community as Is the
issuing of bank credit in any other form
1t is a question in which the convenience
of the people and the economical use Of
bank credit are concerned. The objection
last considered. then. is good as a general
criticism TO system OF banking. but
will not apply with any peculiar force TO
bank-nOte issues OF currency under the
conditions of Joint security from bonds and
sufficient guaranty fund.
CONDITIONS FAVORABLE To REFORM
Ion April l, 1898. the interest bearing
debt Of the United States was SS47. $50, $50.
Incidental to the war with Spain the debt
was increased so that on Nov. l, 1899. its
highest point, the amount stood at sl.046.-
,o2O. Two years later on Nov. Is. 1901.
the debt stood at 1854 027. 100, showing a re-
duction of s92. OILS
This statement covers only the face
amount of the debt. Interest is as much a
part OF a debt as is the principal, and this
feature OF the debt has been anticipated
and paid 10 an amount nearly as great as
has been the reduction OF the principal. By
| the application OF f43 So, 0o4 OF the public
moneys interest 10 the amount Of 81. 546 424
| which would otherwise have been a char=e