The Saint Paul globe. (St. Paul, Minn.) 1896-1905, 1901-08-04

this title, not because of it's ALTERATION,
but rather because it more accurately
expresses what / shall seek to maintain,
that a natural bank currency is net less
but more a national bank currency than
that issued by the banks under the pres
ent law. The present system of issuing
bank notes was founded primarily in or
der to make a forced market for United
States bonds The law was derived large
ly from the free banking systems Of the
states Of New York, Ohio and Michigan,
as they existed before 1da0. The neces-
stiles of the general government at the
time Of the enactment of the law Sug
gested the use of United States bonds as
a basis for the banks to issue currency
which would be as safe as government
bonds and at the same time enlarge the
demand for the bonds which the gov
Crnment so Sorely needed to sell. In or
der to make the monopoly for the govern
ment complete. a 10 per cent tax rate was
imposed upon the issues Of state banks.
which caused immediate retirement of
their notes and left tie field for circu-
lating notes entirely to the new national
banks.
1t is remarkable commentary on the
system of banks issuing a bond-secured
circulation, that when the national bank
currency act was proposed. a committee
of the bank officers of New York city re-
ported that 1t was plain that the act
would foster a system of wild cat
Eanking, showing how wildly the i'm
preston remained Of the bond-secured
currency that had been issued a few
years before, under the laws Of the states
of Illinois. Michigan, Wisconsin and Min
nesota, and which had met with dsas-
trous results. To say that the national
bank act has many admirable features 10
commend it is quite superf1uous. Having
the national banks in all the states under
"a uniform law, with issues, Uniform IN
appearance with reports and eXamna-
tons Of the most searching character.
are advantages and safeguards that
0ignpnGpd Ter
any banking law or system. But admir-
able as are many of the provisions of the
@ct, experience shows that in it's ability
to furnish a banking currency for the
country sufficient for trying emergencies
of a commercial panic, it has been a fall
IRE. In the year 1866, soon after the act
had been generally accepted by the banks
all over the country, their notes IN cir
culation amounted to $2Sl, 479000; the de-
poSits at the same time in the bank"
amounted to $59S,0l7,0O. In 1882 the cIrcu-
lation had increased to $35S, 742, 600, an IN
crease of about u per cent being the
highest amount the national banks have
ever issued. The deposits at the same
time had increased to $l.13S, 600. or
about 50 per cent more than in 1866. In
1880 the circulation had not only not i'll
creased, but was about $75, 000,0 600 less than
IN 1882 and only about $2,500000 moro
than in 1866, Notwithstanding a lcrge in
and an increase in bank deposits to
&, co., 100000, or nearly 336 per cent over
1866. This showing would seem to indi-
cate either that bank checks and other
instruments for the transfer of credits
were taking the place OF bank note cur
rency, or that there are fatal obstacles
in the way of bank note issues, which
must be removed if the banks are to
serve the commercial public with these
useful Instruments. Is it not proper to
inquire whether the issuing of bank Cur
Tency, based upon United States bonds
as security, may be regarded as perInd-
nent principle? AS a patriotic American.
Lelievmg in the great growth in wealth
and strength of our beloved country,
Tondly anticipate the happy day when the
public debt shall be paid off. Since the
Civil war more than twO-thirds Of tie
debt has been paid and every month We
now read Of the secretary using the
bonds, and reducing the debt still more.
When the last bond is bought, aWl the
nation has no longer any bills payable,
upon what bonds then shall the national
question nse eds no reply; the experience
Of past ears suggests that no bonds can
take the place of government bonds. Sup
pose, however, that our patr1oSc anticI-
pations be too deIusive, and that a public
debt is to remain, as with nations Of Eu-
rope. Is the debt to grow in amount so
as to keep pace with the growing bust
ness of the country, that the demand Of
the national banks for circulation may
be supplied? Even were government
bonds to remain abundant, currency
he. Bank currency, like bank deposits,
should owe its origin and it's value to the
wealth OF the country in process OF ex-
change.
But let us dismiss this and consider
the system as it is today, in our inquiry
for what is best. Is that national bank
circulation true bank currency? Mani
testify not. Experience shows that ma
tiOnal bank currency neither increased
during periods of greatest activity, nor
diminished during periods of business
dep: cssion. While all other forms Of
bank obligations, such as cashiers checks,
certificates of deposit drafts and checks
followed the alterations of increasing
and diminishing commercial demands,
bank note circulation has been but little
affected. Indeed, bank notes issued upon
United States bonds as security appear
to me to be only a device by which mon
ey invested in the bonds may be released
and be restored to the bank investors,
less whatever premiums may be paid fOi
the bonds. The banks receiving interest
upon the bonds and at the same time
having all the money invested returned
to them, less the small premium the
bonds may have cost. That is to say,
bank of 100000 capital and correspond
ing deposits, may invest about $1G6, coo
in United States bonds, and in due time
receive from the comptroller $100,000 cur
rency, making permanent investment
in the premium of $500 and receiving an
pUally interest upon the bonds to the
amount of $1,000. 1t is only the cutting
amounts and using them through the
banks as part of the circulation of the
country. 1t is apparent that this circu-
lation, from its very nature, can bear
no relation to the business needs of the
country. Its volume is fixed by the profit
to be made upon bond investment and
not regulated by commercial demand
This is more clearly shown by the very
course of the national bank notes them
selves. They are issued as the promis-
sorry notes of the banks. They are os-
tensibly its bills payable, the same as
any other OF its obligations. But how
inherently they are treated. Where
cashiers checks, certificates or drafts
are paid or redeemed by the bank. the
proper account is charged with the
amount paid for the redemption, and thu
Instrument is cancelled; but with a bank
hote-the bank promise to pay-if it is
ever redeemed, is put in the drawer with
otner cash assets of the bank and count
ed as cash. How extraordinary and alb
surd 1t would appear to a bank officer If
a merchant seeking an accommodation
should list among his assets in the state
neht OF his condition a lot of his paid
pronlssory notes. This is not to say that
the pank notes so counted as cash are
not good. They have behind them the
pledge OF the bonds, besides having a
paramount Hen on the assets Of the bank
and the liability of the stakeholder. hut il
illustrates the fallacy Of calling such is
sues a currency adapted to the needs
of business.
Setting aside the right the bank notes
have of permanent lien on all the bank
assets and the stockholders liability. Let
rs. in assing, inquire as to thu certai ntv
or the value of the bonds which arc