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

Under an arrangement entered into be-
tween the banks in the New England
states, and the Suffolk Bank of Boston, it
became what we may term a general
comptroller for them all. It held an
agreed sum from each, as a guaranty
fund, and in consideration redeemed their
notes in Boston in specie, charging each
bank with its redeemed notes, and return
ing them at stated intervals. Under this
system of redemption, it was impossible
for the banks to force an unnatural and
undue amount of notes into circulation.
The result was that the volume of the
notes of the New England banks was re-
deemed eight times a year, whereas the
volume of national bank notes IS now re-
deemed about once in every two years.
Considering how deGclelat the state laws
were in many respects before the eStab-
liShment of the national system, in regard
to supervision and regulation of banks,
and of their note issue, the management
OF the state banks of Ohio. Indiana, Ken
tTcky and others, comnends itself to our
admiration.
Usually when anything is proposed for
the security of bank note circulation, eX-
cepting United States bonds, the cry is
raised at once of wild cat banking, as
though in abandoning q bond secured cir
cdlation, all protection and safeguards
were lost. Since the wild cat" days,
banking, like everything else, mas gone
through process in many respects, Of
great development National regulation
and supervision have been established;
railroads and telegraphs have made the
remoteSt parts of the country immediate
ly accessible; the scrutiny of banks of
each other is more careful and critical
and the methods of business are more
exact, so that it would not be possible
for many of the banking conditions that
prevailed before the Civil war, to flourish
again. But there were banks in the
country, as already shown, even in the
so. called wild cat" days before the Civil
war whose history remains to teach US
of the wisdom, the ability ard honesty
of their managers AL wisdom and abIl-
ity and EorCsty necessary for successful
bank management, was not born with
this generation, and will probably not die
with it.
The worst, the most disastrous illustra-
ton Of wild cat" banking, were I'M
der the laws of states where the circu-
lating notes were secured by the deposit
Of state bonds and stocks. Many of the
older persons present today, OubtleSS re-
member, possibly with sorrow, and Ger
tainly with shame, the experience we had
in our own state of Minnesota with bank
ing on our state bonds as security for cir
culation. Only loss and dishonor remain
of that unfC Ttunate era.
The same woeful tale of disaster and
loss was experienced with bond-secured
| banks of Michigan Indiana, Illinois and
Wisconsin. 1t was the recollection of the
fate Of the system in these states. that
led the New York bankers to look with
suspicion upon it's Introduction into the
national bank act. when it was proposed.
The policy of issuing circulating notes
based on business assets has been that
of tho leading banks of foreign countries
for many years. The Bank of England
may be considered an exception The
notes of the issuing department Of that
bank, are fixed in amount by the :-ct of
1874, and secured in part by pledge of
the public debt. and coin for all amounts
exceeding this sum OF debt. But this ex-
ception only seems TO prove the rule. for
in the panics Of 1S47, 1851 1856 and 1880 the
| bank had no legal means of increasing its
issue of notes. The only way in those
crises of aWpTTinQ ruin TO ALI financial In
terests, was by transferring to the issue
department, an amount of its govern
ment Sc curities. and obtaining an issue or
notes against them, which then enabled
the bank TO ScOunt commercial paper.
and relieve the tension. This violation Of
the act of 1874 by the bank was condoned
occasion.
The Bank Of Franco creation Of the
great Napoleon-the Bank OF Austria, the
Imperial Bank of Germany, the Austria
hungarian bank, the Bank of Belgium.
the Bank of the Netherlands, the Bank
of Scotland, the Canadian banks and
many others, all issue their circulating
notes upon their business assets TIE IS
sues of some of these banks are quail
fed by law by specie reserve, notably
the German bank. provision fou ~ in
many of the state acts, before the war,
and in the national act, as originally
passed.
1t is no reply to the argument drawn
from the successful history Of the banks
the United States are different from otn-
er countries, and do not admit Of the ap-
plication of the same principles. To that
NAV be said, that economic and financial
principles are as variable and universal,
as the law Of gravity. Principles and
methods are applicable without excep-
ton to all civilized commercial conditions.
and In my opinion, to no place more than
our own country.
In closing this paper, will you indulge
me while / seek to represent very brleliy
the influence of the subtreasury upon the
currency question, for there can be no
not take the United States treasury into
account.
If the treasury were conducted as that
department of a business organization Is
used in ordinary commercial affairs, sim
! ply to- receive the funds due the govern
ment deposit them in banks, and check
them out In payment of Indebtedness and
current expenses. it would require no
more attention in considering financial
questions, than does the treasury of the
STANDARD Oil company, the United States
Steel corporation, the Pennsylvania rail-
road, or any other of the huge business
undertakings with which we are SO IA
mliiar in these later days That the gov
eminent does not do so. cannot be be-
! cause of the magnitude of its business.
For the operations OF some of the large
| corporations named, very closely ap-
| proach those of the government itself.
During the administration of President
| Polk in 1885, the subtreaSury was eS-
| tablished. II is not now necessary TO
| discuss the reasons why this was done