The Salt Lake herald-Republican. [volume] (Salt Lake City, Utah) 1909-1918, 1910-09-26
NATIONAL BANKING
SYSTEM ANALYzED
Monetary Commission Shows
Origin and Formation of
Currency Now in Use.
THE FREE BANKING LAW
Andrew Mcfarland Davis Goes to
Root Of System and Writes His
tory of Cause and Effect.

Washington, sept. 25.-The national
monetary commission has just issued a
volume entitled The origin and Evolu-
| tion OF the Nationl Banking system"
| This book. the work Of Andrew McFar-
| land Davis. "A well known historian. en-
| bodies the results Of a study from or
| iginal manuscripts OF the motives which
| led to the esta Enlistment Of our nation
| al banking system.
The origin of the system. according
20 the author, is probably found i'm the
same germ from which came I'm 1888.
/ the New York free-bankinE'' law. This
permitted the banks Of that state to
issue notes secured by the deposit OF
state bonds. The success OF this sys-
| TEN. also adopted by a number Of 9TH
er states. naturally attracted the at
| tention Of the man whose insistence.
/ the author believes finally brought
about the passage OF the national bank
I ing law-Salmon 7. Chase. LinCOln's
secretary OF the treasury.
| The first proposition on record
| which can be quoted as suggestive Of
a national banking system other than
| that OF central national bank was
/ made as early as 1915. a -Frenchman
/ travelling in this country from south
| to north experienced loss and disCom-
| fort from the depreciation Of the bank
notes into which he had converted his
funds. He found that these conditions
! increased as ne iourneyed farther and
farther from the place where the
notes were emitted.
Foundation OF Article.
His trials furnished the foundation
for an article which was published I'm
philadelphia in the AnalectiC magazine.
in which article relief was suggested
for this state Of affairs through a
uniform currency which might be
based upon United States stocks. the
use Of which for this purpose would. as
the writer OF the article phrased il.
give a new prop to the security OF
I aff rfsnr Ill
meant that their market value would be
correspondingly increased with this ad-
ditional use. This article was signed
w and fifty years later a contributor
to- the Historical magazine rescued IL
from the oblivion OF the pages Of the
Analectic magazine and republished ~
with the comment that twenty-three
years after its appearance New York
adopted the plan. and that when the ma
tional banking system was created sub
stantially the same arguments were
used"
In 1860 the country was stiu with
out satisfactory circulating medium.
The actual amount OF gold in circula-
ton was insignificant. A traveller
would find "a almost impracticabIe to
carry coin and would be forced TO equip
I himself with bank notes OF uncertain
value. In his memoirs Jay Cooke esti-
mated that fifty millions Of dollars
per annum would not cover the loss to
the people Of this country growing out
Of broken banks. counterfeits. altered
different points"
Hard-Money Wan.
Secretary Chase was a hard-mOney
man. His inaugural address as cover
nor Of ohio in 1865 makes this clear:
a sound and sufficient currency is in
dispensable to the welfare OF every civ
ilized community. The best praCtica BILE
currency. in my judgment. would he
currency Of coin. admitting the use OF
large notes only for the convenience OF
commerce. Such a currency, however.
is only attainable through the legisla-
ton Of Congress and the action Of the
general government"
It was during the summer Of 1861.
while deep In the problems OF war
finance. that Mr.. Chase came TO realize
the benefits 10 be derived from the
preparation and delivery to institutions
OF notes prepared for circulation under
national direction and to be secured g
to prompt convertibility into coin by
the pledge Of United states bonds" This
plan. laid before Congress in the finance
report or December, 1861. suggested a
remedy for the currency situation very
different from that usually proposed.
Up TO this time state regulation had
been looked 20 as the way reform must
come.
The merits Of his new plan. as Mr.
Chase states them in his report were
that the people, in their ordinary bus
mess. would find the advanta ges Of uni
formity in currency. Of uniformity in
security: Of effectual safeguard. IL ef-
feCtual safeguard is possible. against
depreciation. and Of protection from
losses on discounts and exchanges:
government the people would
find the further advantage Of
n large demand for government Sc
curities: Of Increased facilities for OBJ
tanning the loans required by the war.
and OF some alienation OF the burdens
on industry through a diminution OF
the rate Of interest or participation
i'm the profit OF circulation without
risking the peril Of a great money
monopoly. 4 further and important
advantage to the people may be rea-
sonably expected in the increased Sc |
Curity to the Union springing from the
common interest in its preservation
created by the distribution Of its stocks
TO associations throughout the country
as a basis CT circulation
state BnukS Oppose.
This plan. Mr.. Davis says. once
launched by Secretary Chase. was
steadfastly adhered 70. in spite OF very
great opposition from state banks and
other interests. until Congress gave
him the national banking law. one OF
those who supported him was AlphOnso
Taft Of Cincinnati. the father OF the
cember II he wrote Mr.. Chase compli-
mentinE him upon his report and say
ing that II Congress should adopt his
recommendation IL would in itself be
no inconsiderable compensation for the
war.
Little Roadway was made during
tNb-. MI. AUaSts however was hftDill-
ing more and more convinced Of tho
vital Importance Of his measure. He
renewed his recommendation. stating
that owing to their freedom from CON
troll the banks were enabled to meet
every demand upon them by new ennis
sions Of notes. thus increasing their
depreciation with every loan that
might be effected through them. His
anxiety over the adoption Of his plan
may be seen from a letter written 20
the banker John ]. Cisco on December
TO- 1862. u am firmly convinced" he
said. that the adoption or nonadoption
OF this plan is the turning point OF
credit or discredit. II g be adopted.
the finances can be placed on n firm
and satisfactory footing. II it be not
adopted. the finances are delivered rud-
derless. 20 be tossed heiplessly on the
gulf Of irredeemable currency by con-