Evening journal., 1913-08-22
NEW NEWS OF YESTERDAY
How the State Banks We're
Driven Out of Business
BY Holland.

In view of the agitation and dis
cussion Occasioned by the attempt TO
secure from the Congress now in ses-
sion legislation which viii radically
change the national banking and cur
rency law it may be worth while to
repeat conversation which ! had at
the time of the currency panic of 1893
with the late George S. Coe. who was
for many years one Of the great
banking authorities, not only of New
ork, but also of the United States.
asked Mr.. Coe IL he had ever
learned In conversation with John
Sherman or with Salmon r. Chase
who was secretary of the treasury in
LincOln's administration any Of
those in public life i'm Civil War days
with whom he was in frequent con-
sultation respecting the financial
measures of the government why IL
was deemed expedient practically 10
suppress the State banks and to do
that In the only way possible which
was by taxing the currency issued
by State banks at so high a rate as
TO force the withdrawal of State bank
notes from circulation.
Yes he replied, II had many talks
with Secretary Chase and recall one
with John Sherman who was then an
influential member OF the finance
committee of the State in which tho
very difficult and embarrassing Ques-
tion of what should be done with
State bank note circulation was the
principal subject of discussion.
81 suppose ! can answer your ques-
ton by simply stating that il was
found, after the national bank system
was adopted that the old economic
rule that the poorest currency would
drive the best currency Oui of crcu-
lation was again demonstrated 20 be
sound rule.
Congress had authorized Secretary
Chase To issue greenbanks which had
a legal-tender quality. They could be
used TO pay amy kind of debt except
ing charges for customs dues.
I'm order TO infuse into government
bonds the highest possible credit and
character Congress declared that the
principal and interest of the bonds
we're payable in coin Now TO get
that coin was a problem. Congress
said that it could be obtained ir inn
porters through the custom houses
paid their duties exclusively I'm gold,
Congress also said that his gold
must be kept apart from other funds
of the United States treasury
NOW government bonds. whose
credit had greatly appreciated when
il was known that the principal and
interest were sure TO be paid IN gold
were the security of national bank =
note circulation. That made national
bank-notes better currency than the
notes Of the State banks.
$50 II began 10 be speedily noticed
that not only the people, but the State
banks would sell what gold they could
get for the high premium il was com
manding, taking legal tenders in pay
mant and paying ont state hanh-notes
TO their customers.
In other words. not only the people
but the hanks were boarding the best
currency, and this was leading strong
ly toward great imitation of the
paper currency of the country in the
form of state bank notes
Secretary Chase told me that II
was imperative that the danger ol
imitation of the currency by over
issue of State bank notes and the
tendency to hoard LEGAL tenders anC
national banks notes should be me-
nA congress, tie fDuln see no Wa.
TO accomplish this. he said, excepting
10y proposing prohibitive tax upon
state banks notes He told me tha
Senator John Sherman agreed tC
introduce bin providing that every
bank, state or national. which pai'
out State bank notes should be taXe'
at the rate of 10 per cent
III looked to me like a pretty dras
tic remedy" said Mr. Coe. "and 7 die
not know at the time but that " thi
proposed tax became law IL wouli
result in driving out of existence TN
majority of the state banks.
"It did become a law I'm 1864
killed State banks issues, but my judg
ment afterward was that the measur
was a salutary one It certainly pu
an end to all the disadvantages an
dangers i'm the form of cOunterfeitinl
initiation and unwise issuing OF stat
bank notes dangers which had bee
the hane of State bank currency 70
more than. forty years
tCopyright. 1913. by E j. Edward
All rights reservedD
Tomorrow Mr.. Edwards will he
"Why the New York Banks SUI
pended Specie Payments