Grand Forks herald. [volume] (Grand Forks, N.D.) 1916-1955, 1919-10-08
OLD-TIME STATE BANKING

After all. we have Travelled some distance since the
good old days Of what has come to be popularity known
As wildcat state banking. We have In these later years
become go accustomed to seeing money-when we see 1t
At all-sssied under the authority Of the federal govern
Aaent alone that we are apt to forget that there was a
time when the banks OF any state could issue their own
currency. and that they do soNaow unless restricted by the
laws Of their own states.
In those earlier days no such safeguards were thrown
around the banking business as have since been devised.
Perhaps there was not much difference between the fed
sral regulations. such as they were, and those of the aver
age states. But the state banking situation was compli-
Gated by the fact that it lacked uniformity. There was
one banking law for the nation, and as many others for
the states as there were states. Every state bank could
issue its own currency. and very many OF them did 80.
Much CT Lis state bank currency YVES issued far in excess
Of the banks assets, and when the inevitable collapse
came the value Of the banks paper ahrank to correspond
to ito assets. Thus the paper currency IN circulation has
all sorts OF values. The banks in any state stood In var
ious degrees Of solvency ana insolvency. and there were
many states. The value of paper currency fluctuated
fyom day to day. Business houses found 1t necessary to
keep Lists of such currency, with statements of its pres
ent value. and these lists were changed frequently. The
list OF market values OF paper money rese,nbled the stock
lists Of today, with bills of various denominations quoted
at constantly changing figures. 1t was unsafe to accept
= state bank bill without first consulting this list to see
VAeLQer the paper were worth 14 race, or To-. 20 " 30
per cent Of its face.
The evils Of the system were manifest, but It vat
decided that the federal government had no authority
to prevent the issue Of state bank currency. AS has bsen
done In some other cases, recourse was had to the taxing
powers Of congress. and a proh.bitive tax Of 10 per cent
was levied On all state bank Issues. That put a stop to the
issue OF such currency. Nevertheless, II a state bank
today wishes to issue its own paper currency. and the laws
Of its own state permit, it may do so on payment to the
federal government Of the tax.
~ The examination Of banks was apt to be a sort Of 20.
as-you-please affair. The story has been told OF q prac-
tice which was followed in one state for some time which
enabled the banks in that state to pass examinations in
triumph without the trouble Of keeping much cash on
hand. Through a pleasant working agreement between
the owners OF a string Of banks and the examining Off.
ctals, notice was quietly given that a certain bank was to
would pool their loose cash and forward it to the bank
with the banks other assets. and everything would be
found in perfect condition. The money would then b.
forwarded to the next bank to be examined, arriving Jus,
ahead Of the examiner. who took care not to appear nre.
n1aturely. This was repeated until the entire circuit had
been made.
While there are occasional slips yet, the banking st.
uAtipn has improved vastly since those days. In actua,
practice paper currency is Issued only under authority o.
the federal government, and that currency is in all case.
Ars 1nors stringent than they were, ana II those laws .r.
enforced the risk Of the dspnsttor n reduced to s,mosa
nothtng.