The Seattle star. [volume] (Seattle, Wash.) 1899-1947, 1923-03-07

serve banking system, by Arthur
n TruaN, cashier Of the First
National Bank Of Seattle.
In order to understand the con
ditions which brought about the
passage OF the federal reserve act
in 1913. we must make a brief sur
Vey Of banking history.
About the most important fune'
ton OF a hank In the early days
was the issuing OF hank notes, In
fact, in its original sense. tho word
hank" means a heap. pile. an
accumulation. as pank OF earth.
etc. In Colonial times Il was APP
piled 20 any hatch or accumulation
of paper money. thus a New
Rhode Island Bank" meant a new
emission Of bills OF credit Of that
colony.
In the early days OF the Ameri'
can republic a bank was an assoei'
alton whose main business was the
issuing Of notes to circulate as
money. and the phrase banking
privileges meant the right 20 issue
such notes. Daniel Webster even
said that the power 20 issue notes
TO circulate as money WAS the fca-
ture which distinguished a bank
from every other institution.
Bank notes were first issued In
England in 1870. or thereaboutS
They were Instruments Of writing
executed by goldsinithx 20 people
who had left money In their GUS
tody. Several Of these notes were
found IN n hack room Of Child's
bank. the Oldest Of English banking
houses. when Il was removed from
the vicinity OF Temple Bar few
years ago. A sample:
November -. 1854.
~ promise TO pay unto ye RI.
honhle ye Lord North a Gray or
bearer. ninety pounds AZ demand.
For Mr.. Francis Child and my
self.
"JNo. ROGERS"
The issuing OF bank notes became
recognized as a right at common
law. Anybody could issue them and
put them into circulation II people
were willing 10 take them. II was
found IN course OF time that the
exercise OF this right was exposed
10 accident and liable to abuse and
that the state must intsrpose for
the protection Of society.
Al first Il was believed that such
protection could be secured by re-
stricting the issue OF circulating
notes TO a select number OF persons
OF weIl-known character. generally.
but not always incorporated rs a
bank.
To understand some OF the prob.
lens surrounding the issue OF paper
money, we must have some idea OF
the circulating medium OF this coun-
try prior TO the enactment OF the
national bank act in 1850.
Wampum. being only parts OF GER
tain sea shells. was used by aborig.
Ines in New England. and its use
was continued by the early settlers.
because IL was rcdeemable in beaver
skins. which could be sold In Europe
for real money.
Tobacco was used as currency in
Virginia for over 100 years. a most
surprising fact when one considers
the many fundamental objections to
It's use as money.
In New England In 1881 corn was
made legal tender for payment OF
all debts unless money or beaver
skins were expressly stipulated. Mus
ket balls, wheat. rye. barley. peas
and even dried fish were made re-
ceiyable UP 20 certain amounts. I'm.
agine taxes being paid in such com.
modities.
Similar conditions existed thruout
the colonies and while that currency
was far from perfect. ii was de.
cidedly preferable TO the flood OF
paper money which followed IL. II
should be understood that while
these various commodities Just men.
toned were used as currency, the
people at that time really used as
base for the circulating medium
the silver coin, as there was always
a mental comparison between the
circulating medium and silver.
tIhe next installment will tell