Year: 1878

agreed upon by the Committee on Banking
, and Currency, and although we believe tha


even it could command majority in th'
House and Senate its enactment would be ef


fectually checked by Presidential veto, it il
, worth while to show the delusiveness of thu
grounds upon which it is based, and the falsi
! ty of the reasons urged by its friends.


The case is very simple. A certain amount
of United States bonds is deposited in the
Treasury by the incorporstors Of q nationa


bank. and they receive for circulation notes
to the extent of ninety per cent. of the face
value of the bonds. The excess of ten pei
cent. in the deposit over the circulation il a
wise precaution taken to protect the note
holder and the Government from loss in case
of the bank going into liquidation, for IA.
tional bank cannot fail, in the ordinary sense
of the word The banks, of course, receive
interests on the bonds held for them by the
Treasury, and just here comes in the argu


ment of those who desire to wipe them out.
They loosely say the banks make q double
profit on their investments-once on the
| DOuuS anu again Ou uObCc


Why should not the Government, instead of
guaranteeing the notes of corporations, issue
the notes in lieu of its own bonds deposited
by the banks as security for their circulation,
and thus save the interest now aid out on
such honds? This statement of the contro


versy j: especially pleasing TO the infstionists
who want to uproot the banks, because If
their wishes were carried out there would be
an expansion of the currency gained COM
mensurate to the ten per cent. margin be-
tween the face value of the bonds and the
whole amount of the bank notes afoat.


Now, let US see whether the wOuld-be de-
structionists are right or wrong. In the first
place, it must be observed that the profits on
bank circulation are nuch less than they are
commonly supposed to be. The Comptroller
of the Currency made an argument before the
committee in question recently, in which he
showed that, after making allowance for two
facts, the average profit on circulation is only
205 per cent, or s9,644,317 per annum on
the entire circulation; and that if four per
cent. bonds should be substituted as security
for the notes in place of the six per cents, as
some day they must be, it would be only
$6,717,1 ,124, or 10 per cent. on the invest
ment. The facts to which he alluded are that
on the one hand the bonds, though bearing in
terest merely on their par value, have cost
the banks considerable premium, and that
on the other hand the circulation authorized
1 10 of ho fana nf he fu


These official figures are conclusive answer
to the finance thinkers who pirate of the
banking business as earning 25 or 90 per cent.
yearly. Still, these gentlemen will ask why,
if the profit is even no more than nine and
half or six anG q half millions, should not
the Government ssve it by retiring the bank
currency and putting out greenbacks in their
stead? The reply is that, in the opinion of
all the economists and statesmen who have
studied this subject deeply and learned wis.
dom frem the teachings of experience, the
Government ought never TO issue notes at all;
and this because il is practice that when
once adopted may lead, under the theories of
crude and demagogic legislature, to abuse,





course to it as war measure, but our best
thinkers then gave their consent to it with
fear and doubt, and their spprehensioIs have
been fully justified by the rag baby mania
which has lately arisen in the country. Ger
tainly when the expedient of legal-tender
paper was first resorted to in a dire emergency
nobody anticipated that in less than twenty
years it would he seriously proposed in Con-
gress to fasten such currency irretrievably
upon the country and to illimitably expend
its volume. The very authors Of grecnbacks
would have recoiled from the prospect, for
they would have seen in it, as all sound
political economists see 10 the uses to which
it is now attempted to be put, nothing but
peril and ruin. II it were not for the popular
strength which these dangerous follies have
assumed the delicious absurdity of some of
them would be food fer laughter, as for in
stance the bill which q certain Congressman
is said to have in his pocket ready for pre-
seAtation, enaeting in effect that q thousand
millions of irredeemable paper shall be at
once issued and $e5 additional per capita for
each child born in the future. But even q
project of this kind, ridiculous as it is, is
useful as an indication of the madness which
an indulgence in inconvertible money creates.
1t is a direct departure from the true standard
of value, and is indeed not much more ridic-
ulous than Gen. B. F. Buffers leather money
scheme, which includes as possible corollary
the hanging of bank directors to lamp-posts, q
proceeding which, in q moral point of view,
hardly compares with the proposal to en-
courage the increase of population compre-
hended in the bill Of which we have above
spoken. i.,-


The object of the measure which the Bank
ing and Currency Committe has on hand is to
abolish the national banks, the best System
| the country has ever had. The security
demanded, the supervision and examination to
which it is subjected, the regular reports eI-
acted, the reserves required, the limitations
on loans and investments, imposed by the
Banking act, all combine to make 1t an ex-
ceedingly safe and conservative system. How
it is defended is indicated by the statement of
J Comptroller Knox, that the total losses to
creditors from the {, 800 national banks or
! ganized during the last fifteen years have not
exceeded $4,000, 900, an amount probably not
equal to the losses which have fallen upon
the creditors of savings banks within the last
| year. Contrast this record with thss of many
Of the old State banks before the war, with
/, their lack of supervision, guarantee or secur-
ity, their excessive issues, bearing different
quotation fer every section Of the Union, and
their recklessness Of management, and when
this contrast Is made the benefits which the
country has reaped from the national banking
system are At once apparent. The single
advantage which the Government offers to
the national hanks TO comnenaate them for the