Year: 1878

The Bankers and the silver Cues.


1t was stated by Mr. Coe, in his report to
the meeting of bankers at the Clearing
House, that at the present market price OF
silver the quantity of silver bullion required
for coming silver dollar of 412 1-2 grains
can be purchased for ninety cents. 1t hence
follows that the passage of the Silver bill,
or rather its repassage over the veto OF the
President, would cause depreciation OF
ten per cent in the value of all government
bonds. There are various deductions from
these simple premises which the assembled
bankers failed to make either in the report
or speeches, but which are we'll worth pre-
senting, both to the banking interest and
the general public. IT. as we proceed to
state them, they seem like mere truisms
or self-evident propositions they are none
the less important, because they compel
assent as soon as they are put into clear
language.


The national banks, partly by compulsion
of law, partly by voluntary choice, are large
owners of government bonds. We will first
call attention to the part which they own
by compulsion. They are permitted to issue
circulating notes only after having de-
posted with the Treasurer of the United
States bonds to an amount exceeding their
proposed circulation. They are forbidden
to issue notes, or, to be exact, the Comp
troller Of the Currency is forbidden to issue
to them notes exceeding ninety per cent of
the market value of the bonds deposited.
We beg the reader not to be impa-
tient with SO formal q statement of
fact which is within everybody's knowl-
edge, for we really do not intend to trihe
with his attention, but to fix it upon an in
ference which he cannot resist without
denying this we'll known fact. But before
proceeding to our inference We must still
detain him moment on the reason of the
law which prescribes the ratio of the amount
of bonds deposited to the amount of notes
issued Here again what we wish to say is
SO obvious that it may seem like trifing.
and it would indeed be trifing but for the
use we wish to make of it. The bonds are
in excess of the circulation in order to give
perfect security to the note holder When
bank fails the note holders would suffer
loss if the deposited bonds were only equal
to the amount of the notes because they
might not bring their full value in a forced
sale and prompt closing up OF the affairs Of
the broken bank.


Having thus prepared the way we come TO
our incontrovertible inference-which is
that the passage Of the Silver bill would
undermine the security of our national
bank circulation by wiping clean away the
protecting margin established by law.
That this inference is important nobody
can deny that it is true is the obvious re-
suit of simple process Of arithmetic.
When the bonds are reduced to ninety per
cent of their present value, as they would
be by the passage of the Silver bill, the
bank circulation will be precisely equal to
the remaining value of the deposited bonds,
leaving no margin to cover the losses incl
dent to the failure of banks and
the forced sale of the securities.
Our bank circulation has often been
eulogized as the safest in the world, but tho
Silver bill would shake its very foundations,
first by destroying the protective margin,
and then by exciting distrust in the whole
security for when the government has re-
pudiated ten per cent of the value of the
bonds what assurance can anybody have
that it will not proceed further in the down.
ward road to repudiation?


The Silver bill is not only blow at the
security of the national bank circulation.
but blow at the solvency Of all the weak
banks and all the weak savings banks Of the
country. The depreciation of all the gov.
ernment bonds owned by these institutions
to ninety per cent of their present value
would be heavy loss. The national banks
are large owners of government bonds be-
sides those deposited to secure their
circulation, and the savings banks
also hold large amounts. Mr.. Town
send vice president of the Bowery
Savings Bank, stated to the meeting that
that institution holds fifteen million dollars
of government bonds. The Silver bill
would therefore entail a loss of one million
five hundred thousand dollars ON that one
institution. The Bowery Savings Bank is
exceptionally strong and could probably
stand the loss of million and a half with
out becoming insolvent. But how many
savings banks could sustain proportionate
loss without breaking? We imagine the
number to be very few in comparison
with the whole. Such institutions are fail
| ing almost every week in the year, bringing
loss and distress upon their depositors, and
there would be universal tumble of the
weak ones if their securities should shrink
to ninety per cent of their present value.
Yesterday the weather over all the region