Year: 1879

| huyuoN'


National Banks.


Mr.. Chase when Secretary of the Treasury,
devised the scheme of establishing the Nation
| al Banks, and matured the plan by which it
| was carried into execution. At least no other
| name than his is known in connection with it..
| There was no bank in the country at the time,
| except such as was created by State law, and
none of them afforded any security to the pub
lie for the safety of their circulation except in
| the capacity and integrity of their managers
| and in their capital stock actually paid in But
these securities were not sufficient protection
| to the public, because unforeseen losses were
| frequently suffered by Banks honestly man.
aged many banks were controlled by unscru


pulous or speculative men; and some banks
were established by rogues for the purpose of
cheating the public; and IL one of these banks
e ven the best of them-had any other than
local credit except among brokers and bank
men whose business it was to deal in money
and who were compelled to make themselves
acquainted with the credit of banks generally
throughout the country But in the business
community these State banks had little or no
credit except within very narrow circle.


1t was a most delicate and difficult thing to
do, to supercede these State banks which had
been established great many years, to which
the people were accustomed, and which were
supposed to have been created by competent
authority-that is, by State law. grave con-
stitutional question might have been raised as
to the power of the States individually, to is
sue money or to authorize it to be issued by
p,,f of faof
this question was not raised. except in occa-
sional discussions, and there was universal
consent among the people all over the country,
that these banks were established by compe-
tent authority; the question was regarded as
decided by the popular will.


1t was this system that Mr.. Secretary Chase
undertook to overthrow, and he succeeded in
doing it in such way as to avoid any shock to
the business of the country, by holding out in
ducements to the State banks to adopt the new
system voluntarily, which they did promptly,
and almost universally, all over the country.
1t was part of this system that the State
banks in adopting it were to 10 an their capital
nearly or quite the whole of it, to the Govern
ment This was at time when the Govern
ment was in desperate need of money, and was





obtain it, The life of the nation depended up
on the ability of the Administration to obtain
money 1t seems to be wonderful that at such
a time, when it was regarded by many men as
doubtful whether the rebellion would crush
the nation, and whether the Government was
entitled to credit, that Mr.. Chase could devise
a scheme whereby all the banks in the country
would voluntarily loan all their capital to the
nation. 1t is impossible now to say how far
Mr.. Chases plan of creating National banks
helped in carryi ng on successfully the war Tor
the preservation of the MON; but that it con-
tributed in a very important degree to this re-
suit is beyond question.


Persons having no knowledge of business af-
fairs on any considerable scale can have little
conception of the difficulties encountered by
business men, in many ways i'll many lmpor-
tant transactions, growing out OF the imperfect
machinery OF the old State banks. 1t was
somewhat like an attempt to carry ON warlike
oper ations upon a large scale, with armies IN
which every regiment should be perfectly inde-
pendent of each other and of any general COM
mand; in which every ship of the fleet should
be under the independent command of her own
captain, under no obligation to respect or ae-
knowledge any central authority.


At that time no other system of banking was
known to our people than that of the State
banks, and the many inconvcniences attending
it were submitte to rs inevitable. To be sure
we had had United States bank, which in its
day afforded many facilities to the people in
the transaction of business, which could not be
had from the local banks. Everybody knows


~ H. d., Taolr
son laid his heavy hand upon them; he would
have none of them; with his consent there
should be no partnership between the Govern
ment and paper money, which the Democrats
of that day stgmatized as fraud of the old
Federal party The Democratic candidate for
Governor, now, in one of the Western States
was presiding at political convention some
wears ago where a contribution was taken up to
pay its expenses. When the boxes were
brought up to the stand, the President saw a
bank bill in one of them lie took 1t up with
the thumb and the tip of finger, as one might
have taken up a frog by one foot. and holding
it aloft before the Convention exclaimed, Let
the person who put this thing into the box
come forward and take it. The Democratic
party does not recognize such stuff as money!!


Well, the National banks were established,
and went Immediately into successful opera
ton. The change was not attended by the
slightest disturbance of any kind in the busi-
ness world, and their action was perfect IN al
fording all possible facilities for carrying ON
the business of the country in the best way. L
cannot stop here even to mention the many
ways in which the National banks are more
convenient to business men than the old State
hanks were All business men who have had
large transactions with both of them, know all
about it. and no others could understand it,
without a great deal of detail, and even then
very few of them would comprehend it. But
- olxrt hos -hA E,,nuu nd
know nothing of the matter, who are loud and
noisy in their denunciation of National banks,
as "robbers of the people," Why?


The State banks were to loan their capital TO
the Government; that was part OF the plan.
The banks did so, receiving from the Govern
ment its promissory notes. bearing interest at
six per cent. and payable in twenty years.
This interest has been paid regularly. But by
and by the Government induced the banks to
exchange their six per cent. notes for five per
cent, four-and-a-half per cent, and finally for
four per cent. notes, and that is the way they
stand to-day. In short, the Government III
duced the banks voluntarily to strike on Que
third of the Government debt to them. 90 lar
as the Government was concerned IL was equiv
alent to that But these promlssory notes OF
the Government are deposited IN the thiteo
States Treasury as security Tor the redemp-
ton of the National bank bills. Inc Govern
nent sends to the banks ninety dollars in these
hills. for each one hundred dollars of Govern
ment promissory notes so deposited, and pays
also sem-annually to the banks the interest on
promissory notes owned by them.


Now this is the red rag to our Greenback
friends. They rage and roar and paw the
ground fearfully (some of them) that the Gov
ernment should continue to pay the interest on
its notes at the same time that it sends bank
bills to the banks, on which, they say, the
banks make too large profits. But that was
part of the original plan-it was a voluntary
offer ofthe Government to do so-and II was
one reason among others that induced the =
banks promptly to fall in with the new system.