Year: 1875

Government, the people of the United


States have been engaged in war with


their banks, and there are now signs


that the battles which were waged SO


fiercely thirty, forty and fifty years ago


are about to be renewed. We have


now, in addition to hundreds Of private


and State banks, upwards of two thou


sand National banks We have, in


short, more banks and more banking


than we ever had before. A badly


managed bank is about as pernicious q


thing as community can be cursed


with. It gets in debt to the active


business men of the vicinity for the
deposits which they leave with it, and


then it takes those deposits and puts


them where it cannot get them back.


This it accomplishes by lending its


money on improper security. as, for
example, to spectators who have
bought at inflated prices. and are un-
able to sell at any price when snce the
bubble bursts.


There are few who will read this who
have not experienced either the incon-
venience of having borrowed money
which they are unable to repay at the
appointed time, or the misfortune of
having lent money which they cannot
get back at all All collections or comt
binations Of individuals are subject to
the same vices and infrmities as the
individuals themselves. A great bank,
or the government Of great nation, is
liable to the same disasters from an un-
wise use of credit as petty shopkeeper,
or good-natured day-laborer who can.
not refuse to "oblige friend" But
the operations Of banks in countries like
England and the United States, where
credit is widely extended, are INSOFAR
ably connected with every root and
branch Of trade and production. When
the banks suffer, everything else suffers.


The curse of our present system Of
banking is, that the banks, as we'll as
the Government, have been permitted
to issue promises to pay without being
subjected to the obligation to redeem
those promises by paying gold. Paper
money has been made cheap thing for
the banks. 1t has been made profit
able thing for them to deposit United
States bonds with the Treasury, and
issue paper-money to the amount of
nine-tenths the face value of the bonds.
Inasmuch as this paper-money had cost
them but little, and they have never
been called on to pay any of it, they
were tempted to lend it out on insult
eient security, or lock it up in loans on
real estate or railroad and manufactur-
ing property. Since the panic, how
ever, real estate and railroads and fac
tories have not been good property to
sell. Many of the holders of such prop
erty could not. if they sold at the cur
rent prices, realize enough to pay their
debts, of which no small share are in
many localities debts to banks Mean
while interest accumulates, prices Of the
land, houses. machinery, etc., grow
worse and worse, the individuals cir
as we have described grow
more and more insolvent. and the banks
to which they are indebted get more in
extricably entangled than ever. Final
", the bank itself is forced to suspend,
the property goes at sheriff's sale for
mere song, and hundreds Of people who
have had nothing to do with the trans
action suffer on account Of the misdeeds
of others, whose only fault perhaps has
been too great haste to be rich.


Such in brief is the history Of the
great collapses in the banking system
Of the United States in 1920 and