Year: 1876

State OF New York.


The news which began to circulate
in the street q little before noon
for the ensuing two hours, but be-
fore three o'clock ''the wave passed under
the ship" and the business of the day closed
in comparative still water The sudden
suspension of so old ON institution, which
had never been distrusted, naturally
gave shock and excited alarm but the re-
assuring character of the facts developed
during the day allayed the uneasiness, and
1t is believed that the only serious sufferers
will be the stockholders of the bank. The
depositors will be paid in full, although they
will suffer some inconvenience by inability
to use their funds while the affairs of the
bank are in the course Of settlement. But
they will ultimately be paid in full, and the
note holders are, of course secured against
less, rs all note holders are under our national
bank system. A large proportion of the
capital of the bank is swallowed up in this
failure, but the loss falls on the stock
holders, and the community will not suffer.



and almost imperceptible.


This event, whose immediate consequences
are happily of SO little Importance, deserves
attention as a symptom of the condi-
tion of our national banks, and an
indication of the merits and defects
of the system. We will first look
at the bright side of the picture, which we
cannot present in more favorable light than
by comparing this failure with the unex-
pected failure of the banking house of Dun
can, Sherman & Co., which was equally sud-
den and startling and drew so many victims
into its vortex. There is q striking contrast
between the two failures. When Duncan,
Sherman d Co. suspended it was found their
assets fell short of their liabilities by several
millions, and that besides the irretrievable
ruin of the banking house many individuals
and firms were severe sufferers whereas the
failure of the National Bank of the State of
New York drags nobody down except the
stockholders of the bank. This difference
illustrates one of the best features of the
national bank system. Duncan, Sherman &
Co. continued to do business for years after
the concern became insolvent, because it
was free from the supervising control of any
authority empowered by law to inquire into its
affairs and publish its condition. No national
bank can thus trade on its reputation and
maintain Fictitious credit, if the national
banking law is vigorously or even fairly ad-
ministered. 1t is chief merit of the system
that none of the banks included in it can 90
on deceiving and imposing on the public for
any length of time after it has become insol-
vent. The career of the National Bank of the
State of New York has been arrested at so
early stage that none of its creditors will be
involved in serious loss, whereas banking
house not subject to the same kind of super
vision may continue to do business on false
reputation until it engulfs multitute of
innocent parties in the final crash. Had
Duncan, Sherman & Co. been obliged to
make frequent reports oftheir condition to the
Comptroller of the Currency, had they been
liable to a scrutiny of their affairs under the
direction of that officer as often rs he thought
it necessary, their career would have been
cut short much earlier than it was, and un-
suspecting people would have been saved from
great losses. The difference between these
two conspicuous cases of failure is strong
argument in favor of the national bank sys-
tenn, which detects insolvency at so early
stage that creditors OF bank cannot be
ruined if there is reasonable vigilance on
the part of the Comptroller of the Currency


The advantage of government supervision
of banking institutions also furnishes
an argument against the wild crotchet
of the soft money democrats, who
would abolish the national banks
and make legal tender notes the only
currency. If that should be done the bust
ness of banking would be surrendered into
private hands, and there would be no eff
cient check on such abuses as were practised
by the house of Duncan, Sherman & Co.
The government acquires its right of super
vision and examination through the
connection of the national banks with
the issue of currency, and if all
the currency were issued by the gov
ernment and banking were made a pri-
vate business, the community would lose
its chief safeguard against the abuses of
factitious credit. Any banking firm which
had once enjoyed high reputation could
trade on that reputation long after it had
become insolvent, and inveigle an unsus-
pecting community to make deposits which
would be lost when the sham was exposed.
The security of tho creditors of the bank
which failed yesterday, as contrasted with the
losses of the creditors oftho important private
banking house which failed last autumn,
demonstrates the superiority of system
which keeps the banks under an active sur
veillance and forces them to suspend before
they have sunk the greater part of their as
sets.


This is the favorable side of the account;