Section 3.
But the whole is not yet told. The present "National" system is so burdened with taxes and other onerous conditions, that no banking at all can be done under it, except at rates of interest that are two or three times as high as they ought to be; or as they would be under the system proposed.
The burdens imposed on the present banks are probably equal to from six to eight per cent. upon the amount of their own notes that they are permitted to issue.
In the first place, they are required, for every $90 of circulation, to invest $100 in five or six per cent. government bonds.[I] This alone is a great burden to all that class of persons who want their capital for active business. It amounts to actual prohibition upon all whose property is in real estate, and therefore not convertible into bonds. And this is a purely tyrannical provision, inasmuch as real estate is a much safer and better capital than the bonds. Let us call this a burden of two per cent. on their circulation.
Next, is the risk as to the permanent value of the bonds. Any war, civil or foreign, would cause them to drop in value, as the frost causes the mercury to drop in the thermometer. Even any danger of war would at once reduce them in value. Let us call this risk another burden of one per cent. on the circulation.
Next, every bank in seventeen or eighteen of the largest cities—Boston among the number—are required to keep on hand, at all times, a reserve—in dead capital (legal tenders)—"equal to at least twenty-five per centum," and all other banks a similar reserve "equal to at least fifteen per centum," "of the aggregate amount of their notes in circulation, and of their deposits."
Doubtless, two thirds—very likely three fourths—of all the bank circulation and deposits are in the seventeen cities named. And as these city banks are required to keep a reserve of dead capital equal to twenty-five per cent., and all others a similar reserve equal to fifteen per cent., both on their circulation and deposits, this average burden on all the banks is, doubtless, equal to two per cent. on their circulation.
Next, the banks are required to pay to the United States an annual tax of one per cent. on their average circulation, and half of one per cent. on the amount of their deposits.
Here is another burden equal to at least one and a half per cent. on their circulation.
Then the capitals of the banks—the United States bonds—are made liable to State taxes to any extent, "not at a greater rate than is assessed upon the monied capital in the hands of individual citizens of such State." This tax is probably equal to one per cent. on their circulation.