"My country, 'tis of thee!" / Or, the United States of America; past, present and future. A philosophic view of American history and of our present status, to be seen in the Columbian exhibition.

by Willis Fletcher Johnson

“Do not fear, the National Banking system is not going to be destroyed. In the fulness of time it will be yet better established.

“Let us divide the system into two parts, as it were, and treat them as they may be. First, there is the Treasury of the United States, the Secretary charged with certain duties, the Comptroller of the Currency, the executive officer with each of the four thousand National Banks in every section of the land reporting to him, responsible to him, and he to the country at large—and by far his greatest responsibility is the care, faithful preservation and safe return to the depositors of the great mass of the deposits of the people made with these institutions. This is one part, and the great part of the system—the care of the deposits of the people and the careful and safe loaning of these deposits to the commercial and manufacturing community by each institution, all under its general supervision.

“Now we come to the next part of the business of the system, and that is issuing note circulation. Does it occur to you how small a proportion of the circulation of the United States to-day the National Bank circulation is? Let us say it is about one-fifth part. Now let us assume that this shall gradually be cut off, as undesirable as that is; it is gradually declining, while other mediums of circulation are advancing in volume. We must remember that money, actual money, is about four per cent. only of all commercial transaction; credit, and credit alone, supplies the other ninety-six per cent.

“I do not think any National Bank or any other bank should emit any note or bill, for circulation without it is secured. Is it not true that there are very many National Banks in the United States to-day which do not issue circulation, even though banks of a capital of $150,000 and above are required to lodge but $50,000 of bonds with the Treasury, and some of these do not take out circulation on those bonds—whereas a small bank in Dakota is required to lodge one-fourth part of its capital, say if it is $50,000, it is required to lodge $12,500 of bonds with the Treasury, whether it takes out circulation or not? Why is it so? If they issue no circulation, then no bonds should be required. If large banks to-day are not issuing circulation on the small amount of bonds required, say $50,000, even though its capital be $5,000,000 (as is the case), then why require one-fourth part of the capital of a small bank to be invested in high-priced bonds before beginning business?

“Therefore, repeal that part of the National Bank act which requires a deposit of United States bonds from a bank which is to receive no circulation. If a bank choose to lodge bonds, then give it the privilege of issuing circulation on them, as of old.”

The reduction, and now the current purchase, of government bonds, which serve as a basis of circulation for National Bank notes, have driven the bonds to such a high premium that the banks some years ago began to surrender their circulation at such a rate as to seriously contract the currency and excite apprehension as to the result. But for the issue of silver certificates, which have largely taken their place, a crisis would, in the opinion of many financiers, have been reached long ago. The profit on circulation was so seriously reduced by the high price of the bonds, on which it is based, that a number of banks in New York city and elsewhere surrendered their charters as National Banks and organized under the law as State institutions. They were largely impelled to do this by a desire to escape the restrictions imposed by the National Banking laws and the scrutiny of the Comptroller of the Currency and the officials of his department. The passage of the law forbidding over-certification compelled a number of them to take this course. In August, 1883, the Wall Street National Bank was forced to suspend. An examination by the government officials showed that it had certified checks of a firm $200,000 in excess of their balance in cash and that this was the principal cause of the bank’s failure. The cashier was indicted, but the bank was wound up, went out of existence, and the intention of making a terrible example of the delinquent official, who, however, acted with the approval of the president and directors, appears to have been abandoned.

Touching the opposition shown in Congress and elsewhere to National Banking systems, ex-United States Comptroller of the Currency John Jay Knox says:

“The system has been of immense benefit to the government in its disbursements and in funding temporary loans and also in the refunding of its debt which, but twenty-eight years ago, amounted to $2,845,000,000. The National Banking system rendered more valuable service to the government than any other human agency in the resumption of specie payments. The National Banks held on the day of resumption (January 1, 1879) 125,000,000 of United States demand circulating notes. Sixty-two National and State banks in the Clearing House of New York unanimously voted to receive the legal tender notes upon an equality with gold, and on the day of resumption the banks of that city, which held $40,000,000 of legal tender notes, did not present a dollar then, or subsequently to this day, for payment in coin. As at the commencement of the war the banks parted with their gold for the benefit of the government, so at its close and upon the resumption of specie payments they relinquished the right of again demanding it, and were well satisfied to receive instead the demand notes of the government, which are redeemable in coin upon presentation. Yet, notwithstanding these important services, the legislative department of the government has never been strong in its friendship for this system. The statutes of the government contain very much restrictive and very little friendly legislation toward the institutions which were created by its fiat. A few years ago, when the charters of most of the banks were expiring, it was only after a long contest that an act was passed authorizing a renewal of their privileges. If at any time favorable legislation has been granted by Congress, it has been given ‘grudgingly’ and not as a ‘cheerful giver.’

“We have heard much of the surplus and the necessity of the reduction of the revenue. Both parties profess to be in favor of such reduction. Both parties have proposed to reduce the tax on the ‘filthy weed,’ and both parties proposed legislation granting relief to the whiskey manufacturer and the whiskey drinker; but not one officer of the government, nor one man of either House, has had sufficient courage to propose the lessening or the repeal of the tax on the circulation of the banks, which now amounts to less than $1,700,000 and which is the last of the remaining ‘war taxes,’ except the tax upon the two deleterious articles referred to, which are considered by the leading civilized nations as the most fit subjects for ‘high taxation.’

“Yet no class of corporations since the organization of the government have contributed so largely toward the support of the State and the nation, and no class of corporations have ever been so unmercifully taxed as the banking institutions of this country. Not only have Congress and the different State Legislatures imposed high rates of taxation, but the courts of the country, including the Supreme Court of the United States, composed as it is of able jurists who should be devoid of all prejudice, have construed the questions which have been brought before them with rigor worthy of the bitterest enemy of the system. While other corporations engaged in precisely the same line of business are authorized to do business almost without legislative restrictions and without taxation, the very highest rates that can be imposed are placed upon these institutions, whose only source of profit is the loaning of money at the rates of interest fixed by the same high authority which imposes the taxation. Yet, notwithstanding the opposition of Congress and the unfriendly decisions of the courts and the bitter enmity of individuals, the system has steadily and rapidly grown in favor, until the institutions organized under it from the beginning number nearly four thousand, some of which are located in every State and Territory as well as in every considerable village in the land.”