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THE ENTERPRISE. WEDNESDAY JTJYL 1. 1891.
BANKS AND BANKING. FOUNDATION AND PRINCIPLES OF OUR NATIONAL BANKS . e are in n w A m Address by tbe Hon. Myron T. Herrick Delivered before the Grange of Wel lington, Saturday Evening, June 13, This la an age of Inquiry. In this gen eratmb we are not disposed to accept onr politics, finances or leligion, for tbe sim ple reason tbat it was our fathers' and grandfathers'. We Me tbe gray dawn and hear tbe murmers of tbe life in the new century. We are living In, a glorious age. We bave bad a wonderful experience. ' We desire to leave an imprint of progress , as Indelible as did tbe beginners of this century. We demand progress la com merce and manufacturing, in all tbe arts and sciences; we demand progress of our banker, we even demand progress of our preacher. ft is our aim and purpose to furnish tbe best tbat tbe land will produce and to aid in this vast enterprise of feeding and clothing tbe world's people, money, banks and bankers become necessary. "Bank" is an Italian word for bench. Tbe Lombard Jews, in Italy, kept benches in tbe market places, where they exchang ed money and bills. When a banker failed, bis bench was broken up by tbe populace, and be was, therefore, termed bench-nipt" or bankrupt Tbe first mention of banking is made in Exodus xxiL 25, where it says: "It thou lend money to any of my people tbat Is poor by thee, thou ahalt not be to him a usurer, neither shall tbou lay upon blm usury." The earliest modern bank was tbat of Venice, In 1711, which was closed by tbe conquest of tbe French in 1707, after a useful course of 620 years. Several of tbe earlier banks began at the following dates: Venice, 1171; Geneva, 1345; St Petersburg, 17S0; Bank of England, 1694 ; Scotland, 1005; France. 1800; Hamburg, 1019; United States, 1780. The national banking system of the United States was established by acts of congress Feb. 25, 1803, and June 3, 1804 Banking was first established in Europe by tbe Lombard Jews In 808. Tbe essen tlal features of early banks were that a number of people placed their money in tbein and received In exchange for It creditor promise to pay, which credit they might transfer to someone else. The bank of England was formed in a similar manner, of a company of peison who ad vanced a sum ol money to tbe government and received In exchange an annuity for it. This was the foundation of the nation el debt of Great Britain, and the fund are now legally called "bank annuities." Tbe bank cannot Issue more than 15,000,000 paper money. Any additional amounts are covered by actual gold In band, all be ing secured by government securities or gold in tbe vaults. Prior to this tbe na tion's spare funds were deposited with goldsmiths, snd the receipts issued by them were In circulation si bank notes are now. A national bank became necessary to Great Britain for tbe support of the na tion's credit and for the security of a paper currency. Itpiomised to be tbe means of reducing tbe rate of Interest and of re storing colnsge. In 1078, sixteen years previous to tbe establishment of (be bank ot England, proposals were made for tbe establish ment of a "model" bank and n 1083 a "national bank of credit" was projected. Neither were what was wanted and were not carried out. Tbe substantial scheme upon which tbe bank of England was formed attracted the attention of moneyed men and many were anxious to follow in its footsteps. A bank was proposed, 10 advance on tbe security of landed propei ty, similar to Senator Leland Stanford's scheme, A company waa formed and the project seemed on tbe eve of consumma tion. Unable to inspire confidence and get money, tbe scheme fell through. Many others sprung up tbat promised well, but they all faded away. I refer to tbe bank of England, since our national treasury plan ia In many re spect patterned after tbil wonderful In stitution. Through tbe centuries that followed Its establishment, It has ever been tbe sustaining strength of tbe nation ia times of flnsnclal trouble and disaster, from the bursting of the South Sea bubble Id 1721, to tbe collapse of tbe Argsotlne Republic boom In 1800. - It it believed by mapy that by Its prompt action and power It saved a panic throughout the world In 1800. Genera tions of flat money crank have livtd, died, and, like their wild schemes, have passed Into oblivion, since ll began It ca reer of usefulness. j The bank of France ba had a similar history. I express an axiomatic truth when I suy tlist the founding of a success ful financial policy in a government meana the successful establishment of that government. I demonxtrale this when I ay that for 100 years we bave found our financial policy as it now exists to be equal to all r mergences. Tbe founda tion was'good, and it has grown with the people and will tw equal ffihe demands of the one hundred millions of people to come in the new century. Itwasfouudtd by the grmt intellect 'f Alexander Hsm lllon and It commando the liomsga of men: a plan approved by GcwgA . Wash ington and bis great chief Justice, John Marshall) ' Administrations and parties bave frrun time to lime departed from it. but In good time, like the prodigal son, they have returned in rags and repm. ance. it wan an arm of llil great system . Our special prices on shoes are what please the peo ple and increase our sales. Ask to see our child's shoe at Our lady's Bright Dongola shoe at " " fine . " ' ; at " " finest " ' " at Base ball and Tennis Shoes and Oxfords at One door west of hardware that was put out in '68 and '64, when Unit ed States 7' were below par, and which made'it possible notonly to float the bonds but in after years to retund them on a 4 per cent basis Into bonds which now com mand 120 in tbe market and bave sold in 1800 as high as 129. We now question the wisdom of the 'perpetuation of this system I In order to fairly Judge and compare this system with that of free banking, I will briefly reyiew the history of state banks prior to the national bank. It was tbe practice cf the different states in the union to issue notes payable In specie on demand, previous to 1838, by acts of local legislatures, which were easy to obtain. Under this system the Issue of paper currency became practically unlim ited. People seemed to think tbat tbey bad found the panacea for all financial ills in the paper mill. Inevitable bank ropey and ruin followed. The secretary of the treasury In 1820 reports, "Dissster and distress throughout the nation." In 1834 tbe trouble was incomparatlvely greater; in 1837 every bank in tbe union, including tbe United States bank, stopped payment. In 1838 tbe best managed banks, with capital, resumed payment in specie. In 1830 and 1840 another crash came. Tbe bank notes in circulation amounted to $140,000,000 and la 1842 they dropped to $83,000,000. The disaster and injury resulting to society are still too well knuwn to need repetition. 'Altar tblt, new schemes were devised, such at deposits ol security, purchase of state bonds, deposits of stock, bonds and mortgages. The circulation secured by state debt was tbe best None of tbls circulation was, however, paid In lull Much of It was never paid. Tbe expense ot collection, i.e.,excbange, under tbe old system In 1830 was not less than from 1 percent, to y percent Ln der the national banking system tbe cost would be 8'c. on $100 covering transac tions of $11,000,000,000 (eastern states lc, western Mates 20c) 11 this were restored there would be an increase cost in ex channe, alone, of $80,000,000. In 1857 another crash came, commenc ing with the failure of the Ohio Life and Trust company. and alt tbe banks in tbe United 8tates stopped payment. This re sulted In the passage of a general bank ing act ly the government When tbe war began there were $200,000,000 of pa per money (three-fourths Issued by tbe loyal states), and $275,000,000 of coin in circulation. Tbe government borrowed $50,000,000 of eastern banks and issued demand-notes therefor. In 1862 tbe government authorized the issue of $150,000,000 more, and all this was made legal lender except for duties and customs. Here the nation commenc ed to navigate unknown seas (and rontin ned until tbe resumption of specie pay ment) Then it was that coin went out of circulation; and as treasury notes not based on gold in the treasury went out, gold rose to a premium, as high, or nearly so as it did In South America ln 1890-91 280, 1 believe, was tbe highest In 1803 and 1864 the acts now ln force, creating the national banks, were passed, founded ln time of peril as an arm of the treasury systyn, for the purpose of hand ling tb national debt, upon vtblcb their circulation was based. And by Ibis plan over $300,000,000 of government bonds were sold directly to tbe people, upon which a sounJ currency was based. The national banks were required to place government bonds on deposit with tbe treaauiy and permitted to issae currency to tbe extent of 00 per cent, the amount tbat each bank might lssut being determ ined by Its capital stock and locution. They were oblige j to pay 1 per cent duty or tax on their circulation to the govern ment, and all expenses of engraving, rtc. In the light of the twentyelght yeais tbat followed the adoption ot tills uni form, orderly ani secure system of bunk ing, I think that we must admit that their mission hae been one of relief to tbe peo ple and of security to tbe depositor and holder of their notes. It has almi Inspired degree of confluence not attained by any of its predecessor. In the panic of 1878 very' few national banks succumbed. It was of little conse quence to the bolder of a national bank note whether the bunk laauing It hilled or not, for he was secured by the Itonds dc nnnlU'd wltb the United Statis tieaauiy. It as clearly druionttratt-d that the national liankai-oiild and would, and sure ly did, protect lis circulation." A system of exchange mid collections, for cheap newt, security and promptness was Imme diately established throughout the coun .98 1.98 2.9a 3.98 The Benedict Shoe Co. try, and one which is unparalleled. The government exacted of the banks frequent reports and rigid examinations and re quired them to keep ln their vault one fourth of all tbelr deposits, and by these means tbe depositors were amply secured. Tbe publicity of its condition frequently prevents schemes for private ends by its officers snd stockholders. Following tbe adoption of this system is almost an unbroken line of fidelity and good laltb with the patrons of tbe nation al banks. Tbey cannot become monopo lies, for by the nature of their organization tbey cannot combine. The only serious charce Is that they bave frown rich. They have not individually amassed lor- tunes, but tney are universally sound. It Is true tbat in the commencement they made money by tbelr circulation, but tbat Is not true now, a evidenced by the report of tbe comptroller of currency, 1800, (aee page 7). Ee says, "It Is a well known fact that the circulation of national banks is in process of retirement Dur ing the five years ending October, 1800, the aggregate of their ciiculatlon, based upon deposits of United States bonds, wss reduced from $270,804,189 to 1124.058.730. showing a net decrease during five years of $151,845,463, a decrease for each year of $30,200,000." Tbls ia more signlflcsnt when we take Into account that there was during tbat period an aggregate in crease of 839 national bsnkr. It ii true that the issue of notes was profitable when the government's 7 per cent bonds were at and below par. Then money could be made on the circulation, out with 4 per cent bonds arl20, circula tion Is of no profit. -It Is plain to be seen that this voluntary withdrawal would sot take place If profitable. Compare investments In bsnk stocks wltb Investments in other stocks as an in vestment for dividends. It it not diffi cult to find other stocks paying dividends Irom 6 per cent, to 60 per cent and more. but it Is rare thing to find national bank paying over 8 per cent tne majorl ty of them pay not over 6 per cent. It is the good name tbat they now live on the fruit of well-merited confidence. A return to tbe old system would be to the detriment of tbe depositor, rather than to the bunker. Only In tbe sense in which money means capita), do we want more. In the sense In which it is used as a medium of exchange to facilitate commercial trans actions, the only test of tbe amount neces sary is tbe amount tbat can be maintained at tbe specie standard. Danger la ahead when we depart from tbls. Money must bave an Intrinsic value, the same as any other commodity. What the farmer wants Is a uniform. non-fluctuating money. This la true tor tin reason tbat he cannot, from the nature of his Dullness be at tbe centur of trade and take advantage ot fluctuations. Money system will not prevent pan la as long as people speculate aad borrow more money than tbey have means to pay. While this continues, Just so long will we bave panics and forced liquidation. These troubles cannot be righted by legislation. Tbe simple old rule is Inflexible in its op eration, that of supply and demand. Legislation upon these economic que. tions Is dangerous. Last November, when the whole financial world wu trem bling in the balance, tbe small part of tbe trouble was the gold and the corrency I the greater, tbe confidence and. tbe ex- changes. The little slips ot paper, checks and drafts, with whlcb we pay our erocer and merchant, are placed by tbein to their credit in the bank, and they, in turn, send their draft to the wholesale bouse sod to the manufacturer at the large centers, and they are again taken to the bunk and placed to their credit and by this means no actual money chances hands. . It is all owing tu tbe confidence based upon the void and currency in the bank If wanted. This exchange amount to 0214 Dir cent aod the gold and currency to 1 pet ceni., and this Is what Is unbalanced by want of confidence, and confidence Is but by legislation, lending to overturn well es- tablfHlied financial systems. Legislation against bauks was the principal cause of the panic ol '87. After 100 years of national existence. there lis come certain settled conditions. The constitution ol the United Stales may be reg.inid as one, alo the contititttilons of many states. The treasury syBtem In the main should he one. ' And It Is my firm bellnt that the national banking ayalem la audi thai It should bo pmtected and extended by a wise lift aftr all the natlonuldeht Is puld worth M $ 1.25 2.BO 3.50 4.50 M tl lowest prices. as a protection to tbe peoplo. People and goyernments bave tried for centuries to substitute the "shadow for the substance" in debased coin, paper money etc, and it is with humiliation that we must confess tbat this great cation prac tices fraud when It stamps 78 cents worth of silver "one dollar." The great ocean ships are buffeted by tbe sea and in tbe hurricanes and cy clones only the stoutest survive. We can not control the elements, and tbat Is what we seek to do when we attempt to create values by legislation. We must create values by tbe old process the sweat of our brow and prepare for the elements. The motto of Ironquill is "When communities tarn loose Social forces, that produce Tbe disorders of a gale. Act upon tbo well-known law, 'Face the breexei but close your Jaw.' ' The coroner of Cuvahoea county has begun bis investigation of tbe cause of the disaster that occurred on the Nickel Plate rood June 21, Dl. Every year the number ot railroad accidents Is on the in crease, which should teach tne people tbat It is necessary to clothe tbe railroad commissioner with seditlonal authority to make a more uniform set of rules to eav ern the operating departments ot all roads in tne state. Wnr does the metopolitan press give the prize fighters so much free advertis ing? The advertising which this brutal calling get is what causes it to appear to be popular with the people. If ail the newspapei in our large cities would for one year agree not to print a word con cerning tbe slugging fraternity, there would be no such fraternity, and Die country would be that much better off. Tub Elyria Democrat predicts s won derful rupture in the Republican ranks over the nomination ot Mr. Haskell, Now, Mr. Reefy, we do not expect to loose one vote on Mr. Haskell. II. anything, we ex pect to gain. Tbe candidates all went Into the field for a fair fight aod only one man could be selected. Hence, we pre dict no such thing will take place as tbe Democrat man is worrying; over. The compositors in the Akron Beacon office attempted to dictate to the manage ment whom tbey should employ. Tbe re sult baa been tbat a number of fine print ers from tbe Beacon office bave been look ing for work elsewhere. Served them right. Those Democrats who are so anxioua to dig grave for Senator Sherman would better wait until the corpse is ready. There is an old but good maxim, "catch your hare before you cook it," which we commend to them. The plant of the Obcrlln Record wss contracted to be disposed of last week, but tbe purchaser could not raise the money when tbe time came for the transfer of the property to be msde. Toe bonrd of directors In Norwatk bave made a change. Superintendent of Schools Comings has gone to Ironton, O., at an increased salary: the principal of the school la to succeed blm. It would certainly be a litrle Inwoven. lent to admit Guatemala to tbe union as a state, notwithstanding tbe anxiety ol her citizens to come In- There's too much In tervening teiritory. It Is difficult to find s man, no matter what his politic, who does not honestly bellev that McElnley will lie Ihe next governor ot Ohio. Ihvitiko a man to church and killing him on tbe way Is the latest social fad in ruial Virginia. It will scarcely have many Imitators. Judob Hmxax made a very good se lection when be named W. B. Follenibce for member of the board of election. The Democrat man in Elyria has built him a new office. This la an indication ot a rapid Increase of wealth. The New York Sun doesn't believe In rainbow politics. It concedes In sdvance the election ol McKlnley. j . The cloak makors ln Cleveland went out on a strike last week for higher wagea. A buinorous fact about Hood's Barsapa. rills U expels bad bumor and cteates good humor. Be sure to get Hoods. Su: ii in er Parasols! Parasols! JI M T 'i . .... IB II ,m SUMMER DRESS GOODS! Black Dress Goods in large 6tock for summer wear. Black Embroidered Dress Goods, the latest thing. Chalies in all qualities and 'prices. Desiring to reduce our stock, we are making low prices on many goods. Laundon, Windecker & Co "We do sell the best Umbrella in the market. is guaranteed. The price, too, is within the reach of all. Sprague's Patent Giant Frame Umbrella Tha Ll(hut and Btmrort Cmkr.ll oa tb Glob. Mo tin U break t SJolM hudlal-rut dyes I Wliar other rnunea ere weak SPRAGCE1 GIAKT rBAMEIattivna-l Also EPRAOVE'I IMPROVED PARAGONS. Manufactured by SPBAGUE & FREKCH, Norwalk, 0., U. S. A. For Sale at the Popular Store of v E. E. Goodrich Goods 1 Every one of them O 7 If