THE ENTERPRISE. WEDNESDAY JTJYL 1. 1891.
BANKS AND BANKING.
FOUNDATION AND PRINCIPLES
OF OUR NATIONAL BANKS .
e are in n
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
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
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
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
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
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
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
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
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
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
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
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.
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.
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
Every one of them
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