JOURNAL OF BANKING, CURRENCY, AND FINANCE.

THE NEW NATIONAL BANK LAW, A GREAT IMPROVEMENT ON THE OLD LAW; NUMBER OF THESE BANKS IN EACH STATE-WILL NOT INCREASE MUCH IN THE FUTURE-PUBLIC DEPOSITS IN, AND CIRCULTION OF NATIONAL BANKS-CIRCULATION OF STATE BANKS IN THE THREE CITIES-EFFECT OF MONEY MARKET ON THE CIRCULATION OF THE BANKS-BANK RETURNS OF THE THREE CITIES -CIRCULARS FROM THE CURRENCY BUREAU RESPECTING THE REDEMPTION OF NATIONAL BANK NOTES, AND THE TRANSFER OF UNITED STATES BONDS-FINANCIAL AFFAIRS IN ENGLAND-STATE OF THE MONEY MARKET-RETURNS OF THE BANK OF ENGLAND AND THE SAVINGS' BANKS-STATE OF CIRCULATION IN THE UNITED KINGDOM-BANK OF FRANCE RETURNS.

We devote a large part of our space this month to the new United States Banking Law. An examination of its leading features will convince our readers that it is, in many respects, a great improvement on the proposed law, and also on the act of last session. For all the evil that has been taken from it, and all the good there is in it, we are devoutly thankful. It now becomes necessary that these banks should give security for the public monies received; and, further, that such as are organized in St. Louis, Louisville, Chicago, Detroit, Milwaukie, New Orleans, Cincinnati, Cleveland, Pittsburgh, Baltimore, Philadelphia, Boston, Albany, Leavenworth, San Francisco, and Washington, shall redeem their currency at par in New York city, and associations organized elsewhere shall redeem either in one of said cities or in New York. The bill also provides that these National Banks shall be liable to State taxation, and subject to the laws of the State in which they are situated, in respect to the interest they may charge. These provisions certainly remove some of the most objectionable features of the system, and we believe a little more discussion of the merits, or rather demerits, of the act, and a little more experience of its workings, will convince all that government has certainly nothing to gain, but everything to lose, by encouraging the formation of National Banks at such a time as this.

As to the individuals who are engaged in organizing them, we think they show great courage, and fear they will experience little but disappointment. Organizing any bank, at a time when there is no legitimate bank business for even the old institutions, would be considered by most a little imprudent. But when we remember that the profits of these national associations depend entirely on government business, that the capital they are banking on is made up of values greatly inflated; that a point in the future must be reached, and not far distant, where these values must be reduced to their proper limits, we cannot but feel that they are very far from having a safe and quiet sea to sail upon. As the Secretary of the Treasury has resigned possibly these new lights may be quickly snuffed out by a repeal of the act itself.

But even as the law now stands the provisions which we have referred to above have taken from these banks the chief privileges and advantages given them before. Their only hope of success was founded upon the destruction of the State institutions, and the Secretary, therefore, freely expressed his determination to ruin the State Banks, that the National Banks might be built up. Congress, however, did not sympathize with him in his crusade, and so passed the law in the form we now have it. Thus these new banks have received a great check,

and, hereafter, they will form a less conspicuous feature in the financial affairs of the country.

The following table gives a statement of the number and aggregate capital of the new National Banks in each State on the 27th of May :

The number now increases very slowly. One great inducement for their establishment, as we have already stated, was the use of the public money; but now the provision of law requiring security to be given makes this privilege 'less agreeable, and, besides, this using government funds has been found to be extra hazardous. The exigencies of the public service require the money at times to be suddenly drawn down very close, and this is incompatible with the use of it to any great extent. The only safe use the public money can be put to is to lend it at call, or, in other words, to promote speculation that may be suddenly destroyed to the great loss of the banks.

The clause in the new bill in relation to compelling the national banks to redeem their notes at commercial centres seems to have grown out of the necessi ties of the case. There is very little general business done by means of bank facilities. Almost all business is done now on a cash basis. The government supplies are however furnished by dealers who do not get their money promptly from the department, and therefore require discounts from the banks. Then when they get their pay it is in drafts on national banks. These banks attempted to make payment in the uncurrent notes of national banks at a distance, a proceeding which the old banks very properly resented. To remedy this the new loan makes the national banks keep their notes at par. In relation to this a correspondence took place between the Comptroller and a national bank, in which the Comptroller wrote the following letter:

DEAR SIR:

TREASURY DEPARTMENT, Office of the Comptroller of
the Currency, WASHINGTON, May 28, 1864.

Your favor of the 27th inst. is received. I am acting in an executive, and not in a judicial capacity; but I have no hesitation in giving my opinion upon the point presented by you, which opinion is, that Government depositaries, whether they are Assistant Treasurers or National Banks, have the right to pay Government drafts, by whomsoever held, in the kind of currency which is receivable for Government dues, and by which Government obligations can be discharged.

The Government is bound to receive in payment of all its dues, except duties on imports, the notes of the national banks. A draft of the Government upon a national

bank is clearly payable to the Government in the national currency, and I have yet to learn that the negotiation of a draft changes its character or the obligation of the payer.

The circulation of the national banks is not officially published, although the law requires peremptorily that the returns shall be given to the public quarterly. The amount is stated semi-officially at $35,000,000, which is probably the full amount that the existing capital will authorize, and there is now not much prospect that the amount will be increased to any considerable extent. The old institutions are generally curtailing their circulations. The banks of the three cities had out as follows:

This is a very rapid curtailment, but has in the general volume of the circulation been more than compensated by the paper pushed out by the national banks during the same time, consequently the effect upon the general depreciation has not been felt. The circulation of the old banks in the interior presents a similar course of contraction, prompted perhaps to some extent by the clause in the new loan bill for the fiscal year, 1865, authorizing a new issue of notes legal tender except for customs and interest and the redemption of bank notes. The changing character of the money market has however more or less influence upon the volume of bank circulation. Thus if we turn to the weekly bank returns hereto annexed we find that when money was very dear early in January the Boston bank circulation ran up to $10,185,615; as money became plenty under the last issues of government legal tender, it ran down to $9,210,000 March 28; under the sales of gold, and the efforts of the Treasury to break the market, money became very dear in April, and the bank circulation ran up to $10,938,991, and again fell ten per cent under the returning ease of June. Thus it is evident that the banks, when money is dear and in much demand, avail themselves of that circumstance to swell their profits. The effect of the issues of government money and of national bank notes is to cause a great rise in prices, and this reacts upon the demand for money, because if the price of any commodity doubles it will require double the amount of money to move the same quantity. The old banks are therefore called upon for more circulation, and the whole volume of paper thus swells without there being in reality any more money. It is only a mode of getting more interest for the same loan. Thus if one thousand barrels of flour are sold for $5,000, and the note is discounted at six per cent, the interest for ninety days is 7 cents per barrel. If the price in paper rises to $10,000, and the note is discounted at six per cent, the interest is 15 cents per barrel, which rise redounds to the profit of the bank.

The returns of the New York banks weekly show a remarkable change in the last month arising from the joint operation of the loan bill and the gold law, both of which promoted an extraordinary demand for legal tenders and power

fully reduced the bank deposits. The latter, which had risen from 130 millions Jan. 23 to 174 millions May 14, and to 175 millions June 4, were contracted 16 millions in three weeks. The returns are as follows:

NEW YORK BANKS.

NEW YORK BANKS. (Capital, Jan., 1864, $

2,..

9,..

Date.

January

66

16,..

23,..

80,..

February

66

46

6,.. 13,..

20,.. 27,..

5,..

12,..

19,.. 26,..

2,..

9,.. 16,..

23,.

80,.

7,.. 14,..

21,..

28,..

4,..

178,009,701 25,122,002 6,032,546

-; Jan., 1863, $69,494,577.) Loans. Specie. Circulation. Net Deposits. Clearings. $174,714,465 $25,161,935 $6,103,331 $140,250,856 $300,753,147 134,861,977 387,546,217 165,991,170 23,884,264 6,008,182 130,311,046 416,962,806 162,925,880 24,077,513 5,049,807 130,136,203 460,811,543 162,296,896 24,203,632 5,913,558 130,665,415 427,306,608 163,076,846 24,070,791 5,974,762 133,849,042 425,430,985 165,090,829 23,521,453 5,916,707 140,464,616 467,751,745 168,302,935 22,523,918 5,908,394 148,014,106 514,887,411 174,928,205 22,301,687 5,907,851 154,875,059 575,442,304 182,317,378 21,188,034 5,937,167 158,999,668 518,951,433 189,757,746 20,750,405 5,918,807 168,044.977 688,822,273 198,229,513 21,059,542 5,889,197 169,637,975 618,338,858 199,372,437 20,425,504 5,514,139 168.315,904 576,253,989 203,993,131 19,526,665 5,708,908 171,151,297 676,372,745 204,333,192 20,924,287 5,804,511 170,513,020 658,352,112 198,703,699 21,687,670 5,779,650 168,350,790 646,593,648 196,286,722 24,868,003 5,679,947 161,978,166 672,442,840 194,157,495 24,087,343 5,626,978 164,578,919 446,587,420 192881,246 23,082,028 5,594,832 168,562,197 410,052,013 194,178,921 22,635,155 5,482,357 174,426,682 413,552,127 197,356,939 22,091,691 5,867,855 173,111,884 486,884,114 195,813,462 21,973,180 5,240,812 171,765,696 410,972,198 196,740,609 22,461,604 5,180,639 174,516,367 477,648,207 194,935,822 24,041,704 5,049,457 172,537,248 445,519,165 195,773,583 22,916,291 4,959,096 169,445,767 431,158,427 197,077,002 22,000,988 4,807,195 158,772,982 412,840,362

The specie in the banks was maintained by the payments from the Treasury under the order to advance the July interest. The loans comprise mostly transactions with the government either directly or indirectly and do not much vary

in amount, although they do in character from time to time. The column of clearings shows an extraordinary diminution in the volume of the bank transac tions. This is due mostly to the decline in stock speculations and in the prices. The returns of the Boston and Philadelphia banks are as follows:

BOSTON BANKS. (Capital, Jan., 1863, $38,231,700; Jan., 1862, $38,231,700.) Date. Specie. Circulation. Deposits. to banks. from banks Jan. 4,.. $76,805,343 $7,503,889 $9,625,043 $32,525,679 $12,831,000 $12,351,500 11,.. 77,747,784 7,531,195 10,185,615 31,524,185 12,703,600 11,019,000

18,.. 75,877,427 7,464,511 9,963,389 31,151,240 12,041,000 11,769,000 66 25,.. 74,146,000 7,440,000 9,729,000 80,893,000 11,106,700 12,227,000 Feb 1,.. 73,959,175 7,885,413 9,660,163 30,655,782 10,825,000 11,854,500 66 8,.. 71,765,122 7,265,104 9,579,020 30,030,292 11,315,000 12.272,000

66 15,.. 71,088,849 7,224,924 9,741,471 30,412,647 11,615,000 13,448,000 22,.. 71,074,000 7,215,500 9,411,000 31,831,000 11,329,600 14,925,400 66 29,.. 72,189,003 7,179,310 9,371,440 33,155,888 12,224,603 16,189,724 Mar. 7,.. 72,687,363 7,108,519 9,606,318 33,688,017 12,313,829 16,535,992 72,105,111 7,052,181 9,490,311 83,891,204 12,704,181 17,315,231 73,207,121 7,038,721 9,548,211 35,090,181 18,092,531 17,266,741 78,485,514 7,016,086 9,210,096 34,859,508 18,352,706 17,071,782 April 4,.. 71,838,506 6,856,708 9,442,082 32,861,609 13,601,005 15,786,091

11,.. 18,.. * 25,.. May 2,..

66 9,..

72,620,348 6,932,192 10,447,916 33,324,978 15,094,360 17,362,371 72,328,896 6,869,726 10,831,806 83,510,054 14,447,997 17,054,244 72,538,611 6,952,498 10,938,991 31,810,971 14,715,981 15,790,498 71,270,181 6,642,798 10,127,097 31,461,499 14,206,581 14,206,592 69,471,481 6,716,484 10,521,591 81,172,584 12,801,000 16,239,000 68,888,581 6,644,493 10,126,473 81,633,071 12,500,671 16,201,088 66,683,510 6,573,181 9,899,193 36,605,181 11,871,719 15,733,691 69,201,301 6,541,201 9,681,204 34,391,208 11,101,307 15,925,201 67,093,500 6,509,181 9,160,621 32,771,821 10,875,181 16,130,720 67,942,400 6,524,207 8,771,181 33,305,220 10,710,089 15,057,131 66 21,.. 68,880,121 6,507,021 8,983,121 82,740,201 11,681,602 14,790,012

" 18,.. * 23,.. "30,..

June 7,.. "14,..

PHILADELPHIA BANKS.

46

PHILADELPHIA BANKS. (Capital, Jan., 1863, $11,740,080; 1862, $11,970,130.)

18,...

64 25,... Feb. 1,...

Loans.

Due Due Date. Specie. Circulation. Deposits. to banks. from banks. Jan. 4,... $35,698,808 $4,158,585 $2,055,811 $29,878,920 $4,316.763 $2,963,563 66 11,... 35,458,967 4,158,235 2,050,891 30,484,227 4,001,473 2,814,188 34,896,842 4,158,125 2,044,427 31,194,851 4,330,120 8,063,148 34,849,959 4,103,065 2,047,846 32,354,253 3,500,693 2,905,921 34,345,126 4,108,109 2,056,532 32,027,147 3,453,431 8,271,306 34,146,677 4,102,671 2,066,069 31,033,030 4,080,059 2.461,873 34,590,880 4,102,748 2,069,061 29,911,704 4.322,609 2,080,750 35,059,676 4,102,588 2,119,488 30,783,741 4,463,751 2,099,778 35,519,704 4,102,848 2,167,348 31,435,753 4,837,264 2,114,227 35,913,334 4,102,632 2,208,492 81,712,547 5,323,316 2,116,042 35,956,678 4,099,707 2,308,250 32,511,405 5,508,146 2,333,819

15,...

8,..

22,.

29,...

Mar. 7,...

Mar. 14,...

66 21,...

36,412,923 4,099,664 2,840,132 32,835,038 6,933,974 2,428,227 36,695,415 4,096,401 2,357,768 33,156,496 5,791,191 2,724,935 37,262,220 4,095,495 2,390,092 34,404,607 5,641,638 3,425,805 37,032,110 4,093,461 2,379,827 35,958,444 5,855,277 3,799,151

39,535,334 4,095,387
39,570,567 4,095,475
39,770,436 3,972 349
39,639,436 3,967,268

2,329,590 38,174,046 5,748,257 3,291,176 2,258,386 37,393,247 6,067,966 2,592,465 2,241,885 37,758,836 6,374,531 2,730,540 2,152,827 87,466,311 6,636,576 2,786,080 2,131,919 37,638,814 6,580,548 2,853,894 39,639,436 3,967,263 2,152,827 37,466,311 6,636,576 2,786,080 39,262,695 8,964,522 2,131,919 87,638,814 6,580,548 2,858,894

39,262,695 3,964,522

46

23....

64 30,...

June 7,... 46 14,...

46 21,...

5,993,116 3,186,259

5,930,707 3,007,288

39,723,493 8,694,320 2,100,927 38,249,800
40,286,433 3,964,758 2,077,753 38,367,171
40,286,488 3,964,529 2,074,273 37,588,203 6,403,664 2,998,548

The following circulars have been issued from the Currency Bureau at Waɛbington:

TREASURY DEPARTMENT, Office of the Comptroller of the Currency, WASHINGTON, June, 1864.

Sections 31 and 32 of the National Currency Act, approved June 3, 1864, provide that every association in the cities of St. Louis, Louisville, Chicago, Detroit, Milwaukee, New Orleans, Cincinnati, Cleveland, Pittsburgh, Baltimore, Philadelphia, Boston, Albany, Leavenworth, San Francisco, and Washington, D. C., shall select, subject to the approval of the Comptroller of the Currency, an association in the city of New York, at which it will redeem its circulating notes at par; and that every association not organized in either of the aforesaid cities shall select, subject to the approval of the Comptroller of the Currency, an association in one of the aforesaid cities, or in the City of New York, at which it will redeem its circulating notes at par.

Be kind enough to advise me, at your earliest convenience, at what National Bank under the provisions of said sections your Bank proposes to redeem its circulating notes.

HUGH MCCULLOCH,

Comptroller of the Currency.