CHAPTER XV 1876 TO 1882 The changes in the National Bank Act in 1875 Continued broadened the scope and increased the power of national opposition. banks with respect to currency by removing all limitation upon the volume, thereby making banking free. This made it possible to organize banks ad libitum in the South and West, and tended to relieve in a measure the disadvantages which caused so much just complaint from those sections owing to the inadequacy of currency and credit facilities. Rich in natural, undeveloped resources, these sections needed capital for their development. What they thought they needed was currency, and believing United States notes most likely to meet their wants, the agitation against national banks and in favor of the substitution of greenbacks for bank-notes continued. Although bank organization and the issue of bank currency was now absolutely free, the cry of monopoly was still maintained. Comptroller Knox in elaborate reports in 1875 and Knox's 1876, in which the history of banking and bank reports. currency in the United States from the beginning of the government was reviewed, demonstrated that the national system was so vastly superior to any that had preceded it that to abrogate it now and return to the former conditions would mean abandonment of a safe and sound currency, a superior banking system, and the substitution of the old state bank systems with all their evils. The cost of domestic exchange which in 1859 Receivership. averaged 1 per cent had, largely by the national system, been reduced to a small fraction of that rate. Against the charge that the national banks made enormous profits, he showed that, taxation considered, the earnings were actually less than those of banks outside the system not subjected to the onerous restrictions of the federal law. The voluntary surrender of over $50,000,000 of notes by the banks he contended was proof absolute that the profit on circulation could not be as large as alleged. Efforts to repeal the 10 per cent tax on state bank issues were defeated by decisive majorities. Congress made several amendments to the bank act with reference to settling affairs of insolvent banks. The duties of the Comptroller of the Currency in this respect are most important. Under the law the Comptroller appoints receivers for failed national banks, fixes their compensation, adjusts differences, and approves compromises in reducing the assets of failed banks to cash. By means of bank examiners he is fully advised as to conditions. By means of hard and painstaking work he is able to exercise an intelligent judgment and reach a satisfactory conclusion as to the value and adjustment of claims, thereby effecting compromises, speedy settlement and payment, avoiding expensive litigation and delay, realizing a much larger net amount for the payment of creditors, and securing to them their dividends in a much shorter space of time. The Comptroller sustains the same relation to a failed national bank and the receiver, that the court in any of our states does to a failed corporation and the receiver of the same. His powers are parallel and coincident. The cheapness and celerity and high percentage of dividends realized in the settlement of failed national banks compared with the administration of corporate receiverships in our different states is most gratifying and highly complimentary to the national system as · administered by the Comptroller of the Currency. nations. A very important feature of the national banking Bank examisystem is the supervision exercised by official examiners. The statute provides that the Comptroller, with the approval of the Secretary of the Treasury, shall "appoint a suitable person or persons to make an examination of the affairs of every banking association, who shall have power to make a thorough examination into all the affairs of the association, and, in doing so, to examine any of the officers and agents thereof on oath; and shall make a full and detailed report of the condition of the association to the Comptroller." The above provision is wisely made very general in its terms. There is practically no limit to the power of the examiner so long as he is right. The good the examiners do is largely of a negative character, in preventing wrongs and mismanagement which otherwise might exist. Such work necessarily does not come to the public notice, and the system therefore does not receive the credit it is entitled to. They do not always detect bad management and prevent bank failures, but their restraining and corrective influence is of the greatest value. Requiring banks to make and publish five verified re- Value of ports of condition annually upon blanks furnished and reports. in a form prescribed by the Comptroller of the Currency, necessarily compels the banks' bookkeeping to conform to such requirements. It compels system and method in the conduct of each bank's affairs, and insures uniformity throughout the nation. This provision. is most wholesome and far-reaching in its effect upon the conduct of the bank's business. The data thus obtained and collected afford most valuable information as to business and economic conditions. Being subject to the verification of the examiner, they are accurate and reliable. Notwithstanding free banking, the banks did not avail of the opportunity to increase their circulation as had been expected, proving that the demand for "more money" on the part of the South and West simply expressed the need of more capital. Eighteen million dollars of new circulation had been issued under the law of 1875, and hence nearly $14,500,000 of greenbacks had been retired. The privilege of reducing circulation by deposit of "lawful money" was made use of to such an extent that there was a net contraction of national bank circulation of nearly $40,000,000 since the act became operative. Thus the contraction of paper currency was fully $54,000,000. On the other hand, the operation of the changed law with respect to reserve against circulation released $14,000,000 of legal tenders, resulting in a net contraction of $40,000,000. The ability to retire circulation by depositing lawful money and the right to increase at any time, gave to the currency a measurable degree of flexibility. During the two years following the enactment of the law of 1874 fully two-thirds of the national bank-notes outstanding were redeemed through the 5 per cent fund and new ones issued, thus furnishing the public a cleanly and wholesome currency. In 1878 a determined effort was made to supplant national bank currency with legal tender notes. The Greenback party favored this movement. Representative Ewing (Dem., O.), one of the chief leaders of the movement, introduced an elaborate bill for the purpose in the House. The measure was defeated by the very close vote of 110 to 114, a dozen Democrats voting against the measure and as many Republicans for it. This vote greatly encouraged the "Greenbackers" to continue their efforts. |