induced Congress to emit $150,000,000 of paper money, and so alarm the public, that $20.000,000 in specie were drained from the banks in thirty days after the reading of Mr. CHASE's first annual report. The country then accepted the necessity of Government paper money as a war measure. They recognized the fact that it was a resource within a fixed limit, although very few thinking men accepted the dogma that it is "borrowing without interest," since all know that it is the most expensive mode of borrowing that can be adopted by either Government or people. The Secretary, in his late report, fully admits this fact, and asserts that "additional loans in this mode would, indeed, almost certainly prove illusory; for diminished value could hardly fail to neutralize increased amount." "Sufficient circulation having been provided, the Government must now borrow like any other employer," etc. With these views, Mr. CHASE's future policy is certainly marvelous, it being no less than to add to the outstanding issue of the Government $300,000,000 of inconvertible bank paper, of a less value than the Government notes of which he complains, and to make the system of issues" a permanent national currency"! There have been organized, he informs us, one hundred and thirty-four of these banks, with an aggregate capital of $16,081,200, which is an average of $120,000 each. At this average, the number of banks under the law will be two thousand, with $226,000,000 of capital, and authorized to circulate $203,400,000 of paper notes, receivable for public dues and redeemable in greenbacks. If these banks do any business besides emitting circulation, it must be to loan their notes and the Government deposits that they are to have, on values inflated at present fifty per cent, and the action of their own notes will still further inflate prices, because they will increase the existing paper money fifty per cent. These facts are a guarantee that those banks can never pay specie, because a return to specie payments by the old banks would sweep away half the assets of the new institutions, as was the case with the late National Bank in 1839. Let us suppose that these concerns should hold the whole of their $100,000,000 of Government deposits-and it is intended that they shall hold much more than that-and that they have loaned the money on securities inflated one half. On the approach of peace, the Government will want its money; the old banks may resume; and the new banks attempt to realize to pay the Government, while their notes are run in for redemption. They would have to sacrifice $100,000,000 of assets to pay the Government, while at the same time they would be compelled to sell stock to redeem the national circulation, which would become worthless from discredit. At such a moment, the insolvency of the whole mass of banks would involve the Treasury in dishonor and the Government in ruin.

In this connection consider the nature of this "uniform currency," for it is this idea of uniformity that is continually dwelt upon in speaking of these bank issues. Will it then be uniform? Greenbacks are, and why not this? The answer is very simple and plain, that it will not be, for it is edeemable (that is, convertible into legal tender.) only at the point of issue. Suppose one were to receive one of these notes issued in Oregon, in some out of the way village, and redeemable only there, what would be its value in New York city? Of course it would only be what the redeeming agent in that city (if it had one, if not, what the broker) chose to give for it, and he would buy it at a discount just in proportion to the expense and difficulty of making the conversion. It would be more difficult to send a note to Oregon to be redeemed than it would be to send one to Chicago, and

therefore the discount on it would be greater. Hence these notes will be at every shade of discount, and as far from uniformity as anything could well be. Greenbacks differ in a very essential particular; they are a legal tender for all debts, and, of course, when notes are a legal tender their point of redemption is everywhere where there is a purchase to make or a creditor to pay. These new bank issues are not to be a legal tender between individuals, and are only to be redeemed (that is, converted into legal tender) at the point of issue.

And in this uncertain discount on these notes will consist the chief profits of issue. The history of the New York law is the proof of this. Nearly all the amendments of that law through many years were directed to circumventing the banks of issue, who kept agents to buy up their own notes at a discount. The plan is this: The law allows five individuals— two men and three clerks to organize in an inaccessible village a bank of $50,000. They are to pay in one-third, say $15,000, and one-third of that is to be put into bonds, say $5,000. On these bonds they get $4,500 circulating notes, with which they buy more bonds and get for them $4,150 more notes, and, repeating this operation six times, they will have lodged $26,000 of stocks and have out $24,000 of notes. The account will then stand

Capital ..
Stocks lodged.

Notes out....

$10,000

26,000

$36,000
24,000

They draw $2,520 per annum interest from the Government in gold on the stocks, and lend the $10,000 at 7 per cent. The circulation cannot be redeemed, because the "place of issue" cannot be found. The owners have a place of redemption in Wall Street, where they charge from to 5 per cent, according to the panic which they can excite. The creation of panics is one portion of their craft. If there is no alarm redemptions are sluggish and profits small, and circulation bankers are disgusted. Means are taken to alarm the public and cause a rush for redemption, when the rate rises to 5 @ 10 per cent. The "uniform currency banks" rake down the profit and then soothe the public mind until they get the circulation out anew. If they redeem six times per annum, at 2 per cent, they make $2,880, and the profits are

66

This is a mere circulation bank, and does not take into account the profits of Government deposits without interest on security. It is simply a uniform currency" machine. It is easy to see that this system will, sooner or later come to the ground; that the notes, when panic is carried too far, will not be paid by the banks, but will fall upon the Treasury. How will the Treasury meet the demand in that hour? By selling the stock held by

the banks. What will $300,000,000 of stocks bring at a moment of dissolution of the currency?

The laws of the State of New York, after the experience of twenty years' operation of the security system, gradually improved until the currency in the State had become very uniform--nearly on a par with specie, and, therefore, on a par with other well regulated banks in other States. This was done by requiring State and United States securities. Thus, take any New York bank, say Commercial Bank of Whitehall. Its position is as follows:

Now, if this bank lodged its stocks in Washington, instead of Albany, would its notes be any more secure, or uniform, or national, or nearer to specie standard? Certainly not. Let us go to Indiana. The Farmers Bank has $53,000 Indiana 5's to secure $45,810 circulation. If Mr. CHASE compels it to sell its State stocks and buy United States stocks, will the purposes of currency be any better subserved? Besides, in case of general disaster, would it not be better that the stocks should be part State stocks, so that such a mass of United States securities might not be thrown on the market at once.

Thus we see that there is no "permanency" and no "unformity" in this currency. It is a mere irredeemable issue of bank notes, petted and fostered by the Government, and, therefore, if the system had any permanency it would only become an immense political machine. The benefit Government expects to receive is really the most wonderful part of the plan. Mr. CHASE tells us that it will create a demand for United States securities as a basis for the banks. How strange it sounds to have such a reason as that urged, when we know that the plan contemplates the depositing of the bonds with the Treasury of the United States and the issuing on them, by the Government, of 90 per cent in currency. That is, Government pays these petted banks 6 per cent in gold on its bonds for the privilege of issuing to them this currency, when it might just as well have issued greenbacks without the intervention of banks or bonds and without paying any interest. Such a benefit as that is certainly marvelous! And yet this is urged as the great reason why this system should be supported, and Government feels so very grateful for the privilege (?) thus granted that it intends to deposit all its funds with these corporations without asking any security, and is to tax them very gently.

A NATIONAL CURRENCY.

BY A. K. SHEPARD,

In a country like ours, where commerce is the chief pursuit, many social evils are directly attributable to radical faults in business, which are very easily corrected, and yet are allowed to exist for generations.

For example, counterfeiting is a crime alarmingly on the increase, and one which leads to others of even worse character, and its very existence is due to the business of the country which tolerates such a system of currency as that with which we are afflicted.

It is not too much to say openly, and from the results of observation and study, that our paper money, as it now exists, is an intolerable nuisance, unworthy the genius of a people making as high pretensions as Americans.

In the State of New York are some three hundred banks, with a circulation, in June, 1863, of $32,000,000. Each bank issues notes of the various denominations from $1, to $500, and very frequently using several plates for engraving the same denomination.

In new England are over five hundred banks, issuing all sorts of notes, and in the Western and other loyal States are eight hundred more, making a total of sixteen hundred banks in the country, issuing notes.

Most of these notes are quoted at various rates of discount, from per cent to 20, and even 40, per cent. Most of them are unbankable out of their own State; many irredeemable by reason of dangerous counterfeits; and these counterfeits in circulation by thousands-a premium on crime and rascality. Banks and brokers thrive, while the community is fleeced and annoyed.

There are no less than one thousand different kinds of bank-notes, which every business man in New York or New England is called upon to criticise and examine, and pay discount on, and suffer more or less from, in the ordinary course of trade.

We talk of the inconvenience of traveling on the continent of Europe, caused by the difference in the coins of each petty State, while the citizen of Pennsylvania or Illinois must visit the broker before he can visit New York or Massachusetts.

Now, opposed to this confused and anomalous condition of the currency, is a system of paper money supplied by Government; one which it is as much the prerogative and duty of Government to provide as to issue coin, and which should represent the whole wealth and material resources of the country; a currency that would pass equally well in Maine and Minnesota, and whose simple eight or nine denominations would not require the skill of an adept to distinguish from counterfeits. Such a system the progress of the age requires, and the commerce of the country should demand of Congress, at its present session, such legislation as will suppress the illegal issues, which infringe upon the constitutional rights of the general Govern

ment.

What is our State banking system but an attempted evasion of Art. I., Section 10, of the Constitution of the United States, which expressly states that "no State** shall emit bills of credit."

Are not our State bank bills registered and entered by State officers, and

does not the State hold the securities and stand godfather to the whole transaction? The bills are as much State "bills of credit" as if issued directly by the State.*

The best corrective yet proposed to these abuses, is a good system of banking to be authorized by Congress, and the people owe it to themselves to lend it their hearty support. The present law may have its defects; but, if it has the act can be easily amended and the system perfected. To the whole country belong the profits upon currency, because upon the whole country are visited the evils resulting from it, and this can only be secured by a national currency. Nor can the banks complain. †

In June, 1863, the banking capital of the State of New York was $108.499.653, and the aggregate profits on that capital, in round numbers, $18,000,000, or about 17 per cent. Taking from the banks their $32,000,000 of circulation, would still leave the aggregate profits on their entire capital 14 per cent.

* We think our correspondent is in error here.

1. A bank bill can in no sense be said to be issued by the State, any more than the promissory note of any corporation is the note of the State. It is not upon the credit of the State that the bills are issued The State does not guarantee their payment, it does not in any way lend its credit to the banks, it forces no one to take the bills they issue, and becomes in no way responsible for them. The bank issues stand solely on the credit of the bank whose promises to pay they are.

2. What agency, then, it may be asked, has the State in the matter? We reply, that it simply regulates this branch of business, as it regulates others within its own territory. The State does not grant the right itself, but it restricts the right to issue bank bills to those persons and associations who give certain security by which the public is saved from imposition and loss. No one contends, of course, that the Constitution of the United States contains any provision prohibiting the issue of notes or bills by private persons or associations. And if no clauses of State Constitutions and no State statute intervened, what would there be to prevent any man or set of men issuing notes and circulating them? For the powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people. The State, however, as we just said, steps in to regulate this branch of trade, restricting this right to those persons, etc., who give security, thus saving the public from imposition and loss. This is the sole agency the State has in the matter. Those who maintain that the charters of banks, granted by State governments and allowing the issue of notes, violate the Constitution, might with more force argue that the issue of State bonds or State stocks is an infringement of the prohibition against bills of credit, because these are pledges of the credit of the State.-ED. HUNT'S MER. MAGAZINE.

We do not understand how, by transferring the currency from State banks to United States banks, the country is to receive any benefit. The country des get the benefit of the present “greenbacks;" but all the profit of the United States bank currency goes to the United States banks, just as the present profit on State currency goes to the State banks. If, therefore, we want a uniform currency, and think the Government should have the profits, the present issues must be continued, and State currency taxed out of existence. We see no other way of accomplishing these ends.-ED. HUNT'S MER. MAG.