the system itself comes to an end. When these notes are deprived of the agency of government in putting them into circulation, we predict an immediate downfall of the whole system.

The main argument which establishes a superiority for the State Banks over the National Banks is this: that the former in emitting their notes, do so only when they receive for them an equivalent in good commercial paper. The security for the redemption of the notes is therefore doubled. Such an emission of paper is only the exchange of a well-known credit for one of restricted currency. When banking operations are conducted upon any other basis, they fall under the designation "kiting," and being known as such, either come to an early termination, as they did many years ago in this part of the country, and but a few years ago in the West—or, if they continue, as was until lately the case in the two instances mentioned in the first part of this article, the extent of the injury resulting from them is so limited as not to work any practical harm. But the National Banks are essentially banks of circulation, and nothing else. They do scarcely anything in the way of discounts, being furnished with a greater source of profit through the forced circulation performed for them by government. The relative soundness of the two systems is therefore so wide apart that the inferiority of the National Banking system is seen to be fatal to their permanency and solvency.

Let us take an example. We will suppose a National Bank with a paper capital of $500,000. This money is invested in government bonds at par. These bonds are hypothecated with the Comptroller of the Currency, and in obedience to the law, that officer issues to the Bank $450,000, or ninety per cent., in circulating notes-notes enjoying the quality of being legal tenders both to and from the government. The government is therefore compelled to take them at par in payment for more bonds, and in turn can compel its creditors to take them at par in payment for services or supplies. With such an amount of capital, let us see the extent of kiting operations which a National Bank can do.

The limit created by law is $10,000. Having reached this figure, it must stop. Now what has been done? On a paper capital of $500,000 the enormous sum of $1,366,278 has been put in most active circulation; while the reserve of $341,568 has probably been mostly lent out on call loans, and thus made to contribute still further to the inflation. The profits of the Bank are, aside from what it may derive from temporarily lending out its reserve, six per cent. in gold on $1,518,081 worth of United States bonds; or, $91,084 per annum, payable semi-annually in gold. This is nearly twenty per cent. per annum in gold on its paper capital, and this is just what all these institutions with a few exceptions are now doing. They are put to no trouble, either. As government does all the drudgery of keeping their paper in circulation, the banking business of such institutions may legitimately be conducted in the garret rooms of a tenement house. Neither marble buildings, nor fireproof safes, nor plate-glass windows, nor gilded counters are required.

Should any popular disaster, or commercial panic, by creating a want of confidence, or even a return to peace, by creating a demand for that capital which now for lack of commercial enterprise is locked up in government bonds, largely occasion their sale, and precipitate a fall in their market valueshould either of these events cause United States sixes

to fall to 70, what becomes of the whole system of National Banks? Who can say therefore that this system is not fraught with dangers of a most momentous character? All the bank panics with which this country or any other country has ever been afflicted will bear no comparison to the ruin which will follow the stoppage of banks issuing in the aggregate three hundred millions of active currency. The only immediate remedy we still possess to avert this tremendous catastrophe is in depriving the notes of their character of quasi legal-tender. Neglect that precaution, and nothing can arrest the course of impending financial calamity.

It is no good argument to contend that because National Bank notes are preferred by the people, they are better than State Bank notes. While admitting the advantage they possess in being printed with a less number of designs than the State Bank notes had; it is manifestly absurd to suppose that their superior ratio of currency is due to this fact. For that matter, a little concert of management among the State Bank officers might have secured a similar advantage for the State Bank notes. The superior currency of the National Bank notes is unquestionably due to their quasi legal-tender character. long as they are a legal tender to and from the government, and are receivable for taxes, &c., and payable for supplies, &c., they must, of course, while the National Banks remain solvent, continue to be preferred to State Bank notes. Their circulation is a forced one; and it is to this fact, and not to any intrinsic merit they possess, that they owe their superior ratio of circulation.

So

That the National system provides a large market for United States bonds when their sale is a matter of pressing moment, is true; but with less circumlocution and less injustice, a larger and readier market might have been created. The credit of the United States, when not bolstered up by such false expedients, would stand much higher than it does today. The bonds of the government need only to have been offered to the people at what they were worth—that is to say, at the price they would bring in open market-and they would have been absorbed in sufficient quantities for all practical

purposes. But what has been the effect of this boasted system of absorbing United States bonds? For every bond absorbed there has been a National Bank note issued, and for every National Bank note issued, there has been a Treasury note retired. The effect of the whole operation has therefore been to convert what was a loan to the government without interest, into a loan with interest, and to transfer this valuable privilege, to the extent of three hundred millions of dollars, to the National Banks. Eighteen millions a year in gold as subsidy to a pernicious system !

And now as to the alleged tendency of this system to maintain the credit of the government by making every holder of its notes an interested party in upholding the government. If it could produce this result, which we deny, nothing would be more unjust.

Anything that tends to support and prolong social development in any phase, whether that phase be Individual, Tribal, National, or International, is an evil; for the artificial prolongation of any phase of progress is contrary to the laws of

nature.

Unless the credit of the government is supported by means of equal interest and solicitude to all, it bears unequally upon those who profit little by it, and confers a disproportionate benefit upon those who profit largely by it. The man who holds a fivedollar National note is very little concerned by reason of this fact in maintaining the National credit, while he who holds thousands of dollars of such notes is by reason of this fact induced to submit to any abuse of power, no matter how onerously it may bear upon himself and others, rather than that his personal pecuniary interest should suffer. And experi

ence supports this view, for it was seen in the case of the United States Bank, that while certain classes were largely interested in maintaining the abuse, the people at large rejoiced when it came to an end-notwithstanding that its bankruptcy entailed more or less loss upon all.

In its legal aspect, therefore, the National Banking system, taken in connection with the invidious taxation of the State Banks, is clearly unconstitutional; as a social and politi

cal institution it is remarkable only for its incongruousness and injustice; and as a financial measure it is deeply sown with the seeds of early and frightful decay.

All the disadvantages of the State systems which are included under the head of bank panics, were but those natural aberrations in systems which were gradually reconciling the benefits of credit with the still prevailing unscrupulousness of the age. They would have gradually led to a better state of things, as they did in New England and New York, and ultimately become more perfect.

In the matter of counterfeiting, it is by no means proved that the National Bank notes form a better safeguard against this crime than the State Bank notes did. The contrary would appear to be the fact; for counterfeits on State Bank notes could never hope to pass easily, both on account of the very circumspection to which the genuine notes were subjected, and the limited circulation to which they were confined; while the National Bank notes would appear to furnish an irresistible temptation to counterfeiting. The winding up of this system will doubtless reveal the existence of counterfeits to a very large extent. Some ten or twelve have been already noticed in the daily journals.

It will have been observed that we have said nothing upon the subject of domestic exchange, which the National system is foolishly expected to annihilate. We classed this among those arguments in favor of the system which did not merit a reply. It remains to be proved that any law can reconcile discordant interests, or furnish a bridge by which either time or distance can be spanned.

Since we have gone to the length of condemning this banking system, our adversaries may now fairly ask us to suggest a better one. To this we reply: The State systems are better. Let us go back to them. But if it be asked, is there no better method of banking than that provided by either of these systems? we reply, yes that better method is found in having no system at all. "What! no system at all?" echo the true believers in governmental omniscience and prevision;

no