## June 15. 1867. N. 1242.

### The National Bank System of the U. States.

Um das für den Krieg nöthige Geld beizubringen, Chase offered to capitalists, capitalists and others the inducement of large immediate profits für die National Banks undertakers. Z.B. The profit and loss outline of the case stands at presents present thus for any 5 persons setting up a National Bk. on the basis of subscribing $100,000 (20,000l.) in lawful money. (Assume 5$ = 1£.):

1) 20,000l. deposited with the Comptroller in Un. States Bonds, 6%, in coin, equal at present price of gold to, say, 81/2 in greenbacks, will produce annually 1700£ (nämlich 20 000£ à 81/2%). 2) The Comptroller will issue for this deposit 90% of National Bk. notes, say 18,000l.; against these 18,000£ in Notes the Bank must keep 15% of Legal Tenders, or 2,600£, leaving 15,400l. available for advances at, say, the same rate of 81/2% in paper, producing per annum 1309£. (15,400 à 81/2%) 3) The result is, therefore, to give an immediate gross return of over 15% p. annum, or 3,009l, on the 20,000£ put down.

The private bank, started purely on its own credit and connection, has gradually to get out and establish a circulation for its notes. Erst nach mehren Jahren it can command a circulation of such magnitude as to be of importance in the profits of the business. Die National Bank launches at once of the whole of the (virtually) Gvt. Notes received by it from the Comptroller, and for the simple reason that they possess almost all the qualities of a legal Tender note. Daher die rasche multiplication der National Banks, besonders in the more remote parts of the country. The Sub-Treasuries were mere offices or vaults for the safe storage of its revenue collection. Waren in no sense credit institutions. So lange as the Federal Gvt. had a surplus revenue and no public debt, they answered. Nicht so, when , and Gvt. became borrower on large scale, and by means of the issue of inconvertible paper. It became, then, apparent, apparent that the Secretary of the Treasury was utterly destitute of the appropriate Organisation. There was no central and powerful Bank, and the Sub-Treasuries were warehouses, not places of financial business. Dieß new organisation has all the faults and dangers, and scarcely one of the advantages and safeguards of a chief Federal Bank.

In a table (C) below, we give from the official returns collected by each State, an abstract of the condition of the State Banks at the end of 1862, or rather early in January 1863, a year after the suspension of the cash payments, and just before the passing of the first National Bank Act at the end of Feb. 1863. The number of banks in each state was in no case unmanageable; in New York State f.i., it was 308; in Pennsylvania 94; in Illinois 25; and the local supervision was aided by general local knowledge.

In the 3 groups of states included in the table C, there were 1205 banks, but 998 davon in the 11 commercial and leading States, forming the Eastern and Middle Regions of the Union. Their PerCentage of Assets und Liabilities were:

B) Summary of Condition of the 998 State Banks in the 11 Eastern and Middle States, 1st Jan. 1863.
Liabilities. P.Ct. Assets. P.Ct.
Circulation 11.3 Cash reserves 12.1
Due to other Banks 10.7 Gvt. Securities 17.3
Deposits 40.0 29.4
Other liabilities 4.5 Due by other Banks. 12.6
66.5 Loans and Discounts 54.2
Capital paid. 33.5 Other investments 3.8
Total: 100.0 100.0 |
141

In the cash reserves, appearing here as equal to 12.1%, of the assets, were included, of course, legal tender notes of the Federal Gvt. In actual specie the Banks in the above category seem to have held about 7% of their assets. The Gvt. securities included State Bonds as well as Federal Bonds. In Cash Reserves and Gvt. Securities, the State Banks held very nearly 29.4% of their total assets. The large items on both sides of the account of sums „Due to“ and „Due by“ other Banks, arise from a practice early adopted in all American returns of distinguishing the balances between one set of banks and another, in order to ascertain in some degree with what exactness the system of exchanges was kept up. On the Liability side, the Circulation was only 11.3%, and the Capital paid up was 33.5%. At the end of 1862, the State Banks had so arrived at a condition of no little strength. We find from table C, that in the 5 Middle States, including New York and Pennsylvania, the Circulation was only 5.7% of the liabilities, against 26% in the more remote and less commercial Eastern States, and 32.5% in the still less populous and less wealthy North Western States. Where the facilities and resources of capital and credit are largest, the quantity of circulation is least. The public have to pay for every Note they retain, and, daher, they retain exactly as many as it is worth paying for, and no more. In table D returns of the 261 State Banks existing at the close of 1861 in the 10 Southern States, just before the Civil War. Diese Figures less trustworthy than in table C., from the more scattered nature of the Banks, and the incipient disorders which, in 1861, prevailed in the South. They give, however, forcible evidence of the greater poverty of the South as compared mit dem North in the comperative largeness of the Circulation and Loans, in the Smallness of the Deposits, Reserves, and Gvt. Securities.

Table C.) Un. States. Twenty Northern etc States. Official Return of State Banks therein, Jan. 1, 1863, prior to passing of Nt. Bk. Act. 25 Feb. 1863. 00,000’ are omitted. Thus, f.i., 65.5 = 65,650,000
Liabilities Assets
A.) Six Eastern States (507 Banks) B.) Five Middle States (491 banks) C) Nine Northwestern States. 207 Banks D) Total 20 States. 1205 Banks. A. B. C. D.
$P.C.$ P.C. $P.C.$ P.C.
Circulation. 65.5 26.0 31.5 5.7 19.6 32.5 116.7 13.2
Due to other Banks. 20.5 7.1 68.4 12.4 1.3 90.3 10.2
Deposits. 66.7 3.0 267.7 48.6 21.2 34.1 355.7 40.2
Other Liabilities. 11.4 4.0 28.0 5.1 4.6 1.0 44.0 5.0
164.2 60.1 359.8 71.8 46.8 67.6 608.8 68.6
Capital paid up. 126.8 39.9 155.2 28.2 15.7 32.4 297.7 31.4
291.0 100.0 551.0 100.0 62.5 100.0 844.5 100.0
Assets.
$P.C.$ P.C. $P.C.$ P.C.
Cash Reserves
Specie 12.8 4.5 51.2 8.3 7.4 12.0 71.4 7.5
Cash items 1.1 42.0$7.0 1.1 1.7 44.2 4.5 Other Banks. Balances due 52.2 25.2 10.1 46.3 7.7 9.2 14.8 81.8 9.5 Notes in hand 11.9 4.0 29.0 5.0 7.4 12.0 48.3 5.1 Stocks 8.0 2.9 146.1 24.3 8.5 13.7 162.6 17.2 Loans 216.3 76.0 265.8 44.2 24.5 39.2 506.6 53.0 Real Estate 4.5 1.7 13.0 2.0 1.6 2.6 19.1 2.0 Other Investments. 2.6 0.8 8.3 1.5 2.5 4.0 13.4 1.3 284.4 100.0 601.7 100.0 62.2 100.0 947.4 100 A) Six Eastern States: Maine, 69. New Hampshire, 52. Vermont 40; Massachussets 183. Rhode Island 88. Connecticut 75. All: 507. B) Five Middle States: New York: 308. New Jersey, 52. Pennsylvania, 94. Delaware 5, Maryland 32. Total: 491. C) Nine North Western States: Illinois, 25; Indiana 37; Ohio 55; Michigan 4; Wisconsin 64; Iowa, 14; Minnesota 7; Kansas 1; Nebraska 1. Total: 207.| 142 Table D.) Unit. St. Ten Southern States. Official Return of State Banks at Close of 1861, prior to the Civil War. D) Five Southern States. 147 Banks. E) Five South Western 114 Banks. F) Total Southern States. 261 Banks. Liabilities.$ P.C. $P.C.$ P.C.
Circulation 39.6 32.0 31.5 27.3 71.1 30.1
Due to other Banks. 4.2 3.3 6.1 5.5 10.3 8.0
Deposits. 16.5 13.0 21.5 19.0 38.0 12.0
Other Liabilities. 4.1 3.3 5.6 5.0 9.7 4.1
64.4 51.6 64.7 56.8 129.1 54.1
Capital paid up 56.3 48.4 51.0 43.2 107.3 45.9
Total. 120.7 100.0 115.7 100.0 236.4 100.0
Assets
$P.C.$ P.C. \$ P.C.
Cash Reserves
Specie 8.1 6.7 21.5 18.4 29.6 12.4
Cash Items 0[.]2 1.8 1.5 2.0 0.8
Other Banks
Balances due 5.1 4.1 11.0 9.3 16.1 7.0
Notes in hand 3.8 3.2 6.0 5.1 9.8 4.0
Stocks 10.0 8.3 8.0 6.8 18.0 7.2
Loans 79.3 65.8 61.7 52.7 141.0 60.0
Real Estate 10.6 8.4 2.2 1.7 12.8 5.0
Other Investments 3.5 3.5 5.1 4.5 8.6 3.5
Total. 120.6 100.0 117.3 100.0 237.9 100.0

Unter

• D) Five Southern States: Virginia (66) North Carolina (31) South Carolina (20) Georgia (28) Florida (2) Total: 147
• E) 5 South Western States: Alabama (8) Louisiana (6) Tennessee (14) Kentucky (44) Missouri (42). Total: 114.