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-The profit is greatest when the bank rate of interest is least, for the reason that the bank receives 10 per cent. less in circulation than it deposits in bonds. If a bank has a capital of $100,000, it receives $90,000 only in circulating notes. If the bonds are 3 per cents. and the commercial rate of interest 10 per cent., there is a loss of 6 per cent. on the margin. If the commercial rate is 6 per cent., then the loss is 24 per cent., instead of 6 as in the previous case. In the computation on which the foregoing table of profits is based, the amount of the 5 per cent. reserve which banks are required to keep on their circulation has been deducted from the loanable circulation. But this reserve on circulation is also allowed to form part of the reserve on deposits. If it is not deducted from the loanable circulation, the profits of the bank from this source are somewhat increased.—The premium on the bonds will disappear if they are held until paid by the United States. The bank holding such bonds until maturity will consequently lose the premium. In the case of the 4 per cent. bonds, the loss of 16 per cent. will be distributed over 26 years, making a loss of a little over of 1

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per cent. per annum, to be deducted from the profits in the table. The 34 per cent. bonds, continued in the place of the 6s, being redeemable at the option of the government, the banks holding them are liable to lose the 1 per cent. premium at any time. If a 3 per cent. bond be issued, a bank taking it at par and holding it till maturity would experience no loss; but if at any time prior to maturity the bank should desire to liquidate its affairs, a loss would arise if the 3 per cents. should then be worth less than par.The national banks in 16 of the principal cities are required to keep a reserve of 25 per cent. upon deposits, half of which, except in the case of New York city banks, which are required to hold all their reserve in lawful money, may be on deposit with other national banks in the city of New York.-The banks outside of these cities are required to hold a reserve of 15 per cent. upon deposits, three-fifths of which may consist of balances with their correspondents in the rescrve cities. The following table exhibits the amount of net deposits, together with the amount and classification of reserve, held by the national banks at the dates mentioned:

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From this table it will be seen that the amount of reserve held largely exceeded the amount required. It is estimated by the best authorities that the joint stock banks in England and Scotland do not hold exceeding five per cent. of their liabilities in ready money; the remainder of their reserves being largely invested in English consols, or deposited in the bank of England. - The amount of cash reserves held by the national banks in this country is usually more than 12

per cent. of their liabilities. The banks held on

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Oct. 1, 1875, more than 133 millions of lawful money, of which only about 8 millions was in specie, the remaining 117 millions being in legal tender notes; and on Jan. 1, 1879, the date of the resumption of specie payments, the banks held nearly 100 millions of legal tender notes. The average value of the legal tender paper dol lar on July 1 of each year from 1864 to 1878, and on Jan. 1, 1879, which was the date of the resumption of specie payments, will be seen in the following table:

1872. 1873 1874. 1875 1876. 1877. 1878. 1879.

cts.

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cts. cts. cts. cts. cts. 38.7 70.4 66.0 71.7 70.1 73.5 85.6 89.0 87.5 86.4 91.0 86.2 89.2 94.5 99.4

On Oct 1, 1880, the amount of specie, consisting of $102,851,032 of gold coin and $6,495,477 of silver coin, was more than 109 millions, and the amount of legal tender notes 64 millions. The amount of specie held on May 6, 1881, was 122 millions, and of legal tender notes 70 millions. This large increase of specie is owing to the gold production of the mines, which, since the date of resumption, is estimated to have been $72,000,000,

and to the excess of imports of gold over exports, which, in the same period, has been $150,241,747. The following table exhibits the total amount of paper currency, and the estimated amounts of gold and silver coin in the country on Nov. 1, 1880, together with the amount of each then in the treasury of the United States, in the national banks, in the state banks, and in the hands of the people at that date:

In the treasury
In national banks
In state banks
Elsewhere

Totals..

-From the date of resumption to that of the table, the gold in the treasury had increased $20,976,007, in the banks $73,976,149, while the paper currency has decreased $50,768,829, and in the banks $37,008,585. The increase of gold in the hands of the people had been more than 80 millions, and of paper currency more than 108 millions, since that date.-The amount of silver coin was but 6 millions, which would be largely increased if the number of standard silver dollars to be issued were limited in amount, and the number of small legal tender notes outstanding diminished. During the next two years the legal limit of the existence of a considerable number of the national banks will expire, and congress will be asked to extend their existence for a second period of 20 years. In the absence of pro hibitory legislation by congress, many of these banks will probably go into liquidation, and reorganize again under the same system.-If at any time the national bank system should be discon tinued, it is probable that the provision imposing a tax of 10 per cent. upon state bank notes would be repealed. These notes would then again be issued under laws now existing, or under new laws enacted for that purpose. These various

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state issues would not all be secured or redeemed at any one point, and the loss and exchange upon such notes would again be a burden to the business interests of the country: the cost of exchange between the various commercial points of the country, at the rate of of 1 per cent., being estimated at not less than 20 millions annually. If the government, as has been proposed, should issue the entire paper currency, now amounting to nearly 700 millions, it should maintain a coin reserve equal to that of the bank of England or the bank of France, which is not less in either case than one-third of its issue. Interest upon this reserve at 3 per cent. would exceed 8 millions, and if to this is added the expense of the issue and redemption of the notes, the total amount would considerably exceed the profit upon the circulation of the national banks now outstanding. The preference of the people for paper money instead of coin is exhibited in the last table, and there is danger that if the government, under authority of future legislation, should assume the right to the exclusive issue of the circulating notes, it might extend such issues beyond the bounds of prudence, and again involve the country in a new suspension of specie payments.

Savings Banks with Capital.

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Capital. Deposits No. Millions. Millions 214.0 480.0 26 218.6 470.5 26 413.3 28 397.0 29 501.5 29

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Capital. Deposits No. Millions. Millions. 500.4 713.53,803 481.0 768.2 3,799 677.2 3,709 202.2 713.43,639 197.0 900.8 3,798 190.1

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2,056 470.4 2,048 455.3 2,076 455.9

-The above table exhibits for corresponding dates in each of the last five years, the aggregate amount of capital and deposits of national banks, state banks and savings banks of the United States.Included among the state banks in the total for 1880 there are 2,802 private bankers, employing a capital of $26,120,000, and having deposits amounting to $182,670,000. JOHN JAY KNOX.

BANK NOTES. We do not propose here to examine the part which bank notes play in the circulation of wealth, nor to inquire how far and in what cases they deserve the name of paper money which is sometimes given to them. We purpose only to show what constitutes a bank note, and how it may be recognized.-A bank note is made payable to the bearer, whoever he

BANKRUPTCY.

The constitution of the

United States gives power to congress to establish uniform laws on the subject of bankruptcies throughout the United States. When the constitution was adopted, the English law divided the general subject into two parts, insolvency and bankruptcy; which were administered by different courts, and to some extent upon different prin ciples. The insolvent law was applied to persons who were imprisoned for debt, and who asked for a discharge from prison upon a surrender of all their property; the bankrupt law was applied only to traders, and always upon the suit of their creditors against them-never upon the application of the debtors. Not only the person but the debt was discharged. In respect to surrender of property and its division among the creditors, the two systems were alike. It was strenuously insisted in congress, in 1840, that the word "bankruptcies" in the constitution was to be understood in a technical sense, and that the legisla ture had no power to provide a system of bankruptcy for persons who were not traders, nor to permit debtors to begin the proceedings by their own voluntary petition. This opinion has not prevailed, either in congress or in the courts. It is now fully established that the grant of power is broad enough to permit congress to provide for the settlement of the affairs of all insolvent debtAt the same time a statute of bankruptcy practically is part of the commercial law, and is hardly needed in purely agricultural communities.-The power of congress over this subject has been exercised but three times, in 1802, 1840 and 1867. The two former acts were short lived, the last was in operation eleven years, and since its repeal many of the merchants of the country have discovered that it was highly useful and they are trying to procure the enactment of a new one.

ors.

may be; it is also payable at sight or on presentation, no time being set when it shall fall due.Such are the two requisites of a bank note which essentially distinguish it from all other classes of commercial paper. All other paper falls due at a fixed date stated on its face, and can be transferred only by indorsement, so that the actual bearer is always required to show the signature of the transferer. A bank note may pass from -one hand to another without indorsement, and is made payable any day.-It has been contended, however, that a bank note should bear on its face something more. Emile Vincans, a distinguished French lawyer, says that a note made payable to the bearer and at sight, requires something else to make it a bank note. It would not, he says, be entitled to this designation, if it were issued by a private house or a simple merchant. There is some truth in this statement.—It is certain that the bank note, viewed in its material conditions, has no other distinctive character than that which we have described; but it is none the less true that the bank note derives part of its power, and consequently part of its virtue, as a circulating medium, from the character of the establishment whence it is issued. If it were issued by a private citizen, it would hardly be accepted by the public; it could not be made to pass for ready money, and it would always be returned to the office whence it was issued, to be converted into specie. It would then but poorly answer the purpose intended by it. The attempt has been made in some countries, especially in Scotland, where the issuance of so-called bank notes is optional with everybody; and it has proved that an operation of this nature is not safe for individuals or private business firms, however wealthy they may be. It is not safe even for corporations organized on a small scale. In England, by virtue of a clause introduced in the charter of the bank of London, in-If we may judge by the practice of commer1708, the issue of bank notes was forbidden to companies composed of more than six partners. The consequence was that small companies which engaged in these operations were exposed to frequent disasters. But this does not affect the character of a bank note the essential requisites of which, that it be payable to the bearer and at sight, always remain the same. We may inquire whether it is a great advantage to a banking house to possess the exclusive power to issue notes of this kind, and whether this exclusive right is an important privilege of the bank. There can be no doubt about this. No other form of obligation presents the same advantages to the company which issues it. Notes made payable to the bearer and at sight, are the only ones which can circulate everywhere without any drawback or disadvantage, and which, therefore, can remain in circulation for an indefinite time, answering the same purpose as specie. The exclusive right to issue notes payable to the bearer and at sight, is therefore equivalent to the exclusive right to raise a public loan, by substituting notes for coin in the circulation. CHARLES COQUELIN.

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cial nations, a bankrupt law is almost a necessity for them.-The great leading ideas of all such laws are two: to divide the property of an insolvent debtor equally among his creditors, and to discharge the insolvent from his debts. The former of these provisions is universally admitted to be both just and expedient, but there is not a very obvious justice in the latter, and it rests upon expediency alone. To take from a creditor a part of a debt which is his property, without full remu neration, can only be defended upon grounds of a public nature, and upon the theory that if an insolvent debtor is to remain under the load of his obligations, his creditors are likely to obtain little or nothing from him, while, if he is freed, the community will have the benefit of his renewed industry and enterprise. To reconcile, as far as may be, these conflicting interests, it is usually provided that a fraudulent debtor shall not receive his discharge, the renewed industry of such a person not being considered valuable; and also, that the creditors should be consulted, and that a considerable part of them should consent to his discharge. In France the law adds, by way of discouragement

utes, as amended in 1874, the creditors could vote for a composition, and here it was found that the debtor could contrive to obtain votes for almost any composition. A bankrupt law, therefore, should be provided with some machinery which will act without being put in motion by the creditors. In a scheme for a statute lately presented to congress, it is proposed that a salaried officer, like a bank, or insurance commissioner, should be appointed in each circuit, whose sole duty it shall be to provide the supervision over the speedy and economical settlement of bankrupt estates, which the creditors can not be relied upon to furnish.-Another practical difficulty in the working of these laws arises from the selfishness of creditors. In every important bankruptcy, there are some creditors who are determined to attain an advantage over the others, and they will resort to threats and promises and all other means to attain their object. Thus, if the question is of consenting to a composition or to a discharge, these men will insist on being paid for doing what the other creditors are willing to do. In the scheme of a law, above mentioned, a creditor who takes such an advantage is held criminally responsible. This is new; and it is supposed that one or two convictions of creditors, under such a law, would have quite an influence in discouraging this disgraceful practice. The waste and dissipation of assets which was complained of in some quarters, and not without justice, when the act of 1867 was in operation, could best be checked by paying all officers, such as registers in bankruptcy, by salary instead of by fees. The expenses could be reimbursed to the United States by definite payments, as for instance, a fee upon beginning a proceeding and by a specific tax upon the assets. In the United States the federal courts are not familiar to the great body of lawyers and of clients. Their jurisdiction is limited, and their ways are not fully understood. It is highly important that their administration in bankruptcy should be rendered familiar and easy, and to this end it is

to bankruptcy and the reckless trading which causes it, and of inducement to a subsequent payment when possible, that a discharged bankrupt, however honest he may have been, and however nearly unanimous may have been the consent of his creditors to his release, shall be under certain civil disabilities, implying a sort of disgrace, until he shall have paid all his old debts, with interest. His creditors have no legal claim against him, but the public authorities institute this moral sanction. Something of this kind is now proposed in Eng. land in a modified form, and limited to magistrates and members of parliament becoming bankrupt. If it be granted that a careful and judicious bankrupt law is useful in commercial countries, such a law can be provided only by congress. The courts of the several states give precedence to their own citizens who, as creditors, attach or seize the property of an insolvent debtor, over an assignee or trustee for all creditors equally, including their own citizens, who claim under a decree in bankruptcy made in another state, and this whether the seizure is made before or after the date of the decree. So long as this selfish policy prevails, and there is no reason to expect its speedy disappearance, no state law can effect an equal division to creditors of the property of a bankrupt, if any part of it happens to be found out of the limits of that state.-Again, no state has power, under the constitution of the United States, to discharge a debt due to the citizen of another state or country, unless the creditor chooses to come in and prove his debt in the bankrupt court. For these reasons the states can not pass effectual laws upon the subject of bankruptcies. That congress will be urged, and at some time persuaded to pass another bankrupt law, is as certain as that the number of undischarged debtors in the several commercial states will increase with the lapse of time. The pressure of this class, many of whom are worthy and estimable persons, broken by misfortune, induced the passage of the statutes which have been passed. But it will be much wiser in congress to frame such a law carefully and delib-proposed that the registers in bankruptcy should erately with a view to permanence, before the pressure becomes extreme. Such action has lately been advocated by large and influential bodies of merchants, and a committee of the senate has been appointed to consider the subject. What should be the provisions of such a law?-It has been found that the creditors of a bankrupt can not afford to follow up the proceedings in court, or, at any rate, that they will not. They do not wish, as they say, "to throw good money after bad." If they do not, there is great danger that the assets will be wasted in litigation, in fees, and in various ways. In the latest English law a mode of settlement called liquidation can be used by the creditors, and the estate is supposed to be wound up as they may wish; but it is found that the debtor can obtain proxies and votes with great

ease,

and virtually control his own winding up. This has led to vast abuses, and will, probably, be very much modified. So under our late stat

have considerable judicial powers, subject to appeal, and should be required to hold frequent sessions, at convenient times and places, for the accommodation of suitors.-The vexed question of the discharge of debtors remains to be considered. Most laws, as I have said, provide for a control of this matter by the creditors. It has, however, been found that certain creditors, the most avaricious and the least scrupulous, will take advantage of any power which may be given them over the debtor's discharge by exacting terms from him, either of present payment or of promises for the future. The English statutes, of late years, have declared all such promises to be void, and it is seriously doubted whether it is expedient to give creditors any arbitrary power in the matter. The latest proposition to congress contained the suggestion that every bankrupt who can not be proved to have committed a fraud or wrong upon his creditors, should have a free discharge,.

kind of legerdemain has been frequently practiced since the beginning of the Christian era. We can hardly mention a country that has not resorted to this sort of trickery at one time or another. It is still, to this day, a mode of liquidation or redemption which obtains in eastern countries. Sometimes governments made use of artifice in the matter. They debased the coinage, not by the manifest and tangible reduction of its weight, but by misrepresentation on its face. Sometimes, for instance, the government paid in silver crowns with a copper alloy of 40 per cent., a loan which had been contracted on the basis of crowns with an alloy of only 10 per cent. For some time this ruse prevented the inexperienced from detecting the fraud.-The adulteration of the currency had the serious drawback of causing an endless series of dishonest acts by the inhabitants of the country. The adulterated money being used to settle private accounts, the national treasury was not the only defrauder; every creditor was robbed by his debtor. It was almost a step for the better when governments took the resolution to repudiate their debts more openly and heartlessly. They had the lamentable effront

but the creditors might vote that the assignee, as their representative, rather than the creditors individually, should undertake the duty of opposing the discharge of a fraudulent debtor.-It might be wise to impose some disabilities upon discharged debtors until they should pay their debts, as in France; or to refuse a discharge to those who could be proved to have traded recklessly and wantonly after a knowledge of their insolvency; or to fix a minimum of dividend without the payment of which there should be no discharge. So far as we have been able to gather the opinions of persons interested in the question in this country, it is in favor of a liberal policy in the discharge of debtors who have been honest in their dealings.-The mode of discharge by payment of a composition, accepted by a considerable proportion of creditors, and thereby made binding upon the minority, has been already referred to. It has the great advantages to creditors, of speed and certainty, and to debtors of restoring them, promptly, to the control of their affairs. It is the only mode of discharge practiced in France. It needs, however, to be very carefully guarded, in order that the apathy of some creditors, or the rapacity of others, may not produce great inequal-ery to carry this resolution into effect in the ity and injustice. It is necessary, therefore, to provide for a thorough examination into the affairs of the bankrupt, in order to see that his offer is large enough, and for a very careful supervision by the court, to see that all creditors are treated alike, and that a composition offered shall be promptly and faithfully carried out. No mere promises of payment should be accepted without full security for their performance.

JOHN LOWELL.

BANKRUPTCY, National. The private individual who borrows money, generally for productive purposes, is not always in a position to discharge his obligations to his creditors. Unforeseen circumstances may have interfered with his business operations; imprudence and bad faith may have diverted the loan from its rightful destination, and prevented the subsequent restoration of the capital he owed to the lender. What wonder is it then, that states which borrow nearly always for unproductive purposes, or even with destructive objects in view, have so often been placed in such a condition that it was impossible for them to meet their liabilities? The state has this poor advantage over the private citizen: no action at law lies against it, especially when its refusal to pay becomes general, and extends to all its obligations. In former times the state had, besides, the privilege of robbing its creditors without seeming to do so. To accomplish this, all it had to do was to debase the coinage. Shortly after the first Punic war, the government of Rome reduced the as from twelve ounces of copper, which it contained, to two ounces only. With the sixth part of the sum which the government really owed, it thus paid the debts incurred during the war. VOL. I.- -15

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middle ages, and up to the eighteenth century. They borrowed as much as possible from the Lombards and the Jews, the great bankers and money lenders of that period, and then drove them out of the country as criminals, and confiscated their property. The compulsory conversion of the Jews to Christianity sometimes exempted them from expulsion. Their conversion, of course, saved their souls, but it saved neither the outstanding debts due to them nor their hoarded treasure. When the Lombards and the Jews had made room for native Christians in the financial marts, the national treasury met the claims of its creditors by periodical "blood-lettings," or forced levies on the property of the citizens. The most honest and upright ministers of the French monarchy, such men as Sully and Colbert, were not the least violent in the measures taken by them to reduce or cancel the indebtedness of the government; to pay its creditors in lettres de cachet by seizing their property and by sending them to work in the galleys. The regency was inaugurated by the revival of the so-called chamber of justice, whose province it was to cause contractors, purveyors and other persons to disgorge the money they had received or were to receive from the national treasury. The restoration of this tribunal by the duke of Noailles, was preceded by the establishment of the visa-bureau, or auditor's office, whose "examination" of accounts reduced the floating debt from 600,000,000 francs to 250,000,000. It had been preceded, likewise, by the pretended monetary reform which debased, by one-fifth,

the intrinsic value of the silver coin of the realm.

Thus were different kinds of national bankruptcy introduced. Recourse was had to the same measures after the disastrous results of John

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