240 



THE POPULAR SCIENCE MONTHLY. 



posed system would add to their temp- 

 tations and the risk of defalcation. 



Secondly, the difficulties in working 

 the system are greatly enhanced in this 

 country by the wide territory over 

 which it must extend, to at all meet 

 the requirements of the people. 



Thirdly, the banking branch of the 

 Post-Office Department could not be 

 made self-sustaining, and at the same 

 time pay a rate of interest that would 

 draw deposits. It is not likely that 3^- 

 per cent, would be satisfactory when 

 there are perfectly sound banks that can 

 pay five per cent. ; and yet 3^ is prob- 

 ably more than the Department could 

 afford to pay. Following the rule of 

 the English system, and the only safe 

 one, it must invest its deposits in Gov- 

 ernment securities, on which it cannot 

 now realize more than four per cent. 

 Out of the half per cent, margin must 

 come all expenses and the loss of inter- 

 est on unused balances. The Depart- 

 ment could not even take the very ne- 

 cessary precaution of keeping a cash 

 reserve against deposits, and though it 

 may be said that the degree of confi- 

 dence would be so great as to preclude a 

 run, and so no reserve would be needed, 

 it will be found that if the Government, 

 through any of its departments, goes 

 into banking, it will be amenable to 

 the rules that govern banking opera- 

 tions. It could be readily shown, if 

 space permitted, that the Department 

 would be a constant dealer in bonds, 

 buying on a high market, and selling 

 on a low one a process not conducive 

 to profit and it is highly probable that 

 from these various causes the chronic 

 deficit of the mail-service would be in- 

 creased by the losses incurred in the 

 banking department, a result which 

 could not be defended on any tenable 

 ground. 



Next, as concerning State inspec- 

 tion. It is certainly remarkable that a 

 system which 1ms been tried so fully 

 and failed so utterly, should still be so 

 implicitly relied on ; that men, who 



pride themselves on being practical, 

 and who never fail to have their little 

 fling at theorists, should cling to a the- 

 ory that has broken down whenever 

 tested. 



Official examination has had a very 

 thorough trial in this country; it has 

 been a feature of the national banking 

 system since its organization in 1S64; 

 the history of these banks has, as a 

 whole, been creditable, but scores of 

 them have failed, many disgracefully, 

 and the worst of them in localities 

 where it might be expected that the 

 examinations would be most thorough ; 

 while the life-insurance companies and 

 savings-banks of New York have long 

 been objects of legislative solicitude 

 and official care, with results that do 

 not need to be told here. 



The theory of State intervention in 

 such matters is fallacious ; private en- 

 terprise, if left to itself, would compass 

 the desired end much better than any 

 governmental machinery. The indorse- 

 ment which the State gives to a new 

 institution, by granting a charter and 

 nominally assuming a supervisory con- 

 trol, endows it with an air of respecta- 

 bility and solidity which it could not 

 otherwise command, and which is for 

 the most part illusive. If depositors 

 understood that their sole reliance was 

 the character of the men they were 

 dealing with, and that the only super- 

 vision would be such as they chose to 

 exercise, they would soon come to se- 

 lect the guardians of their savings with 

 greater care, and scan their acts more 

 closely. 



The State has a legitimate function 

 which it has very imperfectly fulfilled 

 in this connection ; it is competent to 

 enforce the performance of contracts ; 

 to visit punishment upon negligent or 

 dishonest officials; to secure prompt 

 and inexpensive justice to the sufferers 

 in event of failures. This has not been 

 done, but instead, contracts have been 

 shamelessly broken with impunity; fel- 

 ony has been openly compounded; and 



