5 oo THE POPULAR SCIENCE MONTHLY. 



necessary increase, such as has been seen in the former history of free 

 banking. 



The question of the constitutional power of Congress to authorize 

 such a system can only be alluded to. It would very likely be raised ; 

 but it may be assumed that it would not prove an insuperable objec- 

 tion. It might be made a condition of granting charters or licenses to 

 banks that they should be required to lend a certain percentage of 

 their capital to the Government whenever called upon, and also under 

 proper restrictions be made depositories of public moneys ; thus, as has 

 been suggested, doing away with the expensive and primitive system 

 of local sub-treasuries. 



Bankers to make money on their issues must keep them in circula- 

 tion, which could be done by the same means, and those only, that are 

 employed to build up a line of deposits ; that is to say, they must 

 establish their credit by promptly performing their engagements. 

 Governmental interference should be exercised solely with reference 

 to insistence upon such performance. 



That in some cases there would be mismanagement, dishonesty, 

 and consequent loss, in the future as in the past, is certain ; but the con- 

 trol and supervision of banking should not, any more than that of 

 other branches of business, be regulated upon the hypothesis of fraud. 

 The losses which might come would be comparatively small, would 

 follow quickly upon their causes, would have the advantage of being 

 directly traceable, and so permit the prompt application of remedial 

 measures. With the existing means of swift communication, with the 

 wide distribution of national banks, and the watchfulness which they 

 employ toward each other, and, finally, with the smaller transactions 

 carried on by means of specie, the losses upon bank-notes would not 

 only be small, but would, for the most part, fall upon the banks them- 

 selves, they being the constant custodians of the greater part of the 

 currency ; and they could be trusted to see to it that only such circu- 

 lated as was worthy to have circulation. 



This brings us to a suggestion which is put forth with much hesi- 

 tation, and only as a suggestion, notwithstanding it is believed that it 

 is sound in principle, and might be made safe in practice. It is simply 

 that the banks should assume the risk, and, as a whole, undertake to 

 protect the rest of the community from loss upon note-issues. To 

 effect this it would only be necessary, so far as legislation is concerned, 

 to continue in force that provision of the existing law which makes 

 national-bank notes a legal tender to national banks. It would seem 

 to be well-nigh certain that the banks could assume this risk of loss, 

 whatever it might prove to be, and still the business of issuing notes 

 afford a larger margin of profit than it now does. For this would be 

 but an application of the insurance principle to one class of the acci- 

 dents to which the banking business is liable. The banking interest, 

 as a whole, would undertake to indemnify the public against losses 



