THE FUTURE OF NATIONAL BANKING. 501 



arising from tbe failure of individual banks to redeem their notes. As 

 to the nature and extent of such losses, they already have a much bet- 

 ter basis for estimating them than was available to life or fire and ma- 

 rine insurance companies in their inception. A perfectly trustworthy 

 " table of experience " is supplied by the record of the losses to deposi- 

 tors in national banks for the last twenty years ; these, as before 

 stated, have been only one twentieth of one per cent per annum. This 

 interval covers two periods of panic and consequent depression, and 

 may be presumed to have included most, if not all, of the vicissitudes 

 of the business. If from abundant caution the estimate of probable 

 loss should be put at tenfold that which past experience with the na- 

 tional system has shown, and the present Government tax on currency 

 be added, we should have a total of one and a half per cent on the 

 volume of currency to cover losses and expenses. The premium out 

 of which to pay this charge would be the interest on the excess of the 

 average amount of currency in circulation over the reserve required to 

 be held against it, or say from three to seven per cent, varying with 

 the state of the money market and the location of the banks. This 

 certainly offers an ample margin. 



The idea is not altogether novel even in its application. It was 

 adopted in the case of the various branches of the State Bank of Indi- 

 ana, and worked satisfactorily. Slightly modified, it is applied by the 

 guarantee companies, which, for a much smaller premium, guarantee 

 employers against the fraud and insolvency of their servants. The 

 suggestion may be somewhat startling to bankers, who, as a class, are 

 proverbially and properly conservative, but the soundness of the pi*in- 

 ciple which underlies it has been demonstrated by long experience and 

 is constantly finding wider application. Bankers daily risk, without 

 thought of fear, far larger sums than such an insurance of currency 

 would involve upon guarantees that are much less stable, that is upon 

 the indemnity furnished by insurance companies, which, both as re- 

 gards sums at risk and premiums charged, conduct their business on 

 comparatively small margins. Should the liability seem too great if 

 extended commonly to all the banks, geographical districts might be 

 created with redemption centers, the mutual guarantee of the banks 

 not to extend beyond the limits of their districts. 



Objection may be taken that such a system of currency would in- 

 crease the profits of banking. That it would do so, in some degree, is 

 probable, but it is not in the interest of that business that the sugges- 

 tion is made. The public have the deepest interest in the avoidance 

 of perturbations or disturbance in the currency supply. If the prin- 

 ciples presented be sound, and their application correct, it would seem 

 to be clear that the existing banks could continue their present circu- 

 lation, and guarantee it, with safety to themselves and their note- 

 holders ; and that thus might be accomplished the desideratum of 

 paying off the Government bonds, when the time comes, without can- 



