THE FARMER AND THE BANKER. 145 



notes is kept constantly at interest, which would seldom be the 

 case. Upon these assumptions there is a revenue of seven 

 and one-half per cent, less expenses of conducting the busi- 

 ness and occasional losses which no bank can avoid. The 

 stockholders could not possibly receive much over six per cent 

 dividends, which would be satisfactory but not exorbitant. 

 I have also assumed that the banks purchase the bonds at 

 par, which they could not do. United States three per cent 

 bonds, at the time I write, are at a premium of thirteen per 

 cent, at which rate they pay about two and six-tenths per cent 

 interest. In the large cities, also, the majority of bank loans 

 are made at much less than six per cent — three and one-half 

 to four and one-half per cent being the ruling rate in New 

 York as I write. It is therefore obvious that there might 

 easily be a loss instead of a profit on circulation under the 

 terms of the National Bank Act, which explains why so many 

 national banks issue no notes. The small country banks, 

 loaning in a more retail way, get higher rates of interest, but 

 they could also get higher rates for the money which they 

 have loaned to the government as security From all this it 

 should be evident that, taking the banks together, the majority 

 care very little about the privilege of issuing notes under the 

 terms of the Bank Act as it stands. To some there is doubtless 

 a reasonable profit or no notes would remain in circulation. 

 This leaves us free to discuss the second question, whether 

 it is for the general interest to retain the national bank circu- 

 lation. The public convenience demands a paper circulation 

 of some kind, and if we eliminate the national banks, there 

 remains only the alternative of state banks or government 

 issues. No one who remembers our former state bank cur- 

 rency will seriously consider the first alternative. While we 

 should not again have, under a state bank system, any such 

 wretched currency as we had previous to 1860, it could not be 

 made a good one. The state laws would be made far more 

 favorable to banks than the national act, and in some states 

 the laws would certainly be very lax. There would be some 

 weak banks, and their notes would almost certainly be found 

 mainly in the hands of poor people when they failed, as the 

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