National Banking System Explained

Mr. Henry White Cannon, of New York, spoke on "The National Banking System," under the auspices of the Graduate School of Business Administration in Emerson A last evening. Mr. Cannon was Comptroller of the Currency between 1884 and 1886, and has an extensive knowledge of his subject.

Before outlining the origin of the present system of national banks, Mr. Cannon declared that the topic was of particular interest at present, as the matter is now before Congress, and changes or improvements in our system of national currency may result.

"In 1861, Mr. S. P. Chase, Secretary of the Treasury, in a report to Congress, showed that the Treasury was empty and called for aid from the state banks. A loan of fifty million dollars was raised, which was of great aid to the government and served to bring the union bankers more closely together. Shortly afterward, when several increases of this loan had been made, a permanent system of national banks, under federal control, was established by the National Currency Act of 1863. The success of this measure was largely due to Mr. McCulloch, then Comptroller of the Currency. Secretary Chase at first disapproved. In 1864 the bill that is in effect today was enacted, and 700 national banks were organized. The state institutions were at first somewhat reticent about changing their charters, fearing inconsistency on the part of the federal government, or hostile legislation by Congress, but their hesitation was soon overcome. Since that time the number of national banks has multiplied rapidly, but the circulation, though limited only by their capital, has increased very slowly in proportion.

"National banks have almost the same legal rights as individuals, but they cannot act as trustees, purchase corporation stocks, make loans on real estate, or purchase real estate for others. They can be formed very easily, and are required to deposit certain sums with the government. The Comptroller's duty is to supervise them. The advantages of the system are that it supplies a uniform currency and a market for government bonds; it reduces the cost of exchange; provides safe banking facilities, and acts as a model for the state banks.

Mr. Cannon believed that the new Postal Savings Banks should succeed, for they are needed. They can exist without friction with the national banks, just as state banks have done.

The best way to give the country a uniform, elastic, easily changeable and redeemable currency, he said, is by providing a central bank, controlled by the government. This bank could have sufficient capital to issue notes in times of crises, and could help the national and state institutions in emergencies.