for the convenient transaction of its business, a motive for redemption will develop, and the system will, without doubt, assume an activity more like that of the redemption systems of Canada and Scotland.

It appears from the facts collected by the Comptroller of the Currency that in 1890, at a time when the national banks of the country had outstanding only $125,000,000 of bank-notes, the amount of such notes daily received by the banks in the ordinary course of their business was between $4,000,000 and $5,000,000; while the amount presented for redemption was less than $250,000. The remainder were paid out again in the ordinary course of business, because some sort of currency must be used, and the banks into which they had been paid were not in a position to issue notes of their own to meet the demand. If, however, the law at that time had permitted those banks to issue notes up to 60 per cent. of their capital, without further deposit of bonds, they would have been able, so far as legislative restrictions were concerned, to put out over $200,000,000 additional notes. Each bank of $100,000 capital in the West and South, having at that time only $22,500 of notes, all of them in circulation, would have been able to issue $37,500 more, if so many were wanted. The outcome would have been that the banks receiving on deposit $5,000,000-each having no need for those that it received which could not be as well met by its own notes -would have presented all these notes for redemption and the aggregate redemptions for the year would probably have been $1,500,000,000, instead of being but $70,000,000.

225. Under our national bank experience, with its rigid requirements for bond investments, etc., the banks have been more anxious to keep their circulation down to that obtained upon the smallest bond-deposit permitted, than to compete with one another for an extension of the circulation. The tendency has thus been to restrict the bank currency to a permanent field. The individual, knowing that the bank-note is perfectly secure, has no reason to make any distinction between it and actual coin or other lawful money, except so far as one or the other may best suit his convenience. He never thinks of asking for

the redemption of the note, and where he has occasion to make a deposit in a bank, takes no pains to sort out for deposit the bank-notes as distinguished from government notes, or coin. But in case the issue of notes were comparatively free, as in Canada, the moment the deposit should reach the hands of a banker, the difference would show itself. The government notes and coin would be sorted out, and placed aside as so much cash reserve; the bank-notes, which had been regarded by the outside public as currency, would be regarded by the banker merely as the obligations of other banks to pay him money on demand, and would be treated precisely as checks would be. On reaching the banker they would lose their character as currency, for in that capacity he would have no use for them, all demands for currency being satisfied from his own reserve of notes, which might be issued if desired; the notes of other banks would become mere bank obligations, which could be used to secure additional cash reserve, or to offset indebtedness due to the issuing bank- a purpose for which the bank's own notes would not suffice.

UNIFORMITY OF NOTE ISSUES.

226. An experience of a third of a century with a currency uniform throughout the country has naturally left in the minds of the American people a most favorable impression. To the ordinary business man the security and uniformity of the issues furnished by the national banks have been its most marked characteristics, and whatever support the national banking system has enjoyed has been in a large measure due to the satisfactory qualities of its circulation in these particulars.

It is only necessary to contrast with this experience the system of bank currency which existed in the decade before the War. In the matter of security the difference is, it is true, in some cases a marked one, although there were in the earlier periods numerous state systems whose experience demonstrated the security of the currency. But it was in the matter of uniformity or lack of it—that the difference was most marked and the inconveniences arising most embarrassing. A person traveling from Illinois to New England in the years before the War was compelled several times in the course of the journey to exchange the currency he carried for other notes. The notes of Illinois banks, though of known value, might not circulate to any extent in Indiana and Ohio; and the notes of the banks of those states might be considerably depreciated in New York, while the notes of the New York banks, even where issued by institutions locally known to be sound, would not pass at par in Boston. The reasons for this were two.

227. The first was that outside the locality in which the notes were put out, the conditions of their issue were not known; the banks of one state were permitted to issue upon terms totally different from those of another state; even in the same state some of the banks were operating under one law, and others under another, or under special charters. As a consequence, not only was a knowledge of the conditions of issue required, but, since

the banks were not bound together in any way to make good petty losses due to the failure of individual banks, a knowledge of the management and standing of each bank was also necessary. And, as outside the locality of issue, few of those who had occasion to use bank-notes possessed information, except as to a few large and well-known banks, or banks operating under a well-established and well-known system such as that of New England, depreciation at a distance from the place of issue was inevitable.

But an even more important factor in bringing about their depreciation away from home-and one which would have existed even if the notes had been known by every one to be good-was the question of exchange. A note calling for one dollar in specie in Illinois, was not worth one dollar in Ohio, because of the expense involved in getting the note redeemed. And the further from home the test was made, and the more difficult the means of transportation, the greater the depreciation resulting from this cause. The principle involved is the same as that governing the ordinary charge for exchange in the matter of checks and drafts, and though, owing to the extreme development of transportation facilities, the charge could never again be in this country what it was before the war, if it should exist at all, it would be a source of constant annoyance and inconvenience.

The comparative superiority in the matter of uniformity under the Suffolk redemption system-which by redemption at par in Boston maintained the currency equal to specie everywhere in New England-over that of other states, such as New York-where the currency of the country banks was redeemed in the financial centers only at a discount-naturally impressed those who drafted the original National Bank Act.'

'In New York the first legislative step toward remedying defects arising from the extensive circulation in the trade centers of notes not worth their face value, was in 1840, but it did not attempt to interfere with the matter of exchange.

Every bank was required to arrange for the redemption of its notes in New York or Albany at a discount not exceeding 1⁄2 per cent. Under this scheme however, a curious practice was developed. It was found that a bank could be more profitably organized at some remote point than in these cities, even though its main business

228. Even in Canada in recent years, while the notes of the banks were known to be good-being issued by a comparatively few large institutions, easily recognizable and known to be limited in amount and the conditions under which they were issued being well known- the same difficulty has been observed. Prior to the passage of the act of 1890, the Canadian banks. were required to redeem their notes only at the place of issue. As a consequence, the notes of a Halifax bank, if they should by any means have gone to Vancouver, might have been at a discount owing to the delay and expense involved in sending them home for redemption. So, too, the movement of funds being in general from the maritime provinces toward Ontario and Quebec, the notes of Nova Scotia banks would be at a slight discount in Toronto and Montreal, just as drafts upon those banks would naturally be. The revised bank act of 1890 provided that every bank should redeem its notes in, at least, one city in each of the provinces. And, as the relations of the banks in each province centered about the city designated, all discount for geographical reasons was thereby done away with, and a distinctly national character imparted to the currency.

was actually to be done and notes paid out in Albany or New York. For after paying out the notes at par, they could be redeemed at a discount of 1⁄2 per cent.- by which means a considerable profit might be made additional to the other profits of the bank. To put a stop to this practice, an act of 1848 required that the usual business of each bank should be transacted only at the location designated in its certificate. By the act of April 15, 1851, the city of Troy was added to the redemption cities, and the maximum discount at redemption agencies reduced to one-fourth of I per cent.

Some of the banks, however, voluntarily bettered the provisions of law, and arranged for the redemption of their notes at par in New York. The apprehension that this course would restrict the circulation of the banks so redeeming, proved to be unfounded - the circulation of the banks redeeming at par in New York being evidently given a wider circulation thereby.

In 1858, an "assorting house" was organized in connection with the Merchants' Bank and the Bank of the Interior, under their joint management. This redeemed the notes of New York country banks at the regular discount of 4 per cent. (25 cents per $100), and the notes of New England banks at % per cent. The country banks redeemed the notes from the "assorting house" through their agencies at a discount of 15 cents per $100, leaving the "assorting house" 10 cents per $100 for its compensation. Thereupon the Metropolitan Bank, which then acted as redeeming agent, immediately reduced its rates for redemption to % per cent.