PROFITS OF BANKING

Pacific Press Publishing Company · Oakland, California · Sep 24, 1896

FromSigns of the Times, Vol. 22, No. 38.

PROFITS OF BANKING.

An association of gentlemen in an eastern state raised $300,000 in currency. They went to the office of the treasury and exchanged their currency for $300,000 in 5 per cent gold bearing bonds. They then went to the office of comptroller of the currency in the same building, organized a national bank, deposited their $300,000 in bonds, and received for their bank $270,000 in national currency. They had let the government have $30,000 in currency more than they had received for banking purposes, and had on deposit $300,000 on which they received, as interest from the government, $18,000 a year in gold (and exempt from taxes). This was pretty good financiering for these bankers to receive $18,000 a year in gold on the $30,000 in currency which they had thus loaned to the government. But this is not the whole story. They had their bank made a public depository.

They soon discovered that there was scarcely ever less than $1,000,000 of government money deposited within their vaults. They did not like to see this vast sum lie idle. They, therefore, took $1,000,000 of this government money and bought $1,000,000 of five-twenty bonds with it. In other words they loaned $1,000,000 of the government's own money to the government and deposited the bonds received in the vaults of their bank, on which they received from the same government $60,000 a year in gold as interest. Thus for the $30,000 in currency which they originally loaned to the government they received annually in all $78,000. —Selected.