MR..McCULLOCH might well Bay that the new system was vastly superior to that which it superseded. It is computed that the loss by bills of broken banks averaged, under the State bank system, 5 per cent. of the total circulation annually, so that in twenty years the whole amount of the circulation was lost in the hands of the people.1 So loose were the regulations restraining the issue of circulating notes forty years ago, that it was difficult to distinguish counterfeits from lawfully authorized bills. Professor Sumner tells a story of some counterfeiters who were arrested in a New York garret in 1836, with $20,000 in bills of the "Ottawa Bank " and $800 in specie. They affected the utmost indignation, declaring that they were a " bank," and were printing their own notes to save expense; and they came so nearly within the definition then current of a bank, that they escaped on this impudent plea.2

1 Quoted by Comptroller Knox in Finance Report, 1S75, p. 202. The Bank of the State of Indiana, in 1S62, had a capital of $3,353,050, and a circulation of $5,872,767.

Nothing of this kind has been known in the United States since 1864. The cost of exchange, formerly a heavy tax upon the business of the country, has been reduced to a nominal rate by the creation of a uniform and indubitably solvent currency. It is estimated that not less than $4,000,000,000 are annually drawn in exchange by the West and South upon the East. In 1859 the average cost of Southern and Western exchange upon New York was not less than 1 to 1 1/2 per cent. At the lower rate, the annual cost of exchange would be $40,000,000. Exchange between Chicago, Cincinnati, or St. Louis, and New York is now frequently at par, and rarely exceeds the trifling charge of 80 cents on $1000, instead of $10 or $15, as formerly.1

1 Finance Report, 1875, p. 208.

2 Scribner's Monthly, March,l879,p. 684.

Five per cent. of the bank currency now in circulation would be over $15,000,000; and if to this be added from $40,000,000 to $60,000,000 for domestic exchange, we have between $55,000,000 and $75,000,000 saved to bill-holders annually under the new sys-tern. The $17,000,000 of interest on the bonds by which this currency is secured may, therefore, be regarded as a premium for insurance against direct losses amounting to three or four times as much, besides indirect losses, which cannot be measured, from the disturbance of credit and interruption of business.

1 Finance Report, 1878, p. 150.

Depositors have been protected at the same time. The deposits in the national banks for the last ten years have averaged a little over $600,000,000. The losses by failure during that time have been about $6,000,000-1 per cent. of the whole amount; not 1 per cent. per annum, but one-tenth of 1 per cent. per annum, which is less than half the cost of insuring property against the single risk of fire. During the panic of 1873 five banking houses and two trust companies, doing business in New York under the State law, went down, but only one national bank failed, and that afterward paid all its creditors in full, and has returned 35 per cent. to the share-holders. In the country at large the national banks were able to discount freely to solvent firms in the face of the panic, and by so doing greatly mitigated the disaster. A year after the shock their loans were $10,000,000 above the mark at which they stood in September, 1873, and did not recede to the old figures until the spring of 1876.

But the national banks were not intended merely to do what the State banks had previously done, and do it better. They were created to aid the general government directly, first in raising the inline: sums needed during the war, and afterward in funding the public debt at lower rates of interest. To appreciate the magnitude of these negotiations, the consequent net sity for a net-work of fiscal agencies covering the whole country, and the actual service rendered by the banks to the treasury, it is necessary to review the financial administration of the government since 1861. A simple statement of the debt, in the order in which the liabilities were incurred, exhibits the whole series of transactions in a striking panorama. The following table gives, under the years in which the various securities were authorized, the total issues of the several classes, and the amount outstanding at the beginning of the financial year 1878-79:

Hardly any form of indebtedness resorted to during the war is here missing, but even these figures give a wholly inadequate idea of the shifting volume of the temporary loan, payable on ten days' notice; of the certificates of indebtedness, issued in default of money to impatient creditors, and bearing 6 per cent. interest; of the coin certificates: available for customs; and of notes, with and without interest, flowing into the treasury and out in ceaseless currents. The reported issue in these cases represents the greatest volume at any one time.

Here is first the old debt, contracted under laws which Secretary Chase found in force on the 4th of March. 1861. Secretary Cobb, in October, 1860, with authority to borrow $21,000,000, had been able to obtain only $7,022,000. Secretary Dix, in February, 1861, with authority to borrow $25,000,000, had disposed of $8,006,000 in bonds at 00 to 96, receiving $7,248,600 in money. Mr. Chase, in April, had been obliged to sell 6 per cent. bonds at 85 to 94, and had availed himself of the privilege of issuing 6 per cent. notes to creditors at par. The debt was $90,000,000 when Congress met on the 4th of July, 1861. The securities issued under the old laws during the next year swelled the aggregate to $134,000,000.

Then follows the legislation during the administration of Secretary Chase, from 1861 to 1864. First, the demand notes, intended to relieve the urgent necessities of the government; the 20-year 6's of 1861, taken by the associated banks of Philadelphia, New York, and Boston, just in time to restore the sinking credit of the government ; the 7.30 per cent. three years notes, a still more attractive investment. Then, in 1862, the legal tender notes and fractional currency, the temporary loan and certificates' of indebtedness-all the makeshifts of a great emergency; and the $500,000,000 of 5-20 year 6's, sold in 1863 by Jay Cooke, through the agency of the banks and by the help of the newspapers all over the country. Then, in 1863, the 17-year 6's, taken by the national banks to secure their circulation; the 5 per cent. notes, of which $800,000,000 were authorized and only about $200,000,000 could be marketed; and the 6 per cent. compound interest notes, to which the secretary was obliged to resort.