MEMORANDUM ON THE DEBTS OF THE STATES OF VIRGINIA, NORTH CAROLINA, SOUTH CAROLINA, FLORIDA, LOUISIANA, ARKANSAS, AND TENNESSEE.

VIRGINIA. The entire debt of the State was created before the war. In 1871, after setting aside one-third of the debt and accumulated interest (amounting to over $45,000,000) as West Virginia's share, the acknowledged debt was funded into 6 per cent. bonds due in 1905, with tax-receivable coupons. That which was not presented was neverthe less treated as funded. In 1879 another funding scheme was passed offering $3,000 in a new 10-40 bond bearing interest for ten years at 3 per cent., ten years at 4 per cent., and twenty years at 5 per cent., for $2,000 of bonds with tax-receivable coupons, and $1,000 of non-tax-receivable coupon bonds. About $8,500,000 were funded. These schemes have, however, been wholly or partially superseded by a new one to fund into a 3 per cent. bond on a basis for the 10-40s of 60 per cent., and for the 6 per cent. consols at 53 per cent. It is impossible to predict with any degree of probability what action will be taken. West Virginia has taken no action as to the one-third which Virginia set aside as her share of the debt.

Quotations.-Consols, 56; 10-40s, 43; 3s, 65; West Virginia share, interest from 1871, 12.

NORTH CAROLINA. This State funded its debt into 4 per cent. bonds, due in 1910, excepting an issue of $2,795,000 North Carolina railroad-aid bonds maturing in the 80's, held by United States court to be a lien on the stock of the railway held by the State. It appears, that these have also been "extended" to 1919, carrying the lien. The State, in this arrangement, compelled a surrender of $240 interest per $1,000 (overdue coupons). Six hundred and forty-nine thousand dollars were still unfunded about January 1, 1886. The bonds funded into 48 were scaled 60, 75, 85 per cent.

Quotations.-4s, par; new 6s, railroad, funded as stated above, 124. SOUTH CAROLINA.-The State funded all the recognized debt, under the act of the legislature of 1873, into 6 per cent. bonds due 1893. Certain portions of the debt, issued in 1868, have been declared invalid. The old ante-bellum debt was scaled 50 per cent. in funding. About $154,000 of the old State capitol bonds remain unfunded; also $55,000 Blue Ridge Railroad aid bonds. These are only recognized so far as that they are fundable. A portion of the 6s above mentioned having been declared invalid, a new exchange was made in 1879, new bonds being issued pro rata, as the old 73s were recognized as valid. The latter are termed "brown consols."

Quotations.-Browns, 109; non-fundables, 4.

FLORIDA.-The recognized bonds of the State amount to $350,000 7s of 1901, and $925,000 6s of 1903. The State holds the greater part of these in its sinking and school funds, buying them in the market. A $4,000,000 railroad 8 per cent. loan is claimed to be fraudulent and is not recognized. It is stated that the bonds held by the United States against the State are recognized, but that the State claims a set-off against the United States for expenses incurred in Indian wars. Quotations.-6s of 1903, 113; 78 of 1901, 124.

LOUISIANA. The State funded all its old debt into 7 per cents. at 60 cents on the dollar for principal and interest up to 1874; defaulted in 1880, and then by popular vctes reduced interest to 2 per cent. for five years and 4 per cent. from 1885 to 1914.

Quotations-78 to 79.

ARKANSAS.-About two-thirds of the State debt issued for railroads, levees, &c., has been repudiated by popular votes, &c. The old debt issued under acts of 1838 at 40 in aid of banks is "acknowledged," but no interest is paid thereon. A portion of these bonds ($500,000) was, with the accrued interest, funded in 1870 into 30-year 6s. The greater portion is still unfunded, amounting with interest to about $2,500,000. It is stated that the debt question will be taken up by the legislature which will meet the coming winter. The State is in default for interest to a larger amount than the principal of the recognized debt.

Quotations.-Recognized debt, coupons from 1873, 110.

TENNESSEE.-The State funds the 6 per cent. railroad bonds into new 3 per cents. at 50 cents on the dollar for principal and accrued interest. (This law of the State superseded one which provided for a 3 per cent. bond for 60 per cent. of old principal and interest-bonds to run until 1912, at interest 3 per cent. for two years, 4 per cent. for two years, 5 per cent. for two years, and 6 per cent. from 1888 to 1912.) The old "State debt" is excluded from this operation; but it appears that this debt, amounting to $2,118,000, is fundable into some sort of bond-ex-war interest (for four years). Certain bonds held by the State university were also excluded from the funding operations. There is a contingent liability apparently recognized for $1,137,000 bonds of the East Tennessee, &c., and the Nashville and Chattanooga Railroads, indorsed by the State.

Quotations.-3s, 761; 5s, 102; 6s, 106.

UNITED STATES BONDS HELD FOR NATIONAL BANKS.

At the close of the fiscal year the United States bonds held for account of the national banks, as security for circulation, amounted to $275,974,800, a reduction of $36,170,400 during the year. The amount held as security for public moneys was $19,659,900, an increase of $2,052,900. Three per cent. bonds held for circulation to the net amount of $34,458,750 were withdrawn, most of which were surrendered for redemption.

The amount of bonds deposited during the year was $26,924,900, and the bonds withdrawn amounted to $61,042,400, showing a decrease of $34,117,500.

SEMI-ANNUAL DUTY.

The payments by national banks during the fiscal year for semiannual duty assessed upon them on account of circulation amounted to $2,592,021.33. This amount is $202,562.68 less than the duty collected for the year ending June 30, 1885, which decrease is due to the withdrawal of national-bank circulation, caused principally by the calling in for redemption of 3 per cent. United States bonds, a very large

proportion of which were held by the Treasurer in trust to secure circulating notes issued to national banks.

The deposits during the past year on account of reducing and liqui dating banks and banks whose charters have expired amounted to the sum of $50,391,891.75, and the retirement from circulation and cancellation of national-bank notes amounted to $28,948,881, leaving outstanding on these accounts $21,443,010.75 and a corresponding liability on the books of the Treasury.

Since the organization of the national banking system the total amount of semi-annual duty paid by the banks and collected by this office is, as shown in the appendix:

The national-bank notes presented for redemption during the fiscal year amounted to $130,296,606, which was $19,912,523, or 13.26 per cent. less than the amount presented for redemption in the fiscal year 1885. That there would be à falling off in the amount presented for redemption was indicated by the amount presented during the first three months of the fiscal year; and my opinion, based thereon, and expressed in my last report, that the culminating point in the second upward movement in bank-note redemptions had been reached in the fiscal year 1885, has been verified.

The rate of increase in the redemptions of bank notes during the second upward movement, covering the fiscal years 1882, 1883, 1884, and 1885, is represented by the percentages 27, 34, 22, and 19, respectively. A feature of this upward movement was the constantly decreasing volume of national-bank notes actually outstanding from $362,421,988 on January 1, 1882, to $319,069,932 on June 30, 1885, a decrease of $43,352,056. This seems to indicate that the volume of bank notes outstanding during that period was excessive, or above the point at which it could be profitably maintained. Another fact, however, should be considered in this connection, which is that during these four years of increase in redemptions the silver-certificate circulation of the country was increased $75,755,182, from $39,110,729 on June 30, 1881, to $114,865,911 on December 31, 1884. This increase much more than balanced the decrease in bank-note circulation, and the apparent excessive issue of bank notes might to a considerable extent be due to that fact. The decline in the volume of bank-note circulation has continued without interruption, until the amount outstanding on September 30, 1886, as reported by the Comptroller of the Currency, was $303,511,241, making a total reduction of $58,910,747 since January 1, 1882; and also after December 31, 1884, the silver-certificate circulation gradually decreased, until on July 31, 1886, it had fallen $27,301,867 to $87,564,044. The average outstanding for a year preceding that date was about $91,000,000. Since July 1, 1885, the decline in the bank-note circulation has apparently had the effect to check the increase in bank note redemptions, as they have steadily fallen off from that date, until they now are for the current fiscal year about 31 per cent. less than in the preceding year.

In counting the remittances of bank notes received for redemption during the year there was found $25,528 in "overs," being amounts in

excess of the amounts claimed, and $8,246 in "shorts," being amounts less than the amounts claimed-an increase in both items as compared with the preceding year, when they were $17,060 and $6,445, respectively. The counterfeit notes rejected and returned represented the nominal value of $2,720, which was $840 less than the amount rejected during the preceding year. The total amount of counterfeit notes which have been found in remittances of national-bank notes since the establishment of the redemption agency at the Treasury in 1874, is $48,519. The "stolen" national-bank notes, that is, notes fraudulently put in circulation without the signatures of the bank officers, found in remittances during the year and rejected, amounted to $120.

As usual, the months of September and January during the fiscal year have respectively furnished the smallest and largest amount of national-bank notes for redemption, the former month $7,589,000, and the latter month $17,485,000-a difference of nearly $10,000,000.

From the principal cities the receipts were as follows: From New York, $49,487,000, or 37.98 per cent., excecding as usual the amount received from any other place during the year; from Boston, $30,031,000, or 23.05 per cent.; from Philadelphia, $7,323,000, or 5.62 per cent., and from all other places, $43,455,600, or 33.35 per cent. The average percentage of receipts for the eleven fiscal years ending June 30, 1885, from the cities named and all other places was: For New York, 39.02 per cent.; for Boston, 24.53 per cent.; for Philadelphia, 6.07 per cent., and for all other places, 30.38 per cent., showing, by comparison, that in the last year there has been a slight decrease in the percentage of bank notes received from the principal cities, and a corresponding increase in the percentage received from all other places.

The total payments for national-bank notes redeemed during the year were $130,029,625.12, and were made as follows: By the Treasurer's transfer checks drawn on the assistant treasurers of the United States and transmitted by mail, $74,149,555.26, or 57.02 per cent.; by United States notes forwarded by express at the expense of the consignees, $9,204,752.76, or 7.08 per cent.; by fractional silver coin and standard silver dollars forwarded by express and mail at the expense of the Government, $555,037.84, or .43 per cent.; by redemptions at the counter, $8,385,485, or 6.45 per cent.; by credits in general account as transfers of funds from subtreasuries and designated depositories, $31,007,087.30, or 23.85 per cent.; and by credits in redemption accounts, 86,727,706.96, or 5.17 per cent. It is worthy of remark that 92.92 per cent. of these payments were made without cost to the senders of the bank notes, and that only 7.08 per cent. of the payments were made at the expense of the consignees for express charges. The payments made in the preceding year at the expense of the consignees were 12.83 per cent. Year by year the payments in redemption of bank notes effected by the use of checks and credits have increased until practically the total redemptions are now so made.

The deposits made by national banks during the year to maintain the 5 per cent. redemption fund amounted to $103,359,393.61. Of this sum, 892,363,184.15, or 89.36 per cent., was deposited for the Treasurer in the nine subtreasury offices, and afforded more than the amount necessary to pay the transfer checks drawn by him against these offices in the redemption of national-bank notes. The balance of the deposits, amounting to $10,996,209.46, was received directly by the Treasurer-$1,787,241.84, or 1.73 per cent. of the total deposits, over the counter; $3,433,468.78, or 3.32 per cent., in lawful money forwarded to him by express at the

consignors' expense; and $5,775,498.84, or 5.59 per cent., in proceeds of national-bank notes redeemed.

There was assorted and delivered on the 5 per cent. account during the fiscal year $101,234,035 in redeemed notes. Of this sum $46,701,100, or 46.13 per cent., was forwarded to the banks of issue in notes fit for circulation, and $54,532,935, or 53.87 per cent., in notes unfit for circulation was delivered to the Comptroller of the Currency, to be destroyed and replaced with new notes. The total amount delivered on the 5 per cent. account was $17,070,465, or 14.43 per cent. less than the amount delivered in the preceding year. This decrease is the result of a falling off of $18,136,765 in the amount of unfit notes delivered, and an increase of $1,066,300 in the amount of fit notes forwarded to banks.

The deposits made by national banks "failed," "in liquidation," and "reducing circulation" during the year, under the various provisions of law, for the retirement of their circulation, amounted to $51,209,961.75, being nearly double the amount so deposited in the preceding year. This large increase was in great measure due to the calling in for payment by the Government of its 3 per cent. bonds, which were largely owned by the banks and pledged with the Government as security for their circulating notes. Included in the above amount is $32,423,156.75 deposited by banks under the provisions of section 6 of the act of July 12, 1882, which requires that "at the end of three years from the date of the extension of the corporate existence of each bank the association so extended shall deposit lawful money with the Treasurer of the United States sufficient to redeem the remainder of the circulation which was outstanding at the date of its extension."

The amount of notes redeemed, assorted, and delivered during the year on account of these classes of banks was $29,557,588. The balance on account of these deposits ran up during the year in the sum of $21,652,373.75, which, added to the balance of June 30, 1885, made the balance at the close of the year, June 30, 1886, $60,248,705.85, the largest sum at any time before held in the Treasury for the redemption of the circulation surrendered by the national banks. The total deposits made on these accounts since the establishment of the national banking system to the close of the year were $295,225,393, and the total redemptions of notes out of these deposits were $234,976,687.15. During the first five months of the current fiscal year, these deposits have been $37,926,885.25. The redemptions for the same period have been $11,064,273.50 making an increase of $26,862,611.75 in the balance on deposit, which on November 30, 1886, was $87,111,317.60.

The assorting and delivering of redeemed national-bank notes at shorter intervals than formerly, which was adverted to in my last report, was continued throughout the year. The number of packages prepared and delivered was 106,236, being 44,967 more than in the preceding year. Of these, 29,690 inclosed notes fit for circulation to the respective banks of issue, and 76,546 inclosed notes to the Comptroller of the Currency for destruction.

The expenses incurred in the redemption of national-bank notes during the year, and paid out of the 5 per cent. fund, were $168,243.35, and were less by $13,613.81 than the expenses incurred in the preceding year. They were made up as follows: For charges for transportation, 874,490.52; for salaries, $89,065.18-875,322.19 in the Treasurer's office and $13,742.99 in the Comptroller's office; for printing and binding, $3,190.89; for stationery, $1,163.65; and for contingent expenses, $333.11. The charges for transportation cover the cost of transporting the national-bank notes to Washington and the return of the assorted