From this it appears that owing, to the good credit sustained by the Spanish
Bank of Havana, it was intrusted by the Government with the emission and
redemption of the large issue of paper currency which it became necessary to
make to aid in meeting the expenses of the civil war. But the bank also made
use of the authority it possessed by its charter and increased the issue of
its own bills to the extreme limit of its legal circulation, exceeding
$20,000,000. At first both issues were maintained at par with gold, but the
natural result of excessive issue followed. The bank was authorized to
suspend redemption, and both the Government and bank paper, which were in
the same form and confounded by the public, the one with the Other, shared
the same fate and depreciated to one-third their face value in gold. The
bank, taking advantage of the heavy discount, bought in its own paper, so
that in 1881 its circulation had been reduced from $20,198,060 to
$4,043,280, realizing, as is alleged, a profit thereby of about $10,000,000,
and by the official statement published on the 17th instant the only paper
currency now out is that of the national treasury, which amounts to
$41,427,474.75.
It is further alleged that the bank has during this period from time to time
taken advantage of the fluctuations of the market to make new issues of its
own paper in favorable seasons, and to withdraw the same when the
depreciation was the greatest, thus making a considerable profit out of the
transactions.
The inference of the newspaper is that it is not surprising that “reforms are
found necessary to raise the island of Cuba from its prostration.”
[Inclosure in No.
251.—Translation.]
[El Imparcial, 21st August, 1884.]
the colonial reforms.
The reforms established up to the present time in compliance with the
authorizations disclose a tendency worthy of applause—that of availing
of every possible means of taking up the notes which the Spanish Bank of
Havana omitted on account of the Cuban treasury.
That emission, designed to meet the war expenses with the commendable
purpose that it should be carried out under the protection of the
respectable credit engaged by the Spanish Bank, had such good results at
first that the notes circulated without uneasiness, thanks to the
facility of their exchange at the counter of the bank; but afterwards,
this becoming difficult, disasters arose from which the Antillian
treasury has not yet been able to free itself.
As an evil which now has no other remedy than that of diminishing as much
as possible the circulation, we ought not, as it would seem, to give our
attention to an examination of the past, but lend support to every
effort tending to the extinction of the debt which weighs upon the
island of Cuba.
But as the Government, in the preamble of the decree on the condonation
of debits, has revealed to the country the errors of the ultramar
administration, we have to add to the abuses pointed out by the ministry
of ultramar certain acts which, without precisely constituting an abuse,
have contributed to complicate the economical situation of the Great
Antilla, showing that they have not only engendered difficulties by the
irregularity of administrative proceedings, but also by the toleration
which has been extended to extensive stock-jobbing, growing out of the
nature of the operation.
We hope that what we have to say about this mass of bank notes, which,
after having so greatly disturbed all transactions, must now be taken up
by measures which diminish the receipts of the Cuban budget, will serve
as a lesson in the future.
When there was necessity to raise means to meet the war expenses, the
Spanish Bank of Havana was authorized to increase the emission of notes
on account of the Cuban treasury, and those notes were issued in the
same manner as those of the bank, hence one was confounded with the
other in circulation, both participating in the same vicissitudes.
The natural consequences of a superabundant circulation of paper, payable
on presentation, soon arose. The moment arrived in which the vaults of
the bank could not meet the demands, and it was relieved from the
obligation of paying the notes which were presented for redemption.
There at once came a gradual depreciation, which at last represented a
loss of two-thirds of the value of the notes. These reached a discount
at the rate of $296 in paper for $100 in gold.
Did the Spanish Bank of Havana, which had, according to its own legally
authorized emission, nearly attained the entire amount of its
circulation, amounting in 1873 to $20,198,060, avail itself of the
gradual depreciation of the notes to withdraw from circulation those
emitted on account of the Cuban treasury? Certainly not, but its own;
hence in March, 1881, it only had of its own emission $4,043,280 in
circulation, having realized a profit of $9,755,605 in gold, as is shown
from day to day since 1868 in a work published in 1881.
Since then the bank has completed its work in such a way that, according
to the last balances published in the Gaceta de
Madrid of the 17th instant, there were no other notes in
circulation than those for which the Cuban treasury was reponsible.
That circulation amounts at present to the sum of $41,427,474.75, and
some years must yet pass before it is canceled, while the bank has been
able to take up its own authorized circulation without other
difficulties than that of making new emissions of its notes at times of
an improved rate of exchange, in order to take up a larger sum during
the periods of depreciation.
The profit obtained by this operation has been at the expense of public
prosperity, because the notes of the bank emission being taken as cash
the public has lost the whole amount of the discount when the bank
withdrew them.
And this has been going on during several years, without the Government
fixing its attention upon it, which demonstrates that there is much
carelessness in Spanish administration.
We do not censure the bank, other than that having constituted itself the
guardian of the war emission it did not endeavor to save more than its
own. Like good merchants, the administrators of the bank utilized the
circumstances to do business and to secure profits to its
shareholders.
What we do condemn is that Governmental apathy which allowed the events
to run without even comprehending what was occurring, resulting in the
end in an insupportable charge upon the Cuban treasury and a
considerable relief for the bank.
It is not strange therefore that reforms have become necessary to raise
the Island of Cuba from its prostration.
