cessor, that the bureau would be freer from political and financial influences by its removal from Washington, and it is not believed that either he or McCulloch, if living today, would entertain the same views as to the necessities for a change of location of the bureau or its separation from the Treasury Department as they expressed at the time they made this suggestion.

H

CHAPTER V

Hiland R. Hulburd

ILAND R. HULBURD, the third Comptroller of the Currency, was appointed February 1, 1867, and served until April 3, 1872.

Mr. Hulburd was born in 1829, at Worthington, near Columbus, Ohio. His father was a Presbyterian clergyman of considerable note. Mr. Hulburd graduated at an early age from the Western Reserve College at Hudson, Ohio. He studied law in the office of Anthony Howard Dunlevy of Lebanon, Ohio, and was admitted to the bar. In 1865 he was appointed registrar of the Banking Department of the State of Ohio. On August 1, 1865, he was appointed Deputy Comptroller of the Currency under Hugh McCulloch, and acted as Comptroller during the vacancy in that office from July 24, 1866, to February 1, 1867, when he was appointed Comptroller.

After his retirement from the Comptrollership until the date of his death he spent most of his time in New York City. During the last years of his life he was connected with oil interests in Pennsylvania and had an office in New York City. He lost his life in the burning of the steamer Seawanhaka on Long Island Sound, June 28, 1880.

Although the national banking system was in its infancy during Mr. Hulburd's incumbency of the office of Comptroller his annual reports to Congress, six in number, are replete with interesting matter and compare favorably with the best that have emanated from the Currency Bureau. Subsequent experience demonstrated the soundness of his views on banking questions and practices and the correctness of his conclusions in regard to the subjects discussed.

Payment of Interest on Bank Balances

In his earlier reports Mr. Hulburd devoted a good deal of attention to the practice which prevailed to some extent among

the banks at that time of paying interest on bank balances. He criticised and condemned this practice in severe terms, and quoted the Chancellor of the Exchequer of England as declaring in his comments on the causes which led to the crisis of 1857, as "one eminently liable to abuse, and containing within it the elements of danger."

Notwithstanding the criticisms of Mr. Hulburd, however, this practice, which he so strongly condemned in 1867, steadily increased with the growth of the national system until it became almost a universal custom among the banks, the evil effects of which, as he predicted, were shown in some of the panics of later years.

The contention of Mr. Hulburd was that country banks should keep deposits with city banks only for the purpose of facilitating exchanges in carrying on their own legitimate business, and that the funds so placed should not be allowed to exceed the amount actually necessary for the current demands of their business. He contended that

The payment of high rates of interest on bank balances attracts all the spare capital from the country to the commercial centers. It is drawn away from the country where it is needed to the business centers where the rate of interest is higher. The cities then come in competition with the country and compel borrowers in the country to pay higher rates for loans.

He quoted M. Pereire, the President of the Credit Mobilier of France, as saying that "Banks are instituted only to lower the rate of interest and they fail in their mission when they do not fulfill that character." Mr. Hulburd said:

The city banks by the payment of interest offer a premium for deposits, the volume of which should be regulated only by the ebb and flow of trade. An artificial stimulant is applied, in order to accumulate funds in excess of the natural demand. So long as the country banks can employ their means more profitably at home, they will do so, but when their own trade is dull they will