The New York herald. [volume] (New York [N.Y.]) 1840-1920, 1866-12-05

curty, bit these conditions though steps In tho right
notes available par for the payment Of debts and
settlement Of balances at the financial centre
Banks Of issue are necessity Of our financial system.
recognized encouraged and protected by the govern
ment Tor the public good In return for privileges con-
erred they should be required TO make their issues
require currency that viii pay debts at the centre Of
trade II the banks do not furnish circulation that
VIII conform to this standard their ss ues Will be depre-
cated and tho loss will fall upon the business OF the
country.
The question Is whether this tax shall be borne by the
people, while the banks reap the profit whether the
banks shall perform their whole duty by furnishing
currency which shall be available for the payment OF
oeoss and thus complete the editions ne
growing importance and ono that presses for an early
solution.
National banks in Boston, New York and Philadelphia
recognize their obligations to meet every demand in law
full money of the UAited States whether be gold and
silver or legal tender notes. They ged by law to
ceive in payment OF debts the notes OF every other
national BANK but they cannot compel their customers
to receive the same notes for their balances due from
the banks; and here lies dificulty which will subject
the banks In those cities periodically to very great
The tendency or money to accumulate in these centres
of tradeexcept at certain of the year. when
Is needed to bring forward the products OF the Middle
Western and Southern Siates-s fact which cannot be
questioned These banks obliged to receive all that
il offered, but cannot pay 1t out An escape from this
dilemma may be found in either Of three different
ways:-Flrst the banks may be relieved from the obi
CATION TO receive this currency in payment OF debts;
secondly national currency notes may be made legal
tender from the bank TO It's ~customcrs or ese thirdly
national currency may be kept at par by redemption At
the great centres of trade
without discussing the expcdency Of acting in &C.
cordance with either OF the two suggestions first named
because the first method would leave the currency in
worse condition than 1t is and because the second
method would be arbitrary, and would place national
bank notes on par with United States notes. the necs
sity Tor which Is not apparent at this uncturc-the
natural and most feasible method would be that
requiring the banks to keep their issues at par by
redemptions as above stated.
Under existing circumstances this requirement cannot
be onerous; lawful money, which stands the
representative Of Specie as the agency Of redemptons
being materially In excess OF the currency to be
deemed, would mako the inauguration Of system Of
central redemptions feasible and practicable to
ceponal degree. Fourffths Of the banks have volun
tary recognized the proprcty and expediency Of such
by selecting their redemption agencies in New
York, Philadelphia and Boston Justice requires that
banks which willing conform TO the highest
standard should be sustained and this be done ef
fcctuay only by requiring all TO place themselves the
same 50, ground y y questionable however. whetn es
in House bill No TIL, which postponed to the
sent session This bill provides that every bank shall
the seventeen cities named in section 81 OF the Cur
roncy act but that each bank in those cities shall redeem
in New York, Philadelphia or Bo5on its own notes and
the notes Of every other bank for which may DO the
redemption agent The object Of the last provision IL
indirectly compel every bank redeem either in New
ever but that its purpose perfectly evident and there
fore open 10 every objection that would be urged against
a direct requirement. Of law to that effect
no intention to gnoEe the claims OF any ether section OF
the country There are cities of great commercial I'm
porance In the Middle, Western and Southern States,
whose financial interests demand consideration The
not OF banks located in those cities are, by the pro-
visions Of the law as It now stands redeemabe in New
York. and the managers OF those banks would not have
1t otherwise. II the law did not require it. they would
voluntarily redeem there. The proposed amendment
only srequres sas other banks to do the same thing
It will give those cities and the banks those cities
currency that 10 worth par in New York instead Of de-
precated currency that would be continual clog upon
all business operations.
If any particular section 10 not tributary TO New York,
tho fact that the banks Of that section required to
deem in New York will not make It tributary, but will
make such redemption easy and nowse burdcnsone.
The commercial importance OF any place VIII force its
recognition; money can be drawn from II only for
the payment OF It's debts Trade flows In natural chan
nels and money goes with it, wherever trade centres
there money will accumulate sufficiently for its wants
II money Is arbitrarily concentrated contrary to this
principle Will 1ow back again just water will find
It's level II the argument against rcdeeming in New
York Is based upon the preponderating importance OF
any other place as centre Of trade u ceases TO 30 an
ation issued by banks in that pace will DO worth
at home than at any other point and will home for
the payment Of balances rather than 70 Now York for
redemption consequently there will be hardship In
the requirement II the argument s not based upon that
assumption, its an argument for the other side Of the
question: for IL hardship TO redeem In New York,
the hardship is evidence OF the necessity
II all national banks required TO redeem thor e
sues IN New York. reciprocal obligations will be imposed
upon the banks OF that city The balances kept In those
banks will amount in the aggregate TO very large sum,
and there will be composition between them for the &C
counts Of the country banks Such competition already
exists and has led 10 the dangerous practice OF paying
interest deposits This practice condemned by all
prudent bankers; but where does IL others do
II or lote the accounts Of good correspondents bank
that pays interest on current balances Is OBLIGED To
keep It's funds In constant or lose money In order
TO do this loans payable call are made upon coat
security of more or less value and there Is much
competition for such loans that has the effect 70 lower
the standard Of security required Everything which
causes extraordinary facilities in monetary transactions
tends 70 produce excitement oyertradng aud specaa-
ton, sure to bring compensation .,s sooner Q,
disaster Loans Of this DESCRIPTION are mad .
chiefly TO spectators, and that Is reason enough
why the practice should be regarded AZ unsafe
Conservative banks should not countenance aid spec
ulaon; and New York city banks, made by law the
odans OF the available for redeeming the circua
conservative of all banks They should not be al
lowed TO copardze the funds OF the country banks by
oanng them for speculation, and they would not they
were not obliged 20 pay interest on them Stop the pay
ment Of interest and the temptation 70 make improper
use Of such funds 10 removed.
Tho only way In which the evil in question can be
reached, n II can be rcmeded at all ny law pro-
hibing every national bank from pay ng or receiving
interest on bank balances; and the propriey Of such
law is recommended 70 the consideration Of Congress-
Concurrenty with practical system " redemptons
gradual reduction OF the volume OF legal tender notes
would operate benencay upon tho character OF the ma
opa currency, by checking M expansion beyond tho
necessities OF business II legal tenders were reduced
10 such extent that the amount IN circulation should
not exceed the required perform the functions Of
lawful money as the substitute for specie, redcmpons
would be strngent and banks would BIO compelled
TO regulate their issues by the demands Of trade.
law enacted during the last session Of Congress pro-
v'des that the Secretary OF the Treasury may dinis
the volume Of tho United States In circulation
TO exceed t4,ooo,oOo In any one month. Taking
$500 600, 900 the point from which tho diminuon
commences, q regular reduction of a. 600 900 each
month would leave at the expiration Of two years
800 900 600 Of legal tender In existence; 81 In
lawful money Tor the redemption Of each dollar Of
national currency authorized THIS ratio would hardly
render redemption sufficiently stringent 70 produce much
effect on bank circustion but " this point could be
reached BY the expiration Of one year. the effect would
be more decided
Four million dollars per month would be the rate OF
si3s 900 per day but bankers should the
for the redemption Of their issues diminishing the
OF $500 600 per day they would naturally and unavod
ably curai their circulation 10 the lowest point their
business would permit and the benefits arising from
practical system Of redsmpsions would begin TO be
realized.
This proposition IL based upon the presumption that
u will be the policy Of the government TO withdraw all
ts notes issued for circulation fast u shall have the
power 10 do The fact IL not overlooked, however,
that opinion prevails 70 extent adverse this
view OF the Is frequently and strenuously urged
that the government should keep ne notes In circula
,ion and thus have the use Of so much money without
interest