New-York tribune., 1874-08-01
THE .NEW BANKING Id ".

QUERIES AS TO us WISDOM AND PROBABLE EF-
FECTs FUNCTIONS OF THE GOVERNMENT IN
FINANCIAL MATTERs-wIIL THE LAW BE SHORT
IvEDi
TO the Editor OF The Tribune.
SIR: Is not the Conference Bank bill re-
Gently signed by the President an approach toward
making the Government huge banking or redemption
office the experience of the past and are not
sound principles in banking opposed TO complicatng
the commercial business or banking interests Of the
country with the affairs of Government Should they
not be divorced far as possible Can the Govern
ment safely undertake. under any system to interfere
with the settlements of the exchanges Of the country,
or in short as this bill provides redeem the notes OF
National banks upon deposit of five per cent OF the
amount OF their circulation
Suppose in times of large accumulatons Of currency
az the centers or by combinations OF currency Oper
ators large amounts OF National bank notes sud
denly Washington for redemption, ana the hve
per cent deposit of any number OF banks Is exhausted
Will the Government redeem these notes ana await re-
mittance from the banks or Will they proceed 10 put
the bank in iqudation3 As is now the case the re-
deempc hanks for National banks are the regular cor
respondents of interior banks and usually have large
balances at the credit Of the interior banks for their
current uses and hold IN addition large amounts OF
maturing paper. This bill proposes that the United
States with deposit OF five per cent OF the amount OF
circulating notes shall protect the credit OF the National
OF banks unquestionaby solvent to go to protest by
reason of sudden demand exceeding the five
per cent on deposit. Will the Government do
this3 Is not this bill, in fact, weak
enng in its effect upon the standard oi strength
heretofore required of the National banksf Are the
circulating notes issued by National bank one OF its
liabilities or mott The circumstance that they have
not called upon 20 redeem these notes TO any ex
tent docs not answer the question. why apparently
absolve them from this liability and practically say 70
the country, "Thcse banks having bought a certain
amount OF our bonds we, the United states Govern.
me9 no, nsys es a % no H undertake the redemption
OF their noes" Perhaps by ana oy inns 1athery GOV
hanks upon the nominal deposit Of 10 per cent OF the
aggregate amount IN each bank .
1t the writer tnat the intention OF the GOV
erument was in this matter OF currency, TO furnish
through bonded Indebtedness the basis Tor assoe
with ordiuary banking operations. these assoclations
noninay and actually to perform an the a o or
the ultimate protection OF the bill holder the United
states taking certain steps under the currency act,
shonld se its own bonds deposited with II as ultimate
security the market and proceed 70 maadae ne
this particular liability which the deiantag pan 5k ha
erDment should erect itself into vast conmercla
agency for the redemption OF other peopies PROMISES
fhis bin is weakening measure in that IL dminshes
The amonnt of reserve which prudence and experience
cannot safely fall below Tns five per cent which Is 70
be Deposited with the Government. is TO subserve
double purpose 1t is redeem It's notes. and also TO
be counted by the bank as SO much OF Its reserve
IL has performed It's function redeeming the parent
bank OF this duty still counts i III iis reserve
short hundreds of banks restve under tue restrlc
tons Of this reserve" hail this bill opening the
the relief Of commercial stagnatlon but 40
insuring greater facilities for large dividends:
One word Ia regard 70 tue argument urged
for abandoning reserves to be kept by banks
for their own circulation. The plea that
National bank notes abundanty secured no one
questions; but the absurdity OF the thug was that
while they were considerod under the Currency act,
naty by the issuing bank, these liabilities were
useless aud arbitrarily denied the right 70 be appre
,,ed as OF any value or to be- counted against their
own LIABILITY Thus deposited 100000 0f National
currency in bank the liabilities OF the bank were In
c,eased 70 that extent; but these bank bills, 90
admiraDy secured were. by the construction OF that
act utterly valueess rs reserve. orto diminish the Ia
Stties of Inc bank that received II deposit THIS
1efecf might have been remedied without the weaken
o., ,oces. Of doing away with all Except upon
nnns,ts Bnt We have got the law, aud probably
np1f no be thankful for much IL Ii surrender and
a ana IN the opinion Oh souho ueh WIN ia
its pre sent state be short lved. V
DeirOu Mich, july rs, 1874