New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1874-09-24
WY TIE BANK-NOTE REDEMPTION TX

WHY TIE BANh-NOIE hLDEMf IlOf
PERTINENT rs 4 FAILURE.
The experience of the Treasurer, in attempt
ing to carry out the bank-note redemption
provisions of Mr.. Dawes's compromise currency
juggle is extremely instructive, and well Illus
trates the danger of passing laws without
taking time to find out what they mean or to
consider what is to be the effect of them.
1t is now an admitted fact that the redemp-
ton machinery does not work. We propose
to show by little ciphering that it never will
work under the present provisions OF the law,
and in proving that we shall demonstrate at
the same time that there never was any good
reason to suppose it would work.
The Treasurer had about seventeen million
dollars in legal tender notes to start with,
being five per cent on some S350,OOO,OOO OF
bank note calculation. Some OF this clrcula-
ton was issued by defuDct banks, but, as the
Treasurer is provided with legal tender notes
to take care of it with, that does not inter
fere with our circulation. Let us now see how
the machinery would work under the
amount of business it would necessarily have
to do if the redemption, IS redemption, was
really efficient. 1t is clear, to begin with, that
if National bank notes ever get back to the
banks which have issued them, it must be by
means of this redemption bureau. That part
of the old National Bank act requiring or
"per,nitting" the redemption of bank notes
elsewhere than at the counters of the banks
issuing them, and at Washington, is expressly
repealed by the recent law. Bank notes
are very seldom seen at the counters OF the
banks which issue them. They are as likely
to be anywhere else in the country as they
are in the particular town in Maine or Min
nesota from which they started. So much
will be conceded by every one. The work of
the bureau is, therefore, to receive from all
parts of the country National bank notes; to
separate these notes and return them to their
places of birth-certainly no light task. But
the advocates of the scheme which has just
been tried and found wanting were sanguine
Even the Controller of the Currency predicted
q severe contraction as the result of the
powerful operations of the new machinery.
Redemption, we were told, would make free
banking perfectly safe. 1t was to give us all
the advantages of Scotch banking. The cir
culation was to be self-regulating. The notes
were to be sent back to the issuers faster
than they could get them out again. In
the Summer the Wall Street Spectator
was to be restricted to the use of his own
capital, and in the Fall the crops were
to move as freely as quicksilver. The
currency was to be made truly elias
tic, stretching like the muscles of an acrobat
and springing back like india rubber. In the
dull season Of the year it was computed that
"at least fifty million dollars" would be
stuffed back into the vaults of the banks
which had put them af1oat, and constitute a
reserve fund for periods of pressure. We
should exhaust our space were we to attempt
to set down the half of what this redemption
of paper with paper was to do for us.
We will now show that the redemption
bureau has never done one-tenth the work
involved in what was predicted of it, and that
small part, as we have seen, has completely
broken it down. The average length of time
during which bank note remained out in
Scotland before the passage Of the act of 1916
is variousiy stated at from ten to fourteen
DAYS. The entire bank-note circulation of that
Kingdom was thus redeemed and reissued
every fortnight, to take the longest period
In England, where Bank of England notes are
much employed as reserves of bankers, being
legal tender, and are therefore in less active
motion than either Scotch or American bank
notes, the average life of a ten-pound bank
note was stated in 1857 to be So days, and of
a five pound note, which is the smallest issued,
70 days. We therefore think it is reasonable
to estimate at 80 days at the longest the aver
age life of our National bank notes, under an
efficient system of redemption-so efficient as
to make it safe to permit free banking, mean
ing thereby the unlimited issue of notes on
the present security Of United States bonds.
To redeem the bank note circulation once
in fifty days, the bureau would have to re-
deem on an average seven million dollars a
day, on some days as much as ten or twelve
millions, and on others not more than three
or four millions. Allowing the Treasurer two
days in which to assert and charge to the
various banks their respective notes from the
parcels sent in for redemption, the next step
would be "calln on the Issuing banks to
reimburse the sl7,OOO,OeO fund for{t sums
paid out Of it. This cali" the banks would