The Portland daily press., 1882-02-10
FINANCIAL.
Redemption of United States
Notes.
sENATOR ALLIsoN'S BILL FOR A
RESERVE FUND.

WASHINGTON, Feb. 9.-The bill of Senator
Allison to provide a reserve fund for the
redemption of United States notes is attracting
q good deal of attention among those who
think upon financial subjects in Congress 1t
is regarded by many as offering a safe and
adequate means to maintain the volume of
currency substantially as it now exists during
the period likely soon to arrive, when there
will be considerable contraction of national
bank currency, owing to the surrender of cir
culation on the part of banks by reason of the
high price OF bonds, and the consequent loss
of profit from circulation. The time is not
far distant when, under existing law, and un-
der existing financial conditions, it is easy to
see that very considerable proportion of the
present national bank circulation will be sur
rendered Mr.. Allison's bill among other
things is designed to bridge that possible inan-
cial chasm, and, at the same time, to accumu.
late the gold of the country in vast hoard, SO
that it cannot be manipulated by spectators.
The special purpose of Mr. Allisons bill is
this:
It proposes to issue gold certificates in de-
nominations corresponding TO greenbacks at
the will of the holder of the gold coin, instead
of at the pleasure of the Secretary of the
Treasury. The bill is not identical with the
dangerous Plumb amendment to the Sherman
refunding bill, nor is it analogous to it, as was
at first supposed. The Allison bill would not
operate to weaken the redemption reserve
fund. 1t is designed to protect that fund. 1t
goes further than that, and afirmatively
provides that there shall be reserve fund for
the redemption of greenbacks of at least $780,
100000, provision of law which the recent
debate in the Senate has shown does not now
exist. At all events, Mr.. Sherman admitted
that the Treasury did not keep specific fund
as a reserve. The Allison bill would provide
for the keeping of such fund.- In order to
establish this reserve fund for the redemption
of greenbaeks the bill provides that gold certi-
ficates shall not be issued against gold coin at
any time when the Treasury does not have a
minimum of $120,000000 reserve for the re-
demption Of greenbacks three-quarters of
| which is to be gold and one-quarter silver
coin. Whenever that reserve fund is dimin-
ished below $40, 000, 900, gold certificates are
not to be issued until the reserve shall be
made good The purpose of this provision is
| to protect the greenback circulation so that
the reserve fund shall never be reduced below
the minimum considered necessary for safety.
In other words, the gold certificates are to re
represent gold coin in the Treasury, but they
are not to be in circulation when the reserve
for the redemption of greenbacks is below
| $120,000,000.
When Mr.. Sherman was Secretary of the
Treasury he discontinued the issue of gold
certificates for the reason that, under the
operation of the law as it then existed, holders
of greenbacks could bring them in and take
out gold, return the gold, and demand gold
certificates, and in this way the Treasury De-
partment would be unable to prevent it. For
this reason the Secretary of the Treasury ex-
erclsed his discretion and discontinued the is
sue of gold certificates Mr.. Allison's bill pro-
| vides that these certificates may also be held
| as reserve for banks, the same as coin now
| can be, and that they may be taken for United
| States dues. The coin deposited against these
| certificates cannot be used for any other pur-
| pose, but must be held as specific fund for
| their redemption on demand. The certificates
| simply represent the gold in circulation, OF
cd Mr. be hot tho oh
| lection that such bill would make the
| government bank of issue would not lie. for
the reason that the certificates are not promises
| to pay money, but are the simple representa-
| tives of money already in existence, but, as a
matter of fact, that objection could not obtain,
for the government already is bank of issue,
to the extent that legal tender notes and silver
certificates are in circulation, and he does not
imagine that any one would seriously con-
template changing the law, at least as to legal
tenders. The system proposed by the Allison
bill is similar to that now practiced by the
Bank of England, and the amount of certif-
| Gates would be regulated by the amount Of
| coin that was in the country. One purpose OF
the bill would be to give the interior cities the
| advantages which are now derived in the
cities of Boston, New York and Philadelphia
through clearing houses, where, since the dis
continuance of gold certificates by the
| Treasury Department, similar plan of clear
| ing house certificates has been adopted.
Inc relation OF IneSe ceftlucateS 10 Inc pOSSl-
BILE retirement of national circulation is one Of
| the most important features of the bill. Owing
to the rapid diminution in our national debt
the class of bonds which the banks can obtain
for security for circulation is becoming limited
The banks now hold some $241 100000 OF
.'Windoms," all of which will be paid within
seven years The a per cents will be paid in
at least ten years time, ort1890. This will re.
strict the national banks to per cents as Sc
curity for their circulation. The 4 per cents
| now command premium of about Is per cent
and may go higher. The gold certificates pro.
| posed by the Allison bill, it is maintained
| would be supplementary to the bank notes at a
gehiaa bA sse ID bsgs 3dir circulation
| The bill does not contemplate an increase in
the volume of circulation. These certificates
| would not add, Mr.. Allison claims, an addi-
tional dollar to the currency, inasmuch as they
| simply represent gold coin now actu ally in cir
culation or boarded. The certificates are not
| to be issued against bullion. Another argu-
ment which is made in favor of these certif-
Gates is, that when there is demand for ex-
port gold certificates would be more likely to
be returned to the Treasury in exchange for
the gold deposited against them than green
backs would. and, should that prove to be the
case, the certificates would be a protection to
the greenback reserve.