The Indianapolis journal. [volume] (Indianapolis [Ind.]) 1867-1904, 1883-11-26
BANK CIRCULATION.
Important Suggestions by the Comptroller
of the Currency.

of the Currency.
WASHINGTON, Nov. 25.-The portion of
Comptroller Knox's report relating to con-
traction of the national bank circulation is
the most interesting and important part of
the document. The Comptroller refers to
the probability that all the 3-per-cents. will
be called for redemption within the next
three years, and says
This will reduce the bonds held by the
banks from 1858 900, 900 to $l51, 600, 600, and
cause a contraction OF the national bank cir
culation of about $G0 900, 900 per annum. It
is evident that unless there is additional leg
isation the bonds held as security for rircu-
lation will rapidly diminish. New Iegisla-
tion may, however postpone payment OF the
public debt, or cause the profit on circula-
ton to increase sufficiently to induce the
national banks to invest in the long
4-per-ceRts., which are not to
mature for twenty-four years. Con-
traction of bank circulation may
be avoided by reduction of the redundant
revenue, and there is no doubt this is the
true policy. Contraction of bank circulation
may also be avoided by conversion of long
bonds into 3-per-cents. by offering induce
for the 3-per-cents., to mature 1897, the gov
ernment paying the holders thereof a rea-
sonable amount for difference OF value. The
premium to be paid holders Of these long
bonds may be considerably reduced by pro-
viding that the circulation TO be issued upon
the proposed bonds, when deposited by ma.
tional banks as security therefor, shall not be
subject to the present tax of l per cent, per
annum, or by postponing the time of their
payment. Contraction would also be avoided
by providing for removal of the tax on cir
culation and an increase of the amount of
circulation to be issued to banks upon bonds
deposited by them"
The Comptroller considers that so long as
there is a sufficient amount Of United States
bonds outstanding legislation should be so
shaped as to continue them in use as a basis
for national bank circulation. With a de-
crease in interest and decrease in the profit
upon circulation the amount issued upon
the value of bonds will also decrease. There
is no propriety or justice in authorizing the
issue of 800 upon every 800 OF 3-per-
bent. bonds, worth par, and refusing to issue
a like proportion upon 4-per-cent. bond
worth 1921. The holder of government
bond can readily borrow money upon it as a
pledge from bank TO the amount of % per
cent of its market value and it is not sur
prising that the banks prefer to reinquish
circulation rather than deposit as security
bonds having a margin of more than one
thorizing an increase of issue to 80 or 95 per
cent upon the lowest market price
during the calender or fiscal year previous
to the deposit, together with q repeal of the
tax upon circulation, would result in the
deposit of sufficient amount of and ~
per-cents. to maintain the circulation at
about the present aggregate.
The amount of gain to the government
| from the accidental loss or destruction of
circulating notes, the Comptroller says, does
not properly belong to the United States or
the banks issuing the notes, but to the
owners of the notes at the time of the loss
and the gain thus accrulng should be carried
| to the credit of the insolvent bank re-
dempton" account in the office of the
| Treasurer.
The Comptroller believes the proposition
to convert the long bonds into threes is
more desirable than the proposition to in.
| crease the rate of circulation, and that the
large contraction OF currency now imminent
should not be allowed to take place too
rapidly, or that the deficiency caused by
such contraction should be replaced by a sub.
shtute less desirable than the bank notes now
! in circulation. Mr., Knox calls attention to
the statement that contraction Of the cur.