The Austin weekly statesman. (Austin, Tex.) 1883-1898, 1886-02-25
CASH BALANCE.
REPORT OF THE MINORITY
OF THE COMMITTEE ON
WAYS AND MEANS.
OPPOSITION TO THE PROPOSED
REDUCTION OF THE TREAS
URY RESERVE.

WASHINGTON, February 23,-Mr. Hewitt, repre-
senting the minority of the committee on ways and
means, to-day submitted report on Mr. Morri
sons bill directing payment of the surplus in the
treasury exceeding Sl00,00O,009 in liquidation of
| the public debt. "The effect of the resolution Z"
says the report, 'f enacted into law, Will be to re-
duce the balance in the treasury available for nav
ment of its current Indebtedness and for the re-
demptiOn of legal tender notes to Sl00,000,000 1t
makes no provision for replenishing the treasury
when the available balance shall fall below $780,
| WO0W. The question thus presented is whether
in view OF the obligations and functions of the
treasury as now defined by law, the proposed linn
itation on the balance now held for meeting liabil-
tiles on demand is prudent and safe in view of the
pledge of the United States to redeem all its in
debtedness in gold coin or its equivalent The
undersigned believe that such limitation would be
unwlse dangerous, and AT variance alike with the
| experience of solvent nations and of sound fnan-
cial institutions. The ordinary disbursements of
the treasury may he roughly stated to amount to
| 81 ,0Oo000 day, To meet this disbursement il is
necessary that reasonable working balance
should be kept on hand, because at times current
expenditures greatly exceed daily receipts
careful business firms generally carry balance
| eqnal To one months disbursements. Measured
| by this standard-and lower could not safely
be adopted, because the secretary of the treasury
! has no power to make temporary loans-the work
ing balance in the treasury should be about $780,
OOOOOO; that this amount is not too large win be
apparent from the fact that in the pension bureau
alone drafts for $10,0000OO will be made on the
|
| payments under arrears cannot be fixed for any
specified date; but beside current expenditures
provided for by law the United States has totally
distinct obligation to provide for debt payable on
demand in the shape of S3i6 0l6 of legal tender
notes. These notes form about onehalf the paper
currency. They constitute final means of pay
ment between individuals and of settlement In all
transactions of business. 1t is absolutely neces-
sary, therefore, that ability to redeem these notes
in coin should at all times be assured beyond per
adventure The only question is as to the amount
| of coin HhSch will cnnstitutn n lhl md
adequate reserve. To determine this point we
| have no other guide than usage and experience In
the case OF gold and silver certificates, the treasury
Keeps dollar for dollar, but in the case of legal ten
der notes. 1t has not been usual to have at any time
in the treasury reserve in coin exceeding one-half
| of the whole issue of such notes.
When specie payments were resumed bonds of
the United States sold 80 as to provide fund
amounting to sos 100000 in gold, for the purpose
Of assuring redemption of notes. which, as the law
then provided, were to be reduced by cancellation
| to O,OO0OO0O. 1t was certainly not considered
safe to begin resumption with less than a one
third reserve, and, as matter of fact, the available
| balance in the treasury amounted to over 40 per
cent 500 in gold coin Is set apart for re-
demption of legal tender notes, being rather less
| than 20 per cent This reserve would be regarded
by prudent bankers as the minimum amount in an
easy money market, but If the financial prospect
should be threatened, prudence would require 1t
| should be enlarged and strengthened. The prac-
tice of the treasury under Secretary Sherman, who
| put the resumption act in operation, was not to
|
things consistent with absolute safety If this ratio
should be adopted, the amount of reserve in coin
would be S133, 100000.
Adding this amount to the amount heretofore
the sum of S6S,0O0,000 as a minimum balance
which the treasury should carry in order to be In
condition of ease and. safety. Any other conclu-
sion is at variance with the lessons of experience
| and well established rules for the safe conduct of
| business. The main argument urged for infring-
ing on this balanae must be the saving of interest
on the 100000, which, after allowing for the tax
amounting to S1,70000O annually, but 1t is to be
remembered that that part of the debt of the United
States represented by legal tender notes. bears no
interest, and that the gain In interest between the
total amount and paper reserve is over $4,0t00a0
per annum; SO that the government could well
afford the outlay required to keep its finances in
the strongest possible condition and should GER
tainly never approach the point where, under the
law, it may become necessary to sell United States
bonds in order to preserve specie payments Such
a contingency would not be an edifying spectacle
to people whose proud boast is that within
twenty years from the close of the war II has paid
off more than one-haf of the public debt, and re-
duced the burden of interest to one-third of its
Certainly policy so humiating would be con
demned by the people when its effect should be-
come apparent. The greatest care should be taken
not to interfere with the eXibility of the currency
and the only flexible agency rests In the treasury
in the power now exercised by the secretary to
make calls for the redemption of the public debt
III Is great question whether BuCn n power should
be entrusted to the government or to the dis
cretiOn of an official In other conservative com
nercial countries it has been conferred on inter.
mediate agencies in direct communication with the
business interests of the people. We have no
such system. and hence the treasury has been
forced to become member of the New York
clearing house, which is the financial center of the
country. The treasury Is thus practically engaged
in the banking business not only in the Issue of
currency but in adopting Its operations to the gen
eral requirement of trade
Dangerous as the system is it was the outgrowth
of a necessity, and until some other security be-
sides the bonded debt of the United States Is de-
vised for the issue of bank currency, the power to
come to the relief of the money market in times
of stringency must rest with the treasury.
Other considerations may be presented as a fatal
argument against the reduction of the treasury
balance of 900 in coin necessary to be kept
for redemption of legal tender notes The ability
of speculators to reducs notes for payment is OBJ
Hous, and unless the expedient Of replacing the
amount by the sale of bonds be resOrted to, the
money market can be so manipulated as to impair
confidence and bring about general disaster, by
which operators for fall would reap abundant
profit at the expense of the legitimate business Of
the country
The undersigned, being clearly of the opinion
that the proposed nresolution will neither be eco
nomical for the government, nor advantageous
to the interests of the country but in fact ex-
tremely dangerous in times of recurring exigen-
cies in the money market, rec )mmend that II be
laid upon the table
The report is signed by Mr. Hewitt. Messrs.
Reed, Hiscock, Brown and Mckinley, while agree
ing with Mr. Hewitt that the resolution should
not pass, differ as to some points of his argument,
and attach the following to his report:
"The undersigned deem that $1000OO,00O at least
needed suitable security for the redemption of
legal tender notes. and think security ought not TO
be impaired They thlRk also that sufficient
working reserve for the business Of the govern.
ment ought to be retained in addition to the legal
tender redemption fund The bill proposed by the
committee, in our opinion, ignores these condi-
tons, and in our judgment will shake pHblic 'con-
fidence in the stability of our currency in such
way that the saving of interest which the bill will
cause will he but a trfe compared with the In
jury threatened"
Away with melancholy! No more rheu-