The morning news. [volume] (Savannah, Ga.) 1887-1900, 1888-03-14
BONDS FOR BANK BILLS.
MR.. FAIRCEILD's OPINION OF THE
SHERMAN BILL.

! Forcible Expansion of the Currency
to beep cedily Followed by Contrac-
ton Fails to FavorabIy Impress the
! Secretary-The Inforcement of The
Scheme Would Advance the Price OF
Bonds.
| WASHINGTON, March 13.-Secretary
Fairchild to-day sent letter to the Senate
Finance Committee in regard 10 the Sher
man bill for the investment of funds for
! the redemption of national bank notes, in
which the Secretary says: your commit
tee some time since asked my opinion upon
Senate bill No. l2li, introduced by Mr.
Sherman. SAID bill directs the Secretary
Of the Treasury to invest 50 per
cent. Of the fund held by the
Treasurer Of the United States under
the existing statutes for the redemption Of
notes Of national banks which have reduced
their circulation, by the purchase in open
ma ket Of United States interest bearing
bonds. TIE bill is mandatory and would
rcqMre the investment to he made immedi-
at y upon its passage The s Cretary is
further directed TO sell in open market as
many Of said bonds as in his Judgment shall
as they are presented for redemption
whenever thel-uninvested portion of said
fund falls below - per cent. of the whole.
The bill further declares that its purpose is
to maintain in the Treasury for such re-
demptlon not less than 20 per cent. and not
more than 80 per cent. of the money de-
posted
GRAVE OBJECTIONS.
After discussing the provisions of the bill
tar A f,tra
Grafton it does not seem to be well thus
forcibly AM suddenly to expand the cir
culating medium when the expansion in
evitably must be followed in a short time
and perhaps suddenly, by almost equal
contraction. The bust ess of the country
has already adapted Itself to whatever
diminuuition of the circulating medium
has been caused through the surrender
of circulation by national banks The ulti-
mate expansion and contraction resulting
from thus bill will, in my Judgment, pro-
mote only speculation, not healthtul bust
ness. The last section of the bill authorizes
national banks to issue circulating notes to
the par value of the bonds deposited, instead
of 90 percentum as now. On Feb % last
the amount of bonds on deposit with the
Treasurer t. secure circulation was $1S2,-
22l, 700, and the circulation thus secured
was Sl63, 22l 1876 The increased circulation
authorized by this bill would probably not
exceed 10 percentum of the bonds now on
deposit for circulation.
BONDS WOULD GO UP.
"At the present price of bonds, even if
this additional circulation were authorized,
any attempt by the banks to purchase more
bonds would soon advance their price
beyond the point where circulation could be
profitably issued upon them. This certainly
would be the case if the forced government
tai purchase required by the earlier pro-
visions of this bill was simultaneous with
the bank purchases. However, a 10 per
cent. increase would be to that extent of
benefit to the banks and not harmful to
the public except as it might compel the
government to pay more for bonds the
purchase of which is directed by this BILL
than otherwise would be the case"
FACTS SHOWN BY FIGURES.
Referring to some tables in the last an
nual report of the Secretary. of the Trea-
sury, Secretary Fairchild says: liable
No. shows approximately the amounts of
the various circulating mediums in this
country, and where held at the close of
each fiscal year since 1860
From this table it appears that in spite of
the decrease in the national bank circula-
ton the total circulating med UNI in the
country increased from 81, 394, 355, 1873 in
1882 to 81, SOL, l56, 997 in 1887, net increase
in five years of Sl56, S0l sos If the aver
age annual decrease of national bank circu-
| latiOn should continue to equal that of the
| average Of the past five years the whole
| of such circulation would have been
retired by the end of the year of 1894.
| The minimum of bonds which the national
banks now in existence must keep on de-
post is about 500, 900, 900. IL is, therefore,
not possible that tais rate of decrease of
| circulation should continu. unless govern
| ment purchase of bonds drives their prices
so high that it is clearly for the interest of
the banks to sell their bonds and retire from
the national system. This might be the re-
suit should this bill become a law. But
even if the national bank circulation
should be retired in the future at the same
rate as during the past five years, there is no
reason b. fear that its place Will not b. sup
piled by other forms of circulating medium
as rapidly as it has been in the past. In my
| judgment the purchase cf bonds with the
surplus revenues of the government is the
only immediate relief from the evils caused
by the accumulation of the circulating me
dunn i'll the Treasury through excess
i've and unnecessary taxation, but
even this relief will be only temporary and
partially effective for that purpose. r.
peal of the laws which levy excessive taxa
ton is the only adequate remedy for the
fiscal disturbances which our government
now suffers"