The Memphis appeal. [volume] (Memphis, Tenn.) 1886-1890, 1888-03-14
REDEMPTION OF BANK NOTES.
Secretary fatrehild's Letter 20 the Sem
ate Finance Commiftce.

Secretnry fafrehfid's Letter 10 the Sem
ate Finance Committee.
WASHINGTON, March l3.-Secretary
Fairchild today sent letter 10 the Senate
finance committee in regard TO the Sher-
man bill for the investment Of the funds
for the redemption OF national bank notes.
lie says in part:
Your committee some time since asked
my opinion upon Senate bill No. 1910, in
troduced by Mr. Sherman.
Sud bill directs the Secretary Of the
Treasury to invest 80 per cent. OF the fund
held by the treasurer OF the United States
under ensuing statutes for the redemption
OF the notes OF national banks which have
reduced their circulation, by the purchase
in open market Of United States interest
bearing bonds. The bill Is mandatory,
aud would require the investment to be
made Immediately upon lis passage.
The secretary is further directed TO sell
in the open market so many Of the said
bonds as in his judgment shall be neccs-
sary 10 redeem the bank notes as they are
presented for redemption whenever the
uninvested portion Of said fund falls below
20 per cent. OF the whole. A bill further
declares that its purpose is 10 maintain in
the treasury Tor such redemption not less
than 20 per cent and not more than 80
per cent Of the money deposited.
The secretary discusses the question
raised by the bill and says After mature
consideration II does not seem TO be well
thus forcibly and suddenly 20 expand the
circulating medium when expansion inev-
itably must be followed In a short time,
and pcrhaps suddenly. by almost equal
contraction:
The business Of the country has already
adapted itself 10 whatever diminution OF
circulating medium has been caused
through the surrender OF circulation by
national banks. Tho alternate expansion
and contraction resulting from this bill
would. in my judgment, promote only
speculation, not healthful business. On
the whole, II would appear 10 be better
that the time when this contraction takes
place should be determined by the volun-
tary action Of the banks as is now the
case, than by the compelled action OF the
treasury, A would be the case even II this
bill applied only 20 future deposits. Banks
will not sell their bonds unless IL be profit
able 10 do 80, but the treasury might he
forced TO sell them at loss under the
provisions Of such bill. The contraction
IL The circulating medium would DO the
same in amount, and II might be more
sudden, under such bill than under the
Law rs Il now stands.
The last section Of the bill authorizes
national banks 10 issue circulating notes TO
the par value Of the bonds deposited In
stead Of 90 per centum as now.
The increased circulation authorized by
this bill would probably not exceed Sl9.-
100000. There would not be great profit
IN circulation ut the present price OF bonds
even II this additional circulation were
authorized and any attempt by the banks
10 purchase many bonds would soon nd.
vance their price beyond the point where
circulation could be proGtably issued
upon them; this certainly would be the
case n tho forced governmental purchase
required by the earlier provisions Of this
IiIl was simultaneous with bank purchases;
however the 10 per centum increase would
10 10 that extent OF benefit 10 the banks
and not harmful 10 the public except as u
might compel the government 10 pay more
for the bonds, the purchase OF which Is
directed by this bill, than otherwise would
10 the case II tho average annual de
crease OF national hank circulation should
continue 20 equal that OF the average oil
tho past five years the whole Of such circu.
latio, would have been retired by the end
Of the fiscal year 1894.
The minimum OF bonds which tho ma.
iional banks now in existence must kccr
I'm deposit Is about so, 100000. IL u
therefore not possible that this rate Of de-
crease of circulation should continue, I'M
loss government purchases Of bonds drives
their price 20 high that Il ~ clearly for the
interest OF the banks 10 sell their bonds
and retire from the national system. Thi'
might be the result should this bill be
come a law.
But even II the national bank circula
lion should be retired In the future nj the
same rates m during the past FIVE years
there IL no reason 10 fear that It's place vii
not be supplied by other forms Of circu
lating medium as rapidly ns II has been IN
The past In my Judgment the purchas'
Of bonds with the surplus revenues Of th,
government is the only immediate relic
lrom the evils caused by the accumulation
Of the circulating medium In the trcasur,
through excessive and unnecessary taxa
lion; but even this relief will he only tenn
porary and partly effective for that pur
pose. Repeal OF the laws which levy tn
Excessive taxation asd cause the accumu
lation OF the harmful surplus Is the onl,
adequate remedy for this fiscal disturbance
which our government now causes.