Iowa County democrat. [volume] (Mineral Point, Wis.) 1877-1938, 1888-03-16
SEC. FAIRCHILD'S VIEWS
Resume of his Letter in Regard te
Sherman'S Bill TO Reduce the Surplus
By the Purchase of National Bank
Notes.-The Opposes the Plan-ReaSonS.
SnERMAN'S BANK NOTE PURCHASE BILL

SnERMAN'S BANK NOTE PURCHASE BILL.
Sec. Fairehild thinks Forcible and Sudden
Expansion of the Circulation Would Not be
Well.
WASHINGTON, March Is. - Secretary
| Fairchild today sent letter TO the SEN
ate finance committee in regard to Sher-
mans bill for the investment of funds
for the redemption of national bank
notes. The said bill directs the seer etary
of the treasury to invest eighty per
cent. of the funds bell by the treasurer
for the redemption of notes of national
banks which have reduced their
CIRCULATION by the purchase in the open
market of the United States interest
bearing bonds. The bill is mandatory
and would require the investment to be
made Immediately upon its passage. The
secretary is further directed TO sell in the
open market as many of said bonds as
in his Judgment shall be necessary to re-
dsem the bank notes as they are present
ed for redemption whenever the unin-
vested portion of said funds falls
below twenty per cent. of the whole.
The bill further declares that its purpose
Il to maintain Ill the treasury for such
resumption not less than twenty per cent
and not more than thirty per cent of the
money deposited. The secretary dis
cusses the questions raised by the bill and
says: after mature consideration it does
not seem to be we'll thus forcibly snd sud
denly to expand the circulating medium
when expansion inevitably must be follow.
ed IN short time and perhaps suddenly by
almost equal contraction. This would,
in the secretary's judgment, promote
only speculation, not healthy business.
On the whole it would appear better that
the time when this contraction takes
place should be determined by the yolun-
tary action of the banks, as is now
the case. The increased circulation au-
thorized by this bill would probably
not exceed $19,O0O,OOO. There woqld
not be great prefit in the circulation
at that price, of bonds, even if this addi-
tlonel circulation were authorized, and
any attempt by the banks to purchase
many bonds would soon advance their
price beyond point where the circula-
tion could be profitably issued upon
them. This certainly would be
the case if the forced governmental pur-
chase required by the earlier provisions
of this bill was simultaneous with the
bauk purchases. However, the ten per
centum increase WOnlu De TO tndJ extent
a benefit to the banks and not harmful to
the public except as it might compel
the government to pay more
for the bonds purchased, which is
directed by this bill, than otherwise would
be the case. If the average annual de
crease of the national bank circulation
should continue to equal that of the past
tive years, the whole circulation would be
retired by the end of the fiscal year of
1894. 1t is not possible, however, that this
rate of decrease continue unless govern
mont purchases drive the price of bonds
so high that it will be for the interests of
the banks to sell and retire from the ma
tional system. Even if the circulation
should continue in the past ratio of re-
tirement there is no reason to fear its
place would not te supplied by other
forms of circulating medium as rapidly
as in the past.
The secretary says, in his Judgment,
the purchase of bonds with the surplus
revenue is the only immt diate relief from
the evils caused by accumulation in the
treasury, but this relief would be only
temporary. The repeal of the laws which
levy excessive taxation and cause tn e ac-
cGmulation OF the harmful surplus is the
only adequate remedy.