Los Angeles daily herald., 1888-03-14
sURPLUs REVENUE.
Fairchi1d DtsapprOvcs of sher.
mans Proposition.

mans Proposition.
WAsHINGToN, March 13.-Secretary
Fairchild to-day sent letter to the
Senate Finance Committee in regard
to the Sherman bill for the investment
of funds Tor the redemption of National
bank notes. The said bill directs the
Secretary of the Treasury to invest 80
per cent of the funds held by the
Treasurer for the redemption of notes
OF National banks which have reduced
their circulation, by purchase in the
market of United States interest bear
ing bonds. The bill is mandatory,
and would require the investment to
be made Immediately on its passage.
The Secretary is further directed to sell
in open market SO many of the said
bonds as in his judgment shall be
necessary to redeem the bank notes
as they are presented for redemption
when the uninvested portion OF said
fund falls below 20 per cent of the
whole. The bill further declares that
its purpose is to maintain in the
treasury for such redemption, not less
than 20 per cent and not more than
30 per cent OF the money deposited.
FAIRCHILD's COMMENTS.
The Secretary discusses the ques-
tion raised by the bill and says:
"After mature consideration it does
not seem to be well to thus forcibly
and suddenly to expand the circula-
ting medium when the expansion
inevitably must be followed in a shsrt
time and perhaps suddenly by an al
most equal contraction" This would
in the Secretary's judgment, promote
only speculation not healthful to bust
ness. On the whole it would appear
better that the time when this con-
traction takes place should be deter
mined by the voluntary action of the
banks as is now the case.
The increased circulation authorized
by this bill would probably not exceed
81 100000. There would not be a
great profit in circulation at the pres
ent price of bonds, even if this addi-
tiOnal circulation were authorized, and
any attempt by the banks to purchase
many bonds would soon
ADVANCE THEIR PRICE
Beyond the point where circulation
could be proftably issued upon them.
This certainly would be the case If the
forced governmental purchase requir-
ed by the earlier provisions of this
bill were simultaneous with the bank
nv r0hocnC fhn n,
centum increase would be to that ex-
tent of benefit to the banks and not
harmful to the public, as it
might compel the government to pay
more for bonds purchased by direc-
tions of this bill than otherwise would
be the case If the average annual
decrease Of the national bank circula-
ton should continue to equal that of
the past five years, the whole circula.
ton would be retired by the end OF
the fiscal year 1894. 1t is not impos.
sible, however, that this rate of de-
crease should continue, unless the
government purchases bonds so high
that it would be for the interests ol
the banks to sell and retire
from the national system. Even il
the circulation should continue in the
past ratio Of retirement there is nc
reason to fear that its place would not
be supplied bv other forms of circu-
lating mediums as rapidly as in the
past. The Secretary says that in his
judgment to purchase bonds with the
surplus revenue is the only immediate
relief from the evils caused by the ac-
cumulation in the Treasury, but this
relief would be only temporary. The
repeal of the laws which levy exces-
sive taxation and the cause of the ac-
emulation of the harmful surplus is
the only adequate remedy.