Pittsburg dispatch. [volume] (Pittsburg [Pa.]) 1880-1923, 1890-01-07

NEW YORK, January 6.-John Jay Knox,
President of the National Bank of the Re-
public, of this city, has prepared a bill
which will be introduced in Congress within
the next few days. The principal object Of
it is to provide for the use OF silver bullion
as basis for national bank circulation.
The bill provides:
That from and after the passage of this act
every national bank, now organized or which
shall hereafter be organized, shall be author
lied TO issue circulating notes as now provided
by law, in amounts not exceeding IS per centum
OF the capital stock of each bank.
Section 2-That not less than 70 per cent of
the circulating notes authorized to be issued by
each bank under this act shall be secured by
United States bonds, at the rate of 100 per cent,
upon the par value of such bonds, provided that
at the option of each bank one-hah of such cir
culation OF 20 per cent may be secured by de-
posit with the Treasurer of the United States,
under such regulations as may be prescribed by
the Secretary Of the Treasury, of gold coin or
bullion or of silver bullion, at the current mar
ket price of such bullion at the time of deposit.
PROVIDING FOR DEPRECIATION.
Whenever the market or cash value of
bullion and of United States bonds deposited
with the Treasurer is reduced below the amount
of circulation issued for the same, the Con-
troller of the Currency may demand and re-
ceive the amount of such depreciation in other
bullion, or in gold or silver coin, to be depos-
tied with the Treasurer, as long as such depre-
citation shall continue; or the amount of the
circulating notes Of such bank may be reduced
by charging the excess of circulation to the re-
demption fund. provided by section Of the
act of June 20, 1874
Section 3-That an account to be designated
as ''The National Bank Safety FUND.- Is hereby
authorized to be opened on the books of the
Treasurer of the United States by reducing the
States OutStQnd-
ing 81, 500 900 and by reducing the national bank
redemption fund $50 900 and crediting the
amount Of So 600 900 to the account of the said
National Bank Safety Fund" To this fund
shall be added the duty of one-halt of per
centum each half year upon the average
amount of national bank notes in circulation.
as provided in section 52l4 Of the Revised Stat
utes of the United STATES.
Section 4-That if any National Bank, after
the passage of this act, shall become insolvent,
and any of the circulating notes of such bank
shall remain unpaid after the assets and
the individual liability of the shareholders of
such insolvent bank shall have been exhausted,
such circulating notes shall be redeemed and
cancelled and destroyed, as now provided by
law, and the amount of such notes shall from
time to time be charged to the National Bank
Safety Fund" as provided in this act.
THE Ex-CoNTRoLLER's ARGUMENT.
In explanation of the provisions of the |
proposed bill, Mr.. Knox says:
The bill provides for the issue of bank circu- |
lation in amount not exceeding 70 per cent of |
the capital of each bank Seventy per cent of this
circulation is to be absolutely secured by the |
deposit of United States bonds at par or of |
silver bullion at the market price. The other |
80 per cent is not to be secured by deposit of |
each bank but is to be fully secured by safety |
fund on deposit with the Treasurer. This |
safety fund is to be opened by cred1ting to the |
fund 81, 500 900 of lost or unredeemed national |
bank notes and the same amount of lost or un- |
redeemed United States notes. The fund will |
be further increased each half year by adding |
to it the semiannual tax Of one-half Of per
cent upon circulation.
1t is estimated that the lost or unredeemed |
national bank notes amount to at least l per |
cent during every 20 years, but only one-half of
the amount estimated to De lost is to be placed
to the credit of this fund. These lost notes do
not belong to the bank that issued them,
neither do they belong to the Government.
They belong to those persons who were the last |
owners of the notes, and cannot, of course. be
restored to the owners. No other use can SO /
properly be made of them as to appropriate |
the amount for creating safety fund for the |
redemption of insolVent national bank notes |
that may not otherwise be provided for. 1t is
not necessary, however, that this appropriation |
should be used for creating the safety fund if |
serious objections are made to its use.
The AK on circulation which amounted /
during the year 1889 to 81, ,4lO33l is abundant |
for creating and maintaining sufficient fund |
for the absolute redemption of 80 per cent of |
all the issues of all the national banks
A GREAT SAVING OF MONEY
The Controller, in his report for 1888, found
by investigation that if 500 of circulation had
been issued during the first 20 years of the
nation al banking system upon $40 of security
the total loss from the notes of insolVent banks
could have been paid from the assets of |
the banks These losses ars very
small. The Controllers report for 1889
shows that during the last 25 years
the total circulation of insolvent banks
amounted to but S15000 900; and 80 per cent of
this amount would be but 81 500 900 for % years,
The amount of insolVent bank notes each year
on the average was 100000, so per cent of
which would be $3.50, 900 annually. The tax on
circulation during the past year was 81, ,4l0,33l
or little less than eight times the amount of
safety fund required.
If the amount of circulation is increased to |
$500. 0O0, 900 the tax to be added to the safety
fund will be 81 000O0. If $780, 0000 600 it will be
So 600 600. so that the amount to be added to the
salty fund annually from the tax on circula-
tion. is without doubt abundantly sufficient to
provide for 30 per cent of all the notes of the
insolvent national banks of the country.
The profit on circulation under this PROPOSE
tion would not be large, but it would be suffi-
cient to induce many, If not all, OF the smaller
national banks which depend on an issue of cir
culation for their profits to induce them to de-
posit silver bullion with the Treasurer of the
United States and take out circulation.
A PERMANENT CIRCULATION.
At the end of the next 20 years, or at the date
Of the payment of the per cent bonds in 1907,
d safety fund would have accumulated of at
least 5000, 0O0 SO that from that time onward
\ sufficient amount of national bank circula-
ton would remain permanently in existence
we'll secured by gold or silver bullion, and sufi-
GENTLY profitable to make the circulation large
enough in connection with the present amount
If United States notes to respond to the de-
nand of the business of the country. It would
also give the banks in the West as well as the