The great West. [volume] (St. Paul, Minn.) 1889-18??, 1890-01-10
BULLION THE BASIS.
A Bill to Provide for a Perma-
nent National Bank Cir
culation Prepared.
Another Omnibus Bill, Includ-
ing Idaho, Wyoming, New
Mexico and Arizona.

Mexico ana Ar1ZOnd.
NEW YORK, Special-John Jay Knox,
president of the National Bank of the Re-
public of this city. has prepared bill
which will be introduced in congress with
in the next few days, the principle object of
which is to provide for the use of silver
bullion as basis for national bank circula-
ton. The text of the bill is as follows:
A bill to provide for a permanent national
bank circulation Be it enacted, etc., That from
and after the passage of this act every national
bank now organized or which shall hereafter be
organized shall be authorized to issue circulate
ing notes as now provided by law, IN amounts a,s
OF each bank.
Sec 3 That not less than 20 per cent of the
circulating notes authorized to be issued by
each bank under this act shall be secured by
United Stated bonds, at the rate OF 100 per
cent upon the par value OF such bonds provid-
ed that at the option OF each bank one-half OF
such circulation of 20 per cent may be secured
by a deposit with the treasurer of the United
States, under such regulations as may be pre-
scribed by the secretary OF the treas
silver bullion, at the current market
Whenever the market or cash value of bullion
and OF United States bonds deposited with the
treasurer is reduced below the amount of circn-
lation issued for the same the controller of the
currency may demand and receive the amount
of such depreciation in other bullion, or in gold
or silver coin to be deposited with the treasurer
the amount of the Acknowledgements of such bank
may be reduced by charging the excess of circu-
lation to the redemption fund, provided by Sec
ton of the act Of June 20, 1874.
sec. 3. That an account to be designated as
''the National bank safety fund.- is hereby au-
thorized to be opened on the books OF the treas
amount of United States notes now outstand-
ing 81, SOC, 900, and by reducing the National
bank redemption fund 81 500 900 and credting
said National bank safety fund" To this fund
shall be added the duty OF one-half of per
centum each half year upon the average amount
vided in section 5214 of the Revised Statutes of
the United States
Sec. 4. That If any national bank, after the
passage of this act shall become insovent, and
any OF the circulating notef OF such bank shall
remain unpaid after the assets and the ind1vid-
ual liabilities of the shareholders OF such in
solvent bank shall have been exhausted, such
circulating notes shall be redeemed and Cancelled,
as now provided by law, and the amount of such
National bank sal safety fund" as provided in
this act.
THE BILL EXPLAINED.
In explanation of the provisions of the
proposed legislation Mr.. Knox says that the
bill provides for the issue of bank circula-
ton in amounts not exceeding IS 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 mar
ket price. The other 80 per cent is not to be
secured by a deposit by each, but to be
fully secured by safety fund on deposit
with the treasurer. This safety fund is to be
opened by crediting to the fund 81, 500, $50
of lost or unredeemed national bank notes.
and the same amount of lost or unre-
deemed United States notes. The fund will
be further increased each year by adding to
1t the semi-annual tax of of per cent
upon circulation. 1t is estimated that the
amount to at least per cent during every
twenty years, but only one-half of the
amount estimated to be lost is to be placed
to the credit OF this fund. These lost notes
do not belong to the banks that issued
them, neither do they belong to the govern
ment. They belong to those persons who
were the last owners OF the notes and can
not, of course, be restored to the owners. No
other use can so properly be made of them,
as to appropriate the amount for creating a
safety fund for the redemption of insolvent
national bank notes that may not other
however, that this appropriation should be
used for creating the safety fund if serious
objections are made to use. The tax on
circulation, which amounted during the
year 1889 to 81, 410,331, is abundant for
creating and maintaining sufficient fund
1OT LIlc dOSOlutc IcucupGlOu VI OU per CcIlI
of all the issues of all the national banks.
The controller, in his report for 1888, found
by investigation that if 500 Of circulation
had been issued during the first twenty
years of the national 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 are very small. The
controllers report for 1889 shows that
during the last twenty-five years the total
circulation of insolvent banks amounted
to but SIS, OO0, 600; and 80 per cent of this
will be but 81, 5OO,OO0 for twenty-five years
The amount of insOlvent bank notes each
year on the average was 100000 80 per
cent of which would be S1SO,OOO annually.
The tax on circulation during the past year
was 81 40, 331, or little less than eight times
the amount of safety fund required. If the
amount Of circulation is increased to $780,
600, 600 the tax to be added to the safety
fund will be 100000. If $500, 900. 600 it
will be 100000, so that the amount to be
paid to the safety fund annually from the
tax OH circulation is without doubt abund
antly sufficient TO provide for 80 per cent of
all the notes of the insolvent national banks
ofthe country. The profit on circulation
under this proposition would not be
large, but it would be sufficient to induce
many, if not all, OF the smaller National
banks which depend upon an issue of circu-
lation for their profits to induce them to
deposit silver bullion with the treasurer of
the United States and take out circulation.
Mr.. Knox estimates that at the end of the
next twenty years, or at the date Of the pay
ment of the per cent bonds in 1907, a
safety fund would have accumulated OF at
least $4,000, OOO so that from that
time onward a sufficient amount of
national bank circulation would
remain permanently in existence we'll Sc
cured by gold or silver bullion, and sutfi-
GENTLY profitable to make the circulation
large enough, in connection with the pres
ent amount of United States notes, to re-
spond to the demand of the business of the
country. 1t will also give the banks in the
West, as well as the East, who have conf
dence in the future value of silver, an OPP