Pittsburg dispatch. [volume] (Pittsburg [Pa.]) 1880-1923, 1890-09-20
TREASURY FUNDS IN THE BANKS.

AS a way to ease monetary stringencv,
Senator Farwell declares that the surplus
Treasury funds should be deposited with the
national banks. Mr.. Wharton Barker, of
Philadelphia, proposes they should be
loaned to the Clearing Houses on the joint
responsibility of the banks composing those
associations, which comes to the same
thing. AS both these gentlemen were lead
ing Republicans during the campaign in
which the chief orators attacked the Cleve-
land administration for having 500, 900, 900
of Treasury funds on deposit with banks, it
might be supposed that the recollections of
1888 would estop them from recommending
that what Secretary Fairchild was attacked
for Secretary Window should repeat. But
the tight condition of Wall street seems to
have given them new light; perhaps it has
convinced them that "the conditions have
changed" since 1888.
Mr.. Barker's proposition that the Treasu-
ry funds shall be loaned to the Clearing
Houses, evokes objections that it really
involves loan to the banks without OBJ
tanning their direct responsibility. The
Clearing Houses are organized for specific
purpose-the convenient adjustment of
balances between the banks; but this plan
would enlarge their functions by charging
them with new duties for which their
machinery is NOT adapted. 1t is even doubt
full if the Clearing Houses could contract
any liability as agent for the banks in deal
ing with the Government. Without a
radical change and reorganization of the
Clearing House Associations, Mr.. Barker's
scheme would simply amount to loan of
the Government funds to irresponsible and
anomalous organizations.
The objections to the loan or deposit of
Treasury funds, to the banks directly,
apply also to the Clearing House scheme.
OF course, the deposit of Treasury funds for
disbursement at various points, in the
designated United States depositaries, is not
open TO criticism. But the keeping OF q
large surplus constantly on deposit with the
banks as a relief from monetary streiDgen-
cy raises two objections. First, if money
is worth five, six or twenty per cent, it is
because commerce needs it, and, of course,
the cost comes out of the people. If the
United States Government collects $50, ,000,-
600 or S100, 600, 900 from the people, that is
not needed for Government disbursements,
and keeps it on deposit in the banks to be
loaned out it is simply taking from the peo-
pie whatever the interest earned on those
deposits may be and giving it to the banks.
In the second place, such deposits while
they may bring temporary relief would
actually imperil the stability of our
finances. The presence of large amount
of loanable funds in the banks always stim-
ulates speculation TO absorb it. If the
Treasury reserves were deposited in the
banks, it would not be long before it was
taken up; and then in case of strIngency the
efforts of the Treasury to meet its own liza
bilities might exaggerate the stringency to
the degree of panic.
The functions of the Government in con-
neetion with the finances are clear. 1t
should collect only such an amount of rev.
enues as is necessary to meet its legitimate
wants. If it should find itself in possession
OF surplus beyond its own needs, it should
employ that surplus in the reduction of
bonded Indebtedness and in judicious ex-
penditures. II taxes permanently exceed
the limits of economical expenditures they
should be reduced SO that the danger of
locking up funds in the Treasury beyond
the needed reserves will be permanently
avoided. This policy fully carried out will
free the Treasury from any shadow of re-
sponsibility for stringency in the money
market.
Finally, when the Treasury has, by such a
course, guarded against its share of respon-
sibility in the locking up of funds, itshould
serve notice by firm adherence to its policy