The sun. [volume] (Morris, Stevens County, Minn.) 1882-1895, 1890-01-09
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.


New York, Special-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 with
in the next few days, the principle object OF
which is to provide for the use of silver
bullion as q basis for national bank Circula-
ton. The text of the bill is as follows:
A bill to provide for q 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 DC
organized shall be authorized to issue circulat-
ing notes as now provided by law, in amounts
not exceeding 70 per cent OF the capital stock
of each bank
Sec. 2. 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 lOo per
cent upon tue par value OF such bonds, provid-
ed that at the option OF each bank one-hal 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
ury, of gold coin or bullion or
silver bullion , at the fimr current It, danGst market
Whenever the market cash value of bullion
and OF United States bonds deposited with the
treasurer is reduced below the amount OF clrcn-
laton issued for the same the controller OF the
currency may demand and receive the amount
of such depreciation i'll other bullion, or in gold
or silver coin to be deposited with the treasurer
as long as such depreciation shall continue, or
the amount OF the circulatingnotes 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 all account to be designated as
"the National bank safety fund.- is hereby au-
thorized to be opened on the books OF the treas
urer of the United States by reducing the
amount of United States notes now outstand-
ing 81 800 900, and by reducing the National
bank redemption fund 81 500 900 and credlting
the amount OF $3 100000 to the account OF the
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
of national bank notes i'll circulation, as pro-
vided in section 5214 of the Revised Statutes OF
the United States.
Sec. 4. That ii any national bank, after the
passage of this act, shall become insOlvent, and
any OF the circulating notef of such bank shall
remain unpaid after the assets and the individ-
ual liabilities of the shareholders of such i'll
solvent bank shall have been exhausted, such
circulating notes shall beredeemed and Cancelled,
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 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
ofthe 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, O9O
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
it the semi-annual tax OF OF per cent
upon circulation. 1t is estimated that the
lost and unredeemed national bank notes
amount to at least l 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 q
safety fund for the redemption of insolvent
national bank notes that may not other
wise be provided for. 1t is not necessary,
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, ,410331, is abundant fol-
creating and maintaining a sufficient fund
for the absolute redemption of 30 per cent
of all the issues of all the national banks
The controller in his report for 19S3 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
to but SIS, 000, 900; and 80 per cent of this
will be but $4, $4,000 for twenty years
The amount of insolvent bank notes each
year on the average was $500, 600, 80 pei
cent of which would be $18OOOO annually
The tax on circulation during the past veal
was 81 ,410, ,33l, or little less than eight times
the amount of safety fund required. If the
amount of circulation is increased to 5000,
600, 200 the tax to be added to the safety
fund will be 100000. If 5000, 200, 900 i
will be $3000,000, so that the amount to bt
paid to the safety fund annually from the
tax on circulation is without doubt abund
antly sufficient to provide for 80 per cent o.
all the notes of theinsolvent national bank,
of the country. The profit on circulation
large, but it would be sufficient to induce
many, if not all, of the smaller Nationa
banks which depend upon an issue of circu
lation for their profits to induce them t
deposit silver bullion with the treasurer o
| the United States and take out circulation
Mr.. Knox estimates that at the end of tn,
next twenty years, or at the date of the pay
ment of the per cent bonds in 1907,
safety fund would have accumulated of a
least $25,0O0,O00, SO that from tina
time onward a sufficient amount o
national bank circulation would
remain permanently in existence we'll Sc
cured by gold or silver bullion, and suffi
large enough, in connection with the pres
ent amount Of United States notes, to re
spond to the demand of the business of tn,
country, It will also give the banks in tn,
West, as well as the East, who have conf
dence in the future value of silver, an op
portunity to invest in that metal, and h
believes that such investments would b.
made for the next three years equal at leas
$40, 600, 900 annually, and thus relieve tn
| treasury from excessive purchases.