St. Paul daily globe. [volume] (Saint Paul, Minn.) 1884-1896, 1890-01-07
new USE FOR SILVER.
1t Is Proposed as a Basis for
National Bank Cireula-
ton.
Banker John Jay Knox Has
Prepared a Bill to That
End.
It Will Be introduced in Con-
gress Some Day This
Week.
The Scheme Would Test the
Sincerity OF Shouteps for
Silver.

lOI UHc use VI SllhGI DIlllti StS 4 D3SlS
for national bank circulation. The
text OF the bill is as follows:
To provide for permanent national
bank circulation, Be it enacted, etc,
that from and after the passage OF thi.
act every national bank. now organized
or which shall hereafter be organized,
shall be authorized TO issue circulating
notes as now provided by law. i'm
amounts not exceeding Sevcnty-live per
centum OF the capital stock of each
bank. Section 2.-That not less than
% 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 Onc-half of such circulation
of 70 per cent may be secured by de-
post 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 SILVER BULLION,
at the current market price of such
bullion, at the time of deposit Wheu-
ever 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 comptroller of the currency
may demand and receive the amount
of such depreciation in other bull
ion, or in gold or silver
coin to be deposited with the treasurer,
as long as such depreciation shall con-
tinue; or tho amount of the circulating
notes OF such bank may be reduced bY
charging tho excess of circulation to
the redemption fund, provided by Sec
ton ). OF The act of June 90, 1874. Sec
ton 3-That an account to be designated
as 1.-The national bank safety fund" is
hereby authorized to be opened on the
books OF the treasurer of the United
States by reducing the amount of United
States notes now outstanding St,5O0,000,
and by reducing the national bank re-
dempli0n fund $l.500,000, and crediting
the amount of Sc 100000 to the account
of the said national bank safety fund"
to this fund shall be added the duty Of
One-half of one per cent each half year
upon the average amount of National
bank notes in circulation as provided
i'll section 5,214 OF the revised statutes
of the United States. Section 4.-Thas
if any National bank after the passage
of this act shall become insoiyent, aud
any of the circulating Notes OF such
bank shall remain unpaid after the as
sets and the individual liability of the
shareholders of such insolvent bank
shall have been exhausted, such cir
culating notes shall he redeemed aud
cancelled and destroyed. as now pro-
vlded by law. and the amount of such
notes shall from time to time be charged
to the
''NATIoNAI. BANK SAFETY FUND.-
as provided in this act. In explanation
of the provisions of the proposed legis-
lation. Mr.. Knox says: The bill pro-
yides for the issue of bank circulation
in amount moi exceeding 20 per cent of
the capital of each bank. Seventy per
cent of this circulation is to be abso-
luteIy secured by the deposit of United
States bonds at par, or of silver bullion
at the market price. The other so per
cent is not to be secured by a deposit
by each. but to be fully secured by
safety fund on deposit with the treas
urer. This safety fund is to be opened
by crediting to the fund 81, SOC, 900 of
lost or unredeemed national bank notes
and the same amount Of lost or uure-
deemed United States notes. The fund
Will be further increased each half year
by adding to it the Semi-annual tax Of
Is of per cent upon circulation. Ii is
estimated that the lost ana unredeemed
national bank notes amount to at least
per cent during every twenty YEATS,
but only half of the amount estimated
to be lost Is to be placed TO the credit OF
this fund. These lost notes do not be,
long 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 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 a safety fund for
the redemption of inSoiVent national
bank notes that may not otherwise he
provided for. 1t is not necessary, how
ever, that This appropriation should DO
used for
CREATING THE SAFETY FUND
IT serious objections are made to it's
use. The tax on circulation. which
amounted during the year 1889 to S1.4IO.-
331, is abundant for creating and main
tanning sufficient fund fer the abso.
Lutte redemption OF so per cent of all the
issues of all the National banks. The
comptroller, in his report for 1888,
found by investigation that if 500 OF
had been issued during tho
hrst twenty years Of the National bank
Irg system upon SO OF security, the
total loss from the notes of insolvent
banks could have been paid from the
very small. The cOmptroller's report
for 1889 shows that during the last
twenty-five years the total cir.
culation of insolyent banks amount
ed to but Sl5,0,0,000, and 80 per
cent of this amount will be but 81, 800
600 for twenty-five years. The amount
OF insotyent bank notes each year on the
average was $500, 900, so per cent of
which would be $3.50, COO annually. Tie
tax on circulation during the past year
was S1,4le,331 or little less than eight
times the amoant of safety fund re-
CURED. Ii the amount of circulation ia
increased to 5000, Coz. go the tax to ba
added to the safety fund will be s., 0OO,-
600. If $500, 100000 it will be $1,000, 900,
SO that the amount to be added to tho
safety fund annually from the tax on
is without doubt abundantlv
sufficient to provide for 80 per cent of
all the notes OF the inSolvent national
banks OF the country.
L PROFIT ON CIRCULATION
under this proposition would not be
large, but it would be sufficient to in.
duce many, if not all. of the smaller
national banks which depend upon an
Issue OF circulation for their profits to
induce them 10 deposit silver bullion
with the treasurer OF the United States
and take out circulation. Mr. Knox es.
Inmates that at the end of the next
twenty years, or at the date of the paw
ment OF the 4 per cent bonds in 1857, a
safety fund would have accumulated of
at least S25,0g0,O00, so that from chat
time onward sufficient amount
OF national bank circulation would
remain permanently in exist
ence we'll secured by gold
or silver bullion, and sufficiently profit
able to make the circulation large
enough in connection with the present
amount Of United States notes to re.
sDond to the demand of the business of
the conntry,it would also give The banks
in the West, as well as the East, VINO
have confidence in the future value of
silver. an opportunity to invest in that
metal, and he believes that such invest.
NIGHTS would be made for the next three
years equal at least to see. o0O, 0Go an.
nuaily, and thus relieve the treasury
from excessive purchases.