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, IncIud-
ing Idaho, Wyoming, New
Mexico and Arizona.

NEW York, Spccial-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 a basis for national bank Circul0
ton. The text of the bill is as follows:
4 bill to provide for ii permanent national
bank rirruatiun Re it enacted, etc, That from
and after he passage OF this act every national
bank. now organized or which shall hereafter be
organized, shall be authorized to issue crculat-
ing notes as now provided by law, i'll amounts
not exceeding IS per cent Ot the capital stock
OF each bank
See. . That not less than 40 per cent OF the
circulating notes authorized to be issued by
each bank under this net shall be secured by
United stated bonds, at the rate OF 100 per
cent upon the par value OF such bonds, prOHld-
ell that at the option OF each bank oneha1 OF
such circulation OF - per cent may be secured
by a deposit with the treasurer OF the United
States, under such regulations as may be pre-
scribed Ivy the secretary OF the treas
silver bullion, ut the current market
price Of such bullion at the time OF deposit.
Whenever the market Ur cash value OF bullion
and ut United states bonds deposited with the
treasurer is reduced below the amount OF clrcu-
lutjum issued lor the same the controller OF the
currency may demand and receive the amount
OF such depreciation i'll other bullion, or i'll gold
or silver coin 10 be deposited with the treasurer
As long AS such depreciation shall continue, or
the amount OF the circuatlnEnoteS OF such bank
may be reduced by charging the excess OF clrcu-
lutiOu ~ the redemption fund, provided by sec
ton , OF the act OF June 20, 1874.
see 3 That an account to he designated rs
"the National bank safety fund, is hereby au-
thOriLed to We opened on the books OF the treas
urer vi the United states by reducing the
amount OF United states notes now OutStand-
iug ) 500 600. and 10y reducing the National
bank lr-,ItlnptiOu fund 81 500, 600 and Credting
the amount q S3,OOOfOlO TO the account OF the
said "NatiOuaI bank safety fund.- To this fund
shall lie added the duty OF One-hait OF ! per
Centum each half year upon the average amount
OF national bank notes i'll circulation, as pro
Vided i'll section OIL OF the Revised statutes OF
the United states.
sec 1. That ii any national bank, after the
passage OF this act, shall become inSOlvent and
any Of the circulating nOtet OF such bank snail
remain unpaid after the assets and the mdNld-
uaI liabilities of the shareholders OF such i'll
solvent bank shall have been exhausted, such
circulating notes shall be redeemed and ranCeled,
as now provided by law, and the amount OF such
notes shall from time to time he 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
till provides for the issue of bank Circula-
ton in amounts not exceeding IS per cent
otthe 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
lct price. The other 80 per cent is not to he
secured by a deposit by each, but to be
fully secured by a safety fund on deposit
with the treasurer. This safety fund is to be
opened by crcditing to the fund 100 $50
Of lost or unredeemed national bank notes,
and the same amount of lost or unre-
deemed United States notes. The fund will
he further increased each year by adding to
ii the Spmi-annUal tax OF of per cent
upon circulation. 1t is estimated that the
lost and unredeemed national bank notes
amount to at least per cent during every
twenty years, but only One-haf 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 50 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
wise be provided for. 1t is not necessary,
however, that this appropriation shOuldsbe
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, 41033I, is abundant for
creating and maintaining sufficient fund
for the absolute redemption of 30 per cent
of all the issues of all the national banks.
The controller in his report Tor 1883, found
| by investigation that if 500 of circulation
! had been issued during the first twenty
years of the national banking system upon
| SO 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 $l5, 900; and 80 per cent of this
will be but S. $4,000 for twenty-five years.
The amount of insOlvcnt bank notes each
year on the average was 5000, OOO 80 per
cent of which would be $1SO,OOO annually.
The tax on circulation during the past year
was 81 .4I0, 33l, or little less than eight times
| the amount Of safety fund required. fthe
amount of circulation is increased to $500,
100000 the tax to be added to the safety
| fund will be $2OOO,OOO If $500, 600, 900 It
will be 100000 so that the amount to be
paid to the safety fund annually from the
tax on circulation is without doubt abund-
antly sufficient to provide for 80 per cent OF
| all thenO of the insolvent national banks
fthe 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 tC
| 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 4 per cent bonds in 1907, g
safety fund would have accumulated OF al
least $25,OOO,OO0, SO that from that
time onward sufficient amount O
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 op
portunity to invest in that metal, and he
believes that such investments would bt
made for the next three years equal at leas
$20,OOOOOO annually, and thus relieve the
treasury from excessive purchases.