New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1891-06-06
THE TREASURY AND THE BANKERS


THE TREASCRY AND THE BANKERS
The most important feature of the interview
of Secretary Foster with Newly ork bankers was
his emphatic assurance that he had the power
and that he intended to maintain the parity of
gold and silver money in use. 1t should have
been scarcely necessary for him to say that ne
meant to enforce to the fullest extent the ACT
passed by Republican Congress and approved
Inv President Harrison. Yet many persons give
so little attention to the provisions OF laws IN
force that the statement will be of real benefit
The argument submitted to the Secretary
AGAINST the extension of bonds at a lower rate
than per cent has much force. 1t is under
stood that he was originally inclined 10 tne
ooinion that the extension OF bonds at per
cent would be as much as it would be wise TO
undertake. Presumably the Judgment OF others
had some weight in the final decision. Two
arguments were presented at the conference
ON Thursday against the extension at any lower
rata of interest; first, that the circulation OF
tho banks might decrease at time neon
venient and perhaps dangerous to the public
and second, that bonds bearing lower rate OF
interest might presently come to sell below par
In the market.
If the banking circulation were relatively as
important as it once was the first suggestion
would be much more weighty than it now ap-
pears. But in fact tho bank circulation has
ceased to be largely important, and is certain
rapidly to decrease. The profits OF that clrcu-
latIon are now so small that its surrender IS
going on at rapid rate even with four and-a-
half or four per cent bonds deposited as security
The substitution of two per cent bonds would
probably continue only part OF the clrculatlon'
excepting for time. The banks are but little
likely to take as basis for permanent clrcula-
ton any bonds at such a low rate which can
be retired at the pleasure OF the Government
With the steady substitution OF new notes for
the bank notes under the Act Of 1890 1t IS Ger
tain that all the decrease by surrender of bank
notes will be more than compensated by the
issue of notes based on the purchase Of silver
bullion. If there were any reason to believe
that a contraction of the circulation would re-
suit, or that some reduction in the circulation
would do harm, the case would be different.
But there is no reason in the recent voluntary
surrender of the new notes and silver certificates
to suppose that the whole of the present clrcu-
lation is necessary. Still less is there reason
to believe that any dimnution in the clrcula-
ton would result from an extension OF bonds
at the lowest practicable rate, or that an in
crease in the circulation of the whole can in any
way be avoided under existing laws.
The other objection has somewhat more force.
1t is argued that bonds bearing less than 2 per
cent interest might sell below par and thus
discredit all issues by the Government. 1t will
be agreed by all that it is not desirable that
any class of Government obligations should be
selling again at a discount 1t would be to the
people'a somewhat unpleasant shock, after see
ing the credit of the Nation SO grandly restored
and all its obligations commanding handsome
premium If there were real danger that bonds
at a lower rate than per cent might be de-
pressed below par, that consideration might
with wisdom be considered by the Government.
In any case, it is not probable that more than
$50 100000 of the bonds will be extended, or
that these will remain outstanding more than
a year or two. The entire difference in interest
to be saved between an issue at ! or per
cent would be only $500, 900, even though the
whole should remain outstanding two years, and
probably not more than 100000. For gain
SO small it is not worth while to risk any dis
turbance, even the slightest Of the Govern
ments credit
But it is also true that United States bonds
paving a fixed sum and free from taxation,
though bearing only nominal interest, are
hardly likely to be selling below par when the
amount of such bonds outstanding is very small,
because of the constant and large demand for
investments considered entirely safe. Under
orders of court, or by trustees or in other forms
of similar nature, large amounts have to be
placed every year in securities without much
regard to the late of interest Obtainabe, From
such quarters there would be at all times some
demand, and from buyers satisfied with any
interest provided the principal is entirely safe.
1t is also true that the banks which continue
circulation on bonds bearing no more than one
per cent interest would be little likely to sur
render it within the short time for which tho
extended bonds will probably remain outstlnd-
ing If the amount to be extended were larger
there would be less force in these cOnsidera-
tions. As it is the business community can
safely trust the Administration to decide with
due regard to the public credit and welfare, and
can possess its peace in the assurance that the
decision either way is not likely to result in
any serious harm.
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A MELANCHOLY BEGINNING.