The Indianapolis journal. [volume] (Indianapolis [Ind.]) 1867-1904, 1892-07-28

500. The increase to $50. 1916. 917 in three
years shows how vigorously the policy
of distributing the surplus among the
national banks was prosecuted. OF
course, these deposits drew no interest.
and there was no reason why they should
have been made in the national banks
beyond q moderate amount necessary to
make government payments.
The subject early attracted the atten-
ton of President Harrison, and in his
first annual message to Congress, in De-
cember, 1889. he said:
The loaning of the public funds to the
banks without interest. upon the security
OF government bonds. | regard as an I'M
autE orized and dangerous expedient. 1t
results IN temporary and unnatural IN
crease of the banking capital of favored
localities. and com peis a cautious and grad
nal recall of the deposits TO avoid injury to
the commercial interests. Ii is not to be
expected that the banks having these de-
posits will sell their bonds to the treasury
80 long the presents hly-benefcial
arrangement ia continued. They now
practically get interest both npon the
bonds and their proceeds. No further use
should be made of this method OF getting
the surplus into circulation. and the de-
poslts now outstanding should be gradu-
ally withdrawn and applied to the pur-
chase of bonds.
This was sharp departure from the
methods pursued during the Cleveland
administration, and shows q marked diff
ference in financial management. The
policy of the Cleveland administration
was to distribute the government sur
plus among favored national banks, al
lowing them the use of it without inter-
est. while the government was paying
large sums as interest on the public debt.
The policy recommended and inau-
withdraw the government deposits from
the national banks and use them in the
purchase of government bonds, thereby
stopping interest. 1t does not need an
expert in finance to say which was the
wiser policy.
By direction of the President the pol.
icy of calling in government deposits
from the national banks was so prompt
ly begun and steadily pursued that, on
the I'd of October. 1890, they were re-
duced to $25. and on the 25th of
September, 1891, to $15,700. 762. This
was a big reduction from $50, 1919, 917.
which represented the government de-
posts in national banks in December.
1887. The effect is seen IN the follow
ing statement from President Harrison's
message of December. 1891:
The surplus on March /, 1889. was $751;
S27, 100. The policy Of applying this surplus
to the REDEEM ption of interest bearing Sc
curities of the United States was thought
to be preferable to that Of deposlting it
banks. There have been redeemed since
the date last mentioned of interest hearing
securities S25g,07S, $50, resulting in re-
duction of the ANIMAL interest charge Of
Sll.GS4.675. The money which had been de-
posted in banks without interest has been
gradually Withdrawn and used in the re-
demption of bonds.
Thus it appears that the change of pol
icy inaugurated by President Harrison
withdrawing the government deposits
from the national banks, where they
were lying without interest, and apply
ing them to the purchase of government
bonds had resulted, up to December.
1891. in saving the people $11, 6S4.675 in
annual interest. Not only this, but the
redemption of the bonds united the sur
plus and added materially to the volume
of money in circulation. For this change
of policy and the benefits dresdltihg
therefrom the country is directly in
debted to President Harrison.