The Daily bulletin. [volume] (Honolulu [Hawaii]) 1882-1895, 1892-07-27
RCRNER'S BANKING BILL.

What is behind the notes to be is
sued by the Bank of Hawaii Moth.
ing but the securities deposited by
its borrowers. Section 4 of the bill
reads
1t shall be the duty of the Post
master-Gencral to loan the money
supplied to him by the Cabinet as di-
rected by Section 2, in sums not less
than one hundred (SlOO) dollars, to
all legal applicants upon the securi-
ties and to the amounts following,
that is to say: upon the prOmissory
note of the applicant with interest
payable thereon at the rate herein
after provided, this promssory note
to be secured by deposit of a sulli-
cient number of interest. bearing
bonds of the Hawaiian Kingdom, at
ninety percent of the market value
thereof in gold coin, or by mortgage
of real estate at not more than one.
half of its taxable value at the last
assessment, or by bullion at so per-
cent of its market value.
1t is by getting into its vault these
valuable securities at the heavy dis
counts prescribed, probably, that
"the more money drawn from it
the bank the richer it would be-
COme,' as the author claims. But
what about the borrowing public? !?
They are required TO give security on
their notes, while they get not n
particle of substantial security on
the bank notes they receive. 1t is
unnecessary to argue what the result
would be from such n one-sided ar
rangemcnt, in crisis of business de-
preston or political unrest. The
author himself gives his whole posi-
tion away, in an attempt to show
that 'the Bank of Hawaii, If put in
operation, would do another thing
heretofore thought impossible, viz. :
| 1t would reverse Gresham currency
law which reads as follows: when
ever two or more currencies of equal
nominal, but different actual values,
are put in circulation side by side,
the cheaper will drive out and take
the place of the dearer by a law as
inexorabe as that of gravity "
This predicated reversal of linan-
clal law Mr.. Horner undertakes to
demonstrate in this wise, his words
being condensed: Suppose the bank
to have loaned gold c)in intrinsically
worth 80 percent of lis face value,
the same amount of silver coin at SO
percent Of its face value, and the
same amount Of paper money worth
nothing intrinsically. AS the bank
is compelled to take back any part
or all Of this money at its face value,
the author answers the query as tO
| which would he carried back, the
cheaper or the dearer, with, CAL
must answer the cheaper" Then he
declares in triumph, "No other sys-
TEN of money could reverse that law
and drive all inferior currency out OF
circulation, save the one foreshadow-
ed in the bill now in the House fol
the organization of the Bank of na,
vail" SO he admits that his pro.
posed paper is 'inferiOr" currency,
to be driven out of circulation by the
operation of the law that brought il
into existence! That means that in
a contingency sure to arrive the bank
would collapse, having left in hanC
nothing but its own notes pushed
back on it by the public. When il
foreclosed on delinquent borrower:
securities, the purchase price woulc
also be paid in its own notes. The
bank notes would indeed be a de
preciated currency from the start
because the law forbids the banE
from dealing in exchange. The pri
vate banks would simply refuse th'
notes for exchange except at dis
count that they could fix arbitrarily
That alone would be sufficient to pu
silver as well as gold at premium
| over the rnp money