New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1893-01-14
4 DISCUSSION ON BANKING.
.,-,-r,v.. Of The AMERICAN ACADEMY OF
POLITICAL AND SOCIAL SCIENCE.
HORACE WHITE MICHAEL D. HARTEE' CON-
rnorrER HEPBURN AND Mr.. TRENHOLM
pEvDJZC

rno11ER HEPBURN AND Mr.. TRENHOLM
TREAT OF PENDING ISSUES
psuase,phia. Jan. 13-The seventeenth scientific
IA, NJ the American Academy OF Political and
~, science convened here last evening In the
~, hail Of the Drexel Institute. The president OF
s academy, Professor Edmund J. James, OF the
..s.,,on school Of Finance and Economy was In the
Vi Representative bankers OF Philadelphia. New
v"., and Baltimore occupied seats on the stage.
~ ,on,c OF the evening "Nationa vs.. State
I ~ Issue" Papers had been submitted to the
asmv on this subject by Horace White. Editor OF
To- Nev.York Evening POST; W. L. Trenholm OF
,iryork exCon-roller OF the Currency Representa-
.,vs VI. D. Harter. Of Ohio and A. b. Hepburn. the
.s.nt Controller Of the Currency.
vr White presented the leading paper OF the cvcn-
49, rbicb was subsequently discussed. He gave
,o,ch Of the good and bad systems Of banking that
,sed before the war. In the former category
,s the state Bank OF Indiana, the Louisiana Bank
, NJ 1872 and the Suffolk bank system Of Ma saC hui
,s The governing principle OF all these was that
90 hanks assets should redeem the circulating notes.
T,. was in the speakers opinion the true theory
- banking because any system which takes dill
AN, care OF the assets will always take OF the
.rrulstinc notes. That 1t is entirely possible 10
hvs such bank system, and to have II enforced con-
,Duousy was proved by those three splendid examples
Tho had systems that existed before the We're
,hs free banks. especially OF the Northwestern
which were COptu dlN'T NEW 1OIk system
n, issuing notes securities lodged with public
scer The losses 10 the public from this kind OF
,n.ng were enormous. The freebank system was
a step backward in the evolution Of banking. be-
uss II absorbed the banks capital before its doors
vsre opened for business. The buying OF bonds by
Z. hank is really buying Its own notes Instead OF
,h,s IFS capital ought to be applied at Once TO the
discount OF commercial paper. The security OF the
poteholder is the paramount consideration. and no
should be given to any system winch
falls In that particular puts the notehoder III
Jeopardy.
Mr. White thought that the system OF banking on
hond security destined to perish soon, because
all the securities fit TO be used for this purpose were
fast disappearing. The national banhnote system
csuM be preserved and improved, however. by
slight change In the present Law, viz: Out OF the
,r,,nt tax on banknOteS constitute safety fund
10 be lodged in the Treasury, the amount OF II TO
be computed by acuarieS, taking the National bank
nortality of the last TWENTY-FIVE years aS basis
Let the Government co1tnue now to be responsible
for the notes, and let ii continue to hold a. now,
first lien the assets and on the personal liability
q, the shareholders for It's own protection, all the
ofher parts Of the National bank laws 10 stand as
now Whenever the safety fund reaches the ascer-
tanned amount let the participating hanks wi ndraw
their bonds and sell them II they choose. There
have been only $4,000 600 of failed bank notes under
the National system since it was started twenty six
replenshed out Of the tax from TO time, would have
been abundant TO redeem all failed banAnOcs.
The safety fund plan )f banking was tried In New
York in 1929 and the system continued thirty years
The safety fund OF New-IOrk consisted OF aX On
IL Of per cent per annrc TIL per cent was ac-
cumuatcd This found in practice to be suiii- |
Gent 10 redeem all the Jailed hank notes under the
system while the losses under the free bank system
which ran parallel with it, amounted to 80 per cent
OF the notes of the banks which failed These losses
resulted from depreciation Of securities and the delay
In converting them INTO cash. Mr.. White had conf |
dence that this plan would solve the bank problem,
and furnish better currency than the present Ma
tonal s. stem, because ii would be really elastic.
Mr.. Harter spoke substantially follows:
The banking periods or epOchs in the United States
or rather on Ibis continent have been 10 date Iour
them as follows: The first, beginning with Ccnln $. |
The land bank and the specie bank co''d with |
The end OF the Revolutionary War. The second, and
really the one In which banks first exercised all the |
functions Of properly conducted banking began with |
Philadelphia. The third beam with the New York |
s STATE legislation which provided for securing clrc.
atng notes by stock collateral deposited with state |
authority This marked the greatest single advance |
n banking science since the world began; in lo4i
and under it the Bank Of England has been
a aa and upon 1t hing tn 4nances O. G.ea
Red Dos, stump Tai and Coon Box" banks |
were also founded upon it, and all r;n along to
Of the htlest finally, III l7eO TO lo6j. provided a
State bank circulation 50 nvenlent, flexible. 50
elastic and automatic that TO drive it out OF use re-
CURED the highest tax upon clTculltOn ever known
and the most unreasonable and aibrary legislation
with the creation OF the National banks in Is 3. or
more prop ry, possibly. in 13'3 The National banN-
ne system had features Of importance not already
n use and fully understood in tho various stte'.
But for the decreasing supply OF United states bonds
try. The probable redemption Of the bonds In 1907
distinctly points 10 The opening Of the ih p"Hod in
American banking, in conn, ction with viii h NJ.
arer laid it was easy 10 forecast the money supply
ditons the adoption Of which were. in his opinion,
essential 10 successful financial future Tor the
tnuc 10 be- II Is now, the sole standard OF valne
In the United states. The second YVES that the Gov.
and retire ali the paper it has ont. Every other
form OF money would then be promptly rcdecmable
or convertible into gold and the volume under any
good BANKING system would always be what the bust
ness OF the Nation needed.
the House OF Representatives. No. $40. in detail
Mr.. Harters plan provides that the United states
notes issued by any bank: that the circulation Of
any bank shall not exceed so per cent of the par
value Of the bonds deposited by that banl mt III.
tax state bank circulation shall be repealed that
bank circulation shlll BE- secufd by approved bonds
deposited either In the United states Treasury or In
The state treasures; that tan OF l3 OF per cent
from Which tax Shall be tirncd Into r'.ervc fund
10 secure the circulating notes, and that no bank |
lie then proceeded to answer objections made to
II, and touched upon every objection made 10 date.
Taper was SuOmltWd Dy n. :. HcpDlirn. Con
,roer OF the Currency on the subject Of state and
NATIONAL nix CT cula'ion." in times 4 rospcrity. he
said. stste bank bills would circulate freely, but In
TINES OF rincency they would return to the bank,
redemption and they would have 10 be redeemed in !
lersl-endcr money provided by Congress. BY every
Consideration of sound business principles Congress
should provide al the money the country requires.
u the States share with IN" United States the
issuing 81 paper money, shall have chain OF !
sovcr lgntics, each with varying laws and systems
I III uatIOn should be secured. When the United /
safes bonds 10 exist, other suitable securities
VIII exist Tie function Of the Government Is not
merely 10 protect the no'c holder. but far
able, 10 protect al creditors. Safety fund PROVISIONS
are m re 0ne'Ous upon mis- than the enforced owner
ship OF securities.
HIS OFFERED PLEA WAS SIMPLE SICTDE.
The rare occurrence Of man pleading guilty - |