New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1893-08-04
N1TIONIL BANK CIRCULATION
A METHOD FOR FACILITATING ITS INCREASE IN
TINE De NEED.


TINE IF NEED.
Tothe Editor of r TIT bune.
Sir: In a time Of severe financial strain like the
present any measure looking to the relief OF the
money market, and tending 10 relieve legitimate
| business from extreme depression and loss. Is
| hailed with thankfulness with the entire business
| community.
The reported action on the part Of savings banks
| trust companies and other financial institutions
in making ARRANGEMENTS with the National banks
for the sale to the National Danxs ~ Government
bonds to enable the banks to take out Nationai
bank notes by depositing United states BONDS with
the Treasury Department is such measure, and
the good effect of the news is already apparent.
| There is, however, method of doing this to a
| greater extent than has so far been Undertaken
without forcing upon the savings banks trust com-
panes any other institution owrinS Government
bonds the necessity of absolutely selling them, ana
losing their control of the bonds and that, too
at market price which several per cent less
| than Government bonds sell for under ordinary
| conditions. Any institution owning considerable
amount OF United States Government bonds which
is indisposed to actually sell the and so lose
control of them could doubtless make an arrange
ment with National bank or banks whereby
the Government bonds in question could be deliv-
cred the National banks by bill of sale, the Ma
tional banks dsposng them with the United States
| Treasury, taking out 80 per cent OF the face value
OF the bonds In National bank notes. and giving
/ o
on the United states Treasury which would enable
the present owner of the bonds to redeem them at
any time from the Treasury, and so protect them
selves against any possibility OF loss or the diner
ence between 20 per cent Of the par value OF the
bonds and the actual premium at which they now
sell. In many cases IT would not be necessary even
10 do this. the relations between many OF the
savings banks and trust companies and certain OF
the National banks Is so close. and the mutual
confidence great, that there would be no need
of caution TO protect any Oh the partes 10
the Arrangement against loss from the other;
general understanding would be suhcieht LOT al
practical purposes.
II such a course as this could be adopted II would
| Immediately make available an immense NUMBER
Of Government bonds, which are now held by IN
stitutions that do not wish TO lose the control OF
them who are under any particular necessities
themselves and therefore hardly called upon to
make a sacrifice of several per cent on the amount
Of their Investment. which would be the case II
the bonds marketed at the present quotations
for Government bonds which of course. as every
body knows. lower than was the case prior 10
the present crisis
The advantage Of this plan would be that. with
out real risk any Of the parties interested In the
transaction there would be immediate creation
OF currency which would be disbursed in the ordi
nary channels OF trade. thus furnishing means for
the transa elton of business the necessity OF which
is 40 keenly felt present 1t would be particular
ing a supply Of currency in small denominations 1t
might be urged that there would be considerable
delay in the signing of the National bank notes
which would be taken out against such deposits
OF bonds but the answer 10 that is that the banks
so taking out the bank notes could issue the same
I'm large denomina lions. thus saving time in the
signing and substitute them in place of legal
tenders Of small denominations which they now
hold in their vaults AS portion of their cur
rency reserve.
In former times before the Government had
retired go many Of its bonds the National osnk
circulation was an exceedingly elastic one. in
creasing diminishing as the necessities OF the
money market required. owing to the fact that
n. available supply Of United States Govern
ments was very much larger and there was no
difficulty in securing them whenever it was to the
advantage of the banks to take out circulation.
Since the REDEMPTION however. of so large por-
to-, O. thn hnnd-I debt. Government bonds have
drifted very largely into the hands OF the savings
and the ability OF the National banks to secure an
adequate supply of bonds basis for circulation
has therefore. been very much crippled. The
present financial distress is 40 general and wide
spread and the pressure 80 great upon all branshes
OF business and indeed. upon the people at large
who are not actually engaged in any occupation
that the situation fully justiiies all banking IN
situations In uniting forces in conservative and
proper manner to stem the tide and relieve the
OF the savings banks as it is for the
National banks as is evidenced by the
OF the principal cities OF the country and indeed in
the smaller towns the savings banks have been
compelled, as matter OF sound banking and pre-
caution. 10 enforce the sixty and ninety day rule
on the withdrawal OF deposits, and therefore any
thing they do which viii restore confidence,
supply money and relieve the present distress is.
a direct benefit to themselves well to the
community at large. d. S. c.
NewYork. Aug. 3. 1893.