The morning call. [volume] (San Francisco [Calif.]) 1878-1895, 1893-01-13
TALKING OF MONEY
Future of the Banking
System.
WORDS FROM INSIDE SOURCES
Giving an Indication of the Probable
Course of the Administration
of Cleveland.
Special to THE MORNING CALL

PHILADELPHIA, Jan. 12-The seven
teenth annual session OF the American
Academy of Political and Social Science
convened here this evening at the Drexel
Institute. The president, Professor Ed
mund j. James of the Wharton School Of
Finance and Economy, was in the chair,
and representative bankers of Philadelphia,
New York and Baltimore occupied seats on
the stage. The topic Of the evening was
National versus State Banks of issue"
and papers were submitted by Hon. Horace
White, editor of the New York Evening
Post. Hon. w. l.. Trenholm OF Ohio and A.
). Hepburn. present Comp troller of the
Currency.
The discussion had significance far
beyond mere academic debate, as the first
two OF the three gentlemen are known TO be
intimate advisers of President-elect Cleve-
land In financial matters. while Hepburn
represents Harris0n's administration. Mr..
White. III the leadiag paper Of the evening.
gave sketch of the good and bad systems
OF banking that existed before the war. ln
the former category the governing principle
was that thea banks assets should redeem
Its circulating notes. This In the Speakers
opinion, was the true theory OF banking.
The bad systems were the free banks, espe-
cally OF the Northwestern States, which
copied after the New York system of issu-
ing notes against securities lodged with a
public officer. The free bank system was
step backward in the evolution OF banking,
because it absorbed the banks capital be-
fore its doors were opened for business.
White thought that the system of banking
on bond security was destined to perish
soon. because all the securities tit to be
used for the purpose were fast disappear
ing. The national bank-note system could
be preserved aud improved, however. by
very slight change in the present law.
namely: Out Of the present tax on bank
notes to teate a safety fund, to be lodged
in the treasury, the amount of 1t to be CON-
puted by aetuaries. taking the national bank
mortality of the past twenty-five years as a
basis. Let the Government continue as
now to be responsible for the notes and TO
hold the first lien on the assets and the per-
s0nal liability of the shareholders for its
own protection; all other parts Of the
national bank law TO stand as now, When
ever the safety fund reaches an ascertained
amount let the participating banks with
draw their bonds and sell them if they
choose.
This plan would dispense with the crav-
ing for silver currency because it would
furnish all the circulating notes needed;
AMI 1t would dispense with the need for
State bank notes, because every facility for
sound banking that The State could posi-
bly, grant would be granted by the national
Government.
Hon. NJ. d. Harter of Ohio laid down
conditions to be adopted, which, In his
opinion. were essential to the successful
financial future of the United States. Gold
must continue to be the sole standard of
value. and bimetallism must and can only
be maintained by limiting the coinage of
silver as we do now. The Government must
Stop the issue OF legal-tender paper, retire
in the best manner, and at as earya date as
can properly be done. all the paper ii has
out. and must thereafter conine itself to
collecting taxes. disbursing the proceeds
and keeping its bands off the money market.
With the Government simply coming
freely all gold and restricting the coinage
OF the baser metals every other form Of
money would be promptly redeemable or
convertible into gold, and the volume under
any good banking system would always be
what the busine ess of the nation needed.
Harter then presented the bill introduced
in Congress and pictured the business of
the United States. free from Congr essonal
control, which would follow the adoption OF
this plan. and said that while it provided
for State banking the banking of the future
would under the bill be very largely done
by national banks and by banks and bank
ers, and not in issuing notes.
Comptroller Hepburn's paper was on
State and national bank circulation. 1t
said, in part The constitution provides
that Congress must provide all the money
that possesses full debt paying power.
BY every consideration OF sound business
principles 1t should provide all the money
the country requires. AS in the past so in
the future, every period Of financial depres-
sion would result in q more or less general
suspension of specie payments by the banks.
If state banks are allowed TO circulate their
notes their acceptance becomes a business
necessity, and State bank circulation loses
its money power in crisis. Instead Of pay
ing debts, IL comes forward itself to be
paid and so adds to the danger.
If the States are to share with the United
States in the issuing of paper money we
will have a chain of soyereigntles each
with varying laws and systems. The profit
Of BANKS circulation depends upon the
length OF time IL is outstanding in order to
get their notes into general use, aud keep
them outstanding the State banks would
seek to arrange with city correspondents
for their REDEMPTION, and as result of the
intense competition for the strong bank ac-
counts all of cur cities would be drawn into
the meshes, and weak and bad notes would
not he confined to their place of issue.
Circulation should be secured and when
United States bonds cease TO exist other
suitable securities will exist. The function
OF the Government Is not merely to protect
the note-hodeIs. but so far as possible to
protect all creditors. In recent years banks
have become large owners of securities, and
since this is the case it would not be an
onerous provision to require them to own
the proper securities as the basis for the