Birmingham age-herald., 1894-12-07
THE BALTIMORE PLAN.
VIEWS OF MIR. A. B. HEPBURN

VIEWS OF MIR. A. B. HEPBURN.
 The December number of the Forum pub- fishes a thoughtful and timely article on s'The Baltimore Plan of Currency Re- form,' which is certain to attract wide spread interest. It is written by A. B. Hepburn, ex-comptroler of the currency, and now president of the Third National bank of New York city. He reviews the history of the national currency system since the first issue of fiat money, and then elucidates tho full meaning of the "Baltimore plan.'' A few selections, of course cursory and insufficient, are here given from his careful article.
 The Baltimore plan proposes to amend the National bank act so as no longer to re- uuire the government bonds as security for circulation, but provide safety fund in- stead; to allow banks to issue circulation to 50 per cent of their paid up, unimpaired capital, and in an emergency 75 per cent. Ali notes of failed banks are to be redeemed by the government, as under the present law. A guarantee or safety fund, qual to per cent of the outstanding circulation, is to be accumulated and main tained by gradual taxation upon such circulation. From this fund the government Is to re- deem notes of failed banks. The govern ment also retains prior lien upon the as- sets of failed banks, including stockhold- ers' liability, as now provided by law, in order to replenish this safety fund and pro- tect itself against possible loss. Practi cally, the only change is to substitute a guarantee fund for government bonds as security, the other changes being incidental. The details are open to discussion and improvement, but believe the principles to be right. The Baltimore plan has nothing to do with the money of ultimate redemption, whether gold or sil- yer or greenbacks. It simply provides a bank note currency redeemable in lawful money. Bank notes are not legal tender and should not be. A legal tender quality would tend to keep them iu circulation, prevent their return for redemption, inn pair their elasticity. bank note is 0 representative o! value, by mutual consent, performing the office of money, called into existence by some industrial need local to the bank of issue, and should appear and disappear at the beck and nod of such in- dustry.
 The principal defect in our present bank note currency is the want of elasticity. The inability of banks, under existing law, to supply a currency commensurate with the wants O. business, has given an oppor tunity for false theories of finance to come to the front and to command approval. It Is not bazarding much to say that, had the national bank act been amended in 1865, as now proposed by the Baltimore plan, and a currency responsive to commercial needs thus made possible, the country would have been spared the greenback heresy and the more substantial and serious injury to credit and business attendant upon silver legislation.
 Just such law as the one proposed by the Baltimore bankers is now in successful operation in the Dominion of Canada, ex- cept that the Canadian law allows. circula- tion to the par of unimpaired capital, and the gover D ment assumes no responsibility for the redemption of failed banks' notes