The Indiana State sentinel. [volume] (Indianapolis) 1868-1895, 1894-12-05


eminent bearing a low rate OF interest and
maturing within a specia, period, but the
congress having failed 70 confer such au-
thority. resort was necessarily had to the
resumption act Of 1875. and pursuant 10
its provisions. bonds were issued drawing
interest at the rate of per cent. per an
mum and maturing ten years after their
issuance, that being the shortest time au-
thoriZed by the act. i am glad 10 say.
however. that in the sale Of these bonds
the premium received operated 10 reduce
the rate Of interest 10 be paid by the gov
eminent TO less than 3 per cent.
Nothing could be worse or further re-
moved from sensible finance than the re-
lations existing between the currency the
government has issued, the gold held for
its redemption, and the means which
must be resorted to for the purpose Of re-
plenishing such redemption fund when
impaired. Even If the claims upon this
fund were confined TO the obligations
originally intended, and If the redemp-
ton of these obligations meant their can
collation. the fund would be very small.
But these obligations. when received and
redeemed in gold, are not cancelled. bu.
are reissued, and may do duty many times
by way of drawing gold from the treas
ury. Thus we have an endless chain in
operation constantly depicting the treas
ury's gold and never near a final rest. As
If this was not bad enough, we have by
statutory declaration that Il Is the
policy OF the government to maintain the
parity between gold and silver, aided the
force and momentum of this exhausting
process, and added largely to the currency
obligations claiming this peculiar gold
redemption Our small gold reserve is
thus subject TO drain from every side.
The demands that increase our danger
also increase the necessity of protecting
this reserve against depletion. and 1t is
most unsatisfactory 20 know that the pro-
lection afforded is only a temporary
palliation.
It is perfectly and palpably plain that
the only way, under present conditions,
by which this reserve when dangerously
depleted can be replenished is through
the issue and sale of the bonds of the
government for gold; and yet congress
has not only thus far declined TO author
ize the issue Of bonds best suited 20 such
a purpose. but there seems a disposition
in some quarters to deny both the neces-
sity and power for the issue of bonds
at all. l can not for a moment believe
that any Of our citizens are delibera tely
willing that their government should de-
fault in its pecuniary obligations. or that
its financial operations should be reduced
to a silver basis. At any rate / should
not feel that my duty was done If /
omitted any effort 1 could make TO avert
such a calamity AS long, therefore. as
no provision is made for the final re-
demption, or the putting aside of the
currency obligation, now used to repeat
eddy and constantly draw from the gov
eminent its gold, and as long as no better
authority for bond issues is allowed than
at present exists such authority will be
utilized whenever and as often as it be-
comes necessary, TO maintain a sufficient
gold reserve and in abundant time to save
the credit of our country, and make good
the financial declarations of our govern
ment.
Elasticity of Currency.
Questions relating to our banks and cur
rency are closely connected with the sub
ject just referred to and also present some
unsatisfactory features. Prominent among
them are the lack of elasticity in our cur
rency circulation, and it's frequent con-
centratiOn in financial centers when 1t is
most needed in other parts OF the country.
The absolute enforcement of the govern
ment from the business of banking is the
ideal relationship of the government 10 the
circulation of the currency Of the coun-
try. This condition cannot be Immediately
reached, but as a. sep in that direction,
and as a means of securing more elastic
currency and obviating other objections TO
the present arrangement Of bank circula-
ton, the secretary of the treasury presents
in his report a scheme modifying present
banking laws and providing for the issue
Of circulating notes by state banks free
from taxation under certain limitations.
The secretary explains his plan so plainly
and its advantages are developed by him
with such remarkable clearness that any
effort on my part 10 present argument on
its support would be superfluOus. / shall
therefore content myself with an unquall-
fed Endorsement Of the secretary's pro-
posed changes in the law and a brief and
imperfect mention of their prominent
features.
The New Plan.
1t is proposed to repeal all laws provid-
ing for the deposit of United States bonds
as security for circulation; to permit ma
tiOnal banks to issue circulating notes not
exceeding in amount IS per cent. of their
paid-up and unimpaired capital. provided
they deposit with the government a
guarantee fund, in United States legal
tender notes. including treasury notes of
1890, a sum equal i'm amount to 30 per cent.
of the noes they desire to issue, this de-
p)Sit to be maintained at all times, but
whenever any bank retres any part Of its
circulation a proportionate part of its guar
antee fund shall be returned 10 it; TO per-
NIT the secretary Of the treasury TO pre-
pare and keep on hand ready for issue,
in case an increase in circulation is de-
sired, blank national bank notes for each
bank having circulation, and II repeal the
provisions Of the present law imposing
limita ions and restrictions upon banks
desiring to reduce or increase their cir
culation, thus permitting such increase or
reduction within the limit of 75 per cent.
Of capital to be quickly made as emergen-
cies arise.
In addition to the guarantee fund re-
ouired, ii Is proposed TO provide a safety
fund for the immediate redemption of the
circulation notes of failed banks bv i'm
posing small annual tax, say One-half Of
l per cent, upon the average circulation
of each bank until the fund amounts TO )
per cent. of the total circulation outsta and
ing. When a bank fails. its guarantees
fund is to be paid into this safety fund,
and its notes are to be redeemed in the
first instance from such safety fund thus
augmented. any impairment of suc1 fund
caused thereby to be made good from the
Immediately available cash assets of said
bank, and if they should be insufficient.
such impairment to be made good by a
pro rata assessment among the other
banks, their contributions constituting a
first lien upon the assets Of the failed bank,
IN favor of the contributing banks.
As a further security, ii is contemplated
that the existing provision fixing the indl-
vidual liability Of stockholders is to be re-
tanned, and the banks indebtedness on ac-
count Of its circulating notes is to be made
a first lien on all It's assets. For the pur-
pose of meeting the expense of printing
notes official supervision, cancellation ana
other like charges there shall be imposed
a tax of say one-aalf of per cent. per an
mum upon the average amount of notes
in circulation. II is further provided that
there shall be no national bank notes is
sued Of less denomination that $40; that
each national bank, except in case of a
failed bank, shall redeem or retire its