The Wichita daily eagle. [volume] (Wichita, Kan.) 1890-1906, 1894-12-05

notes. When bank fails, its guarantee
fund held on deposit to be paid into INT
safety fund and us~d in the REDEMPTION o.
its notes and if this fund shall De impaired
by the redemption OF the notes OF faiieo
national banks, and the immediately avail
able cash assets of such banks are INSULT
cient to est ablish the fund, il shall at ono.
be made good by pro rata assessments up
on the other banks. according 10 the
amounts of their outstanding circulation
but there shall be first lien upon all the
assets of failed bank or banks to REIN
burse the contributing banks. The safety
fund may be invested in outstanding
United States bonds, having the longest
time 10 run, tie bonds and the interest up
on them TO be held as part OF the fund
and sold when necessary TO redeem notes
Of failed banks.
PROVISIONS TO BE REPEALED.
Eighth-Repeal the provisions of the
REORGANIZATION and extension act OF July
L, 1892, imposing litigation upon the re-
duction and increase OF national bank cir
culatiOn.
Ninth-Repeal provisions OF the law re-
qniring banks 10 keepa reserve on account
of deposits.
Tenth-The secretary of the treasury
may, in bis discretion, use any surplus
revenue of the United States II the re-
demption and retirement OF United States
shall not in the aggregate exceed an
amount equal TO 20 per centum OF the adj
tiliOnal circulation taken out by national
and state banks under the system herein
proposed.
+ Notwithstanding notes issued by
banking corporation duly organized under
the laws of any state, and which tranSacts
10 other than ii banking business, shall be
exempt from taxation under the laws OF
tie United states when il Is shown 10 the
satisfaction of the secretary OF the treasury
and the comptroller of the currency: l.
That such bank has at no time had OUT
standing its circulating notes IN excess OF
75 per centum of its paid up and unlm-
raired capital .. That its stockholders
are individually liable for the redemption
OF its circula ting notes, The full extent OF
their ownership of stock. 3 That the CIR
culating notes constitute by law nrst
lien upon all the asses OF the bank. 4.
That the bank at all times keep the guar
antee fund in United States legal tender
notes including treasury notes or 1870,
roual TO 50 per centum OF its outstanding
circulating notes. ). That Ii has promptly
redeemed Its notes On demand AT It's prin-
cipal Office, or at one or more oil It's Drench
offices, If il has branches
STATE BANK PRIVILEGES.
Twtlith-TBe secretary OF the treasury
may, under proper rules and regulations
70 be tablsbed by him, permit state
banks to pI ocure and use in the prepare
lion of their notes the distinctive paper
lsed in printing United States securities;
but no state bank shall print or engrave its
notes in simiIitude of "A UniIed States note
Dr. Certificate or national bank notes.
Whatever may be the objections TO the
ssue and circulation of United States
legal tender paper upon either cousIltu-
:ional or financial grounds, II has become
II -..Frrr ,pN-c r-ra am
and constitutes SO large "A part OF our ac-
i've circulation that it could not be sud-
ienly Withdrawn without producing in
;he present state OF our laws considerable
disturbance in the fiscal operations of the
government "a well as the business of the
people, and, therefore, the plan now sug-
yested provides for its gradual retirement
Oy the use of supius -eYeuues hereafter re-
seived, IA process which will probably re-
1uire several years for It's completion. As
these notes cannot be retired TIL other
forms of currency to an equal amount
have taken their place, there will be
nett her a forced contraction nor expansion
Of the circulstion on account OF the change.
GUARANTEE FUND FEATURE.
Gas the plan suggested proposes to ex-
smpt the government of the United States
from all liability for the redemption of
mai ional bank notes and places the sole re-
sponsibility upon the banks themselves,
guarantee fund OF not less than 30 per
centum upon the outstanding circulation
is regarded as a very proper and necessary
feature Of the system.
In my opinion, the imposition of tax
by the federal government upon the USE
of circulating notes. lawfully issued by
state banks, is An unjustifiabie. if not an
Interference with the
authority OF the several states;
nut its validity has been judicialy sus-
tanned. and as il does not appear to be
practicable To repeal IL absolutely at this
lime, il is proposed to avoid Its prohibi
tory effect by exempting from taxation the
notes of such mixing institutions as may be
organized and conducted under conditions
which will amply protect the holders of
their paper. While direct governmental
SUPERVISION is not, and ought not to be pro-
sided for, the requirement that a bank in
order to secure exemption from taxation
must satisfy The secretary OF the treasury
nnd { he comptroller of the currency that it
hrs complied with all the conditions i'm
posed. will enable those officials TO adopt
such measures AS may be necessary in each
case. to secure every material fact involved
ia the inquiry.
REGARDING OBSOLETE RESTRICTIONS.
at will be observed that the plan sub
mitted proposes the repeal of all pro-
visions OF existing laws which require ma
tional banks to hold fixed reserve
against deposits and, as this is depart
ure from the practice which has prevailed
continuously for more than thirty years,
il l. proper to state briefly the reasons
which have prompted me TO make this
suggestion.
When the national banking system WAS
originally authorized, it WAS regarded by
many as "A doubtful experiment at first,
aud various precautionary restri uOns
linn psPH for the lPgnrifV Of tha
holders and deposltors, which practical
experience has since shown to be nnneCeS-
srry and sometimes harmful. Among
these are the requirements that bonds
shall be deposited to secure 80 per cenIum
of their par value in circulating notes and
that a fixed reserve, which cannot be law.
fully diminished, shall be held on account
Of deposits.
The consequence of this last require
ment is that when a bank stands III Deed
Of all its resources II cannot Use them
wiihou. violating the law The necessity
for holding q sufficient reserve against de-
pGsits is not questioned. and, IL fact. he
business OF receiving deposits ana dis
counting paper ought never TO be con
Quoted without l.. but IL should be held
ter actual use when the occasion arises and
net made legally inaccessible at the Very
time it WIS thecretio lily supposed 10 be
beneficial IA sustaining the credit of the
bank ana aiiofalu2 r neI TO It's customers.
USELESS WHEN WORST NEEDED.
Under the present law. when Il bank
finds its reserve in danger of reduction be-
low tire legal requirement. on account of
the dem uds Of Its depoeitors, Il Is com
PEELED At once TO call Ia its loans. thereby
increasing the distru-t aud aglravatiuC
the situation which juGiciouS Use Of he
reserve would have renewed; and. besides.
at such times. IL order TO protect the re-
serve which l. then practically useless for
all practical purposes, clearing house certi-
ficates, varIous forms OF time checks aud