The morning call., 1894-12-05

anG6e IunQ, consisting OF nlteQ SLaIeS leSa'
der notes including treasury notes of 1881 TO tne
amount of 80 per centum upon the circulating
notes outstanding to be maintain ed at all times
and whenever bank retires its circuauoh IN
whole or In part its guarantee FUND TO be returned
to 1t in proportion to the amount of the notes
retired.
8 Retain the provision of the law making
stockholders individually liable and provide that
the circulating notes shall constitute first lien
upon all the assets of the bank.
4. Impose tax of one-half OF l per eentnm
per annuu, payable semi annually, upon the aver
age amount of notes in circulation to defray the
expenses OF printing notes, Official supervision
cancellation, etc
ton than SO, and all notes of the same demon
nation to be uniform in design: but banks desiring
NJ ade payable in that coin. The Secretary OF the
Treasury to have authority to prepare and keep
hand ready Tor issue upon Application re-
serve of blank national banknotes
q. Require each national banking association 10
redeem It's notes at It's Office or at its own OIL
cia agencies, to be designated by it.
Z. To provide safety fund for the immediate
redemption of the circulating notes of failed
mum upon the average circulation of each bank
until the fund amounts to per cent of the total
circulation outstanding. Require each new bank
and each bank taxing out additional circulation
TO deposit its proper proportion OF I'M, ms
its guarantee fund held on deposit is to be paid
into the safety fluid and used In the redemption
OF its and If such fund shall be impaired by
the redemption of the notes of the failed national
banks and the Immediately available cash assets
or such banks are insufficient to establish the
assessments upon the other banks, according TO
the amounts of their outstanding circulation.
But there shall be first lien upon all assets OF
failed bank or banks to reimburse the contri6ut-
ing banks. The safety fund may be invested i'll
outstanding United states bonds having the
longest time to run. The bonds and the interest
upon them are to be as part of the fund and sold
when necessary TO redeem notes of failed BANKS
g. Repeal the provisions OF the reorganization
and extension act of July L. 1892, imposing
limitations upon the reduction and increase of
national bank currency
9. Repeal all provisions of the law requiring
banks to keep reserve on account of deposits
10 The secretary of the Treasury may. in his
discretion. any surplus revenue OF the United
States in the redemption and retirement OF united
States legal tender notes, bnt such redemption
shall not In the aggregate exceed an amount
equal TO 20 per cent of the additional circulation
taken out by national and State bonds nnder the
system herein proposed.
II. Circulating notes issued by banking
poraton duly organized under the laws of any
ing business, shall be exempt from taxation under
the laws of the United States when it is shown to
the satisfaction Of the Secretary of the Treasury
and the Comptroller of the Currency:
(d) That such bank has at no time had out
standing its circulating notes in excess of rs per
centum OF Its paid up and unimpaired capital
(b) That its stockholders are indiv dually liable
for the redemption of its circulating notes to the
full extent of their ownership of stock
(c) That the circulating notes constitute by law
a first lien upon all the assets OF tho bank
(dJ That the bank all times keeps a guarantee
fund in United States legal tender notes, includ-
ing treasury notes of $50 equal to 30 per centum
OF its outstanding circulating notes.
(e) That IL has promptly~redeemed It's notes on
demand and its principal on demand at its prin-
cipal office at one or more OF its branch Offices,
If 1t has branches
IL The Secretary OF the Treasury may under
proper rules and regulations, to be established by
him. permit State banks to procure and use in the
preparation of their notes, the distinctive paper
used in printing United States securities; but no
State bank shall print engrave its notes in sim
iitude OF a United States note or certificate or
national bank note.
Whatever may be the objections 70 the issue
and calculations of United States legal tender
fnf inFNn Rsn Of
ground it has become 30 incorporated into our
currency sy stem and constitutes so large part
of our active circulation that ii could not be
suddenly WI hdraWn without producing, in the
present state of our laws. considerable dis
turbauce IN the financial operations OF the
Government as well as the business OF the
people, and, therefore. the plan now suggested
provides for its gradual retiremeD by the use of
surplus revenues hereafter received, process
which will probably require several years for
its completion.
In my opinion the imposition OF tax by the
Federal Government upon the use of circulat-
ing notes lawfully issued by State banks Is an
unjustitable, il not an unconstitutional, inter-
ference with the authority OF the several States,
but its validity has been judiclaliy sustained,
and as 1t does not appear To be practicable to
repeal absolutely at this time, 1t is proposed TO
avoid Its prOhibitory effect by exemuting from.
taxation the notes of such banking Institutions
as may be organized and conducted under con-
ditioDs which will amply protect the holders
of their paper. While direct governmental
supervision is not, and ought not to
be, provided for, the requirement that
bank. IN order to secure exemption
from taxation must satisfy the Secretary of the
Treasury and the Comptroller OF the Currency
that ii has complied with all the conditions
imposed. will enable those officials TO adopt
such measures as may be necessary in each
case, TO secure every material fact involved in
the inquiry. 1t Will be observed that the plan
submitted proposes the repeal Of all provisions
OF existing laws which require national banks
to hold fixed reserve ag inst deposits, and, as
this is departure from the practice which has
prevailed continuously for more than thirty
years, it Is proper to state briefly the reasons
which have prompted me to make this sugges-
IOn. When The national banking system was
originally organized, II was regarded by many
as doubtful experiment at first and various
precautionary restrictions were imposed for
the security of the nOtehoder and depositor,
which practical eXperlrnce has since shown to
be unnecessary and sometimes harmful. Among
these are the requirements that bonds shall be
deposited TO secure 80 per cent Of their par
value In circulating notes, nd that fixed re-
serve which cannot be lawfully diminished
shall be held on account OF depoSlts. The con-
sequence OF this last requirement is that when
a bank stands In ne of all its resources, IL
cannot use them without violating the law.
To provide for reserve which cannot be
utilized even at time OF the gteatest strin.
gency and dlsIrust without mourning the
penalties OF forfeiture affords most striking
Illustration OF the impOcy OF legislative inter-
ference with the natural laws of trade and
finance. 1t Is not the duty nor province of the
Government to control or regulate the private
affairs OF the people except for Wel-detined
purposes. and, as the custody and use OF funds
belonging to depOsitors are matters which
affect only The interests of the intermediate
party, they should be left to their own judg-
ment and discretion. Every properly managed
bank, If lett free to conduct its own deposit and
discount business In the manner most ad-
vantageous to its own interests and the interest
of its depOsitors, will keep on hand d reason
able reserve to meet not only the ordinary de.
mands upon it, but 10 provide for such
emergencies as are liable 10 occur In the COM
munlty where il is located; but It ought to be
prohibited bY law from using such reserve for
the only purpose 1t was designed TO accomplish.
The requirement that the banks shall pay heir
own obligation imposed upon them no greater
hardship than is imposed by law upon every
business and financial institution In the coun-
try. and the only argument that can be plausi-
bly, urged against IT, in the case Of banks. Is
that, as the Government has undertaken.
through their agency. to secure sound circu-
lating medium, 1t should pledge its credit 10
keep 1t good unoer all circumstances. The
conclusive answer TO this is that the Govern
meut has discharged its whole duty IN the mat
ter when IL has, by its legislation, provided
such safeguards as will, W III honest and COM
pc ent management, guarantee the safety OF
the notes issued by Its authority: and this Is
one Of the results which the proposed plan is
intended to accomplish.
III order o provide wider field Of the active
circulation of our silver coins and certificates,
which now constitute bout ont-ffth of the
ant ipau vol nf nI1r nd 70 or