The Indiana State sentinel. [volume] (Indianapolis) 1868-1895, 1894-12-12
WEDNESDAY, DECEMBER ~. 1894.
SECRETARY cARLIsLEys PLAN.

SECRETARY CARLIsLE,s PLAN.
The currency plan submitted by Secre-
tary Carlisle involves very complete rev.
oIution Of our present currency system, and
much more Its contemplated results are
as follows:
/. The retirement OF all national bank cur
rency. and the abandonment of the deposit
Of national bonds with the government as
security for bank notes Of any kind.
2. The issue of circulating notes by nation
al banks. or banks organized under state
laws, under fixed conditions. TO the amount
Of rs per cent. Of their paid-up capital. Thus.
Il bank is organized with a paid-up CAPT.
tai OF 1000. 900, it may issue notes to the
amount of s75O.OOO. but il must deposit with
the national treasury greenbaclxs or other
United States paper currency to the amount
Of 1925. 900 as a guarantee for the redemp-
ton Of the s75O.OOO Of notes issued. The
stockholders Of national banks will be indi-
vidually liable as at present to the full
amount Of stock owned. The stockholders
Of state banks will be liable. to the same
ing notes" In all banks the circulating
notes will be first lien on the entire
sets Of the bank. A tax Of one-haif or
per cent will be imposed annually on the
circulation Of national banks. On all
banks a tax will be imposed in proportion
to circulation until safety fund Of per
cent. is secured on the entire circulation, and
when any bank fails its notes will be at
once redeemed from this fund.
No national bank is to issue notes of
less than $40.
4. No restriction is to be placed on the in
crease or decrease Of national bank circu-
lation.
5. No bank is required to hold any re-
serve for the protection OF depositors.
6. The secretary Of the treasury may re-
tire United States currency to the amount
Of 10 per cent. Of all outstanding bank cur
rency.
These are the important points Of the
scheme The bank notes proposed would
apparently be safe. unless indeed banks
should fail so rapidly as to exhaust the
safety fund" and even then the first lien
on the entire assets and the personal liability
of stockholders make it improbable that
the owner of bank note could ever fail to
have it redeemed. But these notes are not
legal tenders, and the government is not
responsible for them except of course. as
TO the trust funds held by it for their pro-
lection.
Does this plan furnish an expansive cur
rency? At first thought one says, ''Yes-an
enormously expansive one" But on exam
ination it will be seen that the expansion
depends entirely on the secretary Of the
treasury. for in addition to the 80 per cent.
Of circulation deposited by the banks he is
entitled to retire 20 per cent. in United
States currency. So long as he desires to
exercise this power the issue Of bank notes
would not increase the total circulation at
all but merely change it from United States
currency TO bank notes. to the amount Of
20 per cent. Of the total bank notes issued.
But most important is the question. What
effect would this system have on banking?
The noteholders are safe enough. but how
about the depositors? Taking such a bank
as we have used for illustration above, the
depositor knows that there are outstanding
s525. 900 of bank notes. unsecured except by
their first lien on the assets Of the bank, and
In state banks the first claim against the
individual property Of the stockholders. The
depositor has nothing to look to but what
Is left after the noteholders are satisfied.
There is no reserve for his protection. Will
business men be inclined to deposit with
banks Of issue? Will intelligent bankers be
inclined to issue so long as deposits usually
far exceed the amount they can issue? And in
case Of any symptoms of panic, or rumors
of weakness of bank. will not the de-
positors run on a bank Of issue much more
quickly than on other banks? 1t would
seem that this system would be certain to
increase deposits in safety vaults and old
stockings, and, therefore, a real reduction
of the circulation. We venture the assertion
that the most earnest champions Of this sys-
tenn among bankers will be the very ones
who would not issue notes under it.
1t is probable that the presentation Of the
currency question at this time will bring out
a very full consideration Of it in every
aspect, and it is to be hoped that good will
result from it.