The record-union., 1894-12-05

such banking institutions as may be or
ganlzed and conducted under conditions
which will amply protect the holders of
their paper.
NV hile direct Governmental super
vision IS not, and ought not to be pro-
vIded for, the requirement that bank,
III order 10 secure exemption from taxa
uon, must satisfy the Secretary OF tie
Treasury and the Comptroller of Cur
rehcy that 1t 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 iii the inquiry.
RESERVE AGAINST DEPOSITS.
TT will be observed that the plan sub
mitted proposes the repeal OF all provis-
ions OF existing laws which require aa-
uonal banks to hold a fixed reserve
against deposits, and, as this is q depart
ure from the practice which has prevailed
continuously for more than thirty years,
IL is proper to stale briefly the reasons
which have prompted me TO make this
suggestion. When the national banking
system was originally organized 1t was
regarded by many as a dOu bttul export
ment at first and various precautionary
restrictions were imposed Tor the security
OF the noteholder and depositor, which
| practical experience has since shown to
! De unnecessary and sometimes harmful.
| Among these are the requirements that
bonds shall be deposited 10 secure 30 per
centum OF their par value in circulating
notes, and that a fixed reserve, which
cannot be lawfully diminished, shall he
/ held on account OF deposits. The conse-
| quence OF Jnis last requirement is that
| when bank stands III need of all its re-
sources 1t cannot use them without vio-
iatlng the law.
he necessity for holding a sufficient
reserve against deposits is not ques-
toned, and IN fact the business OF re-
! celVlng deposits aud discoUuting paper
| ought never to De conducted without il,
but 1t should be held for actual use when
the occasion arises, and not made locally
inaccessible at the very time it was
! theoretically supposed To be beneficial in
sustaining the credit Of the bank and al
fordlng relief 10 its customers. Under
the present law when q bank finds its re-
serve IN danger OF reduction below the
| legal requirement, on account of the de-
nanGs OF its depositorS, it is compelled
at once 10 call III lis loans, thereby in
creaSInG the diStrust and aggravating
the situation. which g judicious use of the
! reserve would have relieved, and be-
sides, at such times, in order to protect
the reserve, this is then practically use
less for all practical purposes, clearing
! house certificates, various forms of time
checks and bills and other devices of
! doubtful legality are habltuaily resorted
! TO for the purpose of supplying circula-
tioa to take the place OF lawful money
! lying idle in the vaults of the banks.
/ 10 provide for Il reserve which cannot
! be utilized even at time OF great strIn-
| gency and distrust, without incurring the
! penalties Of forfeiture, affords a most
| striking Illustration of the impolcy of
! legislative Interference with the laws of
trade and finance. 1t is not the duty or
! province OF the Government to control or
! regulate the private affairs of the people
except for we'll defined purposes, and as
the custody and use of funds belonging
to depoSltorS are matters which affect
| only the interests of theimmediate party,
| they should be lett 10 their own iudg-
ment and discretion. The duty of the
| Government, so far as it has any duty in
the premises, is simply 10 provide that all
! the currency issued under its authority is
! sufficiently secured TO prevent it's loss or
! depreciation IN the hands of the people
who are compelled to receive and paw il
! out III the transactions of business; but
! bank is not dependent upon the Govern
ment for authority TO receive deposits
and its use Tor that purpose by the public
| is as purely voluntary as the credit eX-
tended to any other corporation or 10 a
/ private individual.
! Every properly managed bank. if left
! free to conduct its own deposit and dis
count business in the manner most adj
! vantageouS to its own interests and the
interest OF its depositors, will keep on
hand reasonable reserve to meet not
| only the ordinary demands upon IL. but
! 10 provide for snch emergencies as are liza
! bic TO occur in the community where il is
! located; but it ought not to be prohibited
| by law from using such reserve for the
/ only purpose 1t was designed to accom-
| plish.
The requirement that the banks shall
pay their own obligations imposes upon
! them no greater hardship than is imposed
| by law upon every other business and
financial institution in the country. and
the only argument that can be plausibly
/ used against 1t In the case of banks is
! that, as the Government has undertake en-
/ through their agency to secure sound
circulating medium, 1t should pledge it's
credit to keep it good under all circum-
| stances. The conclusive answer to this is
that the Government has discharged its
! whole duty in the matter when it has. by
its legislation, provided such safeguards
| as will. with honest and competent man
| agement, guarantee the safety OF the notes
issued by its authority, and this is one Of
| the results which the proposed plan is in
tended to accomplish.
SILVER COINS AND CERTIFICATES.
I'm order to provide a wider field for
the active circulation OF our silver coins
! and certificates, which now constitute
about one-fitth of the entire volume of
/ our currency, and to protect the treasury
as far as possible against the accumula-
ton OF certificates returned i'll payment
| OF customs and other duties to the Gov
ernment, 1t is probable that no national
bank note OF less denomination than $40
shall be issued. The bank notes under
| that denomination now outstanding
! amount TO S6S, ,25S. $40, and there are also
| in circulation sol, 4I9,S S3l in old United
States legal tender notes in denomina-
| tions less than SO, 500, l93, ,65S III treasury
notes Of 1890, and Sl3l ,047, ,547 in silver
! certificates, making i'll the aggregate
| S3lS, ,6lS, $50 in small notes, or only about
| Sly 016, coo less than the entire issue Of sill
yer certificates.
The fact that our circul ating medium
Is composed OF SO many different kinds
OF currency would seem to require the
enactment of such legislation as will pro-
vide a plan III which each can be safely
and conveniently used, and as this can be
done without discrimination against any
OF them, 1t ought not to be omitted from
any plan which proposes permanent
changes in the system. The policy of
various other countries in this respect ap-
| pears 10 have enabled them to avoid the
difficulties encountered here in the at
| tempt to adopt the less valuable coins and
their representatives in circulation with
out arrangement of the currency or dis
turbance of the public finances Great
Britain, with 500, 900 600 in gold, has ONLY
| $ll2, ,0030UO in silver, none OF which is
full legal tender, and authorizes the issue
OF no note of less denomination than e5.
equal TO S24 30. France, Belgium and
Italy, with S976,000.000 in geld and $685.
| 100000 in legal tender silver, issue no
| notes OF less denomination than 20 francs.
| or s. IS. Holland, with S27, GOO. coo In gold
| and S53. 900 in legal tender silver, is