The Austin weekly statesman. (Austin, Tex.) 1883-1898, 1894-12-13

turbance in the official operations of gov.
eminent as well as the business of the
people, and the plan now suggested foI
lts gradual retirement by the use of the
surplus revenues after it is received is a
process which will probably require sew
eral years for its completion. As these
notes cannot be retired until other forms
or currency to an equal amount have
taken their place, there would be neither
a forced contraction nor expansion of the
circulation on account of change.
AS the plan suggested proposes to ex-
empt the government of the United
States from all liability for the redemp-
ton of national bank notes and places the
responsibility upon the banks themselves,
a guarantee fund of not less than 30 per
centum upon the outstanding circulation
is regarded as very proper and neces-
sary feature of the system. In my opin-
ion the imposition of a tax by the federal
government upon the use of the circula-
ting notes lawfully issued by state banks
is an unjustifable, if not an unconstitu-
tional, interference with the authority of
the several states, but as its validity has
been judicially sustained it does not ap-
pear to be practicable to repeal it abso-
lutely at this time, it is proposed to avoid
its prohibitory effect by eXempting from
taxation the notes of such banking insti-
tutions as may be organized and con-
Quoted under conditions which will amply
protect the holders of their papers. While
direct governmental supervision is not,
and ought not to be provided for, the re-
quirement that bank in order to secure
exemption from taxation must satisfy the
secretary of the treasury or the comptrol-
Ter of the currency that it has complied
with all the conditions imposed to enable
these officials to adopt such measures as
may be necessary in each case to secure
deposltors, is a very material fact in
volved in the inquiry.
1t 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 a depar-
ture from the practice which has
prevailed for more than 30 years, it is
proper to state briefly the J reasons
which have prompted me to make this
suggestion. When the national banking
system was originally unauthorized it
was regarded by many as doubtful
experiment at first and curious pre-
cautiOnary restrictions were imposed for
the security of notehOlders and depos-
itOrs which practical experience has
since shown to be unnecessary and
sometimes harmful Among these are
the requirements that bonds shall be de-
posted to secure 80 per cent of their par
value in circulating notes, and that q
fixed reserve that cannot be lawfully
diminished shall be held on account of
deposits.
The consequence of this last require
ment is that when bank stands in
need of all it's resources it cannot use
them without violating the law. The
necessity for holding a sufficient reserve
against deposits is not questioned, and
in fact the business of receiving deposits
and dscounting paper ought never to be
conducted without it, but it should be
held for actual use when the occasion
arises, and not made legally inaccessible
at the very time when it was theoretic-
ally supposed to be beneficial in sustain
ing the credit of the bank. Under the
present law when bank finds its re-
serve in danger of reduction below the
| legal requirement on account of the de
mands of its depositors, it is compelled
Mt once to call in it's loans, thereby
increasing the distrust and aggravating
| the system which a judicious use of
| the reserve would have relieved and
besides at such times in order to pro-
tect the reserve, which is practically use
less for all practical purposes, clearing
house certificates, various forms OF time
checks and bills and other devices of
doubtful legality are habitually resorted
to for the purpose of supplying circula-
ton to take the place of the lawful
money lying idle in the vaults of the
banks. To provide for reserve which
cannot be utilized at time of the great
est stringency and distrust without in
curing the penalties of forfeiture, af-
fords a most striking illustration of the
impolcy of legislative interference with
the natural laws of trade and finance
1t is not the duty or province of the
government to control or regulate the
affairs of the people except for
certain well defined purposes, and as the
custody and use of funds belonging
Ito depositors are matters which affect
lonly the interests of the immediate par
ties, they should be left to their own judg-
|ment and discretion. The duty of the
government so far as it has any duty IN
the premises is simply to provide that all
1.-The currency issued under its authority
lis sufficiently secured to prevent the loss
or depreciation in the hands of the people
lwhO are compelled to receive and pay II
lout in the TRANSACTION of business; but q
hank is not dependent upon the govern
Iment for authority to receive deposits
land it's use for that purpose by the pub
lie is as purely voluntary as the credit
Extended to any corporation or to a pri-
vate individual. Every prudently managed
lbank, if left free to conduct its own de-
posit and discount business in the man
ner most advantageous to its own inter-
ests and the interest of its deposltors,
will keep on hand reasonable reserve
to meet not only all the ordinary demands
upon it but to provide for such emergen-
cies as are liable to occur in the commu-
nity where it is located; but il ought not
TO be prohibited by law from using such
reserve for the only purpose it was de-
signed to accomplish The requirement.
That the banks shall pay their own obi
cations imposes upon them no greater
Hardship than is imposed by law upon
every other business and financial insttu-
Ition in the country and the only argument
that can be plausibly urged against II
in the case of the banks is that as the
government has undertaken through their
agency to secure sound circulating me
Idium, it should pledge its credit to Keep
liz good under all circumstances. Inc
conclusive answer to this is that tne
government has discharged its whole duty
| in the matter when it has by its legis,,
llation provided such safeguards as Will
with honest and capable management
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.
In order to provide wider field for the
active circulation Of silver coins and GER
ltificates, which now constitute about one
fifth of the entire volume OF our cur
rency, and to protect the treasury as lar
as possible against the accumulation OF