Evening star. [volume] (Washington, D.C.) 1854-1972, 1897-12-07
conditions. recommend that 1t be amend
ed In the following particulars:
Secretary GaUe,a nemedx


Secretary Cages Remedy.
First. Permit national banks to be Or
ganized with minimum capital Of $4,000
inhabitants or less.
Second. Reduce the rate of taxation on
circulating notes secured by deposit of
bonds to one-half of per cent per annum.
Third. Permit banks now organized or
hereafter organized to issue circulating
notes to the par value of the refunding
bonds hercinbefore suggested, when de-
posted by them with the treasurer of the
United States; and, further allow such
banks as shall avail themselves of the op-
portunity to deposit as security with the
treasury of the United States greenbacks,
tai amount OF $500, 100000, against which
there shall at once be issued to them by
the controller of the currency national
bank notes to an equal amount, it being
further provided that from time to time,
at his convenience, the Secretary of the
Treasury shall substitute for the green
backs, treasury notes. and silver certificates
SO deposited to secure circulation, bonds of
the same class and character as the re-
funding bonds first named to the amount
of $2OO.OOOOOO, such bonds to be chargeable
to said banks and by them accounted for
at such price mot less than par) as the
fair market value. During the period of
time intervening between the deposit of
greenbacks, treasury notes and silver GER
tificates and the substitution Of the bonds
by the Secretary of the Treasury the circu-
lating notes specifically issued therefor shall
be exempt from taxation. Upon such SUBJ
stitution Of bonds the funds released there
by shall at once be transferred by the Sec
rotary of the Treasury to the issue and
redemption division.
Fourth. After said banks have deposited
such bonds, greenbacks, treasury notes, or
silver certificates to the amount of 50 per
cent of their capital they shall! be permitted
to issue bank notes in addition to the 80
Der cent thus provided, to the extent Of %
per cent of such deposit, which said %
per cent may be unsecured by any direct
pledge of security, but issued against the
assets of the bank.
Fifth. Extend the guaranty of payment
by the government to all circulating notes
Of the bank whether issued against depos-
tied security OF against assets.
sixth. To secure the government against
less, If any, attaching to its guaranty q
tax of per cent per annum on unsecured
circulation shall be levied to create a safety
fund. which fund shall be invested by the
Secretary Of the Treasury and the control
Ter of the currency in government bonds.
In addition to such funds tie government
shall be further protected by having first
lien upon all assets in case Of failure of the
issuing bank.
Seventh. All notes shall be redeemed in
the city of New York at the subtreasury,
and at such other subtreasuries as may be
designated by the controller of the cur
rency with the approval of the Secretary
of the Treasury. The control of such re-
demption shall be under the direction of
the controller of the currency and made
from, redemption fund of 10 per cent, to
be provided and maintained by the banks.
Eighth. Restrict the issue of rational
bank notes to the denomination Of so and
upward.
A Desirable Credit Currency.
"An examination of the plan herein pro-
posed will show that the amendments sug-
gested are not Of distinctly radical char
acter. 1t is believed that banks organized
under the national bank act, with these
amendments, would give upon thoroughly
safe basis desirable credit currency lead
ing ultimately to further freedom of issue
as the result of time and experience. n
careful investigation of the commercial con-
oitions Of the country at different periods of
the year shows how essential to those sec
tons depending upon the prompt moving of
the staple crops Of cotton, wheat and corn
is Il bank note issue which enables the
local bank to supply it's customers with the
means necessary for such purpose within
the shortest period of time and at the low
est cost. In illustration Of this point at
tention is called to the extent to which the
crop producing sections of the country are
now dependent as borrowers of money upon
other sections.
THE national banks located in the south
ern states have an aggregate capital of
$6S, $4,000 On October q, 1896 they had
borrowed largely from banks in the east, to
assist in handling the cotton crop, $13J4S-
600. On March o following these loans had
feen reduced to $2,5162oO. They succeeded
In borrowing for part of their needs. but
commert 1al necessities required more. With
proper banking facilities the necessity of
such borrowing now existing would be re-
duced to minimum.
Il am confident that under an act allow
ing greater liberality of ISSUE and less
burdenSome rates of taxation those banks
would find 1T to their interest to issue, in
stead of $1S.9JO,OOO, the amount which they
have at present outstanding, a sum equal
to the full amount of their capital and, in
addition. in the season of crop activity, an
additional unsecured volume of circulation
approximating % per cent of their capital
From data gathered from the records of
the Office Of the controller of the currency
1t is found that during the existence of the
national banking system $50 associations
having a combined capital of $4,000 0D
nave been placed in the hands of receivers
OF the number of those in this list whose
aHa1rs are fully closed only eighteen, hav-
ing capital of 81 10000, would have fail
ed to pay in liquidation an amount suffi-
cient to fully provide for their circulating
notes, had such notes been outstanding to
the full limit, as herein contemplated, at
lne TIME or their failures, respectively. The
deficiency would have required to cover it a
contribution from the guaranty fund of
but l94,SO. Had the whole number of 33O
rallied associations maintained In current
use an amount Of note issues equal to %
per cent OF their capital, as herein pro-
posed, the per cent tax on such circuIa-
ton would have produced the sum of 81
t.4, i4o4 ~ available to meet the deficit of
sloi,s shown to have resulted from the
Ialiure OF the eighteen banks which failed
10 yield from their own assets the amount
tnat would have been necessary to provide
Tor all their own outstanding credit cur
rency.
Breaking '"The Endless ChafD.o
I'm submitting these recommendations.
am rot unmindful of the convictions. pre-
conceptions and prejudices so widely prev
alent among the people in much that re-
iates to our currency and banking system.
1t will at once appear to many that the
proposal herein made to place In condi-
tional retirement the sum CT 500 600, 600 in
our legal tender (greerback) issues Is a
discrimination against a form of paper
money, which, uDGer the influence of a
worthy sentiment, has become to them a
symbol of the unity and power of the ma
tion's life. little reflection, however will
lead to conclusion quite to the contrary
OF such an inference. Bearing in mind the
fundamental truth upon which this argu-
ment rests, viz, the necessity for a reduc-
ton in the volumes Of demand liabilities
now constituting q menace to the public
treasury. 1t is. economically speaking,