The record-union., 1897-12-08

the Comptroller of the Currency, with
the approval Of the Secretary Of the
Treasury. The control Of such re-
demption shall be under the direction
Of the Comptroller of the Currency.
and made from a redemption fund OF
10 per cent, to be provided and main
tanned by the banks.
Eighth, restrict the issue Of national
bank notes to the denomination Of $1O
and upward
To illustrate the benefits of this plan,
the Secretary cites the fact that the
national banks with a capitalization or
S6S, ,6SoO0O have a circulation of only
| S1S.9U, 600, and We're compelled to
borrow S13, ,54S,000 from Eastern banks
with which to move last years cotton
crop. His plan, he believes, would in
duce them to issue sufficient circula-
ton to transact all their business with
out borrowing
The Secretary quotes figures from the
records Of the Comptroller's office to
show the 2 per cent. tax on unsecured
circulation would more than reimburse
the Government for it's losses by failed
banks. That loss since the first organ
iza.ion of national banks would have
duced by the proposed tax would have
amounted to $2,454, 140 4S.
The Secretary then goes on to argue
that the greenback in it's present sta
tus is a constant menace to the gold
! reserve and the nations credit, and
that the necessity being for reduc
ton of the demand liabilities of the
Government these offer the most con-
fr fn, hot ntfn
After answering possible objections
from those who demand the permanent
retirement of these notes, he says:
Il am moved to press the recommen-
dation as submitted. in view of the
following considerations:
Paper money is the product of an
industrial, commercial and financial
evolution It's economizing effect in
the use of metallic money precludes the
idea Of abandonment until society shall
relapse into anarchy.
Credit is the base upon which it
rests. Paper money is the evidence
that a thing of value has passed into
the possession Of the issuer, and that
the holder of that paper is willing to
await payment. When payment is
made the evidence of the transaction
should be withdrawn, to appear again
only VIXEN a similar transaction Oc-
ours.
The bank is an agency, the result
also of a pure evolutionary movement.
whose functions it is to issue it's vari-
Gus forms of credit instruments, of
which paper money is one, against the
pledge and promises to it OF the less
publicly known members of the indus
trial community. 1t thus becomes an
intermediary in much the larger part
of all trade and industry.
whatever operates to render the
bank a safe, efficient and available
agency to the people, operates to the
general prosperity.
The requirement that the bank shall
invest its capital in public securities
paper money-is a requirement which
operates by so much to reduce it's eff
ficiency to commerce and industry. 1t
cannot use it's capital in two directions
at the same time. Only necessity to
control the banks capital for the pub
lie use or an indispensable need for
security in such a form to the note
holder can justify this requirement.
The eXigencies of the Governments
finances in 1868 induced Congress to
require from all note-issuing banks a
preliminary investment of their capi-
tai in the Governments bonds. The
many disastrous losses incurred by the
people from the note issues Of ire
sponsible banks previously authorized
to do business by ill-considered proviS-
ions of many separate States seemed to
justify the national Government in re-
quiring from banks of issue a pledge
of the bonds in trust for the security
of their note-holders.
Without further extension Of the
historical statement, it is recognizable
that the exigencies of the Government
do not now require the absorption of
banking in aid of it's own finances.
IN fact, with Treasury conditions
once normally established as to revenue
and expenditure, the funded debt will
within few years, be entirely liqui-
dated
1.-The Importance Of banking in its
relation to industry and commerce de-
mands for it, in view of the consider
ations thus enumerated, careful and
timely attention. The question is COM
plicated by the fact that for a whole
generation our people have been school
ed in system Of bank note issues Sc
cured by pledges in the hands of
public trustee. It is not a good sys-
tenn, but it ought not to be yielded
until in some other form adequate
guarantees for the solvency of bank
note issues are provided
ITO allow national banks to issue
circulating notes equal to % per cent
of their capital upon a payment of .
per cent. per annum as an insurance
or safety fund upon amounts so is
sued is, if the demonstration drawn
from the Comptrollers office can be
trusted, proposition well within the
limits Of safety. Nevertheless, what
ever risk there is should be assumed
by the Government, obnoxious as II
may be to the general principles of
Governmental action. 1t is by such ac-
ton that the situation as it exists has
been evolved. Upon the Government.
therefore, rests the duty of seeing it
properly solved
Some years of experience along the
line suggested will prove what is an
adequate provisional tax for the se-
curlty of note-holders, and will allow
such amendments as time win Justify.
involving as one of it's features a COM
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