New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1897-12-06
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CALENDAR
THE NATIONALBANK SYSTEM
POINTS FROM THE ANNUAL REPORT OF
CONTROLLER ECKELS.

ruE QUESTION OF NoTE-IssUING BY THE GOV
ERNMENT-woRK OF THE NATIONAL BANKS
FOR THE LAST YEAR-LARGE SUM PAID
TO CREDITORS OF INsoLvENT BANKS.
vvas,,ng,or Dee 5-The annual report Of James
" Eckels Controller Of the Currency. for the year
ended October n, 1897. opens With brief review
Of the history OF the legislation which constitutes
the present National Bank act ana invites the at
tention Of Congress to amendments TO the law
recommended in former reports without specifically
repeating them On the subject OF bank-note cir
culation the Controller says:
ut is noticeable that in all the changes which
have been wrought in the National Currency act
from it's inception TO the present time the feature
subject to criticism but which was intended should
constitute the principal benefit to be conferred has
remained comparatively unchanged. namely, the
note-issuing function. Whatever justification there
was IN the first instance for restricting the Issuing
OF notes against the bonds OF the Government de-
posted with the Treasurer Of the United States at
90 per cent OF the par value thereof long since
ceased. In the report Of every Controller or the
Currency during the last twenty years the wisdom
Of changing the existing law 30 that the banks.
and through them the communities In which To-
Gated might have the additional benefit OF an
added loanable capital has been urged. Despite all
this. the law still remains without amendment
Not only should the Bank act be amended In this
particular. but Congress should seriously consider
a
will enable the banks Of the country TO more
adequately meet the demands OF trade and COM
merce in all sections OF the country. The business
Of banking. like every other form Of investment,
must be made attractive to capital. II II Is placed
upon a footing different from other undertakings
embarrassed through unnecessary restrictions and
deprived Of proper sources OF profit the result can
not be otherwise than that investable capital Will
seek other means of employment. and 10 such an
extent deprive the people Of the benefits OF the
agency most requisite to commercial activity.
THE PROVINCE OF THE BANKS.
1T is considered by every great commercial
government, except the United States. 10 be the
sole province OF the banks to issue the paper
which circulates currency. The belief in a
banknote currency being better and safer than
a government paper currency prevailed unques-
toned In this country UNTIL under the apparent
exigencies Of the war, the Government undertook
to issue paper currency. Even under such cir
circumstances the promise always given. how
ever that it should be retired at the earliest prac-
ticable moment and the admission freely made
that 1t neither a wise measure nor a saie
form Of currency.
Between the competition Of the Government
note issues on the one hand and the unnecessary
restrictions imposed by law upon the other. to-
gether with the increasing price OF bonds required
TO be deposited security, the noe-issuing func-
ton Of the banks has been permitted TO become
merely an incident to the conduct OF the National
banking associations Of the country. 1t has been
seriously suggested more than once that the bank
note issues be done away with and all paper DO
issued by the Government instead The danger
of such a course IS not to be overestimsted. The
experience OF every government has been that
governmental currency paper Is source OF weak
and danger. In the United States. where there
has been the nearest approach TO success. with
the volume Of the Federal paper comparatively
limited In amount, the credit Of the Government
has been more than put in jeopardy through
It, and the business interests OF the country sub
1ected to unnecessary loss and confusion.
THE argument that the Government. better than
the banks can provide for the redemption Of paper
note issues will not stand the test OF a careful
analysis The Government means for car
ing for its demand liabilities except through Dor
rowing and through the ,evyng OF taxes. Upon
the other hand. the banks have assets which can
be promptly converted into cash TO meet their
outstanding notes when presented Their ability
10 command gold has always been beyond that
of the Government for in each financial exgency
which has confronted the Government the banks
have furnished to 1t the amounts necessary TO
maintain its solvency. IT Is impossible to believe
that with a system OF banknote issues. based in
part upon securities and in part upon bank assets,
the country cannot be provided with sound. safe
and elastic banknote issue. always commensurate
with and responsive 10 the demands OF trade The
Bank OF England, the Bank OF Scotland and the
Bank OF Ireland have been found 10 be ample
IN their resources provide tho note issues for
use In the trade of the United Kingdom The
came is true OF the Bank OF France. The Deutsche
Reichsbank. or German Imperial Bank. has for
more than twenty-five years maintained its bank
note paper against assets. which has maintained
its value and been so controlled as to successfully
meet the commercial needs Of the Empire"
THE GERMAN IMPERIAL BANK.
Tho Controller call. attention TO the method OF
organization Of this bank. and publishes some In
teresting statistics in connection Herewith.
This bank was created In 1875. AMI by the terms
Of the statute OF Its creation is subject to imperial
supervision and direction. Its functions are 10
regulate the money circulation within the 1urisdic-
ton Of the German Empire. to facilitate settle
ments and utilize available capital. The notes are
issued against its general assets but are not legal
tender the imperial decree stating that there shall
be no obligation TO accept banknotes In case OF
those payments which are to be legally discharged
in COIN The fact. however. Of the notes not being
a legal tender has In way hindered or prevented
their general circulation. and they are freely &C.
cepted both at home and abroad AT all times.
however the bank is required to maintain coin
and bullion reserve amounting TO at least one
third OF the notes in circulation
The authorized circulation Of the bank without
tax was dxed arbitrarily, and this circulation re-
oured a OF one-third In cash or Its eQu'va-
lent and the other two-thirds may be covered by
discounted bills not maturing later than three
months from date, and protected usually ny three
never less than two) solid and accredited vouch-
ers All notes issued beyond the limit so fixed were
TO be covered by cash reserve, but this restrlc
ton on note circulation having always been
source OF weakness to banks Of issue because Of
inelasticity the German Imperial Bank by It's ac
Of creation, provided that when the Imperial Bank
issued Its uncovered notes In excess OF the limit
provided tax Of per cent per annum on such
uncovered notes must be paid. 1t was not until siS
years after the banks creation that any notes
subject to this per cent were issued and only
in q few instances has II been obliged to issue Its
uncovered notes subject 10 this per cent annua
tax.