Evening star. [volume] (Washington, D.C.) 1854-1972, 1897-12-06
REPORTER THECONTROLLER
Why Bank Paper is Better Than Govern.
ment Notes
Issue Equal to the Par Value of Bon d,
Dcposited Should, He Claims,
Be Allowed

The annual report of James H. Eckels,
| controller of the currency, for the year end
ed October 81. 1897. opens with a brief re-
view Of the history Of the legislation which
| constitutes the present national bank act.
and invites the attention of Congress to
amendments to the law recommended in
former reports without specifically repeat
| ing them.
| On the subject of bank note circulation
| the controller says:
1T is noticeable that IN all the changes
which have been wrought In the national
currency act from its inception 20 the pres
| ent time the feature subject to criticism
| but which was intended should constitute
| the principal benefit to be conferred, has
| renamed comparatively unchanged, name
| ly, the nCte-lssung function. Whatever
]ustlfication there was in the first instance
| Tor restricting the issuing of notes against
| the bonds OF the government, deposited
| with the treasurer of the United States, to
w per cent of the par value thereof long
| since ceased. In the report of every con-
| troller Of the currency during the past
| twenty years the wisdom OF changing the
| existing law SO that the banks and
| through them the communities in which
| located, might have the additional benefit
| of an added loanable capital has been
urged. Despite all this the law remains
| without amendment. Not only should the
| bank act be amended in this particular
| hut Congress should seriously consider such
/ n change in method Of bank-note issues as
will enable the banks of the country to
| more adequately meet the demands of
| trade and commerce in all sections of the
| country.
THE business of banking like every other
| form of investment, must be made attrac-
| tive to capital. fit is placed upon footing
| different from other undertakings, embar-
| raised through unnecessary restrictions,
| and deprived of proper sources of profit,
| the result cannot be otherwise than that
| investable capital will seek other means
of employment, and to such extent deprive
the people of the benefits of the agency
| most requisite to commercial activity.
Government or Bank Paper.
TT is considered by every great COM
mercial government, except the United
States, to be the sole province of the banks
| to issue the paper which circulates as cur
rency. The belief in a bank note currency
as beirg better and safer than n govern
| ment paper currency prevailed unquestion-
| ed in this country until. under the apparent
exigenceS of the var, the government UNI
dertook to issue paper currency. Even
under such circumstances the promise was
always given, however, that 1t should he
retired at the earliest practicable moment
and the admission freely made that ii was
| neither wise measure nor a safe form OF
currency.
Between the competition of the govern
| nent rote issues on the one hand, and
! the unnecessary restrictions imposed by
law upon the other together with the in
creasrg price of bonds required to be
deposited as security, the nOte-lssuing func-
| ticn of the banks has been permitted TO
become merely an in rident to the conduct
of the national ba mixing associations of the
country. 1t has been seriously suggested
more than once that the bank-note issues
| be done away with and all paper be issued
hx hos GOV q
such course is not to be overes timated
The experience of every government has
| been that governmental currency paper is a
! source of weakness and danger. In the
United States where there has been the
nearest approach to success, with the vol
ume of the federal paper comparatively
limited in amount, the credit of the govern
ment has been more than once put In
| jeopardy through it and the business in
terests of the country subjected to unnec-
essary loss and confusion.
1.-THE argument that the government.
better than the banks, can provide for the
redemption of paper note issues Will not
stand the test of careful analysis. The
government has no means of caring for its
demand liabilities except through borrow
| ing and through the levying of taxes
Upon the other hand, the banks have as
sets which can be promptly converted into
cash to meet their outstanding notes when
presented. Their ability to command gold
has always been beyond that of the gov
eminent, for in each financial exigency
which has confronted the government the
| banks have furnished to it the amounts
necessary to maintain its solvency. 1t Is
impossible to believe that with system
of bank-note issues, based In part upon Sc
curitieS and in part upon bank assets. the
country cannot be provided with sound.
SAFE and elastic bank-note issue, always
commensurate with and responsive to the
demands of trade. The Bank Of England,
the Bank of Scotland and the Bank of
Ireland have been found to be ample In
1,<f,~ tn
for use I'm the trade of the United King
dom. The same is true of the Bank of
France. The Deutsche Rechbank. or Ger
man Imperial Bank, has for more than
twenty-five years issued bank-note paper
against assets, which has maintained its
value and has been controlled as to
successfully meet the commercial needs of
the empire"
The Controller calls attention to the
method of organization of this bank and
publishes some interesting statistics in con-
nection Herewith.
National Bank Circulation.
The total number of national banks or
ganized since the date the first certificate
Of authority was issued. on June 20. 1868,
to the close of the year just ended was
5.095. making an average for each year of
150 On October 81 last there were in act
i've operation 3,617 banks, having an au-
thorized capital stock Of $630.2302 95. The
total outstanding circulation Of the banks
then in operation was s229, 1875. $50. of which
500, 994 $50 was secured by bonds of the
United States. and the balance by lawful
money deposited with the treasurer of
the United States. The total circulation
outstanding of all national banks on Octo-
Der 81 was $3.50. 131. 005. Of which amount
81, 55S 800 was secured by bonds held for
account of insolvent and liquidating banks
and $26,205,325 by lawful money deposited
for their account and by active banks re-
ducing circulation. The net decrease in the
rod hxy hon "a.
during the year was $125S4, 1874, and the
gross decrease In the total circulation was
a, S51, 292