The Indianapolis journal. [volume] (Indianapolis [Ind.]) 1867-1904, 1897-12-08
PLAN OF A FINANCIER
Concluded from First Page1

portion of these notes into an issue and re-
demption division, there TO be held until the
public is willing to offer for. them in fair
exchange an equal sum in gold, is PROPOSE
ton to dignity them with the honor of
actual gold equivalency when they are
quit ney od
pushed in upon the treasury for redemp-
tion The proposition is therefore quite
different from a proposition to retire and
destroy them. On the other hand, the pro-
posal to thus preserve and honor them will
excite objections from another class, who
will allege that the notes now in question
should be retired and utterly destroyed.
They will aver that SO large a sum, no mat
ter how held, will prove an irresistible
temptation to which Congress Will yield
when in some exigency extraordinary and
pressing needs for public expenditure shall
rest upon the treasury, and that the re-
strictions now proposed, if adopted, will
then be disregarded.
In considering this objection it must be
remembered that If it were granted full
force and yielded to as a determinative OBJ
lection there is nothing whatever to prevent
the law-making power from issuing at any
time and in any amount the legal-tender
notes OF the United States to circulate as
money. Such is the final opinion of the Su-
preme Court, from " ich there is no appeal.
Neither must 1t be forgotten by such OBJ
jectors that use and custom gradually ac-
quire a restrictive power but little less
binding than statutory enactment or con-
stitutional prohibition.
The sO-called treasury reserve OF 500, OOO-
600 Of gold has no warrant in specific leg1s-
lation. although it's propriety has been in
directly recognized by Congress, and yet
there is a supreme confidence that no i'm
pairment in that provision will ever be au-
thorized or sanctioned by congressional ac-
ton. The only real difference, then, be-
a separate department and their destruction
is a difference which could at any time be
covered by legislative action.
BASIS OF RECOMMENDATION
The important nature of the subject under
discussion tempts to a fuller treatment. I
must. however, be content with referring
once more to that feature of this series of
recommendations which touches the ques-
ton of note issues by national banks. I
am moved to press the recommendation as
submitted. in view of the following con-
siderations:
Paper money is the product OF an indus
trial, commercial and financial evolution.
Its economizing effect in the use of metallic
money precludes the idea of its abandon
ment until society shall relapse into an
archy.
Credit is the base upon which it rests.
Paper money is the evidence that thing
of value has passed into the possession of
the issuer and that the holder of that pa
per is willing to await payment When pay
ment is made the evidence of the transact
ton should be withdrawn. to appear again
only when a similar transaction occurs.
The bank is an agency, the result also or
a pure evolutionary movement, whose func-
ton ii is to issue its various forms Of credit
instruments of which paper money is one.
against the pledges and promises to it of
the less publicly known members OF the
industrial 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 in
vest it's capital in public securities as a
precedent to the issue OF its credit 1nStru-
ments paper money - is a requirement
which operates by so much to reduce its
efficiency to commerce and industry. 1t
cannot use its capital in two directions at
the same time. Only necessity to control
the banks capital for the public use or an
indispensable need for security in such a
form to the note holder can justify this re-
quirement.
The exigencies of the governments
finances in 1868 induced Congress to require
from all note-issuing banks a preliminary
investment OF their capital in the govern
mentS bonds. The many disastrous losses
incurred by the people from the note issues
of irresponsible banks previously authorized
to do business by ll-considered provisions
of many separate States seemed to justify
the national government in requiring from
banks of issue a pledge of the bonds In
trust for the security of their note holders.
Wii hDut further . X enSlon or the nlsto lcaI
statement it is recognizable that the eX-
igencies OF the government do not now re-
quire the absorption of banking capital in
aid OF its own finances. In fact, with treas
ury conditions once normally established as
to revenue and expenditure. the funded
debt will, within few years, be entirely
liquidated.
The Importance of banking in its relation
to industry and commerce demands Tor It,,