Evening star. [volume] (Washington, D.C.) 1854-1972, 1897-12-07


ually acquire a restrictive power, but little
less binding than statutory enactment or
constitutional prohibition.
THE so-called treasury reserve of $780,
OOO,OO of gold has no warrant in specific
legislation, although its, propriety has been
indirectly recognized by Congress, and yet
there is supreme confidence that no i'm
pa1rment In that provision will ever be au-
thor1zed or sanctioned by congressional ac-
ton. The only real difference, then. be-
tween holding these government notes in a
separate department and their destruction
is a difference which could at any time be
covered by legislative action.
Pertinent observations.
1.-THE important nature Of the subject I'M
der discussion tempts to fuller treatment.
l must, however. be content1with referring
once more to that feature Of this series of
recommendations which touches the ques-
ton of note issues by national banks.
| am moved to press the recommendation as
| submitted, in view of the following consid-
erationS:
Paper money is the product of an indus
trial, commercial and financial evolution.
Its economizfng 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 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should be withdrawn, to appear again only
when similar transaction occurs.
The bank Is an agency, the result also
OF pure evolutionary movement whose
function it is to issue its various forms of
credit Instruments, of which paper money
is one, against the pledges and promises
to 1t of the less publicly known members
or the industrial community. 1t thus be-
comes 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 it's credit inStru-
newspaper money-is requirement
which operates by so much to reduce it's
efnclency to commerce and industry. 1t
cannot use its capital in two directions at
the same time. Only a necessity to con-
troll the banks capital for the public use
or an Indispensable need for security in
such form to the note holder can justify
this requirement.
1.-The exigencies of the governments
finances in 1863 induced Congress to re-
quire from all note-issuing banks pre-
liminary investment of their capital in the
governments bonds. The many disastrous
losses incurred by the people from the note
issues of irresponsible banks previously au-
thorized to do business by il-considered
provisions 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 his
torical statement, it is recognizable that
the eXige1cies of the government do not
now require the absorption of banking
capital in aid of its own finances. In fact,
with treasury conditions once normally es-
tablished as to revenue and expenditure,
the funded debt will within few years
be entirely Hquidated.
Tine Importance of banking in it's rela-
ton to industry and commerce demands
for 1t, in view of the considerations thus
enumerated, careful and timely attention.
The question is complicated by the fact
that for whole generation our people have
been schooled in a system of bank-note is
sues secured by pledges in the hands of a
public trustee. 1t is not a good system,
but 1t ought not to be yielded until in some
other form adequate guarantees for the
solvency of hank-note issues are provided.
"The problem is two-foid one: How to
withdraw the specific form of security now
provided since it will ultimately disap-
pear; how to provide a substitution which
will be recognized by the people as ade-
qGate security, and which will at the same
time allow to banks within wel-guarded
limits the most useful freedom in their
Eote issues The problem is too large, its
results too far-reachirg, to be solved off
hand or by expert dictum. Its solution
must be gradually reached by the path
banks to issue circuls ting notes equal to
- per cent of their capital upon a pay
ment of : per cent per annum as an insur-
ance OF safety fund upon amounts so is
sued, Is. If the demonstration drawn from
the controllers office can he trusted, a
proposition well within the limits of safe
ty. Nevertheless, whatever risk there is
should be assumed by the government, OBJ
ciples of governmental action. 1t Is by
such action that the situation as it exists
has been evolved. Upon the government
therefore, rests the duty of seeing it prom
erly solved.
Some years of experience along the line
suggested will rrove what is an adequate
provisional tax for the security of note
holders. and will allow such amendments
as time will justify. involving as one of its
features II complete withdrawal Of the
governments guaranty from bank-note
Issues"
Revenues Past and Future
The revenues Of the government from all
sources for the fiscal year ended June 30.
1897, were si303S7 1G7.S9. The expend-
tires for the same period were s44S 49,
G22.3O, showing a deficit of S1SOJ2 434 H.
The receipts showed an increase of $50
11,759.11 ever 1885, and the expenditures
an increase of sl3.I94, 1870. The revenues
for the current fiscal year. it is estimated
will be $4i1 %! .076.6S, and the expenditures
S46o, 21 ,016GS. showing a deficit of SOS Co.,
VD II is estimated tfat the revenues will
be for the fiscal year 1899, under existing
laws $4S2, S74, 647.37. and the expenditures
St04.I22, %, shov ing deficit of SCI 6I7-
$685.
The treasurer of TIL. United States re-
ports that the total available assets of the
treasury were $3.50. 6S5, 321.7O at the opening
of the fiscal year. and $S14. 7G4.31 at the
close. OF these sums, sos. :}54 as. 30 was
available on June 30. 1896. and $2S3 3d.
424.23 on Jure 30. 1897, for the strictly fiscal
operations of the government, while s547,-
330.973 Has held at the former date and
1891 .4GS 953 at the latter. on deposit against
outstanding certificates and treasury notes
The accumulations Of gold in the treasury
have been steadily increasing during the
past four months, and the tendency is to-
ward a still further advance. The net gold
at the close of the last fiscal year amounted
to $40. $50 1913. and has increased since then
to $157, ,9SS on November 80.
Operation of the Tariff of 1897
The tariff act of July "a. 1907. entitled
IAN act to provide revenue for the govern
ment and to encourage the industries of the
United States" the Secretary says. has not
teen in force long enough to determine
fully its merits, but 1t Is confidently be-
lieved that when in full operation it will
afford ample revenue for the ordinary
reeds of the government, while adequately
for mo md