The herald., 1897-12-06
1sl ldefed by Eckels in
Annual Report
me ONE THING NECESSARY
RH1rovAL OF RESTRICTION ON
7s.is NOTE ISSUES
Vhe Business Of Banking Ought to Be
Made Much More Attractive
to Capital
Associated Press Special Wire.

Associated Press Special Wire.
WASHINGTON, Dec. 5.-The annual
report of James H. Eckels, comptroller
OF the currency, for the year ended on
Oct. 81, 1897, opens with a brief review of
the history of the legislation which
constitutes the present national bank
act and invites the attention of congress
20 amendments to the law recommend
ed in Yormer reports without specifically
repeating them. On the subject of bank
note circulation, the comptroller says;
'It is noticeable that in all the changes
which have been wrought in the national
currency act, from its inception to the
present time, the feature subject to crdti-
cism, but which 1t was intended should
constitute the principal benefit to be con-
ferred has remained comparatively un-
chnnged-namely, the note-issuing func-
tion. Whatever justification there was
In the first instance for restricting the
issuing of notes against the bonds OF
the government, deposited with the
treasurer Of the United States to so per
cent of the parvalue thereof, 1t long since
ceased. In the report of every comp
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 they are located, might have the
additional benefit of an added loanable
capital is dwelt upon.
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 such change
in the 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 tn.
country. The business of banking, like
every other form of investment must be
made attractive to capital. If it is placed
upon a footing different from other un-
dertakings, embarrassed through un-
necessary restrictions and deprived os
proper sources of profit, the result can
not be otherwise than that investable
capital will seek other means of employ
ment, and to this extent deprive the peo-
pie of the benefits of the agency most
requisite to commercial activity. 1t is
considered by every great commercial
government, except the United States,
to be the sole province Of the banks to is
sue paper which circulates as currency.
The belief in a bank note currency as be-
ing better and safer than government
paper currency prevailed until ques-
toned in this country, until. under the
apparent evidences of war, the govern
ment undertook to issue paper cur
rency Even under such circumstances
the promise was always given, however,
that it should be retired at the earliest
practicable moment and the admission
freely made that it was neither wise
measure nor safe form of currency.
Between the competition of the gov
ernment issues on the one hand and the
unnecessary restrictions imposed by
law on the other. together with the in
creasing price of bonds required to be de-
posted as security, the note-issuing
function of the banks had been permit
ted to become merely an incident to the
conduct of the national banking asso
Citations Of the country. 1t has been Sc
riously suggested more than once that
the bank note issues be done away with,
and all paper be issued by the govern
ment instead. The danger of such Il
course Is not to be overestimated. The
experience of every government has
been that governmental currency paper
is source of weakness and danger In
the United States, where there has been
the nearest approach to success with the
volume of the federal paper COM
paratively limited in amount, the credit
of the government has been more than
once put in jeopardy through it, and the
business interests of the country sub
fr1 Ioc nd fire
"The argument that the government,
better than the banks, can provide for
the redemption of paper note issues, will
stand the test Of a careful analysis. The
government has no means for caring for
its demand liabilities except through
borrowing and through the levying Of
taxes. Upon the other hand, the banks
have assets which can be promptly con-
verted into cash to meet their outstand-
ing notes when presented. Their ability
to command gold has always been be-
yond that of the government, for in each
financial exigency which has confronted
the government the banks have fur
nished to it the amounts necessary to
maintain its solvency 1t is impossible
to believe that with a system of bank
note issues, based In part upon securities
and in part upon bank assets, the coun-
try cannot be provided with the sound,
safe and elastic bank note issues, always
commensurate with and responsive to
the demands of trade. The Bank of Eng
land, the Bank of Scotland and the Bank
of Ireland have been found to be ample
in their resources to provide the note is
sues for trade with the United Kingdom
The same is true of the Bank of France
The Deutsche Reichsbank, or German
Imperial bank, has for more than %
years issued bank note paper against as
sets, which has maintained it's values
and has been so controlled as to success
fully meet the commercial need of the
empire
The comptroller calls attention to the
method Of organization of this bank and
publishes some interesting statistics in
connection Herewith.
The total number of national banks
organized since the system was put into
operation in 1863 is shown to have been
6095. On October 81 last there We're in
active operation S617, having an author
lied capita Of $3.50, ,230, 295 The total circu-
lation Of the banks in operation at that
time was 1929, ,199. $50, of which 1902 1894, ,555
was secured by bonds of the United
States and the balance by lawful money
deposited with the treasurer of the
United States. The circulation out
standing Of all national banks on Octo-