The Indianapolis journal. [volume] (Indianapolis [Ind.]) 1867-1904, 1898-01-10
Representative McCleary Makes Clear
Point of Interest to Those Who
Favor Currency Reform.
FATE OF HAWAIIAN TREATY
MAY BE DECIDED IN THE SENATE IN
THE NEXT FEW WEEKS.
Annexation Question to Be Debated In
Secret SessiOn-TwO More Days OF
CiviI-Service Discussion.
Special to the Indianapolis Journal.

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Special to the Indianapolis Journal
WASHINGTON, Jan. 9.--The proposition
of the monetary commission that the bank
ing circulation of the country be based on
commercial assets under proper safeguards
instead of on United States bonds. has
caused some inquiry to just what is
meant by commercial assets" The ques-
tion has been answered by Representative
McCleary, of Minnesota, who is member
of the House committee on banking, and
has given much study to the subject. THE
business or commercial assets of bank
Mr. McCleary said Consist of its CONNER
cial paper coming due at various times.
The whole assets of a bank, of all classes,
include all forms of Indebtedness due to the
bank. The distinction between commercial
assets and those of other classes is that
the commercial assets usually represent
| business transactions between merchants,
and in any case consist of notes due within
a short term Taking, for the sake Of IL
lustration, the report Of the national banks
of the United States on Oct. 5, 1887, the
total assets of all classes We're $3,1O5, l3S IO7.
The largest single item was loans and dis-
counts which amounted to $2,051 ,OO9 43s-
The other leading items were the United
States bonds on deposit with the treasury to
secure circuation, 1927, ,4SS, $50; stocks and se-
curities in, the possession of the banks,
$2OS. .S31, ,563: demand debts due from other ma
tional banks $3.50 9SO, ,447; due from approved
reserve agents (the banks in the reserve
cities where the country banks carry
portion of their funds), $2S7. .O17 sos; specie.
S2S9. .SS7. 7O2, and legal-tender notes and cer-
tifcates of deposit for legal-tender notes.
$149, ,494, ,929 1t is the item of loans and dis
counts which constitutes the backbone of
the commercial assets of the bank. The
other items are mostly recoverable in cash
on demand, and a large proportion consists
in cash actually in hand"
"But how are these resources available
for the protection of note issues?" was
asked.
substantially all the assets of national
banks was the reply, except necessary
buildings and fixtures, which stood on Oct.
5, 1897 at $40, 9,113,954, are quick assets, or
should be such. 1t is when they cease to be
quick assets by becoming unmarketable and
losing their computed value that bank Is
driven into embarrassment. The loans and
discounts include the advances made in cur
rency, bank notes or banking credits. which
are represented by the notes given by the
borrowers. These notes in most cases are
disc which constitutes a security for the
recovery of the loan although the mer-
chandise is not specifically pledged, as in the
case of property represented by warehouse
receipt Where the loans are not based
upon transactions in merchandise they are
based upon the credit and property OF both
the maker of the note and the indorser, so
that if one proves incapable of meeting the
obligation at maturity recourse is had to the
other
How much real strength does this system
give to the bank notes issued under such
system?" was the searching question next
put to Mr.. McCleary
1.-THE bank has maturing daily certain
proportion of the notes which it has dis
counted" said he. 1.-THE amount thus matur-
ing daily in the United States at all the
banking institutions is estimated at S25 Co.,
600. A bank which needs to increase its
cash reserve, therefore, has only to diminish
its new loans from day to day and husband
the cash received from those which mature
AS most of these loans run for not longer
than ninety days, the average daily collec-
tions cannot be less than one-ninetieth part
Of it's whole outstanding discounts, and
would amount in week to about 8 per
cent of the amount. AS many of the loans
are for sixty days and for shorter terms, the
actual collections would be much larger
proportion of a whole volume of commercial
assets. When a bank-note circulation is
based upon commercial assets the fact i'm
plies that the whole resources of the bank
are behind the circulating notes for their
ultimate redemption. This means not only
that the cash for the current redemption of
the notes is constantly flowing into the
Golfers Of the bank but that in case of fall
uTe the whole property TO, OF the e., bank 10
The plan of the Monetary Commission for
currency reform proposes an issue of notes
not exceeding the capital stock of the
tional banks and not more than 50 per cent,
except subject to a tax Of per cent.
The circulation subject to q tax Of
acute crisis and great demand for currency.
The possible issues, therefore, under ordi-
$63i 4ss O95, would be S505. 100 376 Against this
amount of circulating notes there would be
total assets amounting to more than seven
times the face value Of the notes, of which
the loans and discounts alone would be more
than four times the value Of the notes. II
may be noted also that the actual specie,
legal-tender notes and certificates of deposit
In the hands of the banks, with the fund
of $10,021,6S9 in the hands of the United
of rotes not to speak of other cash items.
constitute a fund of about $39S ,OO0,OVO, or
You consider then the plan of the none
tary commission an entirely safe one, from
the standpoint of the note holderY
I'm dealing with the question of circuia-
tion alone" answered Mr.. McCleary, the
essential question is whether the assets are
sufficient to cover the notes and IL is OBJ
vious that they are many times more than
sufficient under the plan of the monetary
commission That plan makes the notes a
first lien upon the assets so that they
must be paid before any other charges are
met The plan Of the commission, more
over, provides that there. shall be kept in
the treasury of the United States a re-
demption fund. raised by tax of per cent.
upon the volume of notes in circulation not
covered by United States bonds. This fund
is to constitute a common resource, out OF
which the notes of failed banks are to be
promptly paid, pending proceedings by the
government to recover the amount from the
thus secures the immediate redemption OK
the note, without loss delay. while the
government has not only the great sum
raised for this purpose from all the banks.
but the first claim upon the assets of the
failed bank for the amount which Il has
Withdrawn from the safety fund for the re-
demption of the notes..