The Salt Lake herald. [volume] (Salt Lake City [Utah]) 1870-1909, 1898-12-05

Washington, D. c., Dec. 1.-The annual
report of Charles G. Dawes, comptroller
of the currency for the year ended Oct.
81, 1898, has been sent to congress. The
comptroller states that he does not re-
vieN- IN Their details the plans for the
modification of the currency and banking
i systems, which are now the subject of
| economic and general discussion through
| out the country, but confines his discus
sion to the general principles underlying
| all of them, because they seem TO ignore
| the interests of bank deDositors, with
whose protection the comptroller is pecu-
| larry charged. He states that those
! plans which are now most generally dis
| cussed may be considered as based upon
the following propositions:
I tIrSt-That the 0iSprOporuon between
| outstanding currency liabilities of the.
! government payable in gold and the gold
! held for their redemption should be les
! sened by contraction in the amount OF
| these demand currency liabilities.
Second-That the void in circulation
caused by such contraction should be
filled by an extension of the circulation
of national banks, which circulation, re-
deemable in gold. is ultimately to depend
for its security upon a first lien upon the
commercial assets of the issuing banks.
He states that the assumptions which
seem to underlie these plans are these:
First-That unless we are to have cur
ItuCS CONTRACTION, sumo IdOiGdl eANeHStOH
Of bank note issues is absolutely neces-
sary to the securing of the proper adjust
ment OF government currency Liabilities
| TO its. gold reserve by which adjustment
| the greater safety of the gold standard
is SubSerNed, and,
] Second-That through this radical eS-
tension and change in the present form
of bank note issues alone IS elasticity TO
be secured in our currency.
! As opposed to these propositions and
in connection with the data given and
vic har.n F1af n
changes in the present banking laws. the
comptroller states that his suggestions
are based upon the following assump-
tons:
First-That there is existing no such
condition of the United States finances,
revenues or credit as to justify the prop
osition that the shifting of the burden OF
gold redemption Of outstanding currency
from the government TO the banks is so
important as to necessitate of itself radi-
cal changes and concessions in national
banking laws relative to the issue Of
notes. which changes and concessions
? would not be considered wise if the inter-
ests of the community, irrespective of
government finances, We're alone consid-
cred.
Second-That if from considerations of
general public policy irrespective of gov
ernmental finances bank note issues Sc
cured only by commercial assets of banks
seem unwise, that the resources, credit
and financial condition of the United
States are such that by means of revenue
laws and other amendments to law sug-
gested by the president in his last annual
message, a safer ratio between its out
standing circulation and gold reserve can
be attained, the stability Of the present
gold standard insured, and the currency
maintained upon a sound basis without
contraction.
FUNCTION OF BANKS.
The comptroller then says: 1t must be
| remembered, in connection with the dis
cussion of changes in the present bank
| ing laws that by far the most important
function of national banks is that of an
, acting middleman beween the depositors
! and borrowers of a community, and that
, its note-issuing functions are secondary
in Importance and usefulness under the
present or any proposed system of bank
; 1 note issues.
1t is especially important, therefore in
| proposing changes in the laws governing
the note-issuing powers Of national banks,
that the effects Of such changes upon the
relation of the bank to its depositors and
| borrowers be carefully studied.
It is the belief of the comptroller that
the proposed preference OF the note-holder
over the depositor, which is a fundamen-
{ tai basis Of all these plans, is not only
: inherently wrong and unjustified by any
grounds of public policy. but that its
practical effect upon the present relation
of depositors to banks in the smaller
= communities Of the United States would
be so revolutionary as to bring about the
most injurious conditions in the general
: | business of the country.
The comptroller then fully discusses the
CAGilI lldL LEcIG Is an dulleTelI UlOTdl
: right, irrespective of public policy, TO
prefer a note-holder over a deposit-holder
in the distribution of the assets of an in
I solvent bank and denies that such right
exists.
: After reaching this conclusion. the
comptroller then asks: If, then. there is
no inherent moral right to establish a
! preference OF the note-holdinS creditors
! of an insolYent bank as against the de-
! posit-hOlding creditors in the distribution
of the assets Of an insolvent bank, the
= ] rTC T41rh mol inv n
nand, in the interest of the common good.
that such a preference should be given in
order TO establish a bank note system
! which viii give banks such profit thai
10 secure Il they viii relieve the United
States treasury of the burden of gold re-
. demption and afford the country q circU-
= laung medium having alleged advantages
2 over that now in use2
He then states: In order TO determine
this question. actual data at command
must be examined critically in order to
understand the nature and extent of the
wrong done the depositor class by this
preference. and the consequent effects OF
this wrong upon the community at large
and its business.
The comptroller then presents series
Of tables which indicate more exactly
upon what class of depositOrs the real
burden Of this preference will fail with
almost crushing weight.
These tables. which are elaborate ano
lengthy, show noteworthy results. For
instance. they show that the depOSitOrS OF
= forty-four insolvent banks, having a COM
bined capital of 80 l22 600. nominal assets
S24. 1853 2I2. and with cash dividends paiC
depositors of $,9969SS, or 71.61 per cent
situated in the middle states of Ohio, In.
diana, Illinois Michigan. Wisconsin, Min.
nesOta. Iowa and Missouri, would have
| lost, by preference or the nOte-hOlders
! with 100 per cent issue. 1910 per cent more
than under the present system. or 55.4
per cent of their dividends: with an 8
per cent note issue, 81 &c per cent more, o.
= 44.35 per cent of their dividends; and witt
= a 90 per cent issue, 23.S2 per cent more, OF
t 1926 per cent Of their dividends.
! They also show that as compared witt
!, the rate of loss to the New England de
positor through the preference of tn,
note-holders in cases of insolvency, the
a issues of uncovered notes being either 10
= per cent. so per cent or go per cent of tn
s capital. the depositor in the eastern state.
Will lose a a rate Of nearly two and one
. half times as great; the depositor in thl
southern states at a rate nearly three
times as great; the depositQr in th'
= Pacific states at a rate four times a.
great; the depositor in the middle state!
T at rate Tour ana one-haf tunes a!
great, and the almost obliterated depos
=, 1 itor in the western states at a rate owe
seven times as great.
D The comptroller then states that from
: the tables which have been given ii i
| evident that from the deDositors in TIL
= smaller national banks OF from $4,000 t
6 | $lVJ,O0J capital, and from the deDositor
| Of the newer sections Of the country tn,
: greater amount of the cost of this radica
experiment in currency must be collect
: ed. Thus upon those depositors least abb
TO endure loss must the heaviest losse.
fall.
COMPTROLLER'S VIEWS.
The comptroller calls attention, as
; summary Of his views upon the proposes
: plans, to these propositions:
n tirSt-AS q fundamental proposition
y any bank-note system depending 70
7 security upon the commercial assets o
! | banks and sanctioned by government
! | should be inherently fair in it's relation I
i the deposit-holding creditors and tn
note-holding creditors of an insolven
! naul-