The Topeka state journal. [volume] (Topeka, Kansas) 1892-1980, 1898-01-08
A REFORM WHICH MAY GO
BACKWARDS.


try's currency system, framed by the
monetary commission and introduced
IN the house on Thursday, does not diff
fer greatly from the one prepared by
Secretary Gage The plan for retiring
the g-eenbacks has &, heavier coating OF
sugar, perhaps, so as to render It more
palatabIe, if possible to the people, and
the banking scheme is more elaborate
and open to more serious criticism
With the senate constituted as it is
at present, and as it is likely to remain
for some time there is not the slightest
possibility that either bill will become
law. This fact is well understood by
the president, Secretary Gage and all
the other. advocates of currency reform
along the lines laid down in these two
bills. but it is desired to raise the issue
in time to have it fought out at the fan
elections.
The Chicago Tribune, the orthodoxy
of whose RepublicaniSm has never been
questioned, not only rebels at the pro-
position to retire the greenbacks and
declares that the people will never sub
init to such a proceeding but goes on to
puncture the commissions banking
scheme as follows:
1t is proposed by the Indianapolis
money reform commissioners that ma
tional bank notes shall be a first lien
on the assets of the banks issuing them
Those CORPORATIONS owe their deposit
tors two billions of dollars, payable on
demand. Their capital at this moment
IS 637 millions, or less than a third OF
what they owe their depOsitors. If
they were to issue notes to hellT InaC
amount then there would be a first lien
on the assets of the banks to the
amount of 31S1z millions. The depOsl-
tors to whom is due two billions, would
have only a second lien. Out of what
fund in case OF a panic or run would
they be paid?
The state banks have deposits
amounting to a billion of dollars. If
they were to become national banks,
then the volume of note issues would
be increased half a billion perhaps. 1t
might soon exceed a billion OF collars
Those notes would be a first lien on
their assets which represent chiefly the
money of their depOsttOrs. Would the
depOsitOrs feel pleased when they saw
so big lien showed in ahead of their
claims on the banks with which they
kept their spare money?
There is q, liability Of an adverse bal
ance of trade any year, which would
make gold shipments to Europe neces-
sary. To obtain this gold for exporta-
ton bank notes would be presented
perhaps by tens of millions Tor redemp-
ton. When the depOsitOrs of all the
banks saw the gold going out of their
vaults they would begin to ask them
selves, rs there gold enough left to pay
US with?" To make sure that there
was tens of thousands of them would
draw out their deposits. There would
be a general run" which might ripen
into a panic, and the result would be as
in former cases-the best of the banks
would suspend specie payments of their
notes and the rest would go into insOl-
vency.
The banks, being subject to the dan
ger of an attack from two directions
instead of one-both nOteholder and
depositOr-would have to adopt pre-
cautionary measures which would bear
hard on the business community. When
there was the remOteSt symptom of a
demand for gold they would have to be-
gin calling in loans and squeeze their
customers in order to have funds on
hand with which to meet an impending
double attack.
The more cautious institutions would
lend money only on CALL so that they
could gather in their funds at a days
notice. The result of that would be a
desperate scarcity of money to be
loaned when wanted for fixed periods
It would be far more difficult to get
paper discounted on time than it is
now. The whole thing would be bad
and grievOus all around.
The national banks, with their notes
secured by government bonds and thus
a source of no anxiety, have not gone
through the last thirty-four years with
out mishaps. A great many of them
have gone into liquidation" A few
have paid all they owed to their depos-
1tors. Many others have fallen far
short of doing so. And many millions
have been lost by their depositors.
Dishonest or Incompetent manage
ment has ruined banks in the past and
will ruin banks in the future No surer
plan of increasing the number of cas-
ualties can be devised than the one
which has been elaborated by the com
mission of basing a gigantic circulation
on the assets OF the bank, stockhoId-
ers, and depOsitOrs, and making these
institutions carry two loads when one
burden is amply enough for them to
bear.