Delaware gazette and state journal. (Wilmington, Del.) 1883-1902, 1898-01-06


rertiblo into coin with which to re-
deem its demand Issues. They we're
not a money based on property; they
were only debt. I'M On the other
hand hank note is naver issued
fraud of course excluded except for
consideration in negotiable prnpurty of
equal, or greater, yaino. The note comes
forth as the sequel of the business
transaction; thar on which it ia fased
Is toe active property of the country.
passing between produlers and con
su!ners lhis property, being constantly
reproduced and excLaugedi 10 always
negotiable and always equal to the duty
of meeting the uoto liability. When
| Transaction is closed, the property asset
with which to cancel the corresponding
note liability is preeont. HBnce the
bank notes will be as sound AZ tho
business transactions Of the land. Tha
bank, by the very nature OF the bank
| ing business, is obliged to have Il dollar
of resources for every dollar of its
| liahilltles; the government has moi at
times, and is not Obliged to keep, a
DOLLAR of resources for any Of its mute
| liahiltisB. III the bank directors should
spend the property behind their note
Issues for champagne, then the bank
and the Treasury Tin the period OF in
conyertibility) would be alike situated
as regards the security for their ro-
apectiye issues. The reason why banks
rather than tho government should
Issue notes lies in the fact that banks
] are the only institutions dealing with
the live transactions of Industry and
trade. Government paper ia always
authorized by Legislators who are not
uniier any present responsibility of
| private loss in case of pad management;
on tile other hand the penalty for i'm
prudent issues or acknowledgement in
the case OF bank Issues is visited by
| disaster directly on the property OF the
issuer In the case of bank notes,
property precedes and creates the note
liability; in tbs caso of government
paper, the credit issue precedes prop.
srty ana Is mere speculation. Therefore
the demanded obligations Of the Treas
ury should never be issued as money,
least of all 10 such way as to cast any
doubt on the maintenance Of tue me
tallic standard.
BANKING SYSTEM.
bank makes profit by investing
its capital IN tue same general way as
any other business institution. This
| pEOlb ITs
by buying tina right tduly securely 10
receive money in tho future, and paying
for this right by creating liability on
it's resources to pay the borrower on de-
mapd 1t gives the borrower irnme.
diate means of payment, less the profit,
The prnrit to the bank (already settled
ly the discount operationl is the same
whether the bank Issues its demand
liability to the borrower in the form OF
its notes or in the form of deposit
account to his credit. This explains
why the richest city banks do profit
able business without issuing any
.. notes. They adapt themselves to their
constituents who do nut wish notes,
but who wish TO pay entirely by checks
or drafts. 1t is quite otherwise in
rural districts; there the small bor-
rover calls for notes, seldom using de-
posit accounts. If the smaller banks
in rural districts cannot easily provide
note Issues, then they are cut off from
discounting; hence the lament thai
such districts are pnor in banking facili'
ties.
In effect, banks take the value Of
, marketable goods as expressed in terms
OF money and credit them to the Dor
rower's account, enabling hmm to pay
his obligations by transferring thiI
credit, with checks, bills, &c. liz
!, short. banks are coming property intt
! means of payment, thereby enabling
Que form of property to be exchanged
directly against another form. CAST
! reserves are provided for cases OF dis
! trust or panic. AS commercial homo
develops, the need of cash diminishes
IA increasing per capita circulation
| iu nf dota NV inn in mi ma
cal progress and intelligence. In this
: manner. independently of bank notes
banks are providing, through their do
} posit liability, media of exchange b.
: which. in fact, over 80 per cent OF th
transactions OF the country are nov
carried ON.
The present system of issuing note
. on tho basis of United States bond
results in an inelaatic system which
does not expand Gorrespondingly to tn
demand for notes. In the face OF de
veloping industry in this country. tn
y national hank circulation dimiuishe
y from S341, 800. 256, on December 2Gth
g 1878, to Sl22, 92S, 054 on October "a
: 1880; and yet thUre hnd been d larg
increass in tho capital of nationa
9 banks and an extraordinary expansion
Q of it's deposits. Moreover, any BON
: security OF high character yialds
low rate of interest; and in time c
8 stringenGy, when borrowers neod loan
and the market rate of interest is high
& there is no inducement to buy thes
0 bonds to increase circulation. Hence
under the present syHtom, when note
(. would be most needed, it is leHst profit
y able to issue th0m. Tho syst0n Of re
9 curing epecial part Of the resource
. OF q bank, therefore, to be inyastod j
9 United States bonds, while an obrinu
u source OF safety to ths note hulusr. act
y TO prevent the notes from increasing j
y response to increasing loans aud trans
y actions.
= The commission believe that, instea
of requiring a special part of tho re
o SOURCES of a bank to be set aside in To
/ form VI bunds (of any kind as a 81
! curity for the notes, thoy should be sc
cured by all the RESOURCES OF the hank
. that the notes should no protected
first, by a guaranty fun OF pc
Is cent On their outstanding circulation
J. second, ny prior lien ON all the IT
y sources OF the bank; and, thirdly, h
10 prior lien on the stockholders
e liability. 1t is not proposed to chang
= Immediately from the present to tn
y new system. Up to an amount equt
y to 20 per cent of the capital stock {
n the hank, notes issued by 1T shall nc
exceed the value of United State
!, bonds, reduced by computation to a
y per cent basis. Additional notes ma
9 be issued without further deposit {
III hands Five yonra ofter tina raeanue +