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

its thirty-eight central banks of issue,
as compared with $500 scattered national
banks in this country, furnishes the only
exception to this rule
ef1ce under any such system IN this coun-
try to give security, and credit TO the
notes demonstrates that it is the depos-
itors of the country, and not the banks,
upon whom the great weight of the
note issue must fall.
Fifth-A fairer system would provide
that when a receiver took charge OF an
inSolVent bank he should not first pay
into the general redemption fund helq
by the government an amount derived
from the assets of the bank sufficient TO
pay the note-holderS in full before paying
anything to depositors, but he should pay
into the fund that pro rata share or the
proceeds derived from the assets when
should go to the note-holders, not as pre-
ferred creditors, but as creditors in the
same class as depositors.
The tax upon the solvent banks Tor
the currency privilege should not, then,
be limited to not exceeding l per cent per
annum of their annual note issue, or in
any amount, but should be made suf-
whatever it should prove to be.
SlXth-1f, under Sucn a system, OWING
to causes to which we have referred. the
tax upon the solvent banks would be so
large as to render the issue of such cur
rency improbable and unattractVe to
the banks. it would be a demonstration
VI lllc IdulCdl ulIeTeQGe IN the elN4IOil~
ment and condition Of our banking sys-
TEN as compared with the more cen
tralized and older systems of Europe. II
would be a demonstration of the fact
that under the proposed legislation, while
the banks would take the profits upon
the circulation. the depositorS would take
the bulk of the losses.
1t would be a conclusive demonstration
of what we believe to be the fact that,
under our banking system as at present
organized. the absolute safety OF notes
a5s11
issued TO the extent proposed in these
plans can be secured only by resort 10 d
grave injustice upon depositors, which
cannot be justified upon any grounds of
public policy
Seventh-Such a system of uncovered
notes as this proposed, providing for a
creditors, would interfere radically with
the more important functions of national
banks to which the note-isSuing is sec
ondary and subordinate.
This would be against public policy
and would operate against banking in the
smaller communities and III the west
I ern, southern and central portions of our
country,
Eighth-The government of the United
! Srate is not in such straits, in connec-
| ton with its present currency system, as
| TO compei it to enter into a plan of cur
rency changes by which it in effect sells
| extended and valuable currency privileges
| to the national banks of the country in
exchange. for assistance from them in
! rency obligations payable in gold.
Ninth-f the present conditions of
! governmental currency demand reforms,
| 10 secure which will entail cost, it is bet
ter for the government as the represent
ative of all the people. and under all the
circumstance connected with our barking
system. to pay an ascertained and exact
| cost direct than to endeaVof to evade
| ! by granting extensive currency privi-
| iegfS to banks which Of necessity must
| reimburse themselves from the ccmmuD-
.-fA far. alr fs-. a-f
which they incur in assuming the burden
! of gold redemption or maintaining the
credit of their notes.
The comptroller then discusses the
question of the elasticity needed in bank
| currency, commenting upon the great
| elasticity of the check and draft circula-
and as embodying his recommendations
on this branch of his report, he says:
! While in this country. with its ex-
! tended system of banks and its greet de-
! velopment of the check and draft sys-
| tenn, some degree of elasticity in bank
note issues is desirable, it is not essential
| that it should be an amount so large as
| to make necessary for its security an in
! justice upon the depositor, and thus, by
! interfering with the check and draft sys-
| tenn, defeat one of its own prime objects
me general principles and regulations
| under Which such elasticity might be Oh
tanned are not in any way Inconsistent
! with the principles and arguments we
I have endeavored to set forth. AS cover
| clusion, the comptroller would make the
following recommendation in regard tc
the present laws governing the issue OF
national bank notes:
First-The existing bank-note system,
! based upon deposit of government bonds
as security, should not now be aban.
doned.
Second-For the purpose of allowing
elasticity to bank-note issues to protect
| the banks and the community in time OF
panic, a small amount of uncovered notes
! in addition to the secured notes. should
be authorized by law under the follow
ing limitations: They should be subject
| ed 20 SO heavy a tax that they could moi
| be issued in normal times for the purpose
of profit but would be available in times
| of emergency. The tax should be Sc
! large upon the solvent issuing banks as
TO provide a fund which in connection
| with the pro rata share of the assets Of
| an insolvent bank. would be sufficient tC
redeem the notes in full without necessi.
| tating any preference of note-holders
| over depositors of any insolvent bank
The tax should be so large as to force
this currency into retirement as soon as
the emergency passes.
Such currency could he used only to
| lessen the evil effects of the too rapiC
| liquidation of credits which are collaps
ing under a financial panic but could not
be probably used as q basis of bushes.
| speculation and imitation. 1t should b,
| to the business community what thu
| clearing house certificates are to ou1
cities in times of panic-a remedy for al
| emergency, not an instrument of curren
| business.