Watertown republican. [volume] (Watertown, Wis.) 1860-1906, 1898-12-07
THE NATIONS FINANCE.
Com ptroller Dawes Makes Some
important Recommended
tons to Congress.

Ter of the currency, Charles @. Dawes,
for the year ending October 81, has been
made public Making Il general state
ment Us to the condition Of the national
banks during the wear as shown by the
five reports required from the banks, the
comptroller then goes on to discuss vari-
Gus financial reform schemes that have
been advanced. He does not review in
detail the plans for the modification of
the currency and banking systems, which
are now the subject of economic and gen
eral discussion throughout the country
but confines his discussion to the general
principles underlying all Of them because
lhey seem to ignore the interests of bank
deposltoIrIs, with whose protection the
comptroller is particularly charged
Discussing the assumed DANCED of cur
rency contraction and the methods pro-
posed to secure desired elasticity of cur
rency, the comptroller decides:
fIrst-That there is existing no such CON
ditlOL OF the United States finances, reye-
nues, or credit as to justify the proposition
that the shifting Of the burden of gold re-
denptlon OF outstanding currency from the
government to the banks is important
TO neceSsltate Of itself radical changes and
concessions III national banking laws relative
TO the issue of notes, which changes and
cessions would not be considered wise il the
interests OF the community, irrespective of
government hnances were alone considered.
Second-Ihat IT. from considerations of
general public policy irrespective Of govern
mental finances bank note issues secured
only by commercial assets of banks seem I'M
wise, that the resources, credit, and financial
condition of the United States are such that
Dy means OF revenue laws and other amend
ments to law suggested by the President in
his last annual message. a safer ratio be-
tween Its outstanding circulation and gold
reserve can be attained the stability of the
present gold standard insured and the cur
fency maintained upon sound basis without
contraction.
'Tn the bank note issues Of foreign coun-
tries, in case Of insolvency." says the comp
troller ''the nOteholder would it is under
stood enjoy no preference over the deposit
holder. They would share ratably in the as
sets. To give the credit which enables notes
of these great banks to circulate, restricted
by stringent laws as they are, no injustice
TO depostors such as is proposed in these
plans for the United States is necessary. In
one country only-Canada-are the notehOld-
ers preferred over the depositors in case Of
ada are thirty eight in number, with COM
bined circulation of about S38000,C00.
Fairness to Depositors.
The comptroller states that he cannot
accept as safe any deductions drawn
from the banknOte system of these cen
trail institutions of eastern Canada which
would tend to justify the application Of
the laws governing that system to the
5000 national banks of this country, and
AS i fundamental proposition, any bank
note system depending for security upon the
commercial assets of banks and sanctioned
by government should be inherently fair in
its relation to the deposit holding creditors
and the note-hOlding creditors of an insOlvent
bank.
No system is inherently fair which creates
Il preference of the note-hOlder over the de-
pOsit-holder III the distribution of the assets
of an inSolTent bank. The necessity of the
preference under any such system in this
nd tn thn
notes demonstrates that it is the depOsitOrs
of the country and not the banks upon whom
the great weight of the guarantee Of the
note issue must fall. If the present cOndi- |
tons Of governmental currency demand re-
forms, TO secure which will entail cost it is |
better for the government. as the representa-
tive of al the people, and under all the cir |
cumstanceS connected with our banking syS-
TEN, to pay an aScertained and exact cost
direct than to endeaVor to eyade it by grant
ing extensive currency privileges to banks |
which Of necessity must reimburse them /
selves from the community and the depOsitor !
class for any cost which they incur in ;:SSunl- |
ing the burden of gold redemption or llain- /
tanning the credit of their notes.
Elasticity of Bank Currency.
The comptroller discusses the question /
of the elasticity needed in bank currency /
and commenting upon the great elasticity !
of the check and draft circulation of the !;
country says:
While in this country. with its extended /
of check and draft system, 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 t
any injustice upon the depOSitor and thus, !
by interfering with the check and draft sys-
tenn, defeat one Of its own prime objects.
As conclusion the comptroller would |
make the following recommendations in /
regard to the present laws governing the |
issue Of national bank notes:
ITirct-Tba ovictinr bonl- c1-c+o,,
based upon deposit Of government bonds as
security, should not now be abandoned.
Saccnd-F0r the purpose of allowing elias |
ITCHY to bank note issues to protect the banks |
and the community in time Of panic, small |
amount of uncovered notes in addition to the
secured notes, should be authorized by law |
under the following limitations:
They should be subjected to so heavy a |
tax that they could not be issued in normal |
times for the purpose of profit but would |
be available in times Of emergency. The tax |
should be so large upon the solvent issuing |
banks as to provide q fund which. in connec-
ton with the pro rata share Of the assets /
Of an inSOlvent bank, would be sufficient to
redeem the notes in full without necessitat-
ing any preference of note-holders over de-
positors of any inSolvent Issuing bank. The |
tax should be SO large as to force this cur
rGncy into retirement as soon as the emer-
gency passes.
Such currency could be used only to les
sen the evil effects of the too rapid lquida-
ton Of credits which are collapsing under a
financial panic, but could not be proftably
used as a basis of business speculation and
inhatOn 1t should be to the business com
munity what the clearinghouse certificates I
are to our cities in times of panic--a rem
edy for an emergency not an instrument of
current business.
The comptroller states that in the ad-
of insolyent banks in the in
terest of creditors he has effected an
nual savings approXimating 100000
Concerning bank examinations. he re-
ports that during the year he has ex-
tended over the cities of New York. Bos-
ton, Philadelphia and Baltimore the sys-
tenn of semi-annual visitations by exam
ners, in force in all other sections of the
He has utilized the examiners
in investigations into the credit Of heavy
debtors of banks where such Indebtedness
Il menace to the safety. of
banks, and where, despite the criticisms
IF the comptroller and the efforts of the
bank officials, no material reductions in
the amount of the Indebtedness could be
had. He adds:
Notwithstanding the number ofb anks in !
operation on September 20, $685. is less than
1t any date Of report since December 10
1850, the amount of individual deposits loans
and discounts and total resources is greater.
than at any time during the existence of the
national banking system. On September 90
for the first time, the aggregate resources