The semi-weekly messenger. [volume] (Wilmington, N.C.) 1897-1908, 1898-12-30
A SAFE CURRENCY
BANK NOTES BASED UPON GOOD
COMMERCIAL ASSETS

the WhOac NeSocaDle- eaith Oh the
Country and the Combined Credit OF
Manufacturers, Merchants and Bro.
ers
Baltimore Sum-
A statement of the real nature of q
currency based upon commercial as
SETS has been made by Representa-
tive Walter Evans, of Kentucky, which
meets certain misconceptions regard
ing early banking in the United States
and the recent discussion of asset cur
rency. Representative Evans has been
a strong supporter of the recommends
tions Of the Indianapolis monetary
commission and other measures which
promise to put the gold standard into
law and make 1t acceptable to the peo-
pie by means of an elastic banking
currency. He said today to your cor
respondent:
II think nue. of the distrust regard
ing a banking currency which exists
in the west, as the result of unpleasant
experiences before the civil war, would
be removed by careful consideration
of the facts. In the first place, it is
obvious that conditions have very
much changed since the days Of wild
cat banking fifty years ago.. The west
was then undeveloped and business en-
terprises Of all kinds were subject to
the risks of uncertainties which at
tend the founding of a new commu-
nifty. Even the most careful anker
are compelled under such conditions
to take some risks, If they do bust
ness at all, which would not be taken
in an old n settled community.
SPECULATIVE BANKING.
Speculative banking has been the
characteristic Of the development CT
nearly every country, withOu. regard
to the provisions for the issue of bank
notes. A case in point is the panic IL
Australia, as recently as 1893, when
land values were doomed to an extrav-
gan extent, and money was loaned
upon locks n herds which could not
be repaid upon demand. Unsettled
lands were. appraised at $40 per acre,
which could not be sold when the bub-
blue burst for S.. The note issues of
the Australian banks did not cut n
hgure in this expansion of banking
credits. The whole issue of notes have
rarely exceeded 500, 600, 900 and the prin-
cipal currency Of Australia is gold
coin. Speculation was carried on by
means of deposits and loans, the de-
post accounts of the Australian banks
amounting in 1893 to more than $780,
900, 000."
us any safeguard against such spec
ulation provided in pending bills?"
yes; there is an important safe
guard in the very nature of the prop
osition that bank notes shall rest upon
commercial assets. Few banks have
gotten into trouble which have stuck
to this class of securities, whether they
have issued their credit in the form of
notes or in the form of deposit liabili-
ties payable by check. The trouble be-
gins-not when they change one form
of liability for another, when both are
substantially the same, but when they
sink their assets in land mortgages or
enterprises which do not promise i'm
mediate returns. These are not COM
mercial assets and are not permitted
to be carried in the regular course of
business by the national banks of the
United Statcs
BASED ON THE COUNTRY'S
CREDIT.
Notes or credits resting upon COM
mercial assets rest upon the broad
basis of the whole negotiable wealth
of the country and the combined credit
Of nzarly all the manufacturers mer-
NiabtS III DIOhttS VIII Ncdt WITH the
banks. A broader basis for credit could
hardly be conceived. The SUBJECT was
we'll disposed of in the preliminary re-
port Of the monetary commission iE
the following passage.
"'Notes secured as herein provided
cannot fail to be safe, because, being
based upon all the of all
the banks issuing them, they are based
upon the whole business of the
try. and that business is the thing
which gives life and value to all secur-
tiles. government, municipal, railway
and individual obligations. Should all
the resources of the banks ever so
In value as not to be ample Sc
curity for the amount OF notes that
could be issued under this plan, then
all other securities. even government
bonds, would become valueless.'"
SOME FAILURES INEVITABLE.
But Notwithstanding this broad Sc
national banks some times fail
with impaired assets" said your cor
respondent.
Certainly" was thes>reply. People
die and houses burn down, notwith-
standing they are insured, but this
does not break the insurance compa-
MES. 1t is simply a matter of calcula-
ton, based upon experience. to deter
mine what is the average survival of a
life of a building. and what is the av-
erage life of a banking Institution. If
the holder of the obligation of a bank
looked to the band only for security,
he would in a few cases-very rarely
suffer loss. But substantially all the
bills which are being urged upon con-
gress on this subject by the advocates
of sound money propose that the losses
in the case of individual n shall
be distributed over all the banks of
the system. just as the death a
ments of a year are distributed over
all the premiums of a life insurance
company.
SMALL TAX WOULD PAY LOSSES.
The matter has thoroughly been
worked out by experts, and it has been
demonstrated that a tax Of a fraction
of 1 per cent. Gas low as lis of 1 per
c1lt.) levied annually upon the circu-
lation of the solvent banks would pay
all losses to note holders The govern
ment now collects a tax of l Der cent.