The Indianapolis journal. [volume] (Indianapolis [Ind.]) 1867-1904, 1898-01-03

ton fund and method of redemption. with
the extension of the places of redemption
under the approval of the secretary of the
treasury
6. A further security in the liability of the
shareholders to the full amount of the par
of their shares
DIFFERENCE OF THE SYSTEMS
The chief difference of the proposed from
the existing system of bank notes is that
1t gradually does away with the require
ment that there shall be deposit of bonds
with the government as a condition for the
Issuance thereof. AS now, the notes are to
be first lien upon all the resources of the
banks. including the stockholders liabili-
ties. The change is necessary because OF
the scarcity of United States bonds; and
the attempt to substitute other bonds would
lead TO many evils. The change is wise be-
cause II permits the issuance of notes in
the way and at the time when, and for
the purpose for which, they would be is
sued under natural conditions, if no law
prevented. Such system would more per-
1ectly than any other give the country
circulating medium; 1t would readily and
quickly adjust itself from season to sea-
son to meet the wants of the business OF
the country requiring bank notes for its
convenient transaction. Under the present
system, the problem presented to a bank,
when its customers call for currency, Is not
the amount of its own assets, but its ability
and desire to make investment in Some-
thing quite apart from its usual business as
a bank, in order that it may be in a po-
Sition to provide a man who wishes to move
property or employ labor with the tools
most convenient at the time for his pur-
pose. Notes secured as herein provided
cannot fail to be safe, because being based
upon all the resources of all the banks is
suing them. they are based upon the whole
business of the country, and that business
is the thing which gives life and value to
all securities, government, municipal, rail-
way and individual obligations. Should all
the resources of the banks ever so shrink
in value as not to be ample security for the
amount of notes that could be issued under
this plan, then all other securities, even
government bonds, would become value
less.
The banks are bound together for the Sc
curity of these notes to accomplish the
same purpose that the deposit of bonds is
intended to accomplish, namely, to guard
against loss through the misfortune or bad
management of single banks, and thus save
the holder of bank note the need of as
pertaining the standing of any bank. Inc
objection that is sometimes made that the
larger banks in the great cities would not
issue notes because of an apprehended IA
biltty for other banks is shown by stat1S-
ties to be groundless. The year 1893 was
the year of largest bank failures; but had
all the banks of the country then issued
notes up to 80 per cent. of their capital the
amount of their assessment to make good
the ascertained deficiencies of that year up
to the time of the controllers report of 1896
would have been only a fraction OF per
cent. Had 50 per cent of the capital of all
national banks been issued in notes, upon
the proposed plan, since the beginning or
the national banking system in 1863 the as
sessment upon the banks annually would
have been an amount so insignificant that
it need not be taken into account. Taking
the country banks as a whole, 1t is found
that on Oct. last they had $40l, 900 OF
the $631 900 900 of natiOnal-bank capital
Should they issue notes up to so per cent
of that capital they would have $32l, 900 900
of notes, and there would be 81 956,0OO,OOO OF
resources against these notes, not counting
stockholders liability
If these resources of the country banks
are insufficient security for this amount of
notes they will be insufficient only because
there would then be such a condition of
business paralysis that government, munic-
ipal and railway bonds would be valuelesS,
and also few, if any, banks in the reserve
cities would remain solvent The occur
renee of this disaster is so improbable that
its consideration may be dismissed.
| NO DANGER OF GREAT EXPANSION.
In some quarters fear is expressed that
there would be undue expansion under this
plan. There is no danger Of this. The sys-
tenn of redemption, not only at the banks,
but at the treasury in Washington and at
the subtreasuries, would strongly guard
aga ,ust that. The expansion over that which
could be effected were no notes issued at all
will be found, upon investigation, to be
small. Dangerous expansion does not take
the form of the issue of bank notes, but of
| the extension of credits Very few bor-
roWers take their loans in the form of bank
notes The bank note is only one form in
which he to whom credit is given will use
that credit; he can use it equally we'll for
most purposes If the loan is placed to the
credit of his account by the bank making
the loan to him, or by some other bank or
by a private person.
The plan increases stockholders liability,
so that each stakeholder is absolutely liable
and not ratably and equally with every
other stockholder as now.
The existing tax of per cent. per annum
on circulation is repealed. In its place tax
alton of capital, surplus and undivided prof
it's is provided. The issue of circulating
notes is only one form in which bank eX-
presses it's demand liability. The other
form, deposits, is, under the development
OF modern banking operations, of vastly
greater Importance and the one which, in
cities and highly organized commercial COM
munities, is most used. In OC-ober, 1897, the
country banks issued more than " per cent
of all notes issued. The reserve banks, eX-
cept those of the central reserve cities, New
York, Chicago and st. Louis, issued more
than IS per cent, New York less than per
cent. and Chicago and ST. Louis together
about 119 per cent Surplus and undivided
profits and capital snow the profits and
property of banks, and these are certainly
more legitimate objects of taxation than the
mere Instruments which banks may be
called upon by their customers to issue to
serve chiefly the convenience of those GUS
toners This tax makes as equitable an
apportionment of the expenses of the sys-
tenn as can be devised
me plan PROVIDES tHdI THESE NOTES SnalI
be received by banks and by government in
payment of debts and dues under the same
conditions as now. This provision is made,
not because it materially adds to the Sc
curity of the notes. but that they may be
more convenient to the people and in aid of
their speedy redemption.
This method of passing from the present
to the new system is proposed in order that
the change may be gradual and that the
country may become accustomed to it in
this way, and also to guard against the
possibility of undue sale of United States
bonds Doubtless portions of the country
lack adequate banking facilities; and to
meet this 4 diminution of the minimum
capital required for banks in places OF small
population, and authority for the establish
ment of banks advised
THE COMMISSIONS PLAN.