The record-union., 1898-12-05
In His Annual Report Submitted to the
Flfiy-Fourth Congress.
u General Review of the Principles
Underlying Plans for the Modi-
flcation Of the Currency and
Banking Systems-Necessity for
the Establishment Of 1nterna-
tional and Inter-Colon1ai
Branch Banking.

ed October 81. 1898, has been made
public
The Comptroller states that he does
not review in their details the plans for
the modification Of the currency and
banking systems, which are now the
subject of economic and general discus
sion throughout the country but con-
fines his discussion to the general prin-
ciples underlying all of them, because
they seem to ignore the interests OF
bank depositors, with whose protection
the Comptroller is peculiarly charged.
He states that those plans which are
now most generally discussed may be
considered as based upon the follow
ing propositions:
First - That the disproportion be-
tween outstanding currency liabilities
Of the Government payable in gold and
the gold held for their redemption
Should be lesSened by a contraction in
the amount of these demand currency
liabilities
Second-That the void in circulation
caused by such contraction should be
filed by an extension of the circulation
of national banks, which circulation,
redeema bic in gold, is ultimately to de-
pend for its chief security upon a first
lien upon the commercial assets of the
issuing banks
He states that the assumptions which
seem to underlie these plans are these:
First-That unless we are to have a
currency contraction, some radical ex-
tension of bank note issues is absolute
ly necessary to the securing Of the
proper adjustment of Government cur
to ffe 11xr
which adjustment the greater safety of
the gold standard is subserved; and,
Second-That through this radical ex-
tension and change in the present form
of bank note issues alone is elasticity
TO be secured in our currency.
As opposed to these propositions, and
In connection with the data given and
views expressed hereinafter relative to
changes in the present banking laws,
the Comptroller states that his sug-
gestions are based upon the following
assumptions:
First-That there is existing no such
condition of the United States finances.
revenues or credit as to justify the
proposition that the shifting of the bur-
den of gold redemption Of outstanding
currency from the Government to the
banks is so important as to necessitate
of itself radical changes and conces-
sions in national banking laws relative
TO the issue Of notes, which changes
and concessions would not be consider
ed wise if the interests of the commu-
nifty, irrespective of Government finan-
ces, We're alone considered
Seeond-That if, from consideration of
general public policy. irrespective of
governmental finances, bank note issues
secured only by commercial assets of
banks seem unwise, that the resources,
credit and financial condition of the
United States are such that by means
of revenue laws and other amendments
to law suggested by the President in
his last annual message a safer ratio
between its outstanding circulation and
gold reserve can be attained the sta
bility of the present gold standard in
sured, and the currency maintained
upon a sound basis without contrac-
ton
The Comptroller then says: 1T must
be remembered, in connection with the
discussion Of changes in the present
banking laws, that by far the most i'm
portant function of the national banks
is that of an acting middleman between
the depositors and borrowers of com
munity, and that its note issuing func-
tions are secondary in importance and
usefulness under the present or any
proposed system of bank note issues
1t is especially important, therefore, in
proposing changes in the laws govern
ing the note. issuing powers of national
banks, that the effects of such changes
upon the relation of the bank to its
depositors and borrowers be carefully
studied. 1t is the belief of the Comp
troller that the proposed preference of
the note holder over the depositor
which is a fundamental basis of all
these plans, is not only inherently
wrong and unjustified by any grounds
of public policy, but that it's practical
effect upon the present relation of de-
positors to banks in the smaller com
munities Of the United States would
be so revolutionary as to bring about
the most injurious conditions in the
general business of the country.
The Comptroller then fully discusses
the claim that there is an adherent
moral right, irrespective of public poll
icy, to prefer a note holder over a de-
posit holder in the distribution Of the
assets of an insolvent bank, and denies
that such right exists.
The Comptroller presents a series of
tables which indicate more exactly upon
what class of depositors the real bur-
den Of this preference will fall with al
most crushing weight. These tables
give approximately the loss which
under the proposed plans would result
to depositors from the preference Of
note holders over deposit holders in case
of insolvency, based upon the showing
made by the 195 insolvent national
banks whose affairs have been finally
closed during the existence of the sys-
tenn.
The Comptroller states that from the
tables which are given it is evident
that from the depositors in smaller
national banks of from $4,000 to
SlU0,OOO capital and from the depos-
itors of the newer sections of the
country, the greater amount of the
cost of this radical experiment in cur
rency must be collected. Thus upon
those depositors least able to endure
loss must the heaviest losses fall.
He further states: Those locations
where deposits are smallest, and there
fore where there would be the great
est incentive to the taking out of In
creased circulation, are those where
the depositors would suffer the most