The Indianapolis journal. [volume] (Indianapolis [Ind.]) 1867-1904, 1898-12-05
Argument Against Giving NOtehOId.
ers Preference in Distribution of
Assets of InsOIvent Banks.
PROTECTION OF DEPoSIToRS
SHOULD BE ONE OF THE AIMS or Al
NEW LAW, HE CONTENDS.
Many Recommendations of Interest to
Currency RefOrmers, Bankers
and business Circles.

WASHINGTON. Dec. 4-The annual re-
port Of Charles G. Dawes, controller of The
currency for the year ended Oct 81, 1S9S
will be submitted to Congress tomorrow.
With respect to the condition of national
banks during the year, as shown by the five
reports required from the banks, the con-
troller says:
Notwithstanding that the number OF
banks in operation on Sept. 20, 1883, is less
than at any date of report since Dec -,
1890, 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 Sept 20.
for the first time, the aggregate resources
reached and exceeded the -billion-doliar
mark, the increase since Oct. 5, 1897 being
$29S, ,S77 1916. A comparison of the last re-
turns with those of Oct. 5, 1897, indicates
an increase during the year of $104, 952 1894
in loans and discounts; $79, 1874, $50 in govern
ment securities on deposit with the treas
urer of the United States to secure circu-
lating notes and public deposits and the
amount held by the banks; $57, ,3O4, ,S27.s4 in
specie and legal tenders. The reduction OF
$25, 200 in the amount of United States
certificates of deposit for legal tenders re-
suits in a net increase of lawful money OF
$S, ,SS9, ,S27S4 On Oct. s, 1897, the deposits ag-
gregated ST. S5S, ,349, 1850, and Sept. 90 1893,
$2,OSl, ,454, q, the increase being $17S,1O5,-
411.79. The balance due other banks and
bankers shows an increase os se2627, ,3SS.09
and United States deposits of $50, ,O23, ,O19 27''
The controller states that he does not re-
view in their details the plans for the modi-
fication of the currency and banking sys-
TENS, which are now the subject of eco
the country, but confines his discussion to
the general principles underlying all OF
them, because they seem to ignore the in
terests of bank depositors with whose pro-
lection the controller is peculiarly charged
He states that those plans which are now
most generally discussed may be consid-
cred as based upon the following PROPOSE
tions:
"First-That the disproportion between
outstanding currency liabilities Of the gov
ernment payable in gold and the gold held
for their redemption should be lessened by
a contraction in the amount of these de-
mand currency liabilities.
"Second-That the void in circulation.
caused by such contraction, should be filed
by extension of the circulation of ma
tional banks, which circulation, redeemabie
in gold is ultimately to depend for its CHIEF
security upon a first lien upon the COM
mercial 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 cur
rency contraction, some radical extension OF
bank notes is absolutely necessary to the
securing of the proper adjustment of gov
ernment currency liabilities to its gold re-
serve, by which adjustment the greater
Ga fetv of the syold ard fc e,,bsar,,aa
''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"
THE CONTROLLERS VIEWS.
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 controller
states that his suggestions are based upon
the following assumptions:
"First-That there is existing no such
condition of the United States finances, rev
enues, or credit as to justify the propositions
that the shifting of the burden of gold re-
demption of outstanding currency from the
government to the banks is SO important as
to necessitate Of itself radical changes and
concessions in national banking laws rela-
tive to the issue of notes, which changes
wise if the interests of the community ir-
respective of government finances, were
alone considered.
'Second-That If, from considerations OF
general public policy, Irrespective OF gov
ernment 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 circula-
tion and gold reserve can be attained, the
stability OF the present gold standard in-
sured, and the currency maintained upon 4
sound basis without contraction"
The controller then says: lit must be re-
membered. in connection with the discussion
of changes in the present banking laws.
that by far the most important function OF
the national banks is that of an acting
middleman between the depositors and bor-
rowers OF a community, and that its note
issuing functions are secondary in impor-
tance and usefulness under the present or
any proposed system Of bank-note issues.
1t is especially important, therefore, IN pro-
posing changes in the laws governing 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. IL is the belief or the
controller that the proposed preference OF
the noteholder over the depositor, which is
a fundamental basis of all these plans, IL
not only inherently wrong and unJusunea
by any grounds Of public policy. but that its
practical effect upon the present relation Or