Evening star., 1898-12-05
NATIONS CURRENCY
Controller Dawes Submits Annual
Report to Congress,
FUNCTION OF THE NATIONAL BANKS
Suggested Amendment to Section
5000, R. S, Governing Loans.
HAWAII MD PORTO RICO

The annual report of Charles g. Dawes.
controller OF the currency for the yea-
ended October II. 1Sas. has been seat to
Congress.
Wi n respect to the condition of nat'o. nj
banks during the year. as shown by the
five reports required from the banks. the
con roller says:
Notwithstanding that the number of
banks in operatior, on September 20. ISIS,
IS less than any date of report since
December 10. 1s9o the amount of Individual
deposits. leans and discounts and total
sources is greater than at any time during
the existence of he national banking sys-
TEN. On September ~ for the first time,
the aSgTe gate Resources reached ard CX
ceeded the four hilicn-iolIar mark, the i'll
crease since October :. 1s9I. being S-!iS,-
Ii:SI. 16. A cumnIri<on Of the last e
turns with tho-a of octuher '. 1897. n,Ii-
Gates an increa~. ouTiug the year Of siai,-
H52 1897 In io7s~ and dis counts. SI9l94.S 81
in government sscurires on deposit with
the treasurer o III, United states to Sc
cure circulating notes and public de poSitS
and the amount held by the banks. $50 ."0i.-
S91.A in specie ana legal tenders The re-
ductiOn of so 49, ot1 in the amount Of
United States certificates of Dc Dosit for
legal tenders results in a net increase of
>, 1897, the deposits agsregat ted 81 S3S.:'49.-
l2S3o. and on September -. 1S9S 50 OIL
4Ji ri0c %. the increase being $iIN.1F5 41l.I@-
The balance due other banks and bankers
shows an increase of So 62I. .3SS.o9 and
United States deposits of so O23 O192I.
The controller 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 z neral discussion through
out the country but confines his discussion
10 the general pr!nc pies underlying all of
them. because they seem to 'Snore the in
terests of bank depositOrs. with whose pro-
lection the control er is peculiarly charged.
Two Propositions.
He states that those plans which are now
most generally discussed may be consider
ed as based upon the following i,roposi-
tions:
First. That the disproportion between
outstanding currency liabilities Of the gov
eminent payable in gold and the god held
for their redemption should be lessened by
& contraction i'm the amount of these de-
mand-currency liabilities.
Second. That The void il circulation
caused by such contraction should be filed
by an extension Of the circulation IF ma
tiOnal banks. which circulation. redeenab!e
in gold, is ultimately to depend Tor It's chief
security upon 2 first lien upon the COM
merciaI assets OF the issuing banks
seem to underIIe these plans are these:
First. That unless we are to have cur
rency ContTac ion. some radical extension
Of baak note issues IS absolutely necessary
10 the securing of the proper adjustment
of government currency liabilities to it's
gold reserve. by which adjustment the
greater safety of the gold standard is sub
served: and.
Second Tha; through this radical ex-
tension and change in the pres mt form of
bank note issues alone is elasticity to he
secured III our Cu-reHcy.
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 con-
dition of the United States finances, reye-
nueS or credit as TO justify the proposition
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
and concessions would not be considered
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
erumentai finances. bank note issues So
cured only by commercial assets of banks
seem Unwlse. that the resources, credit and
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 circI-
latton and gold reserve can be attained
the stability of the present gold standard
insured. and the currency maintained upon
a sound basis without contraction.
Function of Banks.
The controller then SAYS:
II must b. 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 acting middleman between the
depOsitors and borrowers of a community
and that its note-issuing functions are sec
ondary 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 governing
the note-issIiug powers of national banks
that the effects of such changes upon The
relation of the bank to lis depostors AMI
borrowers be carefully studied
1t Is the belief Of the controller that the
proposed preference OF the note holder over
the depositor. which is fundamental basis
OF al these plans. is not only inherently
wrong and Unjustifed by any grounds Of
public policy. but that its practical effect
upon the present relation OF deposItors 20
banks in the smaller communities Of the
thlteu states would be reynlu tiOnarY a
TO bring about the most Injurious cond!-
ttonS In the general business of the country
The controller fully discusses the claim
that there is an inherent moral right IRE
specttve OF public policy. to prefer a note
holder over a deposit holder in the distri-
button OF THE assets Of an irsolvent bank
and denies that such right exists
After reaching this conclusion he asks.
II. then. there is no inherent moral right
TO es'ah'isls u preference Of the noIe-ho'l-
ing credi ors Of an insolvent bank as against
the deposit-hoidtng creditors in the distri-
button OF the assets of an insovent bank
the question arises, does public policy de-
mand. In the interest of the common good
that such preference should he given in
order to establish bank note system which
will give banks such a profit that &C secure
IL they will relieve the United States treas
ury of the burden OF gold redemption and
anord the country a circulating rnedir m
having alleged advantages over that nov
in use?
LOSSES to DepOsitors.
The controller then presents a series Of
tables which give approximately the loss
which under the proposed plans would re-
suit to depositors from the preference OF
note holders over deposit holders in case
OF insolvency. based upon the showing mad.
by the 1S5 insolvent national banks whcse
aHaira have