The Advocate and news., 1898-02-02
Reform That Doubles Trouble.

Reform That Doubles Trouble.
Here Is Republican view OF the mon
etry reform proposed by the Indianap-
oils commission 1t is from the Chicago
Tribune:
1t is proposed by the indianapolis
money reform commissioners that ma
tional bank notes shall be first lien
on the assets of the bank issuing them.
Those corporations owe their deposit
tors two billion Of dollars payable on
demand, Their capital at this moment
is 637 millioE7. or less than a. third of
what they owe their depOsitOrs. II they
were to issue notes to half that amount
then there would be first lien on the
assets Of the banks to the amount Of
S181s millions. The depostors, to whom
is due two billions, would have only
second lien. Out OF what fund in case of
a panic or run would they be paid?
The State banks have deposits amount
Ing to billion Of dollars II they were
to become national banks, then the vol
ume Of note issues would be increased
half billion perhaps. 1t might soon
expect billion Of dollars. Those notes
would be first lien on their assets
which represent chiefly the money Of
their depositOrs Would the depositors
feel pleased when they saw so big lien
showed in head of their claims on the
banks with which they kept their spare
money?
There Is a liability Of an adverse bal
ance Of trade any year. which would
make gold shipments to Europe neces-
sary. To obtain this gold for exporta-
ton bank notes would be presented
perhaps by tens of millions for redemp-
ton. When the depositors of all the
banks saw the gold going out Of their
vaults, they would begin to ask them
selves, rs there gold enough left to pay
us WITH" To make sure that there
was tens of thousands of them would
draw out their deposits. There would
be a general run" which might ripen
into panic, and the result would be as
in former cases-the best of the banks
would suspend specie payments Of their
notes and the rest would go into insol-
vency.
The banks, being subject to the dan
ger of an attack from two directions
instead of One-both noteholder and
epositor-would have to adopt pre-
cautionary measures which would bear
hard on the business community When
there was the remotest symptom Of a
demand for gold they would have to be-
gin calling in loans and squeeze their
customers in order to have funds on
hand with which to meet an impending
double attack
The more cautious institutions would
lend money only ON call, so that they
could gather in their funds at days
notice. The result of that would be o
desperate scarcity of money to be
loaned when wanted for fixed periods
1t would be far more difficult to get
paper discounted on time than it is
now. The whole thing would be bad
and grievOus all around.
The national banks, with their notes
secured by government bonds and thus
source of no anxiety, have not gone
through the last thirty-four years with
out nishaps. A great many Of them
have gone into liquidation" A few
have paid all they owe to their depos-
itors. Many others have fallen far
short of doing so. And many millions
have been lost by their depositOrs.
Dishonest or incompetent manage
ment has ruined banks in the past and
will ruin banks in the future. No surer
plan of increasing the number of cas-
ualties can be devised than the one
which has been elaborated by the COM
mission of basing a gigantic circulation
on the assets of the bank, stOckhOld-
ers, and dep0sltors, and making these
institutions carry two loads when one
burden is amply enough for them to
bear.
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