The record-union., 1898-12-18
THE COMPTROLLER AND NOTE
PREFERENCE.

IHclaI documents filed with the Pres
1dent. In his report just submitted
Mr. Dawes gives very elaborately tht
facts and figures relating to currency
and banking interests. 1t is found tha
while we have now fewer banks, the
individual deposits, loans and discounts
and the total resources are greater thar
at any time in the history of the ma
1lonal banking system, the latter item
now exceeding the 81 900, 600 900 mark
He dismisses details of the many
schemes for modification of our system
because they ignore the interests OF
Bank depositors with whose protection
his office is especially charged. The
basis of these schemes he classifies in
two divisions; first, contraction of de-
mand-currency liabilities, so as to les
Ser the disproportion between currency
liabilities Of the Government and the
gold held for their redemption. Sec
ondly, that the void caused by such con-
araction should be filed by enlarging
Ehs national bank circulation, which is
redeemable in gold and must depend
for its chief security upon a first lien
upon the commercial assets Of the
banks.
But the Comptroller denies the sound
ness Of the basis. There is no condition
5ustlfying the shifting of the burden of
gold redemption of outstanding cur
rency from the Government to the
banks. Such a change would not in
his opinion be for the interests CT the
community even if the Government
finances are thrown out of the consid-
GRAFTON. Besides if general public pol
icy, irrespective of Government fin
ances, bank note issues secured as
stated seem unwise, the resources and
CT eGit of the Government are such that
by means of revenue laws as suggested
by the President in his last message, a
safer ratio can be attained between the
outstanding currency and the gold re-
serve, the stability of the gold standard
be insured and the currency be main
fa!ned upon sound basis without con-
traction.
This position Will give rise on the part
OF contractionists and free silver advo-
Gates to much defamation and many
5ierce assaults, and we will have in. con-
sequence some battles royal in Com
gTess. The Comptroller wishes the dis
putants to keep in mind the fact, how
ever, that the greater function of the
national bank is that of middleman be-
tween depositors and borrowers, and
that its note issuing function is sec
..ondary. Proposers of amendments to
1he currency laws should, he insists.
carefully study the effects such changes
ias they would make concerning the
tnote-issuing power of the banks upon
sboth depositors and borrowers.
He contends that there is fundamental
error and wrong in the assumption of
amenders of the currency laws that
mote holders are to be considered as
preferred over the depositors, and that
such assumption is not justified by pub
lic policy. He declares to be ground
aess the claim that there is an inherent
moral right, irrespective Of public poll
5cy, to prefer a note holder over a de-
spositor in the distribution Of the assets
of an insolvent bank. He thus throws
down the gage Of battle and makes the
issue between the Administration and
the radical reforners of the currency
system as represented in the national
banking laws, clear and unmistakable.
He then proceeds to say that if there
is no such inherent moral right. the
question presents itself does public
policy demand than such preference be
given in order to establish a bank note
system which will give banks such a
profit that to secure it they will relieve
the United States of the burden of gold
redemption and afford the country a
circulating medium more advantageous
than that We now have?'
To determine that question examina-
zion Of data must be had, made critic
ally in order to understand the nature
and extent of the wrong done the de-
positor class by this preference, and
the effects OF which would be felt by the
SIltlTG OtESLLiSSS community. 1nlS Cata
he presents in elaborate tables, which
he claims fortify his position. Bur
these, for obvious reasons, cannot be
presented here. To quote. however
from the official synopsis Of the report
the tables show:
The depositors of A insoIvent banks
with a capital of 50, L., 600, nominal as
sets S24, 153, ,212, and cash dividends
paid depositors of 1896, ,9S3, or 71G1
per cent, in the Middle States of Ohio
Indiana, Illinois, Michigan, Wisconsin
Minnesota Iowa and Missouri, would
have lost, by preference of the note
holders with 100 per cent. issue, So &C
per cent. more than under the present
system, or 55.44 per cent of their divi-
dends; with an so per cent note issue
3176 per cent more, or 44.3o per cent
of their dividends; and with a 90 pei
cent. issue, 23S2 per cent. more, OF
SO 20 per cent of their dividends.
They also show that, compared with
the rate of loss to the New England
depesitor through the preference IL
cases of insolvency, the issues OF un'
covered notes being either 100 per cent
so per cent. or go per cent. of the capl
tai, the depositor in the Eastern States
will lose at rate of nearly TWO ans
pue-half times as great; the oepos!Ioi