The sun., 1899-12-07
Secretary Gage on Bank Currency.

The report OF the Secretary OF the Treas
ury to Congress, contains, this year, as It
did last year, besides the usual statistical
information, an exposition ofthe Secretary's
views on financial questions. especially
those relating TO money, banking and the
currency. Mr. GAGE renews his advo-
cacy OF the gold standard, and OF an "elas-
tic" bank CURRENCY, but It is noticeable that
he says not word in condemnation OF tho
Government notes, nor does he propose, as
he did. two years ago. any scheme for their
retirement and for the substitution for
them OF bank notes.
Mr.. GAGE begins his essay with de-
served eulogy OF the gold standard, in the
course OF which he makes the remark that
"if 1t be true, as true il undoubtedly is. that
gold Is now our standard OF money values,
the future needs only the assurance that 1t
will so continue to be, until, at least, the
people shall be SO united in their desire for
change therein as to be able to direct the
voice OF both Houses OF Congress and Sc
cure the approving signature OF the Chief
Executive" He then hints that the present
Congress will " furnish this kind Of an
assurance. Considering that the legislation
OF 1873 has already furnished 1t, and that
the gold standard Is now established as
firmly as 1t possibly can be, We do not
understand why the Secretary uses the
future tensefn speaking Of the subject.
Next, Mr.. GAGE takes up banking and the
currency. He describes tho origin and
development OF banking, and traces our
modern bank circulation to tho giving by
the banker OF his notes OF hand, convenient
In size and denomination, to such OF his
creditors as could be well accommodated
thereby. The restrictions and safeguards
which legislation has, in modern times,
thrown about tho issue OF bank notes he
attributes entirely to the limitation of tho
bankers liability resulting from the
incorporation OF banking institutions and
requiring corresponding Limitation OF his
powers. Herein he betrays an imperfect
knowledge OF history. Bank notes long
ago became much more than bankers
notes Of hand. BY assuming form which
distinguishes them from ordinary promis-
sorry notes, they have acquired standing
with the community similar to that en-
joyed by coins coined at the Govern
ment mint. They pass from hand to
hand and arc accepted at their face
value by almost everybody without
inquiry into the responsibility Of their
issuers. 1t is for this reason, and not be-
cause the liability Of bankers Is limited by
their Incorporation. that laws have been
made requiring security Of some kind
for bank notes. The State OF New
York was the first to establish the sys-
tenn OF basing bank circulation on State
and Government bonds, and the National
Bank act adopts that system. both in prin-
ciple and In many OF It's details. Previous
to the National Bank act, and to tho sup
preston. by the imposition Of prohbitory
tax. Of State bank note Issues, the losses to
our people from bank failures were enor-
nous. Since then. they have been nothing,
and a national bank note Is accepted with
out regard to the bank that issued 1t, Just
as gold coin Is accepted without inquiry
as to the mint at which it was struck.
In place Of this absolutely safe bank cur
rency Secretary GAGE would substitute the
primitive bankers notes OF hand, which he
says "pass from hand to hand without be-
ing questioned and allow them to be is-
sued on the mere credit Of the banker, Just
as promissory notes are mado by other per-
sons. He incautiously says: "Othcr coun-
tries offer us models which it may profit us
to study" but he prudently refrains from
giving the results to which that study
leads, AS early as 1925 the reckless issue
OF notes by the little country banks of Eng
land brought on financial crisis, In the
course OF which the gold in the Bank OF
England was reduced below $1,000, 900,
and the community. as a distinguished
hnancier expressed it., came within few
hours OF state OF barter" To pre-
vent recurrence of the calamity, Par
Lament, in 1926, prohibited the issue
OF bank notes in England and Wales of a
iess denomination than 95, or $25, and in
1914 took away from all English and