The evening times., 1899-12-05

OF our SITUATION as 1t relates TO the cur
rency.
While stability in the currency should
be safely guarded, fexibility-the power o.
needful expaneion-must also be provided
The exercise of this power, with proper
Limitations and restrictions. must be en-.
trusted to the bank. There Is no otheI
agency that can wisely and efficiently exc.
cute 1t. In fact, the banks do exercise
that power now In regard to the larger
part Of that element which, rightly under
stood. really constitutes the currency. II
is a popular delusion that the bank deals
In money. Money Is an incident in its
dealings-an important incident. no doubt
but, truly speaking an incident only.
The bank deals in credits. For consid-
Grafton, varying according to time, place,
and circumstances, it gives to the public
| with whom 1t deals its own debt obliga-
tiohs In exchange for the debt obligations
OF its dealers and customers. The obliga-
tions OF the bank thus created are generally
evidenced by a credit upon its books to
the dealer, who has the right to draw upon
1t by his checks or drafts as his conven-
fence may be served. The constant inter-
change of credits between the bank and its
dealers, with the enormous volume of
checks and drafts constantly passing be-
| tween buyer and seller, constitutes in the
| broadcast sense the currency Of the country.
| 1t is these instruments which trade uses
| in much the larger part OF all its opera
| tions. Money-real money, gold or silver
plays but small part In the multitu-
dinous exchanges. The total money Of the
| country-metallic and paper-is less than
| two thousand millions, while the "depos-
its Of the commercial banks, State and
national. aggregate more than four thou
sand millions.
Whence comes the excess OF two thou
sand millions on deposit? 1t represents,
as, inded. does the whole deposit fund, the
unused credits belonging to the bankers
public, temporarily at rest in the bankers
| hands.
Foreign Banking Systems.
I have said that foreign systems OF bank
ing afford objects OF profitable study. We
need not go SO far. Forty years ago, be-
fore the imperative needs Of the Govern
ment repressed the natural development Of
banking. there had alreay become estab-
lished in several States banking systems
filling to a high degree Of perfection the
services which such institutions should rem
der to the public The New England sys-
tenn, those Of Ohio. Indiana, Louisiana, and
New York-while different from each other
in many particulars and not equally ef-
fective-were all safe and substantially ad-
equate to public needs.
1t is the general theory OF our Govern
ment that the largest liberty should be
enjoyed by the people. subject only to such
restraints as the welfare and safety OF the
whole may require, and in the field OF
banking il may be affirmed that this prin
ciple should be observed.
beg now to point out some of the gen.
eral limitations and restrictions which
Congress has imposed in this department.
and inquire as to their justice, wisdom
and adequacy.
Conditions of capitalization.
l. AS to conditions of capitalization. The
law requires a minimum capital of $50, 900
as precedent to organization under the
national bank act While this would seem
to be fair and moderate limit, it is un-
doubtediy too large for the resources of
small communities, where banking facil
tiles are much needed, and 1t is suggested
that for places of a population of ! 900 or
less the minimum be reduced to s25. 900.
2. The national bank act clearly -ecog-
nizes the note-issuing function as proper
one. but ii is plain that the original con-
ditipns and Limitations imposed have, un-
der changing conditions. become substan-
TALLY prohibitlve in their terms. This
ought to be re-studied, and as large a
liberty given as may be consistent with
tion.
g. The law prescribes percentages ~hich
national banks shall carry In cash against
their deposits and limits the amount of
risk which the bank shall take In loans to
any one Individual. firm, or corporation.
The percentage OF cash reserves seems to
have Justified In practice the provision Of
the law. but the limitations on loans have
been found to work with great inequality.
Tba nf he r0I1
of the Currency on this point. TO be found |
in his report to Congress last year, merit |
careful consideration |
Awhile limitations and restrictions |
exist in several directions, no Limitation has |
ever been given as to the ultimate liability |
a bank may carry upon given amount of |
capital. Upon this point the bank with |
$4,000 capital stands legally as free as
does the bank with $1,000, 900 capital. Cash |
reserves are a defensible subject OF legis- |
lation, because they affect the immediate
of the bank. The limitation of
liability compared with capital is equally |
SO, since the percentage OF capital and ac- |
cumulated surplus effects the ability Of |
the bank 10 bear its own losses. Capital. |
loans. and deposits bear healthful and |
proper relations TO each other. Everything |
else being equal, the measure of risk is |
determined by the extent Of the loans: and |
LOT lHc ultindlc eOINtuCs "a tuS Uduh ds |
to its deposits. the capital Of the bank is |
the proper guaranty. The capital should, |
therefore, be relative and fairly adequate |
to the risks involved.
Not Adequate to Public Needs.
It Is mainly in the lack of adequacy to |
public needs that our national system is at |
fault. The repressive effect upon note is |
sues destroys. or inJuriously limits, one of |
It's very important functions. How in cer-.
tain particulars this injury results l nave |
tried truthfully to show. In view of the |
and limitations which time |
and experience have brought under notice.
efforts have been made to modify the ma
tional banking act. In the House of Rep
of the last Congress, certain |
bills were proposed embodying measures |
which l believe would be effective toward |
needed reform. These measures in their !
general principles are approved by the in
formed judgment of the most thoughtful |
Of our people. 1t is to be expected that |
they will be again offered for the consid-
,rstion Of the present Congress. Without
ndulgfng In specific recommendations at |
his time, which IL made could be but rep
etitions of previous recommendations. l
the subject to the thoughtful at
ention Of the legislative body.
L. J. GAGE,
Secretary.
70 the Speaker of the House of Represen-
tatives.