The Washington weekly post., 1899-11-28


Means Of Providing Additional Currene,
for Use In Time. Of Emergency.
The annual report OF Charles q. Dawes
Comptroller Of the Currency. for the yea
ended October q, 1899. has been prepare,
for transmission 10 Congress
In recommending 10 Congress improve
mcnts In banking laws. as directed oy
section 90 OF the Revised Statutes. tht
Comptroller. before making his chief an,
new recommendation for a bond-secure-
elastic circulation. repeats his recommen
dalton OF one year ago for a law pTOyid
ing for an unsecured emergency circula,
'ion TO lessen the destructive power vi
financial pauics. and taxed 20 heavily that
under normal conditions 1t must be retir.
"a and can neither provide profits for
The banks nor serve IS a basis for the ex-
pansion OF commercial credits. He en-.
phasizcs the necessity Of such a circula-
lion. designed. like clearinghouse Ger.
tiicates, simply as a remedy for a rare
emergency, and not as an instrument OF
current business
In introducing his new recommenda-
ton, the Comptroller then says that II
such a law be not passed. a marked de-
gree OF elasticity is possible OF attain
ment IN connection with our present sys-
TEN OF bond-secured national bank notes
and should be provided for By law wheth-
er the former law is passed or not.
The Comptroller believes that. in ac-
cordance with the Presidents recommen-
dalton, national banks should be allowed
10 issue circulation 10 the par Of the Unit
cd States bonds deposited by them for
circulation, and that, in connection with
the law authorizing this. provision can be
made for secured emergency circula-
ton.
Increasing the Profit.
The object of allowing the banks to take
out circulation 20 the par Of the bonds
Is 10 Induce them 10 furnish for the use
of the public a larger amount of circula-
ton than is in existence at present The
present rate Of profit 10 be derived by
tse banks from their circulation is not
sufficient TO justify them in issuing a
larger amount, but any method of iE-
creasing the profits on circulation will
result in an increase.
IL is true that the authorization OF an
issue OF currency 10 the par of the de-
posted bonds. subject to the present rate
of tax. is one method of inducing a larger
circulation. but Z is not the only method.
BY modification of the present rate of
taxation on bank notes, coupled with the
authorization Of issues to the par of the
bonds the same inducements can be o.
fered for larger circulation, and YET
provision be made for a secured emer-
genCy circulation.
The Comptroller. therefore, would rec
Ommend legislation authorizing the is
suance OF national bank note circulation
10 the par OF the deposited United States
bonds, and that the additional 10 per cent.
circulation thus allowed the banks be
subjected TO tax at the rate of . or
per cent per annum for the time used,
which will tend to prevent its unrestricted
use under normal conditions, and to save
ii for use at those periods OF the year
when crops are 10 be moved, and in those
periods or panic when IL is most valuable
both TO the banks and the business
public as a means of assisting the general
liquidation of credits.
Reduction Of the Tax.
With the object Of securing an increase
in the present bank-note circulation. he
would recommend the reduction OF abol-
ishment of the present tax Of per cent.
per year on the circulation to 80 per cent.
of the deposited bonds-the amount of the
reduction in the tax on currency to be
collected from the necessary per cent. of
tax on the capital and surplus of nation
"a! banks If requisite to the public reYe-
nues. To allow the banks 10 issue up to
the par of the bonds, unsolicited to ad-
ditional tax on the 10 per cent. extra cir
culation, will result in their Immediately
taking out their additional circulation
for the purpose of profit.
Business credits will be extended and
adjusted to correspond with such increase
of the currency, and practically the same
inelasticity will characterize our bank
note issues then as now. With the ad-
vent of a panic we would have no addi-
tional means of lessening the necessity
of a call upon the business community
10 furnish, by the repayment of loans,
practically the bulk of the deposits drawn
by frightened depositors.
Exactly the same rate of profit could
be realized by the banks upon circulation
10 80 per cent. Of the bonds deposited.
taxed at fOur-ninths Of per cent per
annum, as they could realize upon circu-
lation TO the par OF the bonds at the pres
ent tax of / per cent. If the tax On the
so per cent. OF circulation should be en-
tirely abolished, or shifted 20 the fran
chise OF banks. the profit on circulation
would be much larger than could be real
lied upon circulation issued TO the par
of the bonds subjected TO the present tax
In the judgment OF the comptroller by
modification in forms OF taxation the
same relative increase In general bank
culation in addition, can be obtained while
only an increase without any elasticity
could be obtained under any system OF
uniform taxation upon part circulation
Obtaining the Desired Result.
The Comptroller believes that the lew
ing Of tax of one-sixth OF one per cent
upon circulation TO ninety per cent. OF
the par Of the bonds and allowing the
banks to Issue currency TO the par OF the
bonds by paying a tax at the rate OF two
or three per cent. per annum on the ex-
cess up 10 the par when outstanding, will |
result In the desired increase In our gem
eral bank note issues. and provide a |
marked degree OF elasticity in our circu- |
lation.
In this connection the comptroller saws
he can not properly discuss the question |
of taxation OF banks as related 10 The
public revenues further than TO saw tha. |
The imposition OF a tax upon the cauItaI |
and surplus OF the banks 10 offset any |
reduction in the tax on currency will re- |
move any objection 10 his recommenda-
lion on the grounds that Il lessons the |
share OF the public burden which the |
banks should properly bear.
In considering the probable effect on the |
amount of bank circulation outstanding
which will result from a change I'm rates
OF taxation, IL must be remembered tha,
the circulation would properly include. II |
il could be safely made, an estimate ~ |
the increased price OF government bonds
which will probably be incident 10 a great.
er demand for these bonds from the
banks seeking profit on circulation under
the modified rate of taxation
This Increased price OF bonds may be |
such as 20 negative 10 some degree the de-
sired effect of an increased bank circuls-
tion, since IL Will tend 10 lessen the profits
on circulation. IL must be remembered.
however. that this objection can be made
10 any method OF increasing the apparent
- IL. Hfa.sH