Virginian-pilot. (Norfolk, Va.) 1898-1911, 1899-12-17
BONDS AND BANK-NoTEs.

1 In discussing the Currency bill" In
the House of Representatives on the
nth instant. Mr.. Mcclellan (Dem.), OF
New York city. said Gin part) as fol-
lows:
II do not wish 1t understood that i
advocate the present system Of bank
note currency. The first direct conse-
quence of the enactment Of this bill
VIII De q very great rise in the market
price OF Government bonds. Let me
| Illustrate by one class Of bonds In
1873, when the then President OF the
United States was negotiating with the
so-called bond syndicate" for the is
sue of OBSERVATION-DISCLOSURES loan. the
gentlemen who composed that syndi-
cate agreed to take Il per cent. gold
oond at par instead of A per cent.
| com bond authorized by the act of
January IA, 1875, Mt 104h. In other
words in their opinion, and 1t is con-
ceded that they are the shrewdest,
abiest financiers living, n per cent.
COIN bond at 104H is equal In
value to q per cent gold
oono at par. Now. the en-
ae,ment of the bill before the House
VIII ut once make all our coin bonds
gold bonds, and according to the theory
OF the pond syndicate, which am UNI
! wiillng to dispute, per cent. coin
| Doilo at 104h will be equal to a DER
cent; gold bond at 1873 1-3; but the coin
Donds that were issued at 104h are now
worm in the market 1884, So that by
| lhls reasoning the substitution of the
| word gold for the word "coin, must
increase their market price to I'll, an
| increase of 27 As per cent IF this be
true In reference to this one issue, It
VIII necessarily be true in reference to
All our outstanding coin bonds.
II may be said in answer to this that
my hsures are exaggerated and that
our com bonds are to-day Virtually
gold bonds and selling on a gold basis.
una mat the substitution of the word
gold for the word "coin" will moi in
crease their market value. If this Is
true. then our credit is not nearly az
good as that OF Great Britain, a promo
sItion that fancy no member of this
house Will care to indorse. The aver
age price of British consols during the
year 1897 was trifie under 113. Were
the interest increased to per cent.
the consols would be worth 1641s. vel
the consol is not by any manner of
means as desirable bond, even at the
same rate of Interest, as our 1925 per
cents. VIII be when made gold bonds.
IL our 1925 per cents. are TODAY po1d
bonds. when reduced to the terms ~
u .ne consols they would be worth only
w. or S210 less, bond for bond. than
cOnsols man
pass over the fact that the substl-
uution OF the word "gold" for the word
com VIII result In presenting an un-
earned nonus of $60,056.735 to the hold
ers OF the loan of 1925 alone IF this
Dill Us Of such vital Importance TO the
country as Its supporters half hearted-
~ insist, the mere presentation to tho
national bondholders of an unearnef
premium of q AS per cent. should not
De allowed to weigh against it. But
LET us consider whan will be the effect
bonds. o"'
Another section of this bill permits
our national banks to issue bank
notes up to the par value of their
holdings In United States bonds. in
stead of up to 90 per cent, as they are
at present authorized, and substitutes
franchise tax for the present tax
OF per cent. on bank-note issues.
Why? Because it is conceded, and
rightly SO, that the market price Of
Governments Is to-day so high that
1t IS more profitable for our national
banks to sell their bond holdings and
to re-invcst the proceeds in other Sc
curities than it is to hold them as
collateral for the issue Of bank notes
up to 90 per cent. Of the par value of
their holdings. This bill proposes to
increase the authorized issue of bank
notes one-ninth, while at the same
time 1T increases the market value of
our bonds one-fouth. If it is unprofit-
able to-day to issue bank notes, how
much more Improbable Will it be
AFTER the enactment of this bill?
Under present conditions for every
per cent. bond OF the issue OF 1925
held by national bank 5000 in bank
notes may be issued, which, IL loaned
at per cent. with the tax Of l per
cent. deducted, means a profit OF s2T
year: add to this $40 interest on
me BOND makes total profit OF SGT.
Were the bond sold a. the market
price and the proceeds, s1.34O, invested
at per cent, the profit for the year
would $3.50. or only $3.50 in favor of
the bank-note Issue, scarcely enough
10 pay for annoyance of submitting to
the law in reference to bank-note
issues.
BY the proposed plan, for every 4
per cent. bond OF the issue of 1925
held by national bank $1,000 in bank
notes may be Issued, which, If loaned
at per cent with no tax deducted,
would mean profit of $40 year;
add TO this $40 interest on the bond
would make a profit of $50. Were the
bond sold at what would be It's market
price. the word gold" having been
substituted for the word COIN" and
the nroceeds. s1.710 invested at 4 per
cent, the profit for the year would be
s6S.40. or only SLIGO in favor of the
bank-note issue and $3.50 less than
under existing conditions. Instead of
increasing the number of banks of
issue. this bill, if enacted. will reduce
them to the vanishing point. and
cause the disappearance of the S24S.-
S42, 06S in bank notes outstanding De-
cenber LIST. 1899, and the consequent
contraction of the currency to that ex-
tent
a glance at the following table will