The Washington weekly post., 1899-11-28

passed providing for an uncovered emer-
gency circulation for needed pFotection
from the disastrous effects % panies. a
very much larger degree Of elasticity can
be impaired to our present bond-secured
bank note currency. thus making II OF
greater use IN seasons OF the year in
which the demand for currency Is above
| the normal, and Of invaluable assistance
in times Of panic.
Second. This result can be obtained by
the enactment into law Of the Presidents :
| recommendation that national banks be
allowed 10 issue to the par OF the govern
ment bonds deposited BY them as security,
| and by the modification OF the present tax
! upon national banks as follows:
| After determining approximately the
| lowest rate Of profit which will call
| Into circulation the additional amount of
national bank notes deemed necessary for
| public convenience, this rate Of profit
should be reached by lessening or shifting
| 20 the franchise Of banks the present /
| per cent tax on circulation TO - per cent
| Of the par Of the government bonds secur-
1 inE r. tax OF or per cent should
/ then be levied on the excess OF circulation
/ over - per cent OF the bonds. which viii
| make OF such excess circulation secured
| emergency circulation only 10 be used
/ when * becomes a public necessity. and
not as a means Of profit by the banks un-
1 der normal conditions.
| The general increase In bank circulation
desired being possible OF attainment
| through the lowering OF the tax on the 20
I per cent circulation. this additional tax
l on the 10 per cent excess circulation 10
! the par OF the bonds Will not materially
/ interfere with such general increase. and
VIII only operate 10 create an emergency
/ circulation Of great value.
Double the Average.
Third As the use OF rediscounts and
| bills payable On the part Of the Western
and Southern banks at certain seasons OF
the year is regarded as evidencing the need
Of an elastic circulation. and as bearing
upon the question Of the measure OF relief
which may be expected from the bond-se-
cured emergency circulation here recon-
mended, the Comptroller will state that
without any general increase in bank note
circulation as a result OF new legislation.
the possible emergency circulation of 60
100000 Immediately available, based on
bonds securing the present circulation
amounts 10 more than the combined bills
payable and rediscounts OF all the ma
tiOnal banks Of the United States out
standing at any time within the last three
years.
If the Comptroler's estimate Of a possi-
bic bond-secured emergency circulation Jf
SOc0oOO be correct, this amount is about
double the average combined bills payable
and rediscounts OF the entire national sys-
TEN outstanding within that period.
As the elastic and uncovered issues OF
the joint stock banks Of England. Scot
land, and Ireland, comprising all the un-
covered bank notes there issued, may be
cited as Illustrating the advantages of an
elastic circulation, the Comptroller would
also call attention to the fact that these
entire issues are but a small amount more
than the $4,000 900 bond-secured emergency
circulation which would be Immediately
available on existing bond deposits IL the
United States under the legislation rec
commended. and with an Increase in gen
eral bank-nOte circulation resulting from
modified laws, we would probably have a
bond-secured emergency circulation IN
this country larger than the emergency
circulation of the joint-stock banks OF
England, Scotland and Ireland, which is |
secured only by the general assets of the |
banks, without preference over other cred |
itoTs.
Fourth. Even if a special uncovered !
emergency circulation be provided, to be |
used only in case of panics. the plan here |
suggested Of changing the taxation and |
issues of secured bank notes will afforJ !
an elactic circulation OF value In times of 4
money stringency not approaching the Sc |
verify of panic.
With or without the legislation for the |
special uncovered emergency circulation, |
the bOnd-seCured emergency circulation |
Will be of great public -:se.
Suggestions as to Taxation.
Fifth. If provision Re made fer an I'M
covered emergency circulation for use in |
times of panic. subject to tax so large |
as 10 be repressive at all other times,
the ~ per cent. bond-secured emergency
circulation herein recommended might be
taxed at the rate of 2 per cent per an
mum for the time issued, instead Of at
the rate of 3 per cent, thus allowing its
freer use under more normal conditions
But If no uncovered circulation for panics
be provided, the more repressive tax of
3 per cent. seems desirable upon the bond
secured emergency circulation.
Sixth. There is no need, under normal
of a large amount of emer-
Gency circulation or a high degree of
in bank-note circulation. The
immense volume of checks, drafts, and
bills of exchange, based upon the assets
OF banks and often called bank-credit !
expands and contrasts in ac-
with the demand of trade and
business, and is the medium through
which the great bulk of the business of
our country is transacted. 1t is extreme
ly elastic, and varies in amounts at diff
ferent seasons OF the same year 1t is
amply adequate to the business
needs of the country, except in times of
disturbed confidence and financial panic |
Seventh. The issuance of bank-asseI
notes under normal conditions and in the
present development of our banking sys-
TEN can not be justified by the plea that |
without them the needed elasticity of |
currency can not be obtained |
Nothing except the avoidance of panic
can at present Justify any experiments
with bank-asset currency. When author
Zed for use I'm times Of panic they should
be so heavily taxed that they can cir
culate only while a panic lasts, and Ike
certificates, should be a
remedy simply for a rare emergency. In
seeking the theoretical advantages of
iuidity ia bank circulation We should
take no risks with its sOlidity
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