The record-union., 1899-11-28

lection from the disastrous effects OF
panics, a very much larger degree OF
elasticity can be impaired to our pres
ent bond secured bank-note currency,
thus making it of greater use in sea-
sons Of the year in which the demand
for currency is above the normal. ana
of invaluable assistance in times OF
panic. "a
Second-This result can be obtained
by the enactment into law of the Pres
ident's recommendation that National
Banks be allowed to issue to the par
of the Government bonds deposited by
them as security, and by the modifica-
ton 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 pun lie convenience, this rate OF
profit should be reached by lessening
or shifting to the franchise of banks
the present / per cent. tax on circula-
ton to 80 per cent. of the par of the
Government bonds securing it. A tax
of or 3 per cent. should then be
levied on the excess of circulation over
80 per cent. Of the bonds, which will
make of such excess circulation Sc
cured emergency circulation only to be
used when it becomes a public neces-
sity, and not as means of profit by
the banks under normal conditions.
The general increase in bank circula-
ton desired being possible of attain
ment through the lowering of the tax
on the 10 per cent. excess circulation
to the par of the bonds will not mater
tally interfere with such general in
crease, and will only operate to create
an emergency circulation of great
value.
Thlrd-As the use of rediscounts and
bills payable on the part of the West
ern and Southern banks at certain sea-
sons of the year is regarded as evidenc-
ing the need of an elastic circulation,
and as bearing upon the question OF
the measure of relief which may be ex-
pected from the bond secured emerg-
ency circulation here recommended, the
Comptroller will state that without any
general increase in bank-note circula-
tion as a result of new legislation the
possible emergency circulation of 500
100000 Immediately available, based
on bonds securing the present circula-
ton, amounts to more than the COM
bined bills payable and rediscounts of
all the National Banks of the United
States outstanding at any time within
the last three years.
If the Comptroller'S estimate of
possible bond-secured emergency cir
culation of 100000 600 be correct. this
amount is about double the average
combined bills payable and rediscounts
of the entire national system outstand-
ing within that period
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 taxa
ton and issues of secured bank notes
Will afford an elasac circulation of
value in times of money stringency not
approaching the severity of a panic.
With or without the legislation for the
special uncovered emergency circula-
tion, the bond secured emergency cir
culation will be of great public use.
Fifth-If provision be made for an
uncovered emergency circulation for
use in times of panic, subject to tax
so large as to be repressive at all other
times, the 10 per cent bond-secured
emergency circulation herein recon-
mended might be taxed at the rate of
per cent. per annum for the time
issued instead of at the rate of 3 per
cent, thus allowing it's freer use un-
der more normal conditions. But if
no uncovered circulation for panics be
provided, the more repressive tax OF
per cent. seems desirable upon the
bond-secured emergency circulation.
Sixth-There is no need. under nor
NAL conditions, of large amount of
emergency circulation or a high de-
gree of elasticity in bank-note circula-
ton. The immense volume of checks,
drafts and bills of exchange. based
upon the assets of banks and often
called bank-credit currency, expands
and contracts in accordance 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 extremely elastic,
and varies in amounts at different sea-
sons of the same year. It is gener
ally amply adequate to the business
needs of the country, except in times of
disturbed confidence and financial
panic.
Seventh-The issuance of bank asset
notes under normal conditions and in
the present development of our bank
ing system cannot be justified by the
plea that without them the needed
elasticity of bank-note currency can
not be obtained. Nothing except the
avoidance of panic can at present
justify any experiments with bank
asset currency. When authorized for
use in times of panic they should be
50 heavily taxed that they can cir
culate only while panic lasts, and
like clearing house certificates should
be a remedy simply for a rare emer-
gency.
Among other recommendations, the
Comptroller strongly urges laws au
thoriZing the incorporation of banks
for the purpose of carrying on interna-
tional and intercolonial banking as dis
tingushed from domestic banking He
also recommends laws authorizing the
in small communities of
national banks with a capital of So
600.
He repeats his recommendation of
one year ago relative to a modification
of the law restricting loans to any one
individual to 10 per cent of the CAPT
tai of a national bank, and advises the
attaching of penalty for making ex-
cessive loans after the present section
is modified.
He also gives in detail the results of
an extended investigation into the de-
velopment of all the different banking