Evening star. [volume] (Washington, D.C.) 1854-1972, 1900-01-10
Response to Resolutions Sent TO
CONGRESS.
RELATIONS WITH BANK DEPOSIFbBIBS
Have Been Regarded as a Part of
the Treasury
SALE OF CUSTOMS PROPERTY


Senate by Senator Allen, and I'm IN. H,,,s,
by Representative Sulzer. asking FOR in
formation as TO increasing the number Of
hauonal bank depositaries and deposits
ana as to the sale of the New York customs
mouse. Accompanying the reply of ,hs
secretary are many documents relating to
'he transactions. The copying of th,-s,. 4 a.
uine'tts required the services of eishtre,, ,,-
twenty typewriters for four or five DAYS
before proceeding TO respond To the reso-
lu'ioh speclf1caily, Secretary Gage gives a
general review OF his whole course ip tho
nranch OF public finances concerned with
hatlonal bank depositaries. He botes Tho
provisions of the statutes which maxi. al,
lldtlohal banking associations deSicu.t..i
ior mat purpose by the Secretary of IN.
treasury depositdries Of public mnn..,.. ~,
eept receipts frcm customs under st. n
regulations as may be prescribed bv "a.
secretary That statute became ~,
June !. 1854, and its first marked ,.,.,-,o.,,
lon was in the rcfunding opr-ati.r1. az
ls'' when Secretary sherman thought 4,
NECESSARY necessary TO place with national bank de-
Positafles sums of money which reached a.
n@isn @ as S2'9. 9.3ii.6i5. Secretary Fairchild IN
loof-Nn' during a period OF abnormal r.
Selpts of revenue. increased the number OF
deposltdry banks. and allowed such bdi,k,
10 accumulate balances reaching SCI II;tsn
On March /. 1897, there were lag national
h&nk depositaries. holding total of 81;
las4lo With few exceptions theso institu-
uons received deposits from Internal i.V.-
nue. collectors. and rcmitted to the Sab-
treasures any surplus over the amount ~
the nXed balance which they were peInlit-
TED TO hold The amount of public deposits
remained about the same during The first
SIX months of his aGministr ration In No
Vember began those large paymenss which
resulted from the highly successful S,.iil.-
hent Of the Union Pacific railroad indebted
ness, payments aggregating S5S 44S 2sG Al
was thought eXpedient, as a part ut This
enormous transaction. to utilize for i few
Gays the services Of depositary banks win
the result that at the end Of Decrnb.-r
lN?'. such deposits had Increased to SIg-
ls2 III The reason for this action WAS 10
avoid the injurious effect on trade and in
dustry of too sudden withdrawal from
public uses into the vaults OF the treasury
OF so large a sum as S5s.ulansp BN The
end of May. lS5S. these public deposits had
been reduced to 81. .2,::ssa Bot
Soon after this the government WAS col-
fronted with the necessity of raising imme-
dlateiy a large fund for war purposes, and
acting under the authority of { he war revenue
act the people Were called upon To subscribe
to an issue of s200.e,oUoo of bonds on the.
day the books were opened th,. National
CITY Bank of New York and its associates
offered TO take at par and accrued Interest
any portion of the bonds that might MOI he
subscribed for by the public, and GA the
same day j. Z. Morgan g. COMPANY and
their associates numbering fftecrl nr tipe
greatest financial houses of the country
also subscribed to the entire issue Of S.,H-
ooo.oo or any part that might not i,e sub
scribed for by the general public.
Loan FIoated without Disturbance.
1t will be readily recognized that the ab-
sorptfon of s20.00o.e00 within the space Of
a few weeks could not fail TO disturb most
the general business of the conn
try. The Secretary of the Treasury feels
- y,,e.
Ing Of the war loan of 1898 was accomulish-
ed without the slightest interruption 10
that revival of commerce and the indus trirs
of the country which has made the present
a period of unexampled prosperity.
By the end of 1895 the number of national
banks deposltaries had been increased TO
SIG, located in forty-three states and terri
tories, and holding s94. .S6o,0o. The New
York banks were able to control more
bonds and qualify themselves in larger pro
portions than the banks in the interior
cities. With a view to securing a more
distribution of the funds the Sec
retary, early in 1899. designated forty or
fifty additional depositaries. and, while thus
Increasing the deposits outside OF New York
city, he at the same time drew down The
balances in the New York city banks.
0ffer to Buy Bonds.
With the beginning of the present fiscal
year the treasury was feeling the influence
of the revival of commerce. For the six
months ending with December 81. 1859. the
excess of receipts over expenditures aecre-
gated s21,026oo0. This absorption of money
from an active use into the treasury, where
it could serve no present useful purpose,
was source OF apprehension TO the public
and of anxiety to the department. The
situation was intensified by the fact that
The fall movement of currency to the IN
terror, for the movement of crops. operated
10 reduce the cash reserves at all
asercial centers.
The Secretary was indisposed to increase
deposits in public depositaries and n order
10 avoid that. he Offered to anticipate W.
terest on the public debt. and later offered
TO buy s25.oE.ptO of bonds.
The movement toward stringency in the
money market had assumed too great mo-
nentum to be averted by such means.
December Is a financial panic occurred.
Prices of investment securities fell ruin
'usly. Interest rates rose to fabulous rates
ma a general construction OF the money
market was apparent. While this state uf
affairs found its most violent expression n
he security market II excited stale of
anxiety and alarm throughout our indus
rial and commercial communities.
Deposit of Revenues.
The situation was believed to be so grave
Is to justify the utmost interference. The
eceipts of the treasury for December. II
vas perceived. would exceed the expendi-
ures by seven or eight millions. Under
hese conditions a peculiar responsibility
vas thrown upon the treasury. The stat
ties conferred authority TO place public
money, except customs, in designated de-
and gave power to relieve the
situation without possible prejudice 10 the
reasurys needs. 1t was therefore an
December Is. that the Secretary
would deposit internal revenue collections
With depositary banks to the amount of
hirty or forty millions, should so much be
Lpplied for.
From this point the Secretary makes
irect answer to the congressional inquiry.
lis principle OF action has been to so man
ge the receipts and expenditures as to
,roduce dhe least disturbance in that part
4 the money supply which must be at the
ervfce of commercial and industrial use.
'ince June 1. 1898. the receipts OF the treas
Try have amounted to eleven hundred mil
IONS By the aid of depositaries the
mount in the treasury at the close of any
quarterly period during that time never
ose more than SD. 500. 900 above the aver
ge for the whole period. Tables presented
how that substantial equilibrium was
maintained at all times between the rela-
Ion to the supply of money In the treas
Try and the supply in commercial uses.
Relations With National City Bank.
Taking up the history OF the govern
nent's connection with the Hanover Ma