Evening star. [volume] (Washington, D.C.) 1854-1972, 1900-02-12

and passed when our bonds mature and
| monetary conditions may be entirely diff
| ferent.
| The bill undertakes too much: it not only
| defines and establishes the monetary stand
| ard. but sets out a scheme to fund the pub
| lie debt three years before any of our
| bends mature; and in order 10 make this
| scheme success it provides that the ma
| tiCnal banks shall be the most important
| factors in its execution.
| Separate the Funding Scheme.
"In my judgment the public debt should
| be funded without any reference whatever
| to the national banks. Let the scheme of
| funding stand its own merits and by
| itself. Let the government go forward when
| the time comes and borrow money for fund
| ing purposes at as low rate of interest as
| il can, making such a rate as will in
| sure the bonds being maintained at par.
| without depending on national banks or any
| outside agency and without giving grounds
! for the impression that a public debt is 10
4 be encouraged and fostered in order to pro-
vide safe currency.
| Moreover, it seems to me we should not
| reach conclusions and legislate from the
| standpoint of vision or the highest wave
\ of prosperity the country has ever had.
| The conditions which surround us in the
| financial and commercial world are eXtraor-
| binary. Present favorable conditions will
| be followed naturally by a reaction that
| will bring new experiences, and these will
| judge better than now what may be done
| in the matter of funding the public debt
when our bords mature"
The senator then suggested that the gov
eminent might find it difficult at some time
| in the future to keep the proposed 2 per
cent bonds at par. and asked. would it
rot be better and in the public interest to
make the rate OF interest higher and offer
no inducements to the national banks. 1t
may turn out, he said, that the induce
| ments and advantages offered the banks
may cost the government more than the
saving in interest that will result from
| funding the debt at 2 per cent.
A Safer Course.
at seems to me-" said Senator Elkins,
"a safer course would be to allow mar
gin of discretion to the Secretary of the
Treasury in the matter of refunding the
public debt when the time comes: for in
stance, give him authority to refund at a
rate not exceeding, say, per cent per an
| mum. We cannot hope to do in the matter
OF our finances what all other nations, es
pecially Great Britain, the richest nation in
the world have failed to do. She has
never reached a standard as low as 2 per
cent for her national borrowings.
THE chief argument of the distinguished
chairman of the finance committee in sup
port of the refunding feature of the bill
| is based largely upon the supposition that
national banks will aid materially in the
! funding of the public debt at two per cent;
tIldl lil6 pTONlSlOIlS u tilt Ulil dllOWIilS
| tional banks to issue circulation up to the
face value of bonds and the reduction of
the tax on circulation will be of such adj
vantage to the banks that they will at
once buy the two per cent bonds and take
out circulation on them.
National Bank Calculations.
1.-The circulation of national banks is not
SO profitable nor the source of untold
| wealth as some suppose. The capitalization
of national banks the LIST of December
last, was about $500, SIG. 24s, to which may
be added the surplus and undivided profits
which would be converted into capital II it
! would pay to do SO. $341 ,099. SS3. making
an aggregate of s961 ,6l5,S2s, while the
amount of national bank notes in circula-
ton secured by bonds was only s207, 100000.
Reducing the tax on circulation one
| half per cent and permitting the issue of
| bank notes up to the face value of two
per cent, bonds may not be sufficient in
ducement to national banks to largely in
crease circulation, even If all the circula-
! ton could be kept outstanding. A bank
with 500 600 circulation would get 5000
income from its bonds; from this amount
would be deducted tax, $500 and expense
OF redemption, SIPS: total, sG2o; leaving
an annual profit of 81 80.
"ln case the bonds should decline two
per cent, what would be the result? Under
the law the Secretary of the Treasury
would have to call for additional bonds to
secure circulation. This might happen at
a time when the banks could not raise
money. In case of protracted war our
bonds might fall even twenty or thirty per
cent, and this might happen at a time when
national banks could not deposit more
bonds to secure note circu alton. The bill
makes no provision, and / do not know
that any could be made to meet such emer-
gencies.
Then, again. securing by legislation a
low rate of interest through profitable in
ducements to national banks may not in
the end be the best thing for the country
low rate of interest will, in the long
run, tend to make low prices for commodi-
ties. II the use Of money can be bought
cheaply it may have the effect to make
everything else cheap. / am afraid very
low rate of interest would tend to reduce
wages
After referring to what he called the I'M
just prejudice against national banks. Sem
ator Elkins closed by saying:
The Money OF the Future.
"Under present conditions. and even the
more favorable ones promised in the bill be-