The sun. [volume] (New York [N.Y.]) 1833-1916, 1901-12-05

capital stocks, respectively. such payments
to constitute a Guarantee Fund FOR the
protection OF the note Of any bank which
by reason OF insolvency shall become unable
to,pay its notes or demand.
When a bank thus privileged shall become
insolvent the Treasurer OF the United States
as trustee for the noteholder, shall sell the
bonds held as security and credit the amount
80 realized TO a special fund for the redemp-
ton of the notes OF n insolvent bank,
He shall also credit to such account an
amount equal to the United States legal
tender notes originally deposited by such
bank a. security. He hall further transfer
from the general Guarantee Fund 70 the
credit of the special redemption fund OF such
insolvent bank an AMOUNT, In addition 10
the amount realized from the bonds and
legal-tender notes, sufficient TO equal
the total OF the outstanGing circulating
notes Of such insolvent bank, and this fund
80 constituted shall be applied TO the pay
ment OF such outstanding notes. For the
amount hus taken from the Guarantee
Fund" the Treasurer Of the United States,
as trustee, shall be empowered and required
To assert claim against the receiver OF the
insolvent bank and shall be entitled to
receive dividends In the same proportion
as the general creditors Of uch bank Divi-
dends 80 received by him shall be restored
to the credit Of the Guarantee Fund
Neither the present law requiring q deposit
OF 5 per cent. of a banks circulation "a a
current redemption fund, nor the present
system of redemption need be changed,
There are minor details, non-essential In
character, which for the sake Of simplicity
are omitted from consideration.
venture now to present some estimates
or the effects Of these amendments II incor-
porated into the law. If | am not mistaken.
II would lead TO an important increase IN
the capital OF the national banks. Their
total capitalization al present Is secs 600 600.
That. DO go a ,,x-I,,1 al ~ "A xnIaI m ,pt N au
fund of s430 900. 900. the larger part Of which
could be- put into the form Of capital. With
the moderate advantage afforded under
the law so amended, a movement toward
reorganization under the national act would
take place in banks now doing business
under State laws.
IL Is safe, | think, to estimate that within
three years the total capital Of the national
banks would increase from the present
amount Of $685.. O00, 900 to 81, 900, coo 600.
With the right to issue circulating notes to
par of their capital there would be the posi-
bility Of increasing the paper money supply
as population increased by the difference
in amount between present supply green
backs and bank notes both inCluded) OF,
say, seven hundred and six millions and one
thousand millions, or. In round amount,
three hundred millions. When the banking
capital reached a thousand millions there
would be tied up in the Treasury three hum
dred millions in bonds, and two hundred
millions in greenbacks, as security for an
equal amount of bank notes issued. Two
beneficial results would follow: Some sixty
millions in United States bonds now i'm
pTisoned as security would be gradually
released for sale in the general market TO
the advantage of the private investor The
i~mpounding OF the greenbacks as security
for the bank notes would relieve the Govern
ment from all the burden now incident 70
their redemption, to the extent of We hum
draH TniIlnnG For the hQl uCa nf one hun.
dred and forty-six millions In legal-tender
notes which would then be outstanding the
one hundred and fifty millions In gold now
held as a special redemption fund would be
excessive. II this were reduced 10 one hun
dred and forty-six millions, the g~reenbacks
would become virtually what they ought
to Ice in reali' y-gold certificates,
la my opinion, the obligation OF tho
Government to pay the notes of insolvent
banks should be rescinded. Fidelity in
the discharge OF its duty as trustee should
be tho end OF its responsibility. While
its absolute guarantee remains a feature
of law. the broad question will again and
again reair. II the Government Is to take
tn" ultimate and final risk Of bank notes /,
why should it not enjoy the immediate
and continuous profit arising from the cir
Culation OF paper money issues? There
is a good answer TO this plausible inquiry,
but il il not obvious, and to make
the answer clear would require a more
extended treatment than this opportunity
affords.
Thus the problem OF national fnances
would be greatly simplified.
Objections OF various and vigorous kinds
Will toe offered 10 the propositions above
Indicated. IL will bc asserted, on the one
hand. that to give banks privileges 80 great
will induce the creation Of banks organized
for the sole purpose OF note issuing. ana
that the consequence will bo a rel etitlon
q ~ 49, - - ~ =" lNNN-
renCy. On the other hand. il will be
objected that the Inducements to en-
brace the provisions contemplated are IN
sufficient, and tina the scheme will fail for
that reason. The first-named objection
will not stand the test Of fair e~HamIustlun.
A. 70 the second. IL will appear that. though
the Inducements are not large. they are
sufficient A. previously noted. the advan-
tagc 20 a "a 10 issue circulation under
present laws is equal. under the hest pos
sibln conditions, 10 evenly huudredths OF
/ per cent. on ito capital stock, and, p~r-
ver~ely enough, the present system Works
10 reduca the advantage in those regions
where bank notes are "a" most useful form
IN which hank credit can iP extended TO the
borrower her" the rate 81 interest -
per cant 'he advantage or profit l. seventy
hundredths ~ I per cont where the rate
Of interest 'ss r-r cont the profit falls 10
thlrty % huniradth- pl ! pr cont
~ wv ANNHiA WIN .NF INV ANA'AN ~
NAV b. well 20 show tr. siVantag. ~ profit
under u system mH,iird ~ suggested
IL" result hae been carefully worked out
Nv ihr G~uNenip-u' a''uaTy AMI h a. t"l-
love w. q 90 aUtv Wit Tho interest fa'" ~
Z ~ cent th-r" would iS' - profit ~ u-
per cent proNld'i NE whole circultpun
''ull DO" k'pt uut aI ih" time II only
% IET put 81 me IiuF alluv"d could ID"
b o. lu circulation. 40" mont would l'
y ~ d . pei rrnf .Hcauiy under Tho
D HtltluDs o. ir a'riiF' circulation Uuf
rIHu.ifg. flr ptuW would b. % Htt . q
o Irt'.uIN. and ir al > Ist orui lusaNiy
CO.. iTuN would IsT 'u 81 b. II all co., Durlla
uHu 'rTi1 &c. bog uu'. ur = % Htl, 90
IHf .'|f 90 fls uulf Duuli H. utilized
I..-. Wl'r ,HItIHIN fH ulf u'ssut 30.
r.m. IHUI rH's- could i~ ne ts.iw ru
.y'i W Nnrs T's4HrF wlffs laul i.fts
Hr. rsHf I.U.Hlui 90 tHr peoples 49,
f. ur.Irf o. DHndliluus anyshstr would
GOD. HItarfas'a o. rufi isii Co. ufraullr
D ul. HHI q tlrw fl. thE ifuff 90 ,lr..la
U r aIIr Mlrfr capital r -H.trr aHi
.H1fs flr ilElssi 49, U~.du0rnftf uuUII.