The Indianapolis journal. [volume] (Indianapolis [Ind.]) 1867-1904, 1901-12-29
ADMITS THERE IS PREJUDICE
AGAINST CURRENCY BASED on
ASSETS OF BANKS,
But Believes There Is No Element
of Real Danger i'm the PIan-Con-
graduated by Secretary Wilson.

DIES MONIES, Ia, Dec. 2S.-GOvernor
Shaw when seen tonight denied having
given an interview regarding Secretary
Cages treasury policy. on the contrary.
he has positively refused to give any such
interviews. He has. however, spoken in
most cordial terms Of approval OF Secretary
Cages administration OF the department.
Governor Shaw says he positively refuses
to be interviewed at present in respect TO
the asset currency question. in respect
TO his or Secretary Cages administration
Of the Treasury Department. He said.
however, that the nearest he came TO an
expression of opinion on the asset cur
rency question was in a speech delivered
at Norfolk. Neb.. on April % 1901. and which
was published in the Bankers Journal OF
July. In this speech he said
II have been asked 10 say something on
the subject of bank circulation based on
assets. This is not an issue in politics. nor
have we any legal provision therefor.
shall therefore hot attempt 10 defend IL.
/ am willing, however. TO go on record as
in favor of an elastic currency, and If
believed there was no other way TO secure
an elastic currency other than asset cur
rency then / should advocate such an issue.
Il mindful OF the fact that IL is
claimed that an elastic currency places the
control of the volume IN the hands of the
bankers. Who should control the volume2
1 willing the railroads shall determine
the number of cars 10 be used. for they
will build cars as long as there is a de-
mand for them. The cars of the Western
railroads are all employed when the crops
are being moved but literally acres of car
stand on sidetra cks. retired from ,,trc,ila-
ton while the crops are growing. II the
cars could be constructed as cheaply as
currency can be issued they would be
burned in the spring and rebuilt In the
fall.
But, as I have said. I don't believe II
necessary to resort TO asset banking in
order TO provide an elastic currency. I
recognize a public prejudice. akin TO fear
against a currency based on assets, and
prejudice, so long as ii exists, constitutes
an element OF danger, even when the thing
itself against which the prejudice lies con-
tains no element of danger. / believe that
a graduated tax on currency based on gov
ernment bonds would result in elasticity.
That 1 may make myself clear. permit an
illustration, but do not understand me as
advocating much intimating the
correctness of the scale OF taxation ! sug-
gest. | make il only 10 bring out an idea.
Suppose banks were permitted 10 issue
a volume Of circulation equivalent 10 one
fourth Of their capital stock at tax OF,
say. Il per cent: Then permit an in
y per cent, then to increase again TO
q at a relatively increased rate, and
then TO increase again to equal its cap
ital stock at l per cent tax. 1 believe
this would induce the banks 10 carry a
larger volume Of government bonds. They
are good assets, especially for banks with
large deposits. Then. instead Of selling
these bonds to increase it's cash-its circu-
lation in time of stringency-they would be
kept on deposit in Washington, and on
call an increase of circulation would be
issued. 10 be retired when not needed.
when a Western bank now needs more
circulation, more cash. IL rediscounts it's
commercial paper and is compelled 10
deem IL at a given date. and pay a much
higher rate. Let the banks be permitted
to increase their circulation when needed.
10 be retired As soon as the demand for III
ceases. and keep ever present the induce
ment 10 retire it when not needed and
elasticity is secured.
Il repeat that currency based on assets
contains, in my judgment, no element Of
danger. except popular prejudice. This
will vanish the question is discussed
and explained by those who made a study
Of it. The depositor would be in no worse
condition than now. Whenever "A bank
fails the assignee finds its bankable COM
mercial paper hypothecated. In other words.
II has increased its circulation by sending
its assets 10 some other bank and borrow
ing circulation at a high rate OF interest
and IL does this after IL ceases 10 be
solvent. Ii certainly would be no worse
to allow a government issue after special
examination"
Fearing that he had been misunderstood
or misQuoted, Governor Shaw tonight als-
thorized the Register 10 publish the fol-
lowing: 81 have spoken in the highest and
most complimentary terms of Secretary
Cages administration Of the Office of secre-
tary OF the treasury. Further than that
have not spoken, and shall not speak. This
statement must be given no other interpre-
tation than that don't propose to discuss
these problems at this time"
gI,aw- Con4rufnUafaH ~