The Indianapolis journal. [volume] (Indianapolis [Ind.]) 1867-1904, 1901-12-05

in conception is made, for in part. if not
a whole, they have found expression by
those who have most carefully considered
the important questions involved.
by necessary amendments TO the law
provide that any national banking asso-
citation which shall deposit 80 per cent. of
its capital in the form of United States
bonds at their par value, and 20 per cent.
of it's capital in United States legal tender
notes, with the treasurer OF the united
States as security therefor, shall be
titled to issue it's circulating notes to an
amount equal to its paid-in and unimpaired
capital In addition to the deposit of secur-
ity required, banks permitted to issue
notes as above shall pay semi-annually to
the treasurer of the United States, in trust
an amount equal to one-eighth of l per
cent. on their capital stocks, respectively
such payments to constitute guaranty
fund for the protection of the note of any
bank which by reason of insolvency snail
become unable to pay its notes on demand
IN CASE OF INSOLVENCY.
when a bank thus privileged shall be-
come insolvent the treasurer of the United
States, as trustee for the note holder, shall
sell the bonds held as security and credit
the amount so realized to a special fund
for the redemption of the notes of such in
solvent bank. He shall also credit to such
account an amount equal to the United
States legal tender notes originally deposit
ed by said bank as security. He shall fur
Their transfer from the general guaranty
fund to the credit of the special redemp-
ton fund of such insovent bank an
amount, in addition to the amount realized
from the bonds and legal-tender notes, suf-
ficient to equal the total of the outstanding
circulating notes of such insolvent bank,
and this fund so constituted shall be ap-
piled to the payment of such outstanding
notes. For the amount thus taken from
the guaranty fund the treasurer of the
United States, as trustee, shall be empow
cred 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 such
bank. Dividends so received by him shall
be restored to the credit of the guaranty
fund
Neither the present law, requiring a de-
post OF per cent. or banks circulation
a current redemption fund, nor the
present system of redemption need be
changed
There are minor details nonessential in
character, which for the sake of simplicity
are omitted from consideration.
II venture now to present some estimates
of the effects Of these amendments if in
corporated into the law. If l am not mis-
taken ii would lead to important in
crease in the capital of the national banks.
Their total capitalization at present is $685.
100000. They have surplus and undivided
earnings fund of $4S0, 000, 900, the larger part
of which could be put into the form of
capital. With the moderate advantage af-
ment toward reorganization under the ma
tional act would take place in banks now
doing business under State laws
WOULD INCREASE MONEY SUPPLY.
1T is safe, 1 think, to estimate that with
in three years the total capital of the ma
tional banks would increase from the pres
ent amount of $685., OOO 900 to 81 900, OOO, OOO
With the right to issue circulating notes
to par of their capital there would be the
possibility of increasing the paper money
supply, as population increased by the
difference in amount between present sup
ply (greenbacks and bank notes both in
cluded) of, say, seven hundred and six mil
lions and one thousand millions or, in
round amount, three hundred millions.
When the banking capital reached a thou
sand millions there would be tied UP in
the treasury three hundred millions in
bonds, and two hundred millions in green
backs, as security for an equal amount
of bank notes issued. Two beneficial re-
suits would follow: Some sixty millions in
United States bonds now imprisoned as
security would be gradually released for
sale in the general market to the advantage
of the private investor. The impOunding of
the gTeenback as security for the bank
notes would relieve the government from
all the burden now incident to their re-
demption, to the extent of two hundred mil
lions. For the balance of one hundred and
forty-six millions in legal-tender notes
which would then be outstanding the one
hundred and fifty millions in gold now
being held as special redemption fund
would be excessive. II this were reduced
to che hundred and forty-six millions, the
greenbacks would become virtually what
they ought to be in reality-gold certi-
ficates.
I'm my opinion, the obligation of the gov
eminent To pay the notes of insolvent
banks should be rescinded. Fidelity in
the discharge of it's duty as trustee should
be the end of it's responsibility. While its
absolute guarantee remains a feature of
the law, the broad question will again
and again recur: If the government is 10
take the ultimate and final risk of bank
notes, why should il not enjoy the i'm
mediate and continuous profit arising from
the circulation of paper money issues
There is a good answer to this plausible
inquiry but il is not obvious, and 10 make
the answer clear would require more ex-
tended treatment than this opportunity af-
fords. Thus the problem Of national
finances would be greatly simplified.
WOULD NOT PRODUCE EVILS.
COLLECTIONS of various and vigorous kinds
will be offered TO the propositions above in
dicated. II will be asserted on the one
hand that to give banks privileges so great
will induce the creation of banks organized
for the sole purpose of note issuing and
that the consequence wiz be "A repetition
of the former evils of wild cat currency.
on the other hand it will be objected that
the inducements TO embrace the provisions
contemplated are insufficient. and that the
scheme would fail for that reason. The
first named objection will not stand the test
OF fair examination As 10 the second IL
will appear that, though the Inducements
are not large, they are sufficient AS
10 issue circulation under present laws is