The Washington times., 1901-07-02
Circulation Statement
Banks and Bank Notes.


significance in their relation to genera
business conditions. That is to say
they were not caused by monetary
stringency. or by anything going
wrong with the worlds commercial
and industrial affairs@ They seem 10
have been the result of gross misman-
agement. amounting, perhaps, to posi-
tive violation OF the laws under which
they were being operated.
Banking business, ike any other
may be conducted properly or improp-
erly. legitimately or illegitimately, A
close adherence TO the law and a
scrupulous regard for the rights of
other people are very essential in all
business matters. but especially in
banking. which has become. if not the
handspring. at least a most important
part of the machinery which moves all
modern business. Ordinarily the fail
ure OF a bank means great deal more
to the community in which 1t is 10
Gated than does the insolvency OF a
merchant representing business in
which the same amount of capital IS
invested. The reason is that almost
everybody of any means has connec-
ton direct or indirect with the bank.
and it occupies a tiduciary relation to
all of its patrons. The depositors in
bank are almost completely at its
mercy, and when such an institution
doing a large business goes under the
number Of people affected is usually
very great.
Hence the affairs Of a bank are of
the deepest concern TO the public, and
too much care cannot be exercised in
seeing that they are properly con-
Quoted. This is especially true because
Of the weli-known fact that bankers
as a class are continuously reaching
out for more and greater privileges
which viii increase their power, either
for good or for evil, accordingly as
these privileges may be exercised.
Whenever a bank, and particularly
national bank, goes down, whether le-
ultimately or otherwise, 1t necessarily
directs public attention to the persis-
tent efforts that have been and are
still being made by these banks to OBJ
tain complete control Of the nations
paper money supply.
1: may be conceded that the national
bank note currency has, upon the
whole, done its work very we'll But
it has been limited in amount, the
Government has stood sponsor for il,
and made il receivable for public dues.
II does not follow that the bank notes
would have been equally satisfactory
if they had been issued In much larger
amounts, had been less adequately Sc
cured. and the Government had not
Ioomed up behind them as their re-
deemer. So far as mere safety goes,
the security, that is To say, the bonds,
may be left out Of account, for in the
last analysis the credit of the Gov
ernment sustains both the bonds and
the notes The notes would have been
Just as good without the bonds as with
them. The greenbacks have never failed
in the performance of their functions
although there are no bonds behind
them Cases can readily be imagined
in which they would be more fully
available. because being legal tender
no creditor can refuse to accept them,
while he might decline TO take the
bank note, which is only a tender for
public dues. At a really critical time
the creditor might. and probably
would. insist upon having lawful, that
is TO say. legal tender, money. which
he would be sure Of being able to pass
On to the next man.
But while the bonds have not been
essential to give credit to the notes
they have. at the same time, served a
double purpose. They have secured
the Government against any loss which
might accrue from its enforced re-
demption of the notes, and at the same
time the necessity Of furnishing this
particular kind Of security has had the
effect Of so limiting the issues OF the
bank notes as TO leave no shadow upon
their credit
This naturally brings up the ques-
tion Of the advisability Of allowing the
banks TO issue notes freely upon their
general assets, and it at once sug-
gests the danger involved In the
scheme The objections to it are many.
and a full discussion Of il would make
a treatise in itself 1t is clear, though,
that the notes, not being legal tender
money, in order 10 be maintained ia
circulation at their fun face value,
must be redeemable, and without de-
lay, in something that is legal tender.
As this is the obligation which rests
upon the Government. the amount Of
che notes 50 to be issued is a matter
Of vital Importance to the national
Treasury.
Suppose the banks should issue five
thousand millions of dollars in notes,
which they might do, if limited only
by the amount Of their general assets.
What would be the effect? That
amount of paper currency would be
more than our distributiye share Of
the worlds total stock of money. IT
would drive gold out Of the country
more rapidly than any gold standard
man ever dreamed Of its being driven
out byz free silver. Then comes the
query How would the Government
redeem them? It would be simply i'm
ID!e, and the notes would shrink
slue chow much no one can telD,
he double reason that they CON
ed more than our pro rata share
worlds currency. besides being
semable, non-Iegal tender prom
which no man was bound to take
In satisfaction of a private debt.
II is idle to say that the banks would
not issue any such amount II left to