The Minneapolis journal. [volume] (Minneapolis, Minn.) 1888-1939, 1902-11-13
Bankers on Currency.


At yesterdays session Of the American
Bankers association at New Orleans, the
association favored the appointment OF a
committee to consider the whole subject
of asset currency and branch banking, and
approval of law providing for great
er elasticity Of our currency system to
make it meet the demands of business,
the volume increasing as business ex-
pands and diminishing when money needs
are less. The committee appointed is to
report at the next annual meeting of the
association. "
The discussions Of the association ind1-
Gated preponderating sentiment against
branch banking on the theory that such
system will create an injurious supremacy
of heavily capitalized institutions affecting
adversely the small banks Of the interior.
The danger from branch banking Is exag-
gerated somewhat. Its active opponents
have alarmed some people by declaring
that it will generate a money trust, "
which Is not rational view, looking at
the subject from the standpoint OF the
worlds experience It is wise for the as
ISOLATION to adjourn a currency reform
effort for awhile, for, at the coming ses-
sion of congress, the time that body has
to spare outside regular business will
probably be devoted exclusively to Cuban
affairs and the antitrust question.
Ex-Controller of the Currency Dawes
made an earnest plea before the associa-
ton, yesterday, for an elastic currency
and his arguments cannot be successfully
controverted. He advocates an emergen-
cy circulation, to be issued when business
requires more currency, and to be with
drawn when the emergency is over, this
circulation to be taxed sufficiently to
compel it's retirement when not needed.
Secretary Shaw recently tested the elias
ITCHY Of our national bank currency and
the whole country knows that the effort
revealed the minimum of elasticity, as
the banks had to buy or borrow govern
ment bonds at high rates to secure a basis
for new note issues to relieve the
stringency in New York. Mr.. Shaw &C
complished comparatively little by this
or other devices, like increasing deposits
in the nationals on other than federal bond
security. and permitting banks to disre-
gard the maintenance of reserve to the
legal requirement. and he finally resorted
to bond purchases.
With an emergency circulation amend
ment to the law which Mr.. Dawes sug-
gests, extraordinary demands for funds
can be met with the greatest facility
This system is successfully in opera tior
abroad. The Bank Of England, which
handles the government funds, in time Of
severe money stringency and threatened
panic, is allowed by its charter to issue
notes in excess Of the legal limit of $75,-
100000, the excess being Withdrawn when
the need is past In Germany the Reichs-
band at Berlin, when the demand fol
money raises discount rates, and severe
pressure is threatened, is allowed to issue
extra notes secured by SPECIE treasury
notes or the notes of other sound banks, tt
meet business needs, and this extra issue
is taxed per cent, which makes it un.
profitable except in time of large demand
for funds, and the notes are quickly retired
when normal conditions characterize thu
money market.
The emergency issue plan is the
simplest and most effective to remove
stringency and avert panics which has
been devised. 1t would meet and supply
fundamental defect in our present sys.
tenn, realized more each year. It is IA,
better than the 1865 convertible bond plar
proposed in 1871, to relieve stringencie.
and crises. It removes any necessity fol
bond purchases by the government to in
ject currency into the market and Is 81
quickly and, quietly actualized that thu
wheels of business will revolve without s
jolt The banks thus adequately regu
late the monetary situation in time O.
stringency or crisis. The national bank
ing law should be amended to provide fo
emergency currency adequately secured
1t is business need. No cry of "money
trust is applicable to it. 1t is a. plain
cold-blooded business proposition. Tn,
system has been long tested and testet
successfully under severest pressure.