The daily morning journal and courier. [volume] (New Haven, Conn.) 1894-1907, 1902-12-04

He Sees No Objection 10 Circulation
Based on Credits, without Making It
First Lien On AAsets-WouId Deposit
Surplus Government Funds Ia BANKS
On Interest aud without Security
Branch Banking Not Endorsed.
Washington, Dec. 3.-The annua! report
of the secretary of the treasury, Leslie N.
Shaw, was presented TO the house to-day.
While the report is mainly devoted to a
business-like presentation of the operations
OF the treasury for the past year and the
present condition of the national finances,
1t will be found to contain some suggestions
relating to the currency which strike new
note. ,..t
He recognizes fully the defect in our
banking system which makes the note cir
eulatlOn utterly unreSpOnSive to the need
OF an element OF expansion and cOntrac-
ton IN the currency to meet the varying
demands of business, especially when an i'll
creased volume of money is needed for the
annual movement of CROPS. Mr.. Shaw evil
IDENTIFY sympathiZes with the position Of
bankers away from the financial centers on
the subject Of branch banking, but he goes
no farther than to say that ne is not yet
prepared to recommend it.
His position ON the question of allowing
ati0nal banks to issue notes on their gen
eral credit is very mildly put In the state
ment that he sees no objection to it. After
this gentle form of statement one Is a lit
tie surprised at the expression of a belief
that there Is no necessity for imlaklnS the
EI-'s 1. first lien upon assets. which is
decided departure from tile ordinary Oplp-
ion. For one thing it makes clear the tatt
credit currency is not necessarily assets
currency this familiar term being really
as much of missioner as bond currency
would be for the present bank notes.
Another point upon which he suggests Il
radical departure is the deposit of govern
ment funds in national banks. He would
favor the plan of charging interest on
these, varying with the demand for money
and requiring no bond security for all He
seems to be doubtful whether this plan
would be deemed wise and suggests, as an
alternative, authority to deposit directly in
the banks any surplus funds In the treas
ury instead of internal revenue and mis-
cellaneous receipts as they are collected,
thus giving freer hand for relieving string
encg.
On the subject of maintaining the parity
OF all forms of money with the gold stan-
dard the secretary has nothing new to say.
He seems to favor the plan of making sill
yer dollars redeemable In gold without put
ting any positive restriction upon their
coinage or limiting their legal tender char
acter, which many believe would be dan
gerous experiment.
The general characteristic of the report,
apart from its clear summary of facts is a
candid statement of the secretary's views
without any positive or urgent rec0mmen-
dations of any kind, 1t is informing and
illuminating, and suggestive rather than
pra=matic.
the report shows a surplus of S91,2S7,-
270.57, The secretary'S own words regard
ing the banking situation follow:
Recent events do not only Justify but en-
force the conclusion that our banking sys-
tenn is imperfect. During certain months OF
the year interest rates dropped dangerously
low-dangerous in the sense that specula-
ton was invited thereby. When the time
arrived for moving crops, rates advanced
alarmingly high. Meantime the price Of
government bonds rendered the mainte-
nance of national bank circulation unprott
able, and this class of currency was retired
with great rapldity.
The department exerted every influence
within its authority to counteract this nat
ural contradiction. During the early spring
the surplus revenues were deposited with
national banks upon satisfactory security,
lions as maintained their limit of circula.
ton. Then, during the months when rates
of interest were low, no deposits were
made. Later in the season, when 1t became
apparent that some measure of financial
stringency was certain to arise, the depart
ment suggested to certain depositary banks
the wisdom fmaking preparation for the
issuance of additional circulation. This
suggestion was submitted to eighteen of the
larger institutions located in central re-
serve cities. to which fifteen responded
with orders for printing $12,000,000 circu.
lation and in the actual issuance of some
thing over ST,000,000. Later, additional de-
posits were made, but they were made
mostly with such banks as agreed to in
crease their circulation by an amount equal
to and frequently double the deposit. In
this way 100000 more circulation was
secured. Still later an offer was made 10
accept as security for deposits already
made, the substitution of state and certain
municipal bonds at IS per cent. Of their
face value in lieu of government bonds
then ON deposit, on condition that the gov
eminent bonds thereby released should be
this way, about $15,000,0O0 circulation was
induced. Thus, by means of these several
methods, the department secured in round
figures 5000 increase of circulation
from the national banks holding govern
ment deposits.