New-York tribune., 1902-01-08
A NEW BANKING BILL.
EXTENSION OF THE CLEARING HOUSE
SYSTEM UNDER FEDERAL SUPER
VISION PROPOSED
[BY TELEGRAPH To THE rRrRrrNF-l !

]
and Currency. which, if enacted into law. will it is
said, materially reduce the danger of financial COL
lapse In times of panic. The title Of the bill is
To protect and support commercial credit, 70
equalize rates of interest to provide for the
porauon or clearing houses 10 regulate and define
their operations. TO provide clearing house cur
rency, secured by pledges of commercial and
the responsibility OF the associated banks. and to
provide for the circulation redemption thereof
Inc measure in Its present shape is the joint work
OF Representative Pugslev and Theodore Gilman
well known banker of New York and senior
Der OF the firm of Theodore Gilman Son & Co. It's
chef feature of interest is the provision for the
tension under federal supervision of the clearing
house system, which in its present operations is
strictly local in the benefits II confers the busi
ness Of the country. 1t has the hearty Endorsement
or many Of the principal bankers Of the United
states. including leading members OF the Ameri
can Bankers Association among whom Charles
Parsons, Of St Louis. ex-presdent of the American
Bankers Association: F. G. BigeIow, president of
the First National Bank of Milwaukee and chair
man Of the executive committee Of the American
Bankers Association; z. J. Parker. Of Quincy. vice
president Of the association Illinois; Charles r.
Hannah, president Of the First National Bank Of
Council Bluffs Iowa; Theodore c. Stevens, of To-
ledo. vtce-president of the American Bankers As
sociation for Ohio; J. NJ. Cunningham, of East Las
Vegas, vice-president of the association for New
Mexico and J. Thomas, of Albany Mo- vice
president OF the association for Missouri
WHAT IS CLAIMED FOR THE BILL.
Defined IN brief and simple form, the effect OF
the bill would be to destroy IN large measure the
competitive system in the banking business by
tablishing a direct basis Of cooperation among the
banks through a general clearing house for each
State 1t would also give elasticity TO the currency
system without In the least threatening imitation.
The bill includes in its operations all State banks
as well as national banks The object OF the pro-
vision which establishes a clearing house in each
State Territory district is to sustain CONNER
ciaI and banking credit in times Of lack Of conf
dence by providing a by which demands tor
circulating notes OF undoubted credit may be met
and commerce and trade sustained without shock
credit. Through the central clearing house In
its State, each bank IN the association will be
authorized TO issue certificates OF credit TO the
extent OF 70 per cent Of its capitalization. these
certificates 10 be printed under the supervision Of
the Controller OF the Currency and TO be duly GER
tilted by him. BY this system different functions
are bestowed clearing houses than can be safely
possessed by commercial banks Clearing houses
further away from the bEst-
ness community with their urgent appeals. than
popular banks and their action, therefore.
would be more conservative in the important mat
ter OF the issue OF currency. At the same time
they closely connected with commercial
banks that they can be appealed TO and make in
stant response in OF need. 1t is contended
by the incorporation Of clearing houses under
a federal law with these special functions, bank
ing system is constituted that Is cooperative in
stead Of competitive. expansive in case OF need
instead OF restrictive and forced Liquidation and
panic avoided. The clearing houses OF the
country would thus be brought into the closest
relations with all commercial banks and those re-
lat!ous would be strictly defined by law. which is
not now the case. This union Of higher and lower
financial institutions would bring all banking opera
tons under the supervision Of the Federal Govern
ment and constitute a true national banking sys-
tenn II is believed that the system would result IN
sustaining and protecting commercial credit even
under the severest strain.
Another difference between the present and the
proposed systems is declared To be even more
fundamental and important than that already
pointed out II is that the ungraded. competitive
and restrictive system Is principally constructed Tor
the private pecunlary benefit OF the Individual
banks while the graded system with its co-opera-
ton expansion and ample available reserve. would
be chiefly for the benefit OF the public. An eN-
animation OF the Pugsey-Gilman bill shows that II
does change the banking principle contained IN
and limited by the present national bank act Inc
bill adds, however, two features not contained III
that act by proposing the issue Of reserve notes 10
take up government notes. and the issuing Of cir
culating notes against bank assets in the hands OF
the banks.
Mr.. GILMAN's VIEW OF THE MEASURE
In discussing the Dill to-day with Tribune cor
respondent MIR. Gilman said:
It is a banking and currency measure ana l5I mas
These two subjects should be kept I dls,aICI; ,ron
independence OF the United 5daISs onIa vas estab-
the banking operations OF the people sHS ,ra ad-
Ished more than half century ago ana LIie a. a.
resulting TO the government -4NtI-
senaratjon have Been almost universally acknowl-
edged The financial principle seems Wen e7S ~.
obIigations and corporations created By the gov
ernnent should take OF their opllsat-oSLIs a..
expenses in peace or war II must Hila me ne ra1
and means 10 raise a revenue sufnclent 10 me- me-
them. II the demand notes or the goVsahH HasIlry;
presented il excess OF the aDllLy ol I's+ @ and the
10 pay them in coin the government aII.t S
ways and 70 replenish Its coin TeseIEe ;o- :,
Congress should decide not 10 MAKE SuSlI fr Fo-
the banks would have 20 accept that dgSlsui; @ aU
they would be powerless 10 chalgg g -, A5bic5 the
5v.a ie IN IN
government provides, not 70 declde WA III .n" S,I
Tency shall be. The laws OF banking govern @ o@'inr nr
ing operations whether the currency Is sia
gold or an irredeemable paper money ne ,t wtIotS
raartcr of the currency OF the government Is M sue
aratsd taken up and decided apart from each
other. The banking system shoQIG stIs not DC '@0
While government and bank currency are two
dictinct questions il s also true tnat good oahh-
ing currency will aid the country IN hlandliiIals "a
good government currency. II the bank currency
sustaIns and protects commercial credits, mere mere
would be less discussion 9i tle money II;
A good hank currency would give the advocates or
silver and nat money al they are striving toT ~Ie ne
they would be Srtevousy disappointed with IHe re-
suits Of free silver and unlimited government cur
our bill does not disturb or conflict with the ma
tional bank act. is supplementary 10 il. Popular
banks ara provided for in the national bank act and
without amendment. The national bank act is ad-
mirable in all its provisions; II is the hover ana
fruit OF republican panBlhg itElslatIoh' II His
served the people well these thirty-ive years; II
has their confidence. and IS enshrined IN thelr az
fectlons. A cnange IN that act Wouq De most rlshy
and most serious. Moreover. changes are re
quired IT, for 1t is difficult how general
law could be made more perfect 10 lose az OhlS,
TO sweep it all away with new national bank
act. would infict such loss on our people that
necessity No such necessity exists. What is
needed is 10 complete the national banking system
Incorporating our clearing houses under a federal
law and thus bring all banking operations under
federal supervision and control.