The Saint Paul globe., 1902-12-04

months from NOV ~, ISUl, 10 NOV. ~,
1902, 467 new banks were chartered,
with capital of over $S0,000,000 and
an initial circulation aggregating, in
round numbers, $7500,000; while the
capital of existing national banks was
increased more than $43,0O0,000. The
increase in circulation, however, dur
ing the twelve months was only about
$20,500,000. Thus it is manifest that
but for the extra ordinary inducements
offered by the department national
bank circulation would have contracted
during the year, Notwithstanding the
organization of new banks and the ag-
gregate increase in national bank CAPT.
tai of about $75,000,000. In fact ma
tional bank circulation did decrease
very nearly $6,oO0,000 during the fiscal
year ending June 80. The efforts of
the department to increase circulation
were not resorted to until after that
date. Fully $50,000,000 increase could
have been secured had the law per-
mitted it's rapid retirement when no
longer needed.
Need of More Circulation.
"The frequent purchase and retire
ment of bonds renders the amount
available for circulation gradually less,
while rapidly growing population,
additional banking facilities and ex-
pending trade suggest the need of an
ever increasing circulation. l, therefore,
believe the time has arrived when IL
will be necessary to adopt one of two
policies-either the government debt
must be perpetuated as basis for ma
tional bank circulation Ind additional
bonds issued as occasion may require,
or some other system must be provid-
ed.
Additional circulation will be nee
essary. Outstanding government bonds
are inadequate to secure 1T even IL
their market value would justify their
use by the banks 1t is even doubtful if
national bank currency based on gov
ernment bonds can be made advan-
tageous tc banks. A lower tax on cir
culation would be counteracted very
promptly by a corresponding advance
in the price of bonds, and the profit
would accrue to the present bond
holder.
81 see no objection to the issuance OF
circulation based upon general credits,
if properly safeguarded. Neither do
believe it necessary to make currency
thus issued a first lien upon assets. A
very small tax upon circulation would
be sufficient to cover any possible loss.
Credit Currency.
"I doubt the wisdom of making pro-
vision for the issuance of credit cur
rency to the limit of the banks capital.
Not that I would fear unfortunate re-
suits, but in all financial legislation the
greatest caution must be exercised lest
the currency be suddenly and unduly
inflated. A gradual increase in c1rcul-
alton is wellnigh imperative, but
sudden and unnecessary increase
would be most unfortunate.
"I am not prepared at this time to
recommend branch banks. Recent
events confirm a previous opinion that
the peculiar conditions of this country
would not be conserved by such pol
icy. Greater economy in management
may be conceded. 1t may be conceded
also that the system works well in
some countries, but no other country
had such diversified and widely sep
arated interests as this. In order that
the parent bank shall be able to serve
widely separated communities, 1t must
first understand the needs Of these
communities, and neither experience
nor observation justifies the CONCLUSION
that such intimacy is likely to exist. u
think far better course, for the pres
ent at least, would be to provide an
elastic currency available in every
banking community and sufficient Tor
the needs of that locality.
"The department finds the so.calleo
Chinese exclusion laws very dlfhcult
to enforce, and therefore recommends
additional appropriations and the
adoption of the Bertillon system for
the Identification of this class OF Aliens.