Missouri Valley times. [volume] (Missouri Valley, Iowa) 1874-1931, 1902-10-02
Mr.. shaw WAS
misunderstood
So He Issues a Further State.
ment Explaining His
Recent Acts.
BANKS COMMEND ACTION
Ex.secretary Fairchild Says While The
secretary'e Act Is. a Radical De-
parture From Precedent Ii
is Good Thing.

New York. Oct. 2--Secretary Shaw
has given out the following statement:
The department is in receipt of
large number of requests from various
banks in the country clearly showing
that the statement given out Monday
night was misunderstood, or rather
that 1t was not carefully read. That
there may be no misunderstanding the
Following statement is made:
No new deposits will be made on
any securities other than government
ponds so long as government bonds can
be secured. For the present banks seem
TO be able TO obtain. frequently by bor-
rowing, bonds other than 2 per cent
consols. They can obtain the use of
these bonds for {. limited period and
they are as desirable as any for secure
lily for deposits. They are not as de-
srable as security for circulation for
the reason that circulation based there
ON Is taxable at / per cent, While cir
culation based on the per cent con-
soils Is taxable at only one-half OF 1
per cent The banks cannot obtain
except by purchase any bonds as q
basis for circulation, because when de-
posted for circulation they cannot be
released until the circulation is retired,
and 1t may take a year before their
circulation can be retired, and the price
of bonds is so high that bank circuia-
ton is maintained at considerable loss
to the banks Therefore the depart-
ment has decided to release for such
banks as have deposits and are now
maintaining their limit of circulation,
portion of the bonds now held by the
government taking i'm lieu thereof oth-
er satisfactory security, on condition
always that the bonds released will be
used for the Immediate issue of adj
ditional circulation. This provision
does not apply to those banks that all
ready have their maximum circulat ton,
neither does it apply to banks that do
not have any deposits. The sole pur-
pose of the offer is to increase circula-
ton that is already printed and ready
to be issued by banks that already have
the bonds on deposit These deposits
being scattered throughout the entire
country, tine relief offered, 1t is believed,
will be national rather than local, for
it applies to all sections of the country
and tn every state in the union
Relief Of General Character.
That the secretary has intended all
along that the relief should be general,
and for the west as we'll as New York,
was shown by remark he made in
explaining how the effect would be i'm
mediate in New York. He explained
again how relieving the banks of the
necessity of carrying reserve imme-
dfately gave the opportunity to ex-
tend credits to four times the reserve
released.
''Yon see," he continued, your New
York banks do not care anything for
cash-they do their business by means
of credits. Their loans and deposits
are in the form of checks and book
keeping, and all they want of cash is to
maintain their reserves
Then what is the use of increasing
the circulation?" was asked.
oh" replied the secretary instantly,
your banks here do not do all the
business. When 1T comes to the west
ern banks, when they want to make a
loan for the purpose of paying for cat
tie or grain they have got to pay out
the actual currency. They do so much
of their business on books. That is
where the cash is needed and they call
on the banks here for it,
Secretary Shaw during the afternoon
received a number of kilograms from
number of bankers from various Sec
tions of the country commencing his
action.
Eek Secretary of the Treasury Fair
child was one of those who talked with
MIR. Shaw. Their talk was private.
Before going to the subtreasury Mr..
Fairchild had been asked his opinion
of Secretary Shaw's action. 1T is a
radical departure from precedent" said
he, but 1t is good thing--it is just
what was needed in the present circum-
stances"