The Saint Paul globe. (St. Paul, Minn.) 1896-1905, 1902-10-02

The decision of Secretary Of the
Treasury Shaw that national banks
will no longer be required to carry re-
serve against government deposits Sc
cured by government bonds meets with
the general approval Of the heads Of the
local national banks.
The majority Of these bankers do not,
however, approve of Secretary Shaw
in deciding to accept as security other
than government bonds. Such action,
they say, is without precedent and Of
doubtful propriety.
Inasmuch as the question of the suf-
ficiency of any security other than gov
eminent bonds must be passed upon by
the secretary of the treasury, 1T is
pointed out that in case the secretary
should happen to be incompetent, or
perhaps something worse, the conse-
quences would be very serious.
How Bankers View 1t.
E. H. Bailey, vice president of the
First National bank, expressed his
views Of Secretary -Shaw's action as
follows:
Il think that Secretary Shaw's ac
ton in not requiring a reserve to be
carried against deposits secured by
government bonds is to be commend
ed. Such action will release a large
amount of funds.
But the secretarys decision to ac-
cept as security for circulating notes
other securities than government bonds
is without precedent and it might be
considered of doubtful expediency."
Judge ]. w. Lusk, president of the
National German-American bank, said:
Il think Secretary Shaw is clearly
right in not requiring a reserve against
government deposits for the reasons
he gives-the deposits being already
protected by government bonds.
las for the secretary's decision to
accept securities other than govern
ment bonds for United States deposits,
thereby releasing government bonds, so
T that they can be used for circulation,
it is a departure, and of very doubtful
propriety, I think"
Kenneth Clark, president of the Mer-
chants National bank, said:
'"The fact that the treasury depart
ment has eliminated the reserve on
government deposits, where govern
ment bonds are held by the govern
ment as collateral, is something that
should have been done in days gone
by"
Mr.. Clark declined to express any
opinion concerning the secretary's de-
cision to accept other securities than
government bonds.
f. D. Monfort, vice president Of the
Second National bank, said:
Question for Supreme Court.
'sIt seems to me that the decision of
Secretary Shaw to allow the national
banks which have been designated as
United States repositories to hold
government deposits, without holding a
reserve against them, is a. very wise
measure, and one which should have
been put in effect long time ago, in
ocy INIT Ctot dc
deposited by the banks with the treas
ury department to secure United
States deposits are more than ample
security. This action Of Secretary
Shaw will release a large amount Of
funds, which will be Immediately
available for loaning purposes.
In regard to Secretary Shaw's offer
to accept other than United States
bonds as security for government de-
posits, such as high grade railroad and
municipal bonds, which experience in
the past has shown to be panic-proof,
and readily convertible into cash in
case Of necessity, and such bonds as
the New England savings banks are
permitted to accept as collateral for
loans, 1T also seems to me that this is
a good, practical, common sense de-
ciSion. If due care is exercised by the
secretary in selecting bonds Of this
nature, which may be offered by the
banks as security for United States de-
poSitS, and such care as undoubtedly
will be exercised, the interests of the
government will be conserved and the
security will be as adequate as has
heretofore been the case when moth
ing but United States bonds were ac-
cepted as such security.
while the treasury department
would run no risk in accepting this
class Of securities under these condi-
tons, as matter of practice, there
perhaps might be some question as to
what the ruling Of the United States
supreme court might be in case the
law under which Secretary Shaw has
decided to accept other than United
States bonds as security for govern
ment deposits were to be construed by
that tribunal.
'Inasmuch as the law is to the eff
feet that the secretary Of the treasury
shall be permitted to accept as secur-
ity for United States deposits made in
depository banks, United States bonds
or otherwise it would perhaps be a
question, as a matter of law, whether
the United States supreme court would
construe the otherwise as covering
railroad and municipal bonds or not,
but 1 presume, however, that Secre-
tary Shaw has already had a decision
from the attorney general on this
point"
Al