The Minneapolis journal. [volume] (Minneapolis, Minn.) 1888-1939, 1903-07-31

There Legislation Of Vital Impor-
lance to the Business World
Will Be Outlined.
The Object Sought Is to Increase
American Currency Without
~.
Loss Of Confidence.
Epecial to The Journal.

Special to The Journal,
Washington, July Sit was learned TO-
day that the republican members OF the
senate committee on finance will assemble
at Senator Aldrich's summer home on
Narragansett bay in a few days to con-
slider measures for the Improvement OF the
currency and banking laws. The session
will probably continue several days.
1t Is not likely that the conclusion OF
the conference will be greatly influenced
by recent developments on wall street.
Members of the committee consider these
due to excessive speculation or expansion
Of credit for which no currency system that
could be devised would provide a remedy.
The quest Is for a safe means OF ex-
handing the currency when expansion IS
necessary to meet the demands Of bust
ness, and it is thought this may be found
In amendments to the laws governing the
national banks, amendments involving no
radical departure from the forms TO WHICH
this generation Is accustomed.
Circulation Increased.
Our stock Of money in 1893 was 81, 1872
oo0. 900; in 1898 81, 073, 600, 900, and in 1908
(July), sass, 100000. The enormous in
crease of the last five years, it. is pointed
out, was due in part to the slight amend-
ments to the national banking act made
in 1900. We had more national banks In
January, 1898, than in January, 1900. But
permitting the organization OF national
banks with a capital of $4,000 In towns
of less than 5000 population, and author
izing national banks to issue notes UP to
the face value Of the United States bonds
deposited as security instead of 80 per
cent thereof, had the effect of increasing
largely the number of banks and the vol
ume of bank currency. From March, l9oo,
TO June, 1903, the number of national
banks increased from 1872 to 1853 and the
national bank notes outstanding from
S249, 434, S7S ito $4O6, 443,206.
safety and it Is contended that with equal
safety the banks could be permitted. to
issue notes up to the market value Of the
government bonds deposited as security.
| The effect would be ar addition Of about
10 per cent to the Issue now permitted
upon the deposit of government bonds.
The Plan Proposed.
1t is suggested that a further increase
OF the currency volume could be obtained
by amending the law providing that the
governments deposits In national banks
L shall be fully ss secured by govsrnTne nt
I bonds Senator +Aldrich proposes to au-
thori2e the secretary OF the treasury to
t accept also state bonds, the bonds OF nnu-
! inequalities twenty five years old that have
not defaulted In ten years, and whose net
debt does not exceed ten per cent of the
| value of their taxable property, and the
first mortgage bonds of any railroad com
pany which has paid dividends of not less
than 4 per cent regularly for not less thar
ten years, the banks to pay not less thar
~ per cent interest for the use Of the
money deposited with them and the gov
ernments claim to be a first lien on the
| assets of the bank. M...
The senator proposes the interest re-
uuirement with a view to securing return
' of the money to the governments vaults
cd nd he
the substitution Of state, municipal ano
railroad for government bonds with c
view to rendering the last available as q
basis for additional bank note circulation
-. Objections to Plan.
Several objections to his plan are Of
fered. One Is that the government gets
service from the depositaries in the small
towns for the use Of it's money, and they
would not ask for deposits If required tt
pay interest In addition to this service
Another is that the state, municipal ant
railroad bonds the senator proposes tt
substitute are available only in the none,
centers. The bankers In the provincial
cities would have to buy them in the Oper
market and could not handle them a.
readily as the great banks in the metropol
itan cities. This provision would hell
only the banks that make a business O
handling state, municipal and railroad Sc
curities,. while all would be helped equal.
If half the bonds now required as securit.
for government deposits were released ant
thus rendered available as a basis for ad
ditional bank note circulation. If thi
were done, 1t Is suggested, the govern
ment would still be amply secured, sine
it would continue to be preferred cred
itor with a first lien on the capital Of tn
bank, its deposits and the proceeds of al
assessment upon the stockholders, who's
liability Is double the amount of thei
stock
AT present, proprietary banks cheer
fully transact the governments bushes
without profit because the selection of
bank aas a government depository is Ger
tificate Of it's soundness. The care exer
cised In this matter makes the danger o
loss extremely remote.
An Emergency Circulation.
Another proposition Is that an emer
gency circulation be permitted to the ex
tent Of 20 per cent Of the circulation Sc
cured by banks, the same to be subjecte
to a tax SO heavy as to compel it's retire
ment when no longer needed. This not
would be secured by the government as
sets Of the bank and by guarantee fun
derived from tax on banks. It has bee
objected that its issuance during a perio
of stringency would aggravate the troubl
by increasing alarm among depositors an
others. However, it could be no NOR
harmful In this direction than suspension
and it is proposed under such restriction
that it would be employed only as an al
tentative to suspension.
1t is remarked that European banks
while rarely invoking the power to issu
notes above certain amount in excess .
the coin held for their redemption, hav
been materially strengthened by this add
ton to the resources they may employ /
an emergency.