The Atlanta constitution. [volume] (Atlanta, Ga.) 1885-19??, 1903-09-28
DAWES ADDRESS To-
THE BANKERS
Approves Secretary Shaw's Plan for
Heavily Taxed Emergency
Currency and Explains
How It Would Work
During a Panic.

PittsburT, September 24.-1he dele
gates to the ninth annual convention OF
the Pennsylvania Bankers Association
were addressed today by eX-Comptroller
Charles G. Dawes, of Illinois, on PRO
posed Changes In Our Banking Laws"
Mr.. Dawes In part said:
LET US now take up Secretary Shaw's
plan for a heavily taxed emergency as
set currency, considering further some
of the dangers of lightly taxed asset cur
rency which his plan would avoid When
subject to only a small tax. asset cur
rency will be taken out by the banks
in normal times to secure the profits In
cIdent to its issue. AS 1t is a form OF
banking credit, it will form an addition
to the already large amount of banking
credits now IN existence. 1t Will still
further increase the burden resting upon
existing cash reserves. Since 1t can be
proftably issued in normal times, and
since the country can easily absorb an
issue amounting to at least 25 per cent
of the capital OF national banks, this
currency WILL as a whole, be practically
ineastic. it's total volume standing at
about the maximum allowed by the law.
Therefore, in times of panic 1t will be
tensify rather than alleviate panic con-
ditions Secretary Shaw's plan, how
ever. for 5 per cent OF per cent
restrictive tax upon such issues, will
prevent their present issuance since they
cannot be proftably issued under that
rate of taxation unless interest rates are
at the high point which they only reach
at times OF panic or financial disturbance.
AS other forms OF banking credit are
then in process Of liquidation with re-
sulting high interest rates. these notes
can then be issued and will be a great
relief in doing the work formerly done
by the liquidated credits. Such a pro-
cess will not. therefore, be one OF in
flation since the notes at such a time
Will operate to sustain the level OF bank
Ing credits. and not to raise 1t.
Let us consider another danger from
lightly taxed asset notes In their effect
upon bank deposits and depositors. The
bulk OF the business OF the country IS
done in checks and drafts drawn against
deposits In solvent banks. These de-
posts aggregatng over $1,000 ,ooo, 900,
are left with banks through the conf
dence of the depostor class. Any step
In finance which tends in any way to
adversely affect confidence In bank de-
posts is without qualification, the most
unwise step possible TO be taken. When
deposits commence to be generally with
drawn through lack Of confidence the
purchasing power OF the country Is de-
creased. the money actually In circula-
ton is lessened. prices fall. industry stag
mates and commercial depression ersues.
Now these lightly taxed asset notes are
to be issued under an optional system.
The banks can issue the notes or not as
they please. This makes it impossible
to determine from the past record OF
the national banking system as a whole
what the amount Of the tax should be
to make them safe, for percentage de-
ductions from the record of the whole
system cannot safely be applied to part
when there IS no way OF telling the size
or location of the part of the system
which will choose to issue the notes.
Therefore, In order to make the notes
safe in addition to the tax. a first lien
of the note holder over the depositor is