The Saint Paul globe. (St. Paul, Minn.) 1896-1905, 1903-01-26
TO SUPPLY MONEY
TO MEET CALLS
UPON BANKS
Plans Proposed for the Issu-
ance Of Asset Currency
AS the Last of June and
the last of December Ap-
proach the Supply of Money
Also Is inadequate.
Special to The Globe.

Special to The Globe.
NEW YORK, Jan. 25.-While no
change in the currency laws may be
made by congress at the present ses-
sion, it is probable that the agitation
for asset currency will be kept up dur
ing the year by the banking interests,
with the purpose of giving prominence
to the SAEject next winter, when a new
congress Will assemble. From Howard
Irving Smith, a Wall street financier,
who compiled Smiths Financial Die
tiOnary, was obtained an explanation of
the various plans for asset currency.
Asset currency, as prosposed, is to
be issued by banks in the same manner
that bank notes are now issued under
the national bank act, except that in
stead of being secured by deposit or
pledge of government bonds as exist
ing bank notes are secured, asset cur
rency is to be secured by the general
assets; or, in other words, by the gem
eral responsibility of the issuing banks.
The aim is to provide for an expansion
in the volume of money when the need
for money increases, and for con-
traction in the volume of money when
the need for money decreases. Not
only is elasticity sought, but also safe
ty. Asset currency, in addition to be-
ing elastic, must be as good as exist
ing forms of money, or else it would
be deprecated and useless for the pur-
pose Tor Which 1t is intended.
Mr.. Smith stated that the need for
more money was particularly felt in
the period when the crops are paid for
and moved.
The movement of money from New
York and other Eastern financial cen
ters to the great grain producing re-
gionS of the West Northwest and
Southwest, and to the cotton producing
regions Of the West and Southwest, is
an important annual occurrence. 1t
usually begins the latter part of Au-
gust and continues until the forepart
of November, and it is not until De-
cember that it begins, in any volume,
to return to New York and the other
Eastern financial centers.
There is, in the first place, a need for
money by the farmers who grow grain
and by the planters who grow cotton,
to pay their hands; but the large need
for money is to pay the farmers for
their grain and the planters for their
cotton. The farmers and the planters
borrow from their local banks to pay
their hands, and the shippers who buy
from the farmers and planters also
borrow from the local banks to make
payments to the farmers and planters.
The local banks send to the banks
in New York and elsewhere in the
East for money. The local banks may
have balances to their credit in the
New York and Eastern banks, in
longs to them. Often they rediscount
paper (promissory notes and drafts)
with the New York and Eastern banks
that is, they resell paper which they
themselves had bought, and thus obtain
money. The local banks may obtain
money from banks in large cities near
at home in the West and South, but
in such a case the banks from which
they obtain money turn to the New
York and other Eastern banks to re-
plenish their own supplies, so that the
result is the same as if the local banks
had themselves obtained the money
direct from the New York and East
ern banks.
The effect is to denude New York
and other Eastern centers of money.
The banks in these centers have to
deny their regular borrowers, or at
least curtail the accommodation ex-
tended to them, and in addition they
have to demand the return of cali
money (money loaned for an indefi-
mite period, which is subject to return
on the demand of the lender). The re-
suit is a scarcity of money for general
business, and also for speculative op-
erations. Naturally rates advance and
both business and speculation are re-
Stricted.
The chief requirement in moving the
crops is for money of small denomina-
uOnS, and the consequence in some
Years has been almost a famine in
small bills (money of small denomina-
tions) in New York and elsewhere in
the East.
There are other times in the wear
also, when money is in inadequate sup
ply. For instance, money becomes
more or less scarce as the end of June
approaches, and again as the end of
December approaches At these times
money is being accumulated for the
heavy interest payments due in the first
inc on T111H IN
instance on Jan. l. Also when gold is
being exported, money is usually diff
ficult to obtain.
Mr.. Smith, in giving an account of
various plans for asset currency, said
that what restrictions should be i'm
posed to prevent abuse of the author
fty to issue notes is the chief point.
A depoSitor in a bank risks his money
and his credit with a knowledge of the
general standing of the bank, its stock
holders and its officers, and of its con-
dition as shown by its reports. A man
who accepts a check drawn on a bank
has knowledge both of the bank and
of the man who signs the check. A
man who accepts the note of a bank
perhaps thousands of miles from it's
place of origin, cannot have this in
formation, therefore the restrictions
under which the note is issued must
be such as to safeguard, in a general
way, his interest and insure his pro-
tectlon against loss, or the system will
fall and the bank notes will fail to
circulate.
The Baltimore plan, the best known
of all the plans for asset currency, was
the name applied to a plan approved
by the convention of the American
Bankers association in Baltimore in
1894, wherein it was proposed to re-
peal the requirement in the national
bank act for the deposit of govern
ment bonds in the treasury to secure
circulation (national bank notes.; to
allow banks to issue notes to the ex-
tent of one-half their paid-up and un-
impaired capital these notes to be sub
ject to an annual tax of one-half of 1
per cent; and to allow banks to issue
"emergency circulation to the extent
of -25 per cent additional, the addi-
tional circulation to be subject to a
heavier tax. A guarantee fund of s
per cent was to be established by the
banks, to be held by the treasury, for
the redemption of notes, and cifcula-
tion was to be a first lien upon the as
sets, and upon the liability of stock
holders of banks, which liability is for
an amount equal to, and in addition
to the par value of the stock owned
by stockholders.
John G. Carlisle, when secretary of
the treasury, proposed that banks be
permitted to issue circulation UP te rs
per cent of the paid-in capital upon the
deposit of 80 per cent of the amount of