The San Francisco call., 1903-09-25
DISCUSSING THE CURRENCY
SYSTEM OF UNITED STATES

E" rTTsBURG. Sept. PAT tO-day's
session Of the Pennsylvania
Bankers Association ex-cOmp-
troller Charles G. Dawes Of Ill
nois delivered ar address on
Proposed Changes In Our Banking
Laws" Dawes said:
The address Of Secretary Shaw at Chicago
n favor Of the authorization OF small issue
ot heavily taxed bank notes unsecured by the
deposit Of the United STATES bonds required
under the present law indicates the new phase
recently taken on in the country. Il marks
the passing from serious public consioeratlon
OF the complex and radical measure adVo-
Gated by Congressman Fowler and many olhers
and the inception OF the discussion 0i SIM
pie and sane remedy Tor a generally recog-
nized defect IN our monetary system.
For some years the topic Of asset currency
has been chiefly discussed by what may be
termed the radical element vf currency re-
formers Their work has in a general way
been most useful IN Inspiring interest In the
subject but has not resulted In the presen-
tatiOn Of any plan which has secured anything
like unanimity OF support even among the
radicals themselves
As has been ably pointed out ~ Professor
Cleveland 0f the University OF Pennsylvania
their mistake has been in misunderstanding
the difference in the nature, method and his
torv OF the growth OF the American system
Of independent banks and that o. the con-
tinental system. and IN attempting TO devise
plans for grafung on our differentiated sys-
Of centuries OF evolution in systems OF as
ISOLATED and centralized banking Their plan
for the authorization OF lightly taxed national
bank notes unsecured by Government bonds.
= adopted AT this time would probably pre-
ciPitate an early and most calamitous crisis
IN the business OF the nation.
IL is matter OF common knowledge and
the aggregate statements Of the national bank
ing system published by the Comptroller show
present IN a well-eNpanded condition;
in other words. these Liabilities. taken in the
aggregate. bear at present sIcn ratio 70 the
actual cash reserves that 10 incrense them
much more would result In dangerous in
adequacy in the proportion borne ty the cash
reserves 10 liabilities Now, IN this expanded
condition OF banking credits. ana with well
expanded condition OF general credits other
than banking credits-at a period when the
financial history OF this country and every
other would indicate that we should be prepar-
80 methods for facilitating the future liqui-
dation OF credits rather than methods for
creating additional present credits. we hear
the advocates OF lightly taxed asse- currency
calmly advocating as a bulwark OF safety TO
paDking and business interests OF me couh-
try The granting OF an authority 10 the banks
20 stil further increase the disprOpJrtion be-
tween their liabilities and their cash reserves
by the issuance OF these notes II is a prin-
ciple Of sound finance il is or sound
srchftecture thar v-hcn a high structure seems
a little unstable the situation is ore demand
ing masonry in the cellar rather than paint
on the roof
Thanks 10 the law OF March IA 1900 the
nation has builded W the sold foundation OF
tine governmental currency issues and our cur
reucy system Is sound As gold II the treas
ury Is 70 the credit Of the greenbaclzs so
are the cash reserves of banks 70 TIE credit
of their Liabilities. While at present these
cash reserves are sufficient 10 sustain these
Liabilities yet 50 long these Liabilities re-
main al their present amount We want no
lessening of the cash and no adding 10 the
liabilities
When subject 70 only a small tax asset
currency viii be taken out by the banks in
normal times 70 secure the profits incident TO
its issue Il viii stiH further increase the
burden resting uDon existing cash reserves.
In times Of panic II VIII be added burden
on the banks and intensity rather than allevi-
ate panic conditions. Secretary Shaw's plan,
however. for a or 9 per cent restrictive tax
Ipon such issues viii prevent their present
issuance since they cannot be prOht2bly issued
under that rate OF taxation unless interest
rates are at the high point which they only
reach at times Of panic or financial disturb
ance. As other forms OF banking credit are
then in process Of liquidation with resulting
high interest rates. these notes can then be
issued and viii be a great relief in doing the
work formerly done by the iquidatec credits
Such a process viii not. therefor. be one Of
imitation since the notes at such = time VIII
operate 20 sustain the level OF banking credits
ard not 70 raise 81
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