The Cairo bulletin., 1904-02-11

Payment for the Panama canal
seems near at hand Last week the
secretary of the treasurer filed a
warning order to the national banks
holding government deposits 10 be pre-
pared to pay on short notice TO the
depository banks in New York twenty
per cent of their deposits Govern
ment expenditures have been SO large
in prop y ion to receipts that this call
Is deemed Imperative Us practical
effect on the money market will be-
awaited with interest
Significance is attached to the fact
that this money is to be paid over TO
the depository banks in New York.
No part of it will go to the treasury
of The United States; there will be no
locking up of money, even temper
arilys in the vaults of the treasury.
Disturbances of money market condi.
lions will. therefore, be reduced 10 the
minimum.
Ii is even possible thar the with
drawai Of government deposits will
operate 10 hiring about
easier monetary conditions National
banks have the right 10 take oHt cir.
cnlation to the fun amount of their
capital stock, furnishing government
bonds as security. A bank. for ex-
ample. having SS00.000 capital. $500,
GOO circulation and sl.5o0,000 govern,
ment deposits could order 100000 ad.
ditional circulation, have its bonds
10 the circulation account.
and thus be reimbursed for the With
drayal and payment Of 100000 as per
the order of the secretary. Many of the
national banks throughout the coun
try which hold government deposits
have never taken out circulation TO
the full amount of their capitalization,
and some of them will prohably
finance the operation in this way
The probability is thar very little
of the money. If any. paid TO the de-
pository hanks of New York will act,
ualIy 20 out OF this country. There
are two reasons why this IN trae Sew
York bankers some time since made
heavy purchases OF Panama camel (
stock al concessions in anticipation OF
the payment In fact. Ii is stated that .
the greater portion of this stock is
now believed 10 be held in this conn- |
try This being true. the purchasers \
will simply collect from the govern
ment through the banks in New York, 4
and the money will not be withdrawn
rom circulation Furthermore. New !
York bankers have been heavy pur
chasers of foreign exchange for some
time with a view to reducing the pay
ment Of that portion OF the purchase
price which would otherwise go out
OF the country in gold, TO simple ex
change operation. which is made pos
sible by the fact that large credit I
baiaacc exists in Europe in favor of I
this country Hence. if the transaction |
is successfully financed as outlined the /
money supply Of the country will he I
increased 'by just the amount of addi
tional circulation which the banks De 4
sire and are In position 80 take out
But all Of the banks will not be able 4
10 take ont additional circulation: some 4
of them would probably not care to
do 50 In any event II would then .
deyolve upon these banks to withdraw I
their government bonds In sufficient 4
amount TO release 20 per cent Of de
p0sits secured by them. and either lock .
these bonds up in their own vaults on
else authorize their sale In the for
mer case the banks would have to re-
nit their 20 per cent OF government
deposits to New York; in the latter
case they would simply retain their de
posits and sell their bonds to make
good the amount called FOR The bonds
command a premium so the banks
would have something Jeff over and
above their par value, though the sale
Of many bonds would naturally lower
the market price Incidentally, the
Baltimore fire may operate to that end.
as the large insurance companies will
probably be forced to market a great I
many securities TO pay the enormous /
losses that have been sustained. /
CourierJouFnal
AT fhlp0 0Drph unIIoC