The Indianapolis journal. [volume] (Indianapolis [Ind.]) 1867-1904, 1904-04-09
FINANCIAL NEWS
AND COMMENT

The natural effect of the plethora of money and
the low rates of interest would be the retirement
of bank circulation. This effect was apparent on
Monday in the deposit by New York banks for
CORRESPONDENTS of 81 90 COO the retirement of
circulation. or two-tnrds OF the amount allowed
by law IN any one month But at the same Tune
ton by banks wncn have nad united states De-
posIts taken away from them ior the Panama
D.. ymenIs, and prefer to turn the Donds into
money this way, at least temporarily rather
than 10 risk loss by selling them at the market.
Moreover, the prospect mat Congi eSs Will make
sIruction of the fanama canal available Tor cir
culatcn upon the same terms as the consols of
lySV is not cheerful one for the hanks tnat have
keep them in use security circulation until
maturity, during which time the premium can De
written off gradually.
the circulation to be based upon them is taxed
only y OF | per cent. per annum and in order to
get the benerit of this low tax the banks
Issue circulation upon them. Banks which hnd
Gil culation Improbable are reducing ii fast
as the law will permit. Other banks which hoped
enjoy The use of government deposits are sub
stituting their own notes for the United States
money Withdrawn. The problem thus suggested
Will become urgent when the government de-
posits in banks are being drawn down TO their
normal amount in the years before the Spanish
war Of about ten Gays x COLLECTIONS OIL OF internal
There be but one result or such an In
crease in national bank circulation will be
United states deposits, thus releasing less
than $40 600 consols of 1885, and the issue Of
the Panama per cent. bonds with equal rights
to an unknown amount. and that is the export OF
sold ough to make room for the new circula-
ton. The present condition of the exchange mar
ket may be influenced quite much by the
perfiuous bank note circulation as by anything
else.-Exchange-
The whole subject of the deposit OF govern
ment money in the national banks takes on a
new interest by reason of the recent call by the
secretary of the treasury for the withdrawal of
street Journal. This Is the largest amount that
has ever been taken out OF the depository banks
been Withdrawn from difrerent banks in different
parts OF the country ana deposited. temporarily,
payment of the panama canal. This has resulted
In large accumulation of government deposits
here. Meanwhile the Panama canal payment has
been delayed by legal acknowledgements in Paris
and it is still uncertain how soon the payment
ten banks, which are able To make such use of
| it they please in the money market. and what
statement given elsewhere, showing an expansion
| of loans by these banks since Jan. % of over
| sS10O0O0o
THE deposits of government money in the ma
| tional banks practice introduced by Secre-
tary Fairchild in the first Cleveland admnistra-
tion On Sept. /. 1883. the money thus deposited
| in the banks had reached the sum of $50 u91 23y
The question of the wisdom of this disposition of
the government money was live subject of de-
bate in the campaign OF that year. Ii may be re-
| called that James q. Blaine. in his addresses at
that time. attacked severely the policy of the
ment money in favored banks But it was also
the subject of criticism upon economical grounds.
| s. v. White. who then in Congress- said in
| the House of Representatives speaking on the
/ government deposits, that this blockhouse build
| ing without joints or mortar, Will topple over,
! and IL will not be safe for business to be
too near its base This prophesy: II is needless
/ to say, has not been realized. and the custom of
| depositins the government money in the national
banks has been continued by one administra ton
after another. and recently the deposits have
reached enormous figures. the amount now being
more than Sl62, 0oO, 600.
/ Nevertheless. the discussion to the policy
of these deposits has been revived from time to
| time AS long ago 1SSS the Chronicle. in dis
cussing this matter, said Some alarm has been
expressed lest these accommodating amounts in de-
| pository banks may. when drawn against. cause
| disturbance We think the anxiety on that ac-
| count is wholly uncalled for. When any part is
checked out by the government 1t will be simply
taken out of the banks. but pass from one bank
to another like any other deposit; Ii will remain
| in the channels of trade ali the time The dis
| tributing of it will be a slow process any way.
| and can be timed and apportioned among the
institutions holding the funds as not to cause
| the least commotor.
Without going 200 deeply into the subject at
this time. ii is clear that government deposits in
the banks must be viewed rather as a necessary
evil than as a positive benefit They can
| be justified only the ground that a large
treasury surplus held in the treasury vaults is
! a burden TO business. The best way of getting il
| into circulation. and making IL of the largest
il can be made the basis Of credit NevertheiesS.
| this system gives rise to many evils. The de-
| -of government money to the banks receiving il
| Its withdrawal at one time would be impossible
on account of the distur bance that it would Gre
ate business
/ THE large increase in the government deposits
| III this city in preparation for the Panama canal
payment. is an object lesson OF some of the evils
attending this system: 1t Is responsible. in part.
expansion is 10 be deplored. and there is reason
TO believe that IL contributes largely to the ex-
port OF gold when 1t hoped conduct the
whole operation of paying for the canal without
| exports