The Birmingham age-herald. [volume] (Birmingham, Ala.) 1902-1950, 1906-02-08
SHAW PICKS FLAWS
IN SCHIFF'S PLAN
Chamber of Commerce Was
Too HaSty
STRlNGENCY NOT GENERAL
Thinks Repeal of the Redemption Pro-
vision Would Not Effect the
Remedy as Sua-
gested.

Washington, February 7.-secretary of
the Treasury Shaw has received through
Jacob H. schif of New York a copy Of
the resolutions recently adopted by the
chamber of commerce of New York city
IL which exception is taken TO some of
the seeretary's views on the subject of
currency legislation. In his reply. the
secretary says under yesterdays date:
MY Dear Schiff:
al am in receipt of your letter of Feb
ruary 2, accompanied by a copy of the
report of the committee on finance and
currency of the New York Chamber of
Commerce. or those who study the ques-
ton, nine men out of ten agree that
something should be done to make our
currency system elastic. but of the nine
who unite that something should be done.
1t is difficult to find two who agree upon
the measure that should be adopted.
I'm the committees report l find the
language:
" The redemption of national bank
notes is limited to a total of So 000,O09
per month, thus tieing up TO large ex-
tent the only source of redemption we
have.
'The most unfortunate feature of this
statement is the fact that there is no
Limitation on the redemption of national
bank circulation"
The secretary points out that the COM
mittee recommended the repeal of the law
; referred to. and says:
Not Considered Carefully Enough.
I'm face of the fact that the banks of
New York city alone returned to the
treasury for redemption over $12,000000 in
national bank notes during the single
month of December last, the foregoing
recommendation justifies my regret that
the committee did not give the subject the
consideration which it is due. While there
is a law limiting the amount of lawful
money which the banks may deposit for
the retirement of circulation to 100000
per month. there is no limitation on re-
demption of national bank notes, and no
limitation ON the retirement of national
bank circulation by banks that wish to
deposit their own notes. The limitation
IS upon the contraction Of lawful money.
II beg to suggest that in my opinion
the repeal of the provision would not eff
feet the remedy. Logically. banks find it
profitable to retire their circulation, sell
their bonds, swell their reserves when
ever money is worth excessively high
rates Of interest l regret that the com
mittee of the Chamber of Commerce did
not study the question in the light of
the actual operations of the banks of
New York city.
1.-The repeal of the $9,0OO,Oo0 per month
limitation on the amount of lawful money
that can be taken out of circulation for
the retirement of national bank circula-
ton would make it possible to retire all
our national bank circulation in given
month if all national banks studied the
question as closely as do few banks
in New York city.
Can Not Afford p Per Cent.
I'm your letter you urge that the cham
ber's recommendation that the Secretary
of the Treasury be authorized to deposit
all public funds except the gold re- !
serve in a reasonable working balance in |
national banks at a reasonable rate of
interest, should be brought to the i'm |
mediate attention of Congress. / think |
alton that these deposits be at reasonable
rates of interest, provided they be made |
without specific security. You bankers |
must recognize that banks cannot af-
ford to pay 2 per cent on long de- |
posits, except when interest rates are
below 2 per cent If compelled to give |
government bonds securities. 1t is |
not likely however, that any bank would |
surrender a government deposit because !
of fluctuatlon in current rates of in
terest. Thus you will see that the two |
recommendations of the chamber, If they |
had any effect whatever would result |
in further expansion during the seasons
of plenty, and further contraction, when |
interest rates are high.
II also note the suggestion in the re-
port that additional circulation equal to |
30 per cent of the bond secured crcula
ton maintained by the bank of issue |
would be excessive and result in infia-
ton. Nearly all advocates of elastic cur
rency urge the necessity of some plan |
which will relieve local stringency. The /
scarcity of money when called for the !
reference of the question to the commit /
tee of the Chamber of Commerce was con-
fined to New York City. and was there
fore local
Stringency Not General.
Had the stringency been acute
throughout the United States as it was
in New York, l doubt whether an in
crease of national bank circulation equal
to 80 per cent of the aggregate circula-
ton then existing would have been ex-
oaes;,.a lace thai, tl,n l;,,,;+ a,,tbo,;val