Evening times-Republican. [volume] (Marshalltown, Iowa) 1890-1923, 1906-10-10
ASSET CURRENCY EXPLAINED.

AS the time approaches for the con-
vening OF congress the banking inter-
ests become active again for certain
reforms which they want in the cur
rency. A committee of the New York
Chamber of Commerce has recently
contributed one valuable suggestion IN.
It's recommendation Of form OF
asset currency which will not beea pre-
fered lien upon the assets of 8. bank.
Asset currency is not materially diff
ferent from the present SIS and $40
bank notes which the most of US
handle as money whenever we are per-
mitted such Indulgence. except that in.
the case Of the asset currency the bank
issuing the note would not be re-
auired. to deposit United States bonds
as collateral to secure the notes, banks
would simply issue them under certain
Limitations according to their capital
and pay tax on such currency which
would serve to drive it into retire
ment as soon as the demand for loans
should cease and would maintain
guaranty fund or insurance reserve
from which all such notes of failed
banks could be paid. A SIS note of this
kind instead of being the banks PROM
isory note to pay secured by bond col
lateral. would be the banks unsecured
note backed by the insurance fund and
by the fact that the banks capital Is
required by law to be fully thirty per
cent greater than its volume of asset
notes out, plus bank reserve always
on hand in real money, of 25 per cent
Of the amount of notes issued.
In these days when a national banks
it current almost anywhere in the Un-
tied States, it would seem reasonable
that such a banks own personal prom
Use to pay on demand would pass for
currency IL Insured by a guaranty
fund. The man accepting such note
does not now hesitate to deposit $1,000
in any national bank and receive its
verbal promise to pay it back when he
wants 1t.
Heretofore advocates of asset cur
rency have thought it necessary to
double safeguard such bank notes by
giving the holder a prior lien on the
assets Of the bank, thus making the
note the same as "a first mortgage bond.
Bankers have objected to this on the
ground that a currency having a prior
lien would always prove menace N
that depositors would get scared on
much less provocation II they knew
that any considerable amount of bank
currency was out holding lien on the
banks assets ahead of theirs. Hence
much of the opposition to asset cur
rency on the part of bankers has been
because of this prior lien feature. De-
positors would not deposit in a bank
il any other sepositors were to be pre-
ferred to them,
The fact is a form Of currency which |
can not be made sound without the |
first mortgage security should not be
at all Bank notes unse
cured by bonds have been used for
in Scotland and Canada |
without danger. While the prior lien
exists there, experience with bank
failures shows that it is not necessary
The great need is for "a form of cur
,ency which will appear in seasons of
goat demand and not remain as
money when those seasons pass. Al
present a bank can not go into the
open market, buy bonds and get bank
notes from Washington in time to meet
seasonable demands. Even If it could |
t would not for the reason that the gov |
ions 10 lunoms sul saImII lueuiuIs
currency which can be retired in any !