The Minneapolis journal. [volume] (Minneapolis, Minn.) 1888-1939, 1906-12-09
CREDIT CURRENCY NOTE
-. H. -
AS REFORM SOLUTION
J. B. Forgan Explains Commits
stems Plan to Chicago :
Bankers. y
Special to The Journal.

0pecAhA 70 1ue JouIudls
Chicago, Dec; S.--Before the Bank.
dent of the First National bank, dis
cussed the report of the bankers COM
mission on currency reform This COM
mission recently met in Washington
and Mr.. Forgan was one of it's members.
It appears from the controllers report
that altho national banks now have
the privilege of issuing their notes Sc
cured by government bonds to an
amount equal to their capital, they have
extent of 62* per cent. The commits
sion proposes adopting the unused 371b
per cent to the issuance Of currency on
new basis. .
The commission was divided, he said,
as are bankers and as it public opinion
generally, between highly taxed
emergency currency and a low tax
credit currency; The former, it; is
woa n sea pnt s en S S was
prevail. It is intended to be issued in
anticipation of a threatened danger.
On the other hand, it is claimed for Il
loW-taxed credit or asset currency that
if ample redemption facilities are pros
vided it would adjust itself automatic
ally, to the existing demand, preventing
fluctuations in interest rates and the
CSu1 !eHCC VI tIilCISCuCISo. IL Is ODc
jected to the emergency currency that
there is nothing automatically elastic
in it, it being issued only when trouble
is imminent and voluntarily retired by
the banks as soon as they can no longer
afford to use it: It can thus be retired
only by depositing with the government
the money to redeem it when it's re-
Strives to COMPROMISE, ~ =
Mr. Forgan claimed for the low-taxed
credit currency that it automatically
adjusts itself exactly to the require
find in its circulation is the prime factor
in causing it's daily redemption because
each bank in its effort to, keep out it's
own notes will convert those Of all the
other banks into legal reserve money at
the earliest opportunity.
Advocates Of both theories being
firmly set in their convictions and the
public at large undoubtedly similarly
divided the commission devised a plan
views. They found that by allowing
the banks to issue credit notes bear
ing the more or less moderate tax of
21@ per cent to the extent of 40 per
cent Of their bond secured circulation,
but not exceeding Is per cent of their
capital and further amount in emerg-
ency or highly taxed notes (the tax
being per cent?, to the extent Of 1919
pei. cent of their capital, the banks
could in addition to their present 62A
per cent Of secured notes issue 25 per
cent of credit notes at 21@ per cent and
l21@ per cent Of emergency notes at S
per cent. without adding to their pres
ent privilege as to total issue.
1t is also provided in the commis7
sion s plan that the same reserves must
be carried against credit notes as are
now required against deposits. This
principle was accepted because when a
bank pays a check in it's own notes it
merely gives out demand obligation
similar in nature to the deposit obliga-
ton, which has been cancelled BY the
payment Of check. Another provision
is that the taxes provided shall be paid
into the United States treasury to:
constitute a guaranty fund for the re-
demption Of notes Of failed banks and
to pay. the expenses of printing and the
cost Of redemption.