New-York tribune., 1906-11-26
LETTERS TO THE EDITOR.
PLEA FOR ELASTIC CURRENCY.
Henry W. Peabody Asks Repeal of Restrlc-
tions on Ranknote Circulation.
TO the Editor of The Tribune

To the Editor of The Tribune.
Sir: The joint committee o: the New York Cham
Der OF Commerce and of the Bankers Association
in its recommendations of changes in laws regu-
latirg national bank system embodies several
that were previously submitted TO the New YORK
Chamber of Commerce but eliminates those Tor the
creation OF central bank Of issue and for the non
availability of future bond issues as basis TOT
banknotes. The committee declares that changes
are mperatively required. the present volume OF
hanBnotes being wholly unresponsVe 10 'i'e nc
mands Of commerce, and recommends;
That any bank having a surplus fund equal 10 ~
per cent of its carial snail have authority to issue
credit notes in amount equal to 40 per cent Oh us
bond secured circulation. without security but sup
Ject to tax of 2i2 per cent per anrum ana a Iur-
ther volume equal TO 121a per cent of the banks
capital subject to 4 tax of per cent per anhum,
the total of credit not TO exceed the capltal
of the bank; that all public moneys above rea-
tied in national banks without collateral security
or special guarantee therefor but in no case an
oank' and to be subject 10 interest at the rate Oh
Almost last but by no me ans least in Importance.
the joint committee recommends that the proV1s,
secured notes to W 81 9s m hG m66h sha be Te
pealed." This simple measure for repeal is not
gresa. and has been passed by the House of Rep
resentatives, The repeal of the restrictions upon
me rsurement Of notes imposed by me law Oh Ies-
would remove TIE present cause of the non-elas-
need for fnrtba ri The ei }r7nst remedy
IS the best and it is my belief that to restore 10
the banks the freedom retire notes, which since
lS& has not been allowed will suffice 10 provide
emergency currency when the business OF the coun-
try needs it,
Careful study of the other recommendations Of
the committee. especially for the of unsecured
notes. must make ii apparent that If these Were
Io!loWed the Fundamental principles of the national
parA system would he subverted. During Iorty-
TWO years the national bank notes have been as
good gold secured by deposits OF bonds. dollar
for dollar Since 1882 banks have issued only such
amount OF notes they willing TO MAINTAIN
IN CIRCULATION and would reasonably refrain from
taxing out emergency notes when IL would ne I'M
possible for all the banks retire in the aggregate
congress may halt at the radical changes pro-
poseo by the committee. but may il not reasonably
repeal the existing restrictions enabling the banks
10 retire as freely they may issue bond secured
notes? II is sometimes alleged that the supply of
United States bonds is inadequate for the purposes
worry while only twothirds of the bonds outstand-
ing are held by the banks and il ought not to be
dltncult for hanks to procure to borrow with
collateral such bonds would suffice for emer-
gency currency. Nor need We fear disaster If some
banks should retire circulation in order realize
profit In the sale of their bonds, since the process
of withdrawal If in large volume. would cause tenn
porary strtngency and lessen the value of the
bonds offered for sale.
Doubtless the volume of United States bonds will
There can be no hazard in the experiment of Civ
ing the banks liberty for year two and the op-
portunity to provide emergency currency when
business needs it and to retire II at will. While
heartily appI owing the recommendation of the
mttee for the removal of the restrictions upon the
changes in tie character of national bank notes.
| and would rather bear the ills have than
| ny 10 others that We know not Of.
Boston, Nov q, 1906 HENRY w PEABODY.