Evening star. [volume] (Washington, D.C.) 1854-1972, 1906-02-08
FOR[L ASTlC CURRENCY
Secretary Shaw Answers OBJ
jections to His Plan.

cob III. Schiff of New York q copy of the
resolutions recently adopted by the cham
Der of commerce of New York, in which ex-
ception is taken to some of the Secretary's
well-known views on the subject OF cur
rency legislation. In his reply the Secre-
tary says, under Tuesdays date:
my Dear Mr.. Schin: am In receipt OF
your letter of February 2. accompanied by
report of the committee on finance and
currency of the New York chamber of COM
merce. OF those who study the question
nine men out Of ten agree that something
should be done to make our currency sys-
tenn elastic, but of the nine who unite that
something should be done it is difficult to
find two who agree upon the measure that
shall be adopted.
I'm the committees report find this Ian
guage: THE redemption of national bank
notes is limited to total of S3000.OOO per
month, thus tying up. to a large extent. the
only source of redemption we have.
THE most unfortunate feature OF this
statement is the fact that there is now no
limitation on the redemption of national
bank circulation.
Due Study Not Given.
'In the face of the fact that the banks at
New York city alone returned to the treas
ury for redemption over SIC, 600 IN ma
tional bank notes during the single month
of December last the foregoing recommen-
dalton justifies my regret that the commit
tee did not give the subject that considera-
ton which is It's due. While there is II law
limiting the amount of lawful money which
the banks may deposit for the retirement OF
circulation to $1,000, 900 per month, there is
no limitation on redemption of national
bank notes, and no limitation on the retire
ment of national bank circulation by banks
that wish to deposit their own notes. The
limitation is upon the contraction of lawful
money by the deposit thereof for the retire.
ment of bank circulation. / beg to suggest
that in my opinion the repeal of the provi-
sion would not affect the remedy. Logical
BY. banks find 1t profitable to retire their
circulation, sell their bonds, swell their re-
serve, whenever money is worth excessively
high rates of interest. / regret that the
committee 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 So, 900, 900 per month
limitation on the amount OF lawful money
that can be taken out of circulation for the
retirement of national bank circulation
would make it possible to retire all our
national bank circulation in given month
il all national banks studied the question
as closely as do few banks in New York
city.
IN your letter YOU urge that the cham
hers recommendation that the Secretary or
the Treasury be authorized to deposit all
public funds except the gold reserve and
~ reasonable working balance in national
banks at a reasonable rate of interest
should be brought to the immediate atten-
ton of Congress. think fayorably of the
committees recommendation that these de-
posits be at a reasonable rate of interest;
provided they be made without specific Sc
eurity. You being banker must recognize
that banks. cannot afford to pay 2 per cent
interest on government deposits, except
when interest rates are below per cent, II
compelled to give government bonds Sc
eurity. 1t is not likely, however, that any
bank would surrender government deposit
simply because of auctuation in current
rates of interest. Thus you will see that
the two recommendations of the chamber,
If they had any effect whatever, would re-
suit in further expansion during seasons OF
plenty and further contraction when inter-
est rates are high,
Increase in Circulation.
1T also note the suggestion in the report
that additional circulation equal to 80 per
cent of the bond-secured circulation main
tanned by the banks of issue would be ex-
cessive and result In imitation. Nearly all
advocates of elastic currency urge the ne
cessity Of some plan which will relieve local
stringency. The scarcity of money which
called forth the reference of the question to
the committee of the chamber of commerce
was confined to New York city, and was
therefore local
HAD the stringency been as acute
throughout the United States as it was in
New York in December. I doubt whether
an increase of national bank circulation
equal to 80 per cent of the aggregate
circulation then existing would have been
excessive. If less than the limit authorized
by law did prove sufficient to restore nor
NAL rates of interest, certainly no more
would issue If subjected to tax Of or 6
per cent. The whole theory of heavily
taxed circulation Is to prevent excessive
issue at any time and to insure Its retire
ment when normal conditions are restored.
But this is simply detail and not essential
to the method outlined in my report.
while the committee in general terms
declared against the plan briefly stated in
the report of the Secretary OF the Treas
ury, which Is substantially the system now
and for many years In successful operation
in Germany, 1t failed to point out any de-
feet therein except as to the volume Of ad-
ditional circulation that might be issued
in case of an emergency. You will quite
agree with me. think. that greater latitude
of discussion would have ensued had the
committee formulated some system of its
own. While 1 think the German plan the
best and most practicable, do not consider
1t the only workable method If none other
can be formulated. however, there is great
hope that sooner or later the country will
agree upon the recommendation contained
in the report. Very truly yours.
(Signed) 81. NJ SHAW"