The sun. [volume] (New York [N.Y.]) 1833-1916, 1906-11-16
PLAN FOR ELASTIC CURRENCY.
PROPOSED LEGISLATION TO RE
SUBMITTED TO CONGRESS.


n pr oyides for the Issue OF Credit Bank
Notes and for . Guaranty Fund TO Pro-
vide for the Redemption Or Notes Of
FAILED Banks and Cost Of Redemption.
WAsHNoroN Nov. i5.-The members
Of the monetary commission Of the Bank
ars' Association who, with a committee
from the New York Chamber OF Commerce
have been considering Tie defects in the
currency system Of the United States"
with a view to suggest changes which
will make the volume of tho currency more
responsive to the demands of commerce."
concluded their labors to-day and ad.
iourned subject to the call OF the chairman.
A. b. Hepburn of New York. Before adj
Iournment the commission made public
its report to the association, adopted unani-
nously by the fifteen members, and ac-
companied by an explanation in detail
og the remedial plan which will be recon-
mended to Congress.
A subcommitte e was appointed to draft
- hill to be presented in Congress EN-
bodying the details Of the plan. A. B.
Hepburn Of the Chase National Bank OF
New York. James B. Forgan Of the First
National Bank Of Chicago, and j. L. Hamil-
ION Of Hoopeston, ILL.,, former president
~ the American Bankers Association,
compos the committee. The committee
makes the following recommendations:
We recommend the enactment into law
cf the following. having the firm conviction
that thereby will he provided a bank note
currency safe beyond ~peradventurc and
automatically varying in volume as the needs
" vary:
CREDIT BANK NOTES.
I. Any national bank having been actively
doing business for one year and having "A
surplus fund equal to 20 per cent. of its capital
shall have authority TO issue credit notes
as follows. subject to the rules and regula-
rions to be determined by the Comptroller
Of the Currency:
(a). An amount equal to 10 per cent of its
bond secured circulation. subject to a tax
at the rate OF 2s per cent. per annum upon
The average amount outstanding. provided
hat if at any time in the future the present
proportion Of the total outstanding unma-
,ured United States bonds to the total cap
itaization of all going national banks shall
diminish, then the authorized issue Of credit
notes shall be increased 70 a correspondingly
greater percentage OF its bond secured notes.
b.. A further amount equal to i2H per
cent. OF its capital, subject to a tax at the
rate OF 5 per cent. per annum upon the aver
age amount outstanding in excess Of the
amount first mentioned.
The total of credit notes and bond secured
notes shall not exceed the capital.
REsERvE
,. The same reserves shall be carried against
credit notes as are now required by law to
he carried against deposits.
GUARANTY FUND.
5. The taxes provided upon credit notes
shall be paid in gold to the Treasurer of the
United States, and shall constitute a guaranty
fund for the redemption of notes of failed
banks. and for the payment of the expenses of
the printing and the cost of redemption. In
order that the guaranty fund may be ample
from the be ginning. any bsnk making sppli-
cation to take out credit notes for issue shall
deposit with the Treasurer Of the United
states in gold an amount equal TO S per cent.
thereof. The unused portion Of this initial
payment shall be an asset of the contributing
banks respectively. and shall be refunded
from time to time when this may be done with
out reducing the guaranty fund below an
amount equal to S per cent. Of the credit
notes taken out.
REDEMPTION.
I. The Comptroller Of the Currency shall
designate numerous redemption cities con-
veniently located in the various parts of the
country. Through the agency of the banks In
such cities adequate facilities shall be pro-
Sided for active daily redemption Of credit
notes,
5. The provision Of existing law limiting the
retirement of bond secured notes to % 900 900
Ter month shall be repealed.
a All public moneys above a reasonable
working balance. from whatever source de-
rived, shall be currently deposited from day 20
dav In national banks without requiring col
,atersH security or special guaranty therefor,
huf in no case shall the balance carried with
snv bank exceed 50 per cent. OF the capital
~, roof. Al banks receiving such public
morr-s on deposit shall pay into the United
yates Treasury interest there on NJ the rate
- . ror cent. per snnum,
The report il signed by the fifteen MEM
lcrS of the monetary commission and
C%urcrrrcd in by f. 4. vanderlip and Charles
\ Conant Of tho currency committee Of
tho Now York Chamber Of Commerce,
and Representative Charles n. Fowler.
chairman of the Banking and Currency
'nmnittee Of the House OF Representatives.
u vas said that the plan was approved
also by the Secretary of the Treasury and
rho Comptroller of the Currency, who met
With the commission. In explaining the
necessity for the legislation, the committee
saws.
changes ~ the existing bank note system
are imperatively required. The present
volume of bank notes Is wholly unrespousive
10 the demands OF IL does not
expand with the need for currency in the
cror moving period, causing ~stringency.
nor contract when the uses for currency are
less extensive. causing redundancy. We
ind that the banks are under the necessity
Of parting with their reserve money to supply
the demand for currency at certain seasons.
although that demand would he quite as well
satisfied II banks could supply their credit
notes instead of depicting their reserves and
cnpsing q contraction injurious to business.
While this matter affects every business
interest. II concerns the general public even
moro deeply than it does the bankers. IL
il obvious that borrowers during three or
tour months of the year are forced TO pay a
materially higher rate OF interest than would
he necessary II banks could supply the cur
rency demand by issuing their credit notes
instead Of depicting their reserves and being
forced to demand the repayment Of loans In
order 70 replenish their reserves.
The commission agree upon the following
principles which they believe underlica correct
solution oil the currency problem 80 far rs IL
relates to the issue of a bank note currency:
4 credit currency should be issued by the
national banks Of the country under proper
.atWt,VtAna