New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1906-02-08
Mr.. SHAW ON CURRENCY
REPLIES TO j. III. SCHIFF.
The Secretary 4nsaoers Chamber of
Commerce Criticism of His Vieacs.

u-asbingror, Feb. Secretary Shaw has re-
-.,ad through Jacob II. Schif. copy of the
.oso,ptions. recently adopted by the Chamber Of
commerce OF New-York. I'm which exception is
.sken 10 some OF the Secretary's well known
-;su-s on the subject Of currency legislation. In
h,s reply the Secretary says:
Nv Dear Nj Schiff:
u am in receipt OF your letter Of February -
oconnpanied by a copy Of the report Of the COM
-nittee on finance and currency OF the New-Nork
chamber Of Comm cree. OF those who study the
oiestion. nine men out of ten agree that some
tting should be done 10 make our currency sys-
,am elastic. but Of the nine who unite that
something should be done. ii is difficult to find
rv-o who agree upon the measure that shall be
adopted.
In the committees report find this language;
Tho ressrnption Of national hank notes is limited
90 q total Of 100000 month thus tying up. 10
> large extent. the only source Of redemption we
-oent IS the fact that there is no limitation
NJ The redemption of national bank circulation.
THE limits on CIRCULATION.
The Secretary points out that the committee
recommended the repeal Of the law referred to,
md says
In the face Of The fact that the banks at New
York City alone returned to the Treasury for re-
5a-1nfion over $4,000 600 in national bank notes
6uring the single month of December last the
foregoing recommendation justifies my regret
MAJ tTe committee did not give the subject that
consideration which is Its due. While there is
law limiting the amount of lawful money which
TIE hanks may deposit for the retirement or
circulation 10 100000 a month. there is no
Irritation on redemption OF national bank notes.
and no limitation on the retirement Of national
hank circulation by banks that wish to deposit
their own notes The limitation is upon the con-
t-sotion Of lawful money b. the deposit thereof
for the retirement of bank circulation. beg 10
suggest that in my opinion the repeal OF the
,,rovision would not affect the remedy. Log
iosTv hanks find II profitable TO retire their cir
cI,lstion sell their bonds and swell their reserve
whenever money is worth excessively high rates
~ interest. l regret that the committee or the
chamber Of Commerce did not study the cues
lion in the light Of the actual operations OF the
banks Of New-York City.
The repeal Of the SS,000.00o month hmita~
ton on the amount Of lawful money that can De
taken out Of circulation for the retirement OF
national bank circulation would make II pos
sible 10 retire all our national bank circulation
IN = given month II all national banks studied
the question as closely as do few banks III
Nev-YOrk City
IN your letter you urge that the chambers
recommendation that the Secretary Of the
Treasury be authorized 10 deposit all public
funds except the gold reserve and reasonable
working balance, in national banks at reason
able rate Of interest. should he brought 70 the
immediate attention Of Congress thllh favor
sblv of the committees recommendation that
these deposits he al a reasonable rate Of inter
est provided they be made without speclnc
that banks cannot afford to paw per cent N
-erest on government deposits except when in
terest re- ties are below per cent. II compelled 10
give government bonds as security. II Is not
likely however. that any bank would surrender
a government deposit simply because OF huctu-
alton In current rates OF interest Thus YOU
,ciu see t7ar the two recommendations of the
chamber if they had any effect whatever, would
result in further expansion during seasons OF
ulenty and further contraction when interest
rates are high.
LOCAL SCARCITY OF MONEY.
also note the suggestion in the report that
additional circulation equal TO 30 per cent OF the
bond secured circulation maintained by the bank
a. issue would be excessive and result I'm infla-
lion. Nearly all advocates Of elastic currency
Urge the necessity Of some plan which will re-
lieVe local stringeuCy. The scarcity OF money
which called forth the reference of the question
70 the committee of the Chamber Of Commerce
was confined 10 NeW-York City and was there
fore local
Had the stringencv been as acute throughout
the United States 1t WAS in New-York in
December I doubt whether an increase Of ma
uonal bank circulation equal to so per cent
OF the aggregate circulation then existing would
have been excessive. II less than the limit
authorized 10y law did prove sufficient TO restore
normal rates Of interest certainly no more
would issue If subjected TO a tax Of . or
per cent The whole theory OF heavily taxed
circulation is 10 prevent excessive issue at any
tine and TO insure its retirement when normal
conditions are restored. But this IS simply
detail and not essential TO the method out
lined IN my report.
While the committee IN general terms de-
cared against the plan briefly stated in the
report of the Secretary Of the Treasury. which
= SUBSTANTIALLY The system now and for many
,ears On successful operation in Germany, IL
taled 10 point out any defect therein except
as 10 the volume Of additional circulation that
might De issued IN of emergency. You
WIN quite agree with me, ] think that greater
autuoe Of discussion would have ensued had
me committee formulated some system of its
owl. While think the German plan the best
Z q "a . moi
workable me- bod. II none other can be formu
Ialeo, however. there is great hope that sooner
or IsteT the country viii agree upon the recon-
behoa'lon contained in the report
Very truly yours.
L. VI. SHAW.
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