The Birmingham age-herald., 1907-12-23
Congressman Declares That Many Troubles Are Due
 to Speculation
PROTECTION MUST BE
 GIVEN ID DEP0SIT0RS
Mir. Underwood's Bill Is Based on Proposed Tax of 1.10 of Per Cent on All Deposits In National
 Banks of the Country.

Washington December 22.-(Specia1.)- Since the opening day of this session of Congress. many bills have been tintro- duced to relieve the financial distress in the country They run the gamut all the way from straight green back prop ositons to a central bank of issue.
 MT Underwood of Alabama has intro- dGced bill for the better protection of the depositors and creditors of national banks. Referring to his bill, Mir. Under- wood stated that in his opinion the pres- ent panic was not caused from a lack of money in the country; in fact. the country now has more money outside of the treasury than 1t has ever had in its entire history; that the panic was net caused by crop failures or distressed bus- mess conditions but that the whole trou- ble was undoubtedly caused by an over expansion of credits. due to too much speculation and 0 loss of confidence by the people of the country in it's financial institutions.
 Good Banks Plentiful.
 He said that there was probably not more than one bank in hundred which was not perfectly solvent and good, but. as the depostors had no way on the out side of ascertaning which were the solv- ent banks and which the insolvent ones, 1t had created condition of distrust amongst the depositors of the country. and in withdrawing their deposits, they had crippled the financial institutions and distressed the country's system of cred 
 at this time was such as would correct this situation and prevent a continuance of it in the future. The government should endeavor. through it's laws, to es- tablsh abosute confidence at all times in the banking institutions of the country. With these ideas in view, he introduced q bill which. in it's first section pro- vdes for q tax amounting to one-tenth of one percentum per annum on the average amount of deposits of all national banks. to be held as a special fund ir the treas ury and used by the comptroller of the currency to pay the deposltors of any bank that failed the difference between the amount collected from the assets of the bank and the amount due them. He said that the report of the comptroller or the currency showed that the annual average losses in national banks in the last 10 years was five one-hundredths of one percentum, and that in no year did the losses exceed s5,0O,0O0 and that the tax provided for in his bill would be ample to reimburse all depositors for losses, and at the same time not be an excessive charge on any bank.
 No Interest Paid.
 The second section of his Dill provides that national banks shall not pay interest on deposits of any nature or description, except to the United States government, in which case they are authorized to pay interest at the rate of two percentum per annum. The great weakness of our present banking system, he said, grew out of the fact that the country banks were allowed to deposit three-hfths of their reserves In the reserve centers; that the banks in reserve centers paid them from per cent to per cent interest on these reserves. The country banks could not loan their reserves out to the local borrowers at home, but the law allowed them to send their reserves to New York or some other reserve cen- ter, deposit them and receive interest upon the same In this way, in the spring and summer a large proportion of the reserves in the country accumulated in New York, and when fall came, and it was necessary to move the crops, 1t was drawn out at once, and in this way. constricted the amount of lawful money in the New York banks, pulled down their reserve funds and contracted their loans at the very time when the coun- try needed an expansion Of credits and actual cash in the south and west to move the crops. He said that in prohibit- ing the banks from paying interest. most of the reserves would stay at home. in the country banks, and would not be used in New York for speculation in the dull months, and at the same time, in the faii of the year, strain the banks in New York by having the funds drawn out.
 Relief For Situation.
 Section four of his bill is intended to re- lieve the situation at the time the country needs the money to move the crops. It provides that in reserve centers, the amount of the reserves may be reduced, with the consent of the secretary of the treasury, from 20 per cent to 12 per cent. and in the country banks from l5 to per cent. He says that under ordinary circumstances, a bank hardly ever needs more than or per cent to handle it's daily business, ard the object of a large reserve Is for the protection of the people against extraordinary occur rences and panlcs. He believes, when the deposits in the banks are guaranteed. as provided for in the first sections of his bill, that less reserves will be needed 1 than at present and that the banks will be able to run as safely with less cash l actually in the vaults, because there will 1 be no withdrawals on account of lack of l confidence. By allowing the secretary Of