Los Angeles herald., 1907-11-25
CURRENCY
REFORM PLAN
DISCUSSED
CENTRAL BANK OF ISSUE IS
FAVORED
MORE ELASTICITY NEEDED is
BELIEF
incoming Members Of Congress ana
Leaders in Financial World
Talk Of Relief
Measures

-~a,,e,, are being submitted to the
nresident and Secretary Cortelyou' anu
are receiving such attention as the
other exigencies of the hnanclaI STU
alton permit.
Measures relating TO the currency
which arc being discussed among bank
ers and incoming members of congress
nav be roughly grouped under TOUR
heads-a central bank of issue, CEN
trail organization of the existing ma.
tionai banks, the issue OF addltiohai
circulation against various classes OF
bonds other than United states oonus' aus"
and the issue of circulating medium up
an general assets with the security OF
guaranty fund.
The project of central bank based
tlpon the general outlines OF the panh
OF France, or the imperial bank OF Ger
MANY. has apparently been attracting
more attention of late than any pre-
time in recent years.
senator Hansbrough of North Dsko-
ia who is a member of the finance COM
mittee. has announced he will introduce
a bill for such an institution. Mr. WeA-
Ter. vice president of the Whitney Cen
trail national bank of New Orleans Is
openly in favor of q central bank ano
says the New Orleans press, taught by
the strain of the cotton situation, Is
generally with him.
Favor Central bank
Those who favor central bank point
to the recent crisis as the best evidence
of the aid which ii could have afforded
had II been in operation. Their view is
that the national banks would have
been able to rediscount their paper at
such an institution and obtain its notes
tosanv amount necessary to relieve the
strain. 1t is considered significant In
some quarters that Mr.. Ridgely, the
comptroller Of the currency, has just
declared for central bank OF issue
after having in previous reports recon-
mended only general credit currency for
the existing banks. The utterances OF
Afr Ridgely are not, however. conslo-
cred to commit the administration,
since Treasurer Treat has different
plan. which he is advocating whenever
he is invited to deliver pubic aooress
on the subject.
n is so long since a central bank ex-
listed or was even seriously discussed ir
the United States that there Is mucn
difference of opinion as to the details
of the orga MIA tion. Those who advo-
cate IL generally insist that the secre-
tary of the treasury and the comptrol-
Ter of the currency should be ex-ofhcio
members of the board of directors, and
that the president should appoint or
approve the selection of the head of the
bank.
The provision of the German bank
charter in regard to circulation finds
good deal of favor--that after certain
fixed limit of circulation additional ls-
sues which are not covered dollar for
dollar by gold should be taxed at the
rate of 5 per cent.
Others however. prefer the greater
freedom OF the French system where
the volume of note issues is practically
under the control of the bank and
aP a Ia ya
serve permits the bank to serenely
maintain rate of discount much lower
than that of the Bank of ENGLAND. or
the Bank of Germany. while other
countries are in the throes of financial
convulsion.
For Special Circulation
The project of combination among
the national banks through their clear
ing house committees, or otherwise, to
guarantee a special c'- ulation in cases
OF emergency, is embodied in several
plans submitted to the secretary of the
treasury.
While these plans are declared by ex-
perts to have some degree of merit 1t
is feared that they are too complicated
to receive serious attention in congress.
So far as the plans require voluntary
action by the banks this might be diff
ficult to obtain so far as they compel
aCI1On Dy law. II 10 lett Dy SOHlS bhdR
such a policy would be drastic, If not
constitutional, in compelling the
banks to make a use of their assets
which they might not desire to make.
Most of the plans presented at previous
sessions of congress have dealt with the
question of increasing the elasticity of
the circulation issueo by national banks,
by permitting issues on other security
than United States bonds
There is a radical difference of opinion
between the two schoo of thought as
to the nature of these additional issues.
The plan proposed by Representative
Fowler. chairman of the house committee
On banking. provides for issue upon the
general credit of the banks with provision
en- circulation. This guaranty fund is to
be employed when necessary to redeem
the notes Of failed banks
1t is the contention of Mr. Fowler and
others who favor this pan, that a tax
of about one-twelfth of l per cent an
nually upon the circulation would meet
5ll losses. but in order to insure absolute
safety they propose that the tax shall
Re very much larger than this.
Other Bills Discussed
The principle of the Fowler bill is in
harmony with two otLer measures which
attracted considerable attention a year
ago the bill of the special committee of
the New York chamber of commerce,
which was indo-sed unanimously by the
chamber in 1906, and the plan OF the spe-
ciai committee If the American Bankers
association, which was indorsed almost
unanimously at the annual convention of
the association at Atlantic City in Sep
tet1ber last.
The pan of the chamber of commerce
committee proposed issue on the general
credit Of the banks to the amount OF )
per cent tax, to 2. and 4 per cent. and
to the amount of 10 per cent of capital
al each of the rates of and 6 per cent.
This permitted total issues to the amount
of 35 per cent of capital or about $780,
000000 but it was contended that no more
than half of this, taxed ur to the rate of
4 per cent. could be kept in circulation
under ordinary conditions. The plan of
the Bankers association provided for is
suance to the amount of rs per cent of
capital under a tax Of 1-2 per cent and
IL 1-2 per cent OF capital under tax Of 5
per cent.
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