The news-democrat. (Providence, R.I.) 1906-1909, 1907-12-16

counting notes OF their customers for 9TH
ler banks. IL should also have the right
to deal In United states government
bonds. and probably the bonds of states
and municipalities. but not in stocks. IL
should have such authority for dealing In
foreign exchange as will enable IL 10 ac-
cumulate gold credits abroad and import
gold and bullion when needed for its re-
serves.
The main office OF the central bank
should be In the city OF Washington and
such branches established In the reserve
cities and sub-treasury cities as are
| found necessary.
| Its note issues should be credit notes.
the same as I'm Germany and France. and
| they should have the Same protection In
| the way OF a very large gold reserve. the
balance to be covered by bonds of the
government or other approved Issues or
| by the notes discounted by It for other
banks.
The central bank. IL given the exclu-
give right 10 Issue credit bank notes, as
| Il should have. could regulate the issue OF
notes I'm accordance with the demand
which could be determined automatically
and with precision, through its relations
with the other banks of the country.
| This should not make any change in
| the present bond-secured notes OF the ma
| tional banks. and would therefore not dis
turb the present volume of the currency
| or make any change in the demand for
United States government bonds as
basis of circulation
Such a bank as is described, II estab-
lished, would be very great aid in the
establishment OF the postal savings bank
system and make that real practical
question.
POSTAL SAVINGS BANK.
One OF the hardest problems in connec-
iion with the postal savings bank is to
determine how the deposits should be ham
laI taI Cd wi
the banks. In order TO prevent the postal
savings bank only adding TO the amount
Of money the government now takes out
OF circulation. The postal savings bank
funds could be deposited with the central
bank Of issue and reserve. and thus be
made available for the business OF the
banks. which would lead TO their distr-
button wherever needed
Undoubtedly the most practicable plan
which has been suggested would be to
have the stock Of the central bank SUBJ
scribed by the other banks in fixed pro-
portion to their capital. In addition to
this, there might also be some shares sold
by public subscription, with limit as TO
the amount or number OF shares which
could be held by any individual. If II
should be deemed advisable there could
be no objection to the government own
Ing a certain proportion of the shares,
which might be paid in in cash or in gov
ernment bonds, but as there would be no
trouble In getting all the capital needed
this would seem TO be unnecessary. The
better plan would be TO have the stock
subscribed by the banks OF the country in
a fixed percentage OF their capital: have
the stock nontransferable, and require it's
surrender at its par value when any bank
failed or went out of, business. The ma
tional banks should be compelled to SUBJ
scribe for this stock in proportion TO their
tai would thus expand as the number of
banks increased and there would be more
business for IL to do. The directors of the
bank should be chosen, two thirds by the
shareholders ahd one-thir by the United
States government. Some of tue govern
ment directors. II necessary, could be
given the right TO veto certain transac-
tions, and the interests OF the govern
ment, and OF the people genera.y. could
be protected In This way The profits OF
the bank sho I'D be limited. md :he bank
be conducted for the general welfare, not
with a view OF making pro.i's. After pro-
y'ding for the accumulatian OF a moderate
surplus there should be :. return TO the
shareholders OF say, or pee cent. ane
the remainder of the profits should be Ji-
v!ded as in Germany-a small proportion
to the shareholders and the balarcc 10 the
United States government
LIMIT ITS SCOPE.
a national central bank organized In
tnis way, with its profits limi.sd and IT'S
ownership 9!dxy Distributed raainy
among the bauKs who We're To De - GUS
tcmers, when would not b. permittel 10
do a commercial business, but be limited
to transaction OF business with the gov
ernment and with other banks. would
not be open to the objection urged against
the former United States banks, that they
were really private institutions engaged
In a general banking business
Such bank would be little more than
o department OF the government IL
would greatly improve the efficiency and
value OF the treasury department, and
make IL a means OF assistance and bene-
fit to business. instead OF q menace and
a danger, and would make our currency
and banking system n source Of impgeg-
nable strength In times OF financial
stress. BY the wise use Of it's great pow
eis and facilities II would be able to abb
solutely prevent the recurrence In the
United States OF widespread bank
panic 1t would add TO the stability of
our business In every line and give us a
banking and financial system equal to
any in the world.
The central bank OF issue and reserve
Is urged mainly in Tia. interest OF people
engaged i'm general business outside OF
the banks as a protection to them. The
banks would have no interest In II ex-
cept as It aided the general welfare. In
fact ii would rather tend to reduce the
profits Of the banks. and would interfere
with the business of some banks holding
large reserve deposits. The advantage TO
tho banks would be in the protection af-
| forded them I'm the reliability and mobil-
| ~ OF their reserves and the steadiness
and safety 1t would insure to business
| transactions of all kinds. II a satisfac-
tory plan for the mutual guarantee of de-
posits by the banks can be worked out
| IL could be done through the means Of
| the central bank better than through the
treasury department Some Of the OBJ
jections To the guarantee OF deposits by
the general government would not hold In
the case OF its being done by central
bank which might be given power TO do
that In its charter.