Evening star. [volume] (Washington, D.C.) 1854-1972, 1907-12-06
CONDITION OF
NATIONAL FINANCES
Annual Report of Secretary of
the Treasury.
BANK RESERVES TREATED
Bond Transactions That Have Been
Made Discussed.
SOME EMERGENCY MEASURES
A Panic in Money Was Averted.
Some Problematical Estimates.
District Matters.
Bond Transactions That Have Been
Made Discussed.
SOME EMERGENCY MEASURES

SGVETdl QTUpOSco ptdllS tIS1l "CtC S0p4A4S7
ted to him by we'l-known bankers and
students of finance For reasons con-
sidered best to him he adopted none OF
these, nor sought to devise a plan of his
own.
Mr.. Cortelyou discusses financial mat
ters In the following manner:
Act Of March 4, 1907.
Section 4 Of the act approved March 4.
1907. entitled AN act to amend the ma
tionai-banking act. and for other pur-
poses,'' increased from $1,000, GOO to So
10000 per month tho amount of lawful
money which might be deposited with the
tirement Of the circulating notes Of ma
tional banks.
Owing to the currency stringency which
has existed for the past two months, the
national banks have taken out circulation
in large amounts tfrom October I to No
vember 20, $36. 548.S20). 1t is not difficult
to. foresee that at a period not very re-
mote these banks WILL not only be in posi-
ton to retire a large amount Of this cir
culation, but should be encouraged to do
so. 1t is therefore recommended and
urged that the act referred to be further
amended. and Limitation upon such re-
tirement of circulation be left within the
discretion Of the Secretary of the Treas
ury.
Bank Reserves
Under existing law a national bank To-
Gated In a city which Is not reserve city
must maintain Is per cent Of its deposits
as q reserve. It may count its per cent
redemption fund. held for the redemption
of national bank notes, as a part of the
reserve, and after deducting this fund 1t
may deposit three-fifths of the remainder
In, 10 III To-
tional banks located in reserve cities and
In central reserve cities must maintain
25 per cent Of their deposits as q reserve.
and they may count their per cent re-
demption fund as a part of the same; and
the banks located in reserve cities may
deposit 80 per cent Of the remainder of
their reserves in banks in central reserve
cities. There are three central reserve
cities. New York, Chicago and St. Louis.
There are about forty other reserve cities.
Of national banks on August ~, 1907, the
amount Of reserves held by all the ma
tional banks in the country was 81, 49,,
1853 .395. OF this amount about $165 ,OOO, 100
cities as deposits OF banks located in the
forty other reserve cities. A further
amount. which cannot be estimated, wa:
also deposited in the central reserve cite:
as constituting the three-fifths reserv
which all other banks might so deposit
reserve cities by banks not located in re-
serve cities to be $35.OOO.OOO, the amount
SO held by the central reserve cities would
be approximately $500. 100000. The tota
amount held by central reserve banks
due to national banks was $l27 100000
so that nearly one-half Of the deposits by
other national banks in the banks of the
central reserve cities consisted of funds
counted as reserves by national banks out
side of the central reserve cities.
IT might ha rp ga rfad az Worth vyhile to
consider the effect of amending the laws
SO that the country might be divided into
geographical OF commercial sections, with
provision for the retention within each
reserves required to be held against de-
posts in the national banks Of such Sec
ton. The result Of this would be, taking
present conditions. that the banks in tn
three central reserve cities would lose
considerable amount. and this amour
would be transferred to banks In the re-
serve cities located in the different sec
tons and would necessarily be held by
them as cash. This addition to the avail
able and actual cash In banks outside of
the central reserve cities would cons titut,
an element of sire ngth. which, IN times
stress, might aid materially in diminish
ing the violence Of financial disturbances
Such a provision of law as this would no
affect in any way the depositing by ma
tional banks Of their unemployed capital,
outside of their reserves. wherever they
could best use 1t.
Bond Transactions.
When the present secretary assumed
charge OF the Treasury Department
March 5. 1907. there was an available cas-
balance Of s25l .231. 426 10. Of which S14O,-
Ola. 81 consisted of deposits in nationa
bank deposita ries. These deposits includ-
ed the sum of S3000O.0O0, approximately
which had been lodged with the banks in
September. 1906. with the understanding
Treasury during the winter and spring
beginning February l. 1901 Owing to
unfavorable conditions which APPEAR
after these deposits had been made. my
predecessor refrained from calling on the
banks for their return. and as on Marci s
there appeared to be no immediate need
OF the return Of the money to the Treas
ury the banks were permitted for a fur
Their time to retain the deposits
The per mt funded loan OF 1907 D
IS terms was redeema BILE at the pleasur
Of the United States after July |. 1879,
The amount outsta r ding March 1. 1907
was Sill ,606.300, and small amounts %
the bonds were being pi es nted from d.
to day for sale at par. with interest
April l. AS 1t was advisable, owing t
The country. to increase the disburse
lnents from the Treasury. the owners o
the 4 per cent bonds were invited b.
''ircular published March II to surrende
their bonds for redemption, with interest
to July I, to an amount not exceeding
s25. O00. OC0. Under this circular there we
redeemed between the date Of its issut
and June "a registered and coupon bond
to the amount Of $25 0S8. $50. Meanwhile
the disposal Of the remainder of the loar
was considered.
The department had the option Of thru
methods: First. its redemption: second
est at the pleasure Of the United States
third, the refunding under authority o.
the act of March IA. 1900. into per cen
"onsols Of 1880 OF all or any part OF II.
The redemption Of the loan would take
from the Treasury about $3.50 O0O, 600,
loss which seemed to be inadvisabla In
view Of the uncertainty then existing as
to future financial conditions. Its contin-
uance at a lower rate Of interest. Will
posse ssing some advantages. was. on the
whole, uncertain as to its operation and
fleet. So IT was decided to rAfund a part
Of the loan. leaving outstanding an
amount which could easily be redeemed In
July without disturbing financial condi-
tons.
Accordingly on April 2, 1907, there was
published a circular inviting the surrender
of $5O. COO, 900 Of the bonds for refunding
into 2 per cent consols of 1890. The pre-
MUM to be charged for the new bonds
was fixed at 3 per cent, and the old bonds
were to be received upon the terms pre-
scribed by the act of March. Ia, 1850,
namely, a price equivalent to their pres
ent worth to yield an annual income of
~ per cent to the investor. The circular
inviting the surrender of the bonds also