New-York tribune., 1907-11-27
BARGAIN FOR BANKERS
OFFER OF MR. CORTELYOU.
Banks Buying Panama Bonds Can
Keep 90 Per Cent of the Cash.
rFrom Ths Tribune Rureau.l

washington, Nov. 26.-The Secretary or Ine
Treasury has decided to offer special bargain
TO bankers who can raise a small amount of
ready cash. He will sell them Panama bonds
TO the amount Of S500000O0 for 10 cents on the
dollar. In other words, bankers who purchase
these bonds will be called upon to pay only I'D
per cent cash and may retain the remaining W
per cent as federal deposit. furnishing as COL
lateral for the deposit the regular approved
securities.
The issue of Treasury certificates will be Hm-
tied to S5OO00.O00 instead of S100000OOO. and
all bankers who purchase must take out ctrcula-
tion to the full amount of their purchases. AS
means of extracting boarded money from its
hiding places the certificate issue has not proved
an unqualified success. most OF those sold thus
far having gone to the banks and so operated to
reduce their reserves.
Philadelphia is to be made central reserve
city, according to the present expectation OF
Treasury officials. That city has made formal
application for this privilege. and unless New
York can bring to bear sufficient pressure to off,
set the influence Of the Quaker City it will here
after be compelled to divide it's prestige the
only central reserve city in the East with the
City of Brotherly Love.
The current banking law requires that banks
in small towns shall maintain a reserve equal 10
IS pet cent OF their total deposits, and gives
them the privilege OF keeping three-ffths of
this reserve on deposit in the designated reserve
cities. Banks in the reserve cities must main
tain reserve equal to 25 per cent of their total
deposits. but may keep one-half OF their re-
serves I'm the central reserve cities.
There are now only three central reserve cities
in the country-New York. Chicago and St
Louis The banks I'm these cities must main
tain reserves equal TO % per cent of their total
deposits in their vaults. Under the exist
ing law and Treasury regulations. most OF the
banks IN the reserve cities OF the East avail
themselves OF the privilege Of depositing
half of their reserves In New York, but II, a
IS the present intention, Philadelphia Is also
made central reserve city, a considerable por-
tion OF this 80 per cent doubtless Will be kept
there instead Of in New York
Saturday is the day set for the opening Of
bids on the Panama bonds. and It Is asserted
at the Treasury Department that the Secretary
expects the total issue to be oversubscrlbed
although OF the bids are all sealed and
any estimate as 10 their aggregate must be onIv
surmtse. Nevertheless. the Secretary expects
his generous offer of to-day to result in sending
the bonds to a considerable premium. as doubt
less many of the largest bids are not vet filed
Under the ofrer made to-day the bank which
wishes TO purchase 100000 worth of Panama
bonds need remit only $4,000 and collateral for
the remaining $4,000. which will be left on de-
It's 100000 worth of bonds transferred to she
circulation account and viii receive in return
100000 Of it's own notes, which II may loan at
pleasure. 1t Is expected that such transactions
VIII completely relieve the financial stringency.
While no official announcement has been made
in regard to the limitation of the Treasury GER
tihcate issue. other than that all banks pur-
chasing them must take out circulation to the
full amount of their purchases. 1t is the present
int anti
issue TO S50,OOOO00. or one-half that originally
determined upon. This decision Is due doubtless
in part to the improved financial conditions. in
part to the failure Of tho certificates TO draw
out money boarded by individuals in part 10
the fact that purchases made by banks operate
to reduce their reserves to the amount of %
per cent OF their purchases and, therefore. their
loaning capacity by four times the amount OF
their purchase, and I'm part to tho severe criti-
cism which the certificate issue has occasIoned.
although Of course. tho last factor is not ad-
mitted at the Treasury Department
Thus far increased bank circulation based on
Treasury certificates has been engaged to the
amount Of $3,J0oO00. Secretary Cortelyou also
Is impressng on the purchasers of the ceru
fcates the fact that no reserves the right to
call in these securities at any time within the
year that he may deem Il wise. and that the
Treasury balance Will permit of his so doing II
is his desire to prevent all the certificates matur-
ing at the time as that might occasion
embarrassment and might even necessitate the
reissue OF part of the loan.
Secretary Cortelyou will receive tomorrow
a delegation OF bankers from Philadelphia. who
win urge the adoption by the Treasury Depart
ment OF new system Of receipts and disburse-
ments whereby all government bills will be
paid by check on the national repositories and
checks will be accepted in payment OF customs
internal revenue taxes. etc. Under the present
system whenever Treasury warrants are issued
a sum ample to cover them is withdrawn from
the banks and deposited with the Sub-Treasury
which the warrants are issued. So, too. in
the case OF merchants who have customs and
other accounts 10 pay the banks are Obliged to
deposit with the Collector of the Port or other
Treasury Official a sufficient to cover all
checks likely to be drawn in order that the
checks of their customers may be honored by
the government, This results in large and
wholly unnecessary drafts on the reserves of
the banks.
With the check system many transactions
would not involve diminishing the reserves by
a single penny. the checks accepted by the
government would be deposited In the banks;
the checks drawn by the disbursng officers of
the Treasury also would be deposited in the
several banks. and the only cash transactions in
volved would be the small amounts which might
have 10 be transferred Clearing House bal
ances. while the aggregate reserves of the
banks of New York, for instance, would not
be diminished by days a weeks bus-
ness of the government. There is ample war
rant under the existing law for making this
change, so that no new legislation would be
required.
The action of the Philadelphia banks in urg-
ing this reform on Secretary Cortelyou is in