The news-democrat. (Providence, R.I.) 1906-1909, 1907-12-16
RIDGELY FAv0RS
CENTRAL BANK
Comptroller Decl res 1t Would Solve the Two Great
Problems Of Our Banking System and Also Pre-
vide the Machinery for Conducting Treasury
Operations Without the Least Disturbance.

1
cvitable and doubtless desirable, but II
might and should have been more gradual
| and should not have had Its greatest ef-
| feet on our banks Many firms might
have failed and probably some banks
| which were badly extended or loaded up
with speculative loans and securities. We
should have had a gradual. though con-
siderable, reduction In the volume of all
kinds of business and wholesome perfod
Of economy and more normal living and
trading This would have been. In the end,
beneficial, and with the wonderful re-
| cuperative resources and wealth OF the
| United States any business properly man
| aged and based on right conditions would
| soon have improved and have been as pros
] porous as ever. There Is no reason at all
that our banks. as a whole. should have
become involved as they have and not
only their business. but that OF all their
customers have been 50 disturbed as II
is today. All that is needed TO have pre-
vented this Is a proper system OF credit
bank-note currency and bank reserves.
both OF which could have been supplied
by the central bank OF issue and reserve.
| II the banks had known that there were
facilities for exchanging any reasonable
! amount OF deposit credits to note credits
without depicting cash reserves. and. fur
ther, that the reserves that they had were
on deposit where they would be imme-
diately and surely available In currency.
there need have been no alarm among
| them There would have no scarcity OF
currency: no arrangement OF the domestic
exchange: and there would have been no
panic among the banks nor among the
| people.
The only way in which bank deposit
credits can be properly protected from
sudden and unexpected calls, when all
may be involved at the same time. Is by a
| system OF note credits which can be at
any time Immediately exchanged for the
| deposit credits.
ELASTIC CIRCULATION.
The present bank-note circulation can
be best improved and made elastic by per-
mitting the banks to issue fixed per-
centage of their note-secured circulation
or capital in notes uncovered by bond
deposits. IL. against these notes. banks
are required 10 carry the same reserve
as against deposits. II will preserve the
similarity which Is necessary between
note credits and deposit credits These
notes can be made perfectly safe by a
guaranty fund OF not over per cent,
which would be many times the amount
OF money required TO redeem the notes
OF failed banks. based on the experiences
OF ~ years There should be a gradual
ed rate OF taxation on these notes, begin
ming with not over gs per cent. and
| q.
OF such notes to our system would do
much TO Improve II. but still II is not be-
lieved that IL would be as efficient or as
satisfactory In any way as 10 have all
the credit notes issued by a central bank
Of issue.
The use OF clearing house certificates by
the banks has been found a very efficient
means for their defense, and has. or
many occasions, probably prevented n
great number OF bank failures during
panics, and there is some merit in the
suggestion that the clearing house should
be recognized by la wand authorized un-
der certain conditions. TO issue clearing
house certificates for use as emergency
circulation The adoption OF this idea
might make great Improvement In our
banking system, but this is only a half
way measure. The full development OF
the national clearing house idea In the
adoption OF this principle should carry
us further and to the inevitable and logical
conclusion and lesson to be drawn from
IL, which Is that We should have a ma
tional central bank OF issue and reserve
Instead OF stopping at the issue OF clear
Ing house certificates, which are really
credit notes on large scale. IL would be
far better to have these notes issued by
central bank under government author
ity and under proper laws and regula-
tons This could be done far more sys-
tematically and efficiently: Il would have
none OF the disadvantages OF the other
system. and would have all its advan-
| tages, and more besides
A GREAT BENEFIT.
The installation OF "A proper central
| bank would not only be a great benefit
TO all the business OF the country and n
great protection TO our people. but 1t
would solve the problem of the relations
OF our treasury department TO the bust
ness OF tho country. IL would give us
not only a reliable and efficient system
Nnsl n
add stability and safety TO our banking
system. II would shield and protect the
citizen In oil the relations which are so
vital TO him for the conduct OF his busi-
ness or the support OF his family. From
the very necessity OF the case our treas
ury department must have vast trans
actions In the collection and disburse-
ments or Its revenues. which vitality af-
feet the business OF the country every
day or the year. In its relations with
the banks and financial institutions not
only through the funded debt and depos-
Its made with them, but In the collection
or revenues and disbursements, the op-
erations OF the treasury are so vast and
tneir ramincations SO Infinite that 4 is
ed by the most systematic and efficient
means which can be devised.
For several years past the revenues OF
the government have been largely I'm ex-
cess OF expenditures. and there has been
constant problem presented to each sue
cessive secretary of the treasury as 10
| ttit b'oN tutans Ol ItpitClflk III ClrCulat1On
tho money which the government Is
forced to collect. The method OF replac-
ing II by deposit with the banks is prob
ably the only one available and. although
Il has been handled with unusual skill
and ability, Is most unsatisfactory. un-
systematic and inefficient IL always ls q
matter which provokes criticism and
complaint. IL could be handled with fal
better results II the government had un.
der its control n central bank TO which
all revenues could be paid and through
which all disbursements could be made
IL would be better for the government
and would result In far better service 10
the people.
| MANY PLANS.
Many plans have been suggested for
the organization and control OF n central
government bank. An essential feature
OF II should be that IL must be under gov
eminent control. so that II could never
be- monopolized or used by any man or
set OF men. IL should be kept out OF
politics. The men chosen for its mana
gers and directors should be men OF the
highest character and ability, whose du-
ties and interest would be for the un.
divided advantage and interest OF the
banx y worh not be difficult 10 aoro,n-
pllsh this end by having the control dl-
vided between certain directors elected by