The Montgomery advertiser., 1908-01-20
UNWISE MEASURE
AMERICAN BANKERS, ASSOCIATION
AGArNsT ALDRIcH BILL.
II I. Declared to he Impracticable and
Ftnancial1y Unsound--wfll Pre-
sent Their Views to
Couxrers

N0tt&ARAttEt OI tIe currency .COnUlILltc VI
the American Bankers Association to-
night issued full report Of yesterday
meeting of the commission. at which
the various asset currency plans now
before Congress were discussed and re-
jected.
The report. which is lengthy doc
ument. summarizes the commission
objections to the Aldrich bill and the
present Fowler bill and then presents
bill In thirteen sections which the
commission, with the backing of the
Association will recommend to Con-
gress. The Aldrich bill is declared to
be "impracticabIe, unwise and finan-
cially unsound." The Fowler bill. ac-
cording to the report, Introduces
schemes so far-reaching in their scope
and touching so many collateral inter-
ests not germane to the real solution
of our currency difficulties, that we be-
lieve its passage would unsettle rather
than improve financial conditions"
Six principal objections are urged
against the Aldrich bill. The first as
serts that the measure would over
throw safe system of note issues
which has been enjoyed since the foun-
dalton OF the United States monetary
system" and the proposed law is called
step backwards to the conditions
which gave rise to the wild cat cur
1T may be the entering wedge to the
acceptance Of undesirable bonds as Sc
curity for note issues" says the COM
mission. There are recent examples
In the laws Of New York State legal
izing such bonds for savings banks"
In the second place 1t is urged that
the bill would cripple the lending pow
or OF banks by largely decreasing the
banks reserves in lawful money in
order that notes might be issued.
III the bonds behind these notes
were borrowed Instead of purchased, IL
would have the effect of increasing the
liabilities of the banks" adds the re-
port. which is wrong In principle"
In the third place, 1t is said that the
on would tend to create a fictitious
bond market and thus lead nunicina1T-
ties to enlarge their obligations.
The fourth objection IL that the TECH
hieai requirements which the bill pro-
Woes must be observed before notes
can be issued would entail such de-
lays as to make the notes available
only after the emergency had passed. {"
IN NTH objection has to do with
sn l, taxation provisions of the Aldrich
oH. ihese sections, 1t Is declared
would result in the banks suffering a
net loss OF per cent on the notes is
SUED whether they were taken out
against purchased or borrowed bonds.
me sixth objection asserts that the
cost OF taking out the notes would he
paid ultimately by the needy borrower
VINO would be burdened by Increased
interest charges at a time of year
.,S IN the autumn, when he can
After some general criticism of the
Fowler bill, the Commission sums up
the situation as follows:
Let US not be unmipdful of the fact
thal IN response to the demands of the
people, unsound and radical legisIa-
ZION has had Its precedents In our none
1aTy history. After the panic of 1873,
congress passed bill increasing
greenbacks by $4,000, 600. nroiect
which was wisely vetoed by President
Grant. After the panic of 1893, Con-
gress approved a measure providing
for the coinage of SIS, 000. 900 in silver.
which was vetoed by President Cleve-
land. In those two instances. we have
had examples of hasty measures fol-
lowing financial panics and in the two
bilIs herein discussed, we have what
appears TO US to be similarly unwise
measures following the recent tcrisis. ="
The solution proposed by the Com
mission differs from the first Fowler
bill, which was based upon princ;ples
approved by the convention of the
American Bankers Association at At
lantic City. Sept. 23. 1907, in that the
holder of a credit note Instead of be-
Ing a general credit, shall be a prior
lien on the assets of the issuing bank"
The security provided by pledging
the whole of the assets of a bank in
stead OF only portion of them would
aftord more protection to the note hold
er. 1t is also said that the adoption
Of the plan would insure IAN ample
supply of currency to the public; relief
from the disturbed commercial condi-
tfons, such as those through which we
recently passed; and. finally, the GER
tain retirement of the notes when they
have fulfilled their purpose"
The bill proposed by the Commission
is as follows:'
BE 1t enacted by the Senate and
House of Representatives of the United
States of America In Congress assem-
bled, that from and after the passage
of this act, any national banking as
ISOLATION which has been in business
for one year. and has a surplus fund
equal to 20 per centum of its capital,
may take out for issue and circulation
national bank notes without a deposit
of United States bonds as now pro-
vided by law. Said notes shall be
known as national bank guaranteed
credit notes Said notes shall be is
sued in such form and denominations
anu unOeF SuCn rules ana regulations
as the Comptroller of the Currency
shall fix. The amount of said notes so
taken out by any national banking as
ISOLATION may equal to 40 per centum
of the amount of it's national bank
notes at that time outstanding which
are secured by the deposit of Govern
ment bonds. but shall not exceed in
amount rs per centum of its capital;
provided. however, that II. at any time
in the future, the present proportion
of the total outstanding unmatured
United States bonds to the total capt.
sociations in active operation shall di-
minish, then the authorized issue, of ma
tional bank guaranteed credit notes
shall be increased to a correspondngly
greater percentage of the bonds re-
ceiVed notes.
Sec. 2. That every national banking
association taking out national bank
guaranteed credit notes in accordance
with the foregoing section shall pay
to the treasurer of the United States
in the months of January and July a
tax of one and one quarter per centum
upon the average amount of such notes
In circulation during the preceding half
year.
Sec g. That any national banking
association which has taken out
national bank guaranteed credit notes
in accordance with the provisions of
section l. of this act may take out
Il further amount OF national bank
guaranteed credit notes equal to twelve
and one half per centum of its capital,
but 1t shall pay to the treasurer of the
limited states in the months of January