The sun., 1908-01-06
NATIONAL CLEARING HOUSE
B4NK.
Plan IN Detail a. Advocated BY United
STATES Treasurer Treat.


this town regarding the establishments Of a
national clearing house bank. This does not
mean IN any sense Government participation.
only regulation. AS Is now In vogue with the
national banks. Mr.. Treat said that he was
deeply impressed with the assertion recently
made by William A. Nash. president OF the
Corn Exchange Bank Of New York. with
twenty-five branches. that in an experience
Of more than forty years as q member Of the
Clearing House Association not one dollar had
been lost by loans when clearing house GER
tiicates were issued to mitigate the severity
OF panic conditions. The basis Of credit Of
such certificates is collateral consisting of the
best securities Of the bank. including It's COM
mercal paper, on which rs per cent. OF Its
value is advanced
Mr.. Treat believes that suoh credits not only
might be utilized In times OF panic but also
might serve n great purpose by enhrginR
the fiSld Of credits that would afford oppor-
tunity for the banks Of the country to re-
discount oommsrclal notes taken from their
customers.
In an address at Atlantic City on Septem-
ber 2. 1905, he discussed the importance Of
some way being devised whereby q large
bank with a capital OF not less than S2S 900 900
could supply the resources by means OF which
the banks OF the country could redscount
their commercial paper. as now obtains
abroad. This would make liquid the cap
ital OF the dscOunting banks. which In times
OF urgent demand could be used to serve their
customers.
His plan briefly was that the clearing
house associations in the forty reserve and
central reserve cities should be incorporated
under the national banking act. that the banks
OF the clearing house cities be the share
holders thereof and that the capital should
not be less than $3.50 100000 nor more than
$500 600 OOO
This would mean no Government partici-
patton. but simply a national clearing house
bank that would take out. under the same
plan as any national bank, a circulation Of not
| less than so per cent. OF its capital. IL should
| be made a Government depOsitary and the
percentage OF deposits should be equal to that
Of any other bank according to its capital.
| The board OF directors should be taken from
| the several States where the clearing house
] associations are located and an apportion-
ment Of the board OF directors be based on
| the number OF banks and capital in each clear
ing house association. This board OF direc-
| tors would be representative OF several States.
From II should be chosen an executive COM
mittee to take active charge OF the affairs OF
| the bank. The entire board Of directors
should meet not less than twice year.
The national banking act should be so
| amended that all national banks would be per-
| mitted to rediscount their commercial paper
not exceeding 100 per cent. OF their capital
| and surplus. The national clearing house bank
| should discount only for banks. both State
and national. and not for individuals. and
should be permitted TO redisCount not only
| the commercial notes for the clearing house
banks but also the commercial notes Of other
national and State banks in good standing.
The paper presented for discount should have
the approval OF the clearing house bank In
the locality from which it was offered. This
would insure a careful scrutiny Of all notes
offered the same as now obtains m the dffer-
| ent clearing house associations. All such
| notes should be discounted at a uniform rate
| In order to make this rediscount favorable to
the national clearing house bank It should
| be permitted to retain IS per cent. OF the dis
| count on deposit, not subject to check. until
| the loan had matured and been paid. This
| would AFFORD no small amount OF profit to the
clearing house bank. to insure payment for
| its expenses and dividend fund. The amount
| OF discount that the clearing house bank
would accept from different localities would
| of course be decided In a spirit of fairness.
This would serve a great purpose. inAsmuch
| as commercial notes that were discounted by
| a national clearing house bank would enable
such banks to utilize their capital and make IL
| liquid for more extended accommodation to
| their customers.
The national clearing house bank should
| not be required to carry any reserve against
| the retention OF deposits arising from the
| discounts OF commercial paper. because IL
| would hold as collateral the remaining part
\ OF the discount as security. much in the same
way as the Government now does not require
| a depository national bank 20 carry any re-
serves against the public funds because se-
curity is pledged therefor.
| To provide for emergencies in times OF
| panic the Secretary OF the Treasury should
be empowered in his discretion TO advance
| to the national clearing house bank upon
application additional quantity of its bank
1 - .A IT,
| ital and surplus, on an average time Of credit
not to exceed six months. To provide for
the security for the issuance OF such emer-
| gency notes the Secretary should be per-
mitted to peceive as collateral the CONNER
| cal notes taken and indorsed by the national
clearing house bank to the amount OF 65 to
70 Der cent OF the par value thereof These
notes would be daily maturing and other
notes could be substituted in their place. IL
necessary II 10 were important that the amount
Of credit should not be reduced before the ex =
piration OF a six months credit.
This credit in the form OF bank notes would
AFFORD great relief to the mercantile interests
OF the country. as IL would enable the com
mercial banks to make liquid large amount
OF their resources. the same as now obtains in
England. France and Germany.
| The plan IL IL held would AFFORD the mer-
camille and industrial interests equal OppOr-
tunities to those that now obtain in banking
circles broad, and at the same time would
do much to prevent the congestion OF credits
and abnormally high rate Of interest. The
utilization of commercial credits in the form
OF business paper is now withheld from banks
for lack OF adequate facilities. which IL great
drawback to the business growth OF the cOun-
try. and this plan OF advancing national
bank notes to the national clearing house
bank would be a great help in furnishing 8
supply Of currency needed to move the crops
The opportunity might also be embraced by
foreign banks to send here large sums OF
money to be invested in business paper as Il
would be guaranteed by the Endorsement OF
| two good banks. aside from the sOlvency OF
| the maker OF the note. Security would be 10
| the maker OF the note. the bank which first
discounted the same. and the last purchaser
and guarantor. the national clearing house
bank.
This form OF security is regarded aVorAbly
| not only here but abroad, as il Ia similar tc
that accepted by the Bank OF France and the
Imperial Bank OF Germany, and under theiI
banking law such collateral Is deemed amply
safe for the Issuance Of emergency bank notes
Il is not generally expected that what ar,
known as commercial banks would make In
vestments in stocks and bonds. as they prefer
loans on business paper that natures at shor
intervals and furnishes regularly reliable 10
come to meet the demand Of depositors.
WASHINGTON, JaDuary4. 4. TUR0or
|