Evening star. [volume] (Washington, D.C.) 1854-1972, 1908-02-10
TO PREVENT DISASTER
Senator AIdrich Urges His
Financial Bill.
CURRENCY IN EMERGENCY
Proposed Issue Of $500, 600, 900 in
National Bank Notes.
APPROVED SECURITY NEEDED
Plan Patterned on That Of the Ger
man Observation-Disclosures OF
the Finance Committee.
CURRENCY IN EMERGENCY
APPROVED SECURITY NEEDED

Senator Aldrich addressed the Senate AT
length this afternoon in support OF DE
bill reported by the finance committee 70
provide against possible financial str1n-
gency by supplying an adequate Issue Oh
national bank notes secured by MUNICIPAL
state and railroad bonds. The speech was
an exhaustive discourse upon the CHAR
acteristics Of financial crises ana the
means adopted by the countries OF the
world to avoid disaster. After referring
to the experience in this country in last
October and the measures adopted by the
Treasury and the leading financial fnstitu-
tons Of New York. whereby collapse was
averted. Senator Aldrich continued:
1.-The committee. after full consideration.
felt that IT was safer to follow, In the
form OF legislation they should recon-
mend. the experience Of the great com
mercial nations which have found II neces.
sary to provide means to meet or pIesen.
panic conditions by the extension OF note
issues under different restrictions ana
conditions from those imposed on Ordinary
issues.
German Governments Plan.
1.-THE German government gives ths
Imperial Bank Of Germany. which Is I'M
der the direct control OF the imper,ai
government. the practical monopoly OF
the bank note issues in that country
The Imperial Bank has authority 70 -.
sue an arbitrary amount. thSOU.uO OF
notes not covered by specie. A further
issue is authorized equal to the amount
Of specie held. 4 still further amount
may be issued subject to tax OF per
cent per annum. the average interest,"
charge in Germany being less tnan tnis
0ddifi0nal
notes specie must be held to the extent
of one-third of the amount and GOOD oiIs
of exchange against the remaining !wo-
thirds. In recent years and eApeciait9
during the past year the privilege OF IN
creased issues under the 8 per cent pro-
vision has been freely used
'The plan for additional notes which
the committee recommend for your aeop-
ton is substantially the plan OF the I'M
perial Bank of Germany. with q change
in class of securities required ana Q
change in the rate Of taxation In lis
general features the plan of note Issues
adopted by the German law OF 1919 iol.
lowed the English bank act Of 1874. but
ever. by adding the provisions for note
expansion that ] have explained.
1.-THE committee on hnaneA believed that
the example of Germany was the Setest
precedent for them to follow. and the one
most likely to successfully answer eur
requirement for a temporary emergency
note issue, for a currency which would
not be permanent in its character and
which would add no new elements to OUT
somewhat complicated currency scnsms. .
the bill which they have reported AngWeFs
these requirements.
Provisions Of the Bill.
cit provides for a possible issue in
emergencies OF $500. .Oo0 Of national
bank notes, redeemable by the United
States in lawful money upon presentation
at the Treasury. The notes will be iden-
teal in character and tenor with the
national bank notes secured BY the de-
post Of United States bonds. They are
to be issued to any applying associatien
II. IN the judgment Of the Secretary OF
the Treasury, business conditions in the
particular locality Of the bank demand
additional circulation. For tho security
Of the government the banks are required
to deposit in the Treasury state. municipal
or first-class railroad bonds, Of q char
acter and in amount satisfactory to the
Secretary Of the Treasury. Upon state
and municipal bonds the bank is entitled
to receive notes TO the extent Of 80 per
cent Of their value. and upon authorized
railroad bonds Is per cent Of their value.
Notes for the entire amount Of the
issue are to be prepared at once and de,
nearest the places of business OF the
different banks. 1t is made the duty Of
the Secretary of the Treasury to make
without delay an examination Of the Sc
curities which might be available for
as would be acceptable to the govern
ment for this purpose. The notes are to
be distributed by the Secretary eQuitably
among the banking associations In the
several states. upon the basis OF the pro-
,fnh f,n pVnfv a ivo6 no nj -
capital and surplus Of each state bears
to the total capital and surplus Of all
the banking associa tons OF the United
States. These notes are to be taxed one
half per cent monthly or 6 per cent per
annum and can be retired at any time
upon the deposit Of lawful money or ma
tional bank notes.
Security Required.
"The bill authorizes the Secretary OF
the Treasury to receive any legally au-
thorized bonds issued by any city. town,
county. or other legally constituted mu-
nicipality or district in the United States
which has been in existence for a period
OF ten years. and which for a period Of
ten years previous to such deposit has
not defaulted in the payment Of any
part o. either principal or interest Of any
funded debt authorized to be contracted
by 1t and whose net FUNDED indebtedness
does not exceed 10 per cent Of the valua-
ton Of it's taxable property. to be ascer-
tanned by the last preceding valuation
of property for the assessment Of taxes.
THE problem before the committees was
to find some simple method Of remedy ana
prevention that was merely an extension
or supplement to the existing system and
that could be provided through the use
of existing machinery. The system Of
issue and redemption, which has existed
for forty years. is continued by the terms
Of this bill. The currency Is intended for
temporary use only and not to be re-
tanned in general circulation, and we have
made the most careful provisions for its
enforced retirement when not needed.
The notes to be issued are nominally ma
tional bank notes, but they are in sub
stance national currency Of the United
States. issued through the agencies OF the
national banks.
1.-The remedy We provide Is simple,
prompt and efficient At any time within
forty-eight hours, II an emergency re-
quires it, $500 GOO, 600 OF new money can
be put into the channels of trade to allay
public excitement and to meet extraordi-
nary demands.
THE committee believe that this great
fund. placed by the government at the