New-York tribune., 1908-01-09
THE 4LDRICH BILL.

The ounce of prevention is entirely want
ing in the provisions of the Aldrich BILL 1t seeks
to mitigate crisis after the crisis has arisen.
The national bank system was created during
the Civil War and state bank circulation was
taxed out of existence for the double purpose
of making a market for the governments bonds
and basing thereupon currency for popular
use. The government derived great advantage
then from the sale of its bonds and continues
TO derive great advantage from the same
policy The recent issue of Panama IS netted
the government approximately 104 because the
bonds are available for bank circulation. Com
pairing these Is with British conSolS and Ger
man imperial 3s, they would not. as an invest
ment. have realized more than IS. The differ
ence between 104 and - measures the advan-
tage which the government, E.. the taxpayers.
continues TO realize from the policy of a govern
ment bondsecured currency.
1t is now proposed to include other bonds,
what may be characterized savings bank in
vestment bonds, as basis for banknotes. This
would give to the bonds approved for such pur-
pose a fictitious vaue-one in excess of their
usual investment value-measurably the same
that we have seen attaches to United States
bonds: but this enhanced value would not
inure to the benefit of the goyernment-that is
to the people generally-but to those who had
such bonds for sale. Were this measure law,
banks depositing such approved bonds with the
Treasury would receive 40 per cent of their
value in currency. subject to tax at the rate
of per cent per annum. That is to say in
a currency famine produced by the boarding
of money or otherwise, a bank could invest
100000 in such bonds, deposit the same and
receive $4,000 in currency. A bank would
lock up $4,000 of its own money by such a
transaction and be less able TO serve the public
n WHY Should aI DI<S
of discount and deposit be driven to make saw
ings bank investments? Possibly banks in the
larger cities could borrow or hire bonds for
such q purpose Are not banks in all sections
of the country entitled to the same considera-
ton? Banks in the rural districts could not af-
ford TO own such bonds; neither could they bor
row them.
Why this discrimination against commercial
paper? The principal function of national
banks is the discounting of commercial paper
and dealing in foreign and domestic exchange
Outside of the City of New York and possibly
two or three other cities. where a real call
money market exists the banks of the country
conduct their business upon the basis Of the
maturity of their commercial obligations. With
the proceeds of their maturing notes they meet
and supply the current demands of their Gus
toners. BY banking foresight they forecast
future demands and arrange their maturing
obligations TO meet the same. This is the
principle upon which banks of discount and de-
poSit are conducted.
The convertibility of bonds depends upon
their market value, and in crisis they have
no market value, except at great sacrifice. Com
mercial paper, with due date, must be paid to
avoid insolvency. and banking experience shows
that there is better collateral than good
mercial paper. Why should not the notes of
the farmers, mechanics merchants manufact-
urers, importers, the great army that rnpre-
sents the Drawn and brain of our industries,
notes that have been approved and accepted by
the banks-why should not these notes, in
dOrsed by the banks be received as collateral
for the proposed currency, instead of coercing
banks to purchase bonds which in the ordi-
nary conduct of their business they would not
purchase? 1t is easily within the power of
Congress, many precedents pointing the way
to frame legislation that will make the natural
and normal investments of banks the basis for
circulation.