New-York tribune., 1908-03-18
THE AMENDED ALDRICH BILL.

The action of the Senate Finance Committee
in striking out of the Aldrch bill the pro-
vision authorizing the use of railroad bonds as n
basis for circulation is probably the beginning
of the end Of that measure. The bill has stead
ily lost in public esteem, until it had to be
amended in order to retain reasonable chance
of getting through the Senate, and 1t will meet
stronger opposition in the House than 1t has
yet encountered. for there the full force of pub
lie opinion will be concentrated against its
vicious underlying principle.
The amendments TO the bill do not make it
any more acceptable 10 believers In currency re-
form. 1t is just as Objectionable in principle
TO base banknoteS On state, city and county ponds
as on railway bonds, and certain practical OBJ
jections 10 the bill merely Intensified by mar
rowing the list of securities on which it is pos
sible TO take out emergency circulation Mr.. Al
drich chairman of the Finance Committee, rec
ognlzed this in the report which he made to the
Senate yesterday, wherein he said:
The committee believed when the bill was re-
ported and now believes that it is desirable 10
have for these emergency notes as large an
amount as possible of available security.
The two great practical objections to the bill
were that most of the banks throughout the
country would have difficulty in obtaining bonds
In an emergency and that the purchase of bonds
by banks for circulation purposes would tend to
give them a fictitious value. Both these obJec-
tions are strengthened by reducing the available
supply of securities to one-thrd or onequarter
of what the bill originally provided. Railroad
bonds in this country amount to about S6oOo-
100000. Miscellaneous state, municipal and
local bonds make up total of only about ST.
25OOOOOGO OF both classes of these securities
together Senator Aldrich estimated there were
about 50 100000 available under the un-
amended terms of the act. If his estimate was
correct the elimination of railway bonds prob
ably leaves the total of securities available little
if auv greater than the total additional circula-
ton permtted-to wit, S5OO,OOO,0OO. II the
amount of available securities Is SO diminished
that practically all Of them would be required
by the banks in an emergency, then the difficulty
of the banks in getting them when needed would
be greatly increased and the tendency to initiate
their price greatly enhanced
Nor does the further amendment prohibiting
the retirement by national banks Of more than
100000 Of circulation in one month conform
To sound currency principles. The bill would
permit q large expansion of the banknote sup
ply and then improperly and arbitrarily restrict
its contraction. That is initiation pure and
simple An examination Of the weekly reports
of the German Bank shows how a really elastic
currency contracts unhindered by any imitation
st restrictions in response to a contraction in
business To go back no further than the last
few weeks. the German Bank reported a decrease
in circulation, February 10 February 10, of SlS,
100000; February II, "A decrease of S13.oOO,OOO; ;
February % decrease of $11,250,0OO; March
- an increase of S24,000,0O0, in response to a
business demand for quarterly settlements; ;
March @ a decrease of S10250oO0 and March
Is. decrease of S62JO0O0 The German Bank
circulation had been greatly expanded to meet
a strain on credit there corresponding to that
which brought ruin here. 1t is now contracting
at a weekly rate greater than the monthly rate
rlarmifted by the AlCrich bill.