The morning Astorian. [volume] (Astoria, Oregon) 1899-1930, 1908-03-14

upon which we may plume ourselves
as being in advance Of other nations,
but VIC have al least one humiliation
10 lessen scli-gloriiication. Our
banking sysetm Is the worst in the
civilized world,
The statesmen Of 1860 did not have
a clean slate to begin with. Govern
mcnt credit was then precarious and
needed support, and the temptation
10 use banking for this purpose prov
ed irresistible. Sound banking was
sacrificed 70 sustain the National
credi, when II was resolved that the
currency should be placed upon Gov
crnmcnt bonds, which. in the opinion
Of Mr.. Gage. ex-Secretary Of the
Treasury, resulted In giving a mark
ctabic value 70 these twenty per cent
higher than they would have other
wise reached
The result Is that our banking capi-
tai is diverted 10 the extent OF 81 ,2S0,-
oo0.0o0 invested in Government, bonds
by the banks, because currency issued
must be based upon an equal amount
Of these bonds deposited in the Treas
ury A reserve Of twenty-five per
cent against deposits must be kept in
cash and reserve OF five per cent
agains, circulation kept in Washing
ton Tor note redemption Mr.. Fowler
the able Chairman OF the Finance
Committee in the House, states that
the loss caused by this reaches $780,.
100000 annually Banking capital in
France, Germany, England Scotland,
Canada, etc. escapes this loss, because
their currency Is based upon the as
sets OF the banks. None OF their cap
ital Is locked up in bonds as security
for notes. Banks keep the reserves
which experience proves to be neces'
sary.
This. then. is clear-~that banks in
other countries start with great adj
van ,age over ours. which are heavily
handicapped,
There is another important advan-
tagc these banks possess over ours,
Currency based upon the assets OF
banks rests chiefly upon trade bills.
In the nature OF things, the bank is
called upon 10 issue or redeem notes
just as business requires. Business
brisk. more notes are needed, and
they remain in circulation; business
dull, less notes needed, and some are
promptly returned TO the banks for
redemption, All is elastic and auto
matte.
The law in European nations does
not restrict the issue OF currency
equal to the resources OF the banks
except that when the Bank OF Eng
land was reorganized in 1874 the Gov
crnment owed il eleven million pounds
and ii was agreed that the Bank
might issue uncovered notes to this
amount, but any issued beyond this
should be covered by gold. The
practice in emergencies il for tht
Government to allow the Bank te
disregard this and to issue additiona
currency uncovered, but the Banl
must at all times redeem notes II
gold upon presentation. In ordinar,
times the amount OF notes issued b,
the banks does not exceed much, i
any, one-half the amount issuable
Canada's average is fifty-four cent
Scotland's is less.
We hear the reply, "All this woult
be great improvement upon ou'
system, except that Our bank note'
have the bonds of the Government
behind them. the best of all securities
Our people would never agree to ac
ccpt bank notes without this. Othe
nations have not this undoubted sec
urity."
Let us look into this. Take Can
ada as an example, which has
nroper manner of banking modelet
after the Scotch system. CANADIAN
banks issue notes based upon assets
These are secured in the following
manner:
First. They are first lien upoi
all the resources of the bank.
Second Every stockholder is Il
able to an amount equal to the pa
+, value Of his stock to meet the debt
Of the bank-upon this the note'
have also a first lien.
Third. The Government taxed tn
banks five per cent Of their averag