Omaha daily bee., 1909-10-17

cities, in order TO maintain the reserve of
legal tender money required by law, are
forced to exchange national bank notes for
legal tenders. But this kline OF redemption
really amounts to no redemption at all. -
II arises from no difficulty the banks en-
counter to circulate the notes, but from
the requirements of the law.
The s222. 291, $40 of bank notes which Mr.,
Hepburn says were last year deposited in
the treasury for redemption by the New
York banks were at once forwarded to the
banks which issued them and by them i'm
medistely returned to circulation the same
as any other money. They were out of
circulation for no longer time that gold or
any other currency in process of transpor-
tation from place to place.
The weakness. in our banking system
arises, as an able English writer expresses
It, not so much from the lack OF elastic
currency, as from inelastic banking.
Our banking law concerning reserves is
ineffective and weak as we'll. as ridiculous.
No means are provided for concentrating
resources and making them useful in times
OF stress and panic; on the contrary, the
arrangement is just the opposite and tends
10 make every bank a panic breeder in
stead Of panic breaker.
While the actual money required to be
held on hand by every bank is ~insignifi-
cant for the protection Of depositors for
which 1t is intended, It is sufficient on
account OF the multiplicity Of banking to
take from circulation the larger part of our
circulating medium.
The absurdity of our reserve require
ments is shown in the necessity placed
upon the New York banks, as stated by Mr..
Hepburn, Of shipping many millions of na-
iona bank notes to Washington in order
to obtain the species of currency deslg-
mated as reserve money.
These banks may hold as reserve silver
and silver certificates which are redeem
able in nothing, and yet national ban
notes.-the safest Of our currencies. be-
cause redeemable at the United States
treasury and protected dollar for dollar
by national security as well as the CAPT
tai Of the issuing banks-must be ex-
changed for other money merely for a
technical difference between them indi.
eating a use for the superior currency
almost forgotten in actual business trans
actlons-that of legal tender.
The subject OF bank reserves was fully
treated in an article by the writer which
was published in the March, 1908, issue OF
the Annals of the American Academy OF
Political and Social Science and win not
receive here any further extended notice.
The emergency circulation suggested in
that paper and advocated by him for many
years for the prevention Of panics found
practical legislative expression in the Aid
ich-Vreeland bill. which. Il may be re-
called, was vehemently opposed by all OF
the asset currency bankers
II not one dollar OF currency is ever Is
sued under that law it will only offer the
strongest evidence Of its sufficiency to full
fill the purpose intended.
With the support that II affords banks
in time Of panic win be more composed
and will not seek wildly TO strengthen their
reserves by calling in loans.
Mr.. Hepburn says: w already possess
a great central bank-the Treasury de-
partmsnt; it is the greatest bank Of de-
post IN the world"