The times dispatch. [volume] (Richmond, Va.) 1903-1914, 1910-06-11
our UNCERTAIN BANK NOTES


OUR UNCERTAIN BANK NOTES.
Contrary to general expectations,
the session of Congress now fortu-
nately drawing to a close has been
without financial legislation The re-
port of the Monetary Commission has
not appeared; Senator Aldrich's bill
for the establishment of Central
sank mas not been given to the pub
lie; not a single bill regulating the
| currency has received the approval or
| Congress-
on general principles, the absence OF
financial Legislation on the part of a
Republican Congress is Ciod-send to
the country, but it begins to look as
though we may expect trouble unless
| Congress speedily enacts some finan-
! cial legislation. Legislation is espe-
cially needed to regulate the output ot
national bank notes. for this is the
| greatest permanent source of danger
to our monetary system, and is, at
| times, growing menace to the sta
| bility of our currency
/ Under the broad terms of the Ma
tional Banking Act, the banks have
| been availing themselves of their right
| to issue notes on the security OF bonds
deposited with the government. These
bonds are generally sold for par, and
| though they bear very low rate OF
interest they bring the banks some
| return on the full amount of their
| money deposited with the government
| while the national bank notes issued
the bonds deposited, enable them to
trade very probably. a bank, for in
stance, deposits $4,000 with the gov
eminent and receives 2 per cent bonds
therefor on these bonds the bank re-
ceived annually but $4,000, yet it can
ness 10000 in bank notes which ii
can use as a loan funu and on which
1t can normally make per cent. the
year.
This is too good an investment for
the banks to neglect, and consequent
iy almost every bank in the country is
issuing notes to the limit of its de-
posts with the government At the
end of the last fiscal year the total
outstanding national bank notes
amounted to something over $685., 000.-
600, or a very considerable part of our
circulating currency. Yet we are in
formed by the New York Times that
during the last few months the banks
have issued S24,oO0.oO0 additional
notes.
According to the theory on which
the national banks are authorized To
issue notes. no menace to the finances
OF the country should result from this
use of their right of issue, but. un-
fortunately, the theory does not work
well. OF course, the banks are given
the right of issue to afford the gov
eminent steady market for its
avail themselves Of this right except
when the country stands in need of
more money. There is no such need
at present. for the actual circulation
OF bank notes has decreased, while
their total amount had increased. Con
= | t.
ing it's own purpose in framing the
law and is endangering the entire ma
tional currency by allowing so great
a volume of national bank notes to be
! issued.
, The outcome of the situation is
: doubtful, as the Treasury is running
low and the demands for money are
most uncertain, yet it is easy to see
that unless some new regulations be
adopted, the national bank notes may
t play havoc with financial security
] suppose, for instance, Congress should
De compelled, as is not unlikely, to
/ issue new bonds for the running ex-
penses of government in addition tc
the regular Panama bonds. Clearly
the banks alone would take the low.
interest bonds and they would onl,
take them in order to issue nationa
notes Tor them. In this way the vol.
, lme OF national bank notes would
steadily Increase and would Inevitably
depreciate in value for Gresham's Law
always operates In the same way, ii
q serious panic occurred, or if the
government engaged in war, govern
ment bonds would certainly fall below
par and might easily fall below 90
In such case the bank notes, ISSUED
on 30 per cent, Of the face value OF
government bonds, would not be Sc.
cured, and would, in depreclating. up.
set the entire money market.
The whole subject is an intricate one
: and the solution of the question is b,
no means easy, but there are rock.
ahead unless the government regu.
lates the issue of bank notes, not ac.
cording to the whims of the banks
but according to the demands of trade
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= SIXTY-NlINUTE COURTsHIP.
/, young man drifted into Washing
b ton Thursday night via the Pennsyl-
Vania tie-route, with his wife beside