The times dispatch. [volume] (Richmond, Va.) 1903-1914, 1912-11-17

OF all commercial nations.
The volume Of such notes or credits
In banks expands or contracts with
the varying activity Of trade. and
banknotes should be psedicatsd upon
such assets--the best Of assets-and
expand when business activity and the
public welfare call for their use: on
when the service 10 no longer required
When Q bank possesses ample capital
and surplus. II replste with commercial
assets representing the best names and
best credit-just such assets - the
bank was created to handle--and Yet
cannot obtain currency TO satisfy the
demand Of its customers. except by
buying gold abroad ~ . premium and
importing the same. the trouble u not
with the bank. but with the law. That
was the general condition which ex-
listed In 1907. and the responsibility
for that condition and conseQNeni
public indifference. which fails to in
spire action by Congress. What other
nations have proven a. to currency
based upon commercial assets we
should incorporate into our law.
Market Tor Conmere1al PaDes.
Third-There should DO q market
for commercial paper available to all
banks. Interior banks may redts-
count their notes with correspondents
In metropolitan centres. but banks
In our larger cities have little recourse
except In foreign countries. There
should be Q central institution. under
government control. where short-time
commercial paper or loans that are
good beyond peradventure can be dis
counted and the proceeds. IL need be.
received In banknote currency. Such
q recourse does not exist now. 1t
would afford business necessary re-
lief and avoid q money stringency with
its resulting loss to all classes. capi-
talistic and manualistic alike.
How Clearing Houses Stop Panles.
Congress having neglected to pro-
vide such Q currency. the clearing
houses Of the country have sought to
meet and have succeeded In meeting
crises successfully. by combining their
credit ana responsibility In the form
Of clearing house certificates. In New
York and some other large cities clear
Ing house certificates are issued in
denominations OF 5000 and muit!pies
thereof Such certificates are good
only In the hands OF member banks.
and are disable only In the settlement
Of debit balances at the clearing
house. In other cases clearing house
certificates have been issued In the
form ana size of current bank bills. In
amounts ranging from 81 upwards.
and in rare instances for fractional
parts OF a dollar. They were designed
TO. and did. circulate from hand to
hand as money.
not SUB ject to . tax. but the latter
ri tn hA MOI
cent tax imposed by Congress. which
was designed to tax State bank circu-
latiOn out Of existence. and incident
ally induce State banks to come into
the national system. The emergency.
how ever. which called such certificates
into use. was so great that the govern
ment. with full knowledge and record
evidence available, has In no instance
made any attempt to enforce the 10
per cent tai. The useful purpose
served by such certificates and the
good accomplished were proclaimed by
ALL
These certificates SO used are simply
form OF asset currency. For the
best OF reasons the government neg
lected to enforce the penalties provided
by law. although the violation Of law
was fragrant. and yet. strangest Of all.
with this object lesson borne IN upon
them with almost crushing emphasis.
the government negiects to provide
for Q currency. within the law. SINH
lar in character. nut superior in en-
cacy.
The need Of proper and hexible-cur-
rency was well illustrated by the ex-
periencs Of the country In 1888. The
great protection which such . cur
rency would afford to the country gen.
orally and to every individual. by tn.
protection Of values. whether 1t be
wage, salary, bonds or factory. was
wildly brought to the attention Of ali,
by the very general resort to cur
rency substitutes which obtained.
In 1893 the silver propaganda. In
favor Of the free coinage OF silver a.
the ratio Of l6 t. /. raised the fear
that tho country might 9. Oh = silver
basis and the standard OF values be all
upset accordingly; this fear gave I'M
due consequence to the Barring failure
and had the effect OF preventing an
early restoration Of confidence The
boarding Of gold. In anticipation Of a
possible premium. should the country
60 on . silver basis. was an incident
OF the situation and directly affected
the money supply.
The resulting stringency induced the
issuing OF Gearing mouse ceft1uco&eS
very generally In the smaller ~ well
- the larger cities OF the country.
and also the issuing Of certificates of
deposit and cashiers checks BY the
bankers In smounts e u, SS and $40.
designed 70 pass into general cirou-
lation - money. The monsy str1n-
Gency was thus relieved. the panic
overcome. and all such currency re-
tired within . short Deriod-not ex-
ceeding three or four months-without
the loss OF dollar.
lDAepenaeDee ~ MODey CentFe0.
The experience Of Columbia, 8. c..
was very illuminating In respect to
this subject. The bankers there were
unable to obtain currency from their
metropolitan correspondents, and
therefore issued clearing house certi-
fcates, which were used in paying the
farmers. moving their crops and the
transaction Of business generally in
that community. One Of their leading
bankers prepared statistics. showing
the amount Of currency which had
been brought into ColE mi ia By express
the previous year. to supply the crop
moving requirements Of the fall The