The Mankato free press. [volume] (Mankato, Blue Earth County, Minn.) 1879-1924, 1912-11-29
i. S. TREASURY AND I
BANKING BUSINESS
From Tuesdays Daily.

From Tuesdays Daily. .r.- a.
BY Franklin MacVeagh, Secretary
of the Treasury. i
No reform of our banking and
currency system can be adequate
which does not take the United
States treasury out Of the banking
business. We have become so ac-
customed to the banking operations
of the treasury that we have not
realized how it has developed into
powerful central bank. The treas
ury has greater power and greater
assets than the Bank of England,
which for years has been the insti-
tuition at the foundation of interna.
tional credit. The treasury is the
strongest bank in the world as re.
CARDS metallic reserves. It's enor-
nous store of the yellow metal is
not approached by that of any of
At one time the treasury was the
greatest note-issuing bank, and it
might become so again.
The Bank of England. regarded
throughout the world as the strong
NoN VI S'ii ihSiitulIouo, sup
ports the great structure of English
credit on gold reserve of less
than $200,e09.O00 Our treasury, in
addition to $1,000, 100000 of gold
held in trust against gold certif-
Gates, carries net gold surplus
varying from $2OO,OG9,0GO to $780,
000.0G0. Our treasury's hoard of idle
gold, in other words, would support
tnt hnn NIL Of
England.
When the independent treasury
system was established, the idea
was that all the funds of the gov
eminent should be stored in the
treasury vaults in the form of
money just as the medieval war
lords kept their treasures in strong
boxes. The independent treasury
system was established in trouble
some financial days, when the state
banks were not the safest places
for the deposit of money. The peO-
pie decided that the public funds
must be kept i'll government vaults
for safety
Railroads Gould Make Panic.
But in these days of well -organ-
lied national banks, conducting
eyes of the government, everyone
keeps his surplus funds in some
banks. Not only do private individ-
ualS and great corporations bank
their funds from day to day, but all
the municipalities and state govern
ments use the banks for the safe
keeping of their money. The ma
tional government alone holds to the
Of inn re
funds stored away in vaults. No
other great government does this.
in England, France. Germany and
other leading countries, government
funds are deposited in banks like
the funds of any other business.
Imagine the storm of Indignation
that would be aroused if the rail
roads of this country should insist
on being paid for transportation in
money, and then hoard this money
for weeks and months in strong
boxes. The gross receipts of our
railroads are in the neighborhood
of $4,000 100000 a year, if the rail-
roads boarded their receipts in
money for only four months they
ly a third of all the money now
ICuJdllH5 III illc COuHIly IL IHlo
money were taken out of the vaults
of the banks, it would mean such
panic as no country has ever
seen or ever will see.
The banks of the United States
have about $4,000, 100000 of depos-
it's on money foundation of ST.
5C0,O0O,OOO. The experience of the
leading banking countries is that
Il - ;nh; ha 1,,;1
ten-for-One against cash in hand. In
central banking centers like New
York and London larger metallic funds
are needed, because in these CEN
tiers are accumulated the basic
banking reserves. The New York
banks, for example keep about $780,
100000 cash reserves against $1,000
100000 deposits.
Loss of Cash Cuts Credit.
In this country with our rigid
laws fixing the minimum reserves
the banks must hold, any loss of
cash by the banks means an in
slant contraction of their loanins
power. If the banks of New York
and Chicago lose $10C,C00,C00 cash,
they must at once reduce their liza
bilities by 00,009,000. This means
tDaI lney must reduce ny all amount
their loans to the business COM
munity
With the volume of bank credit
moving in the reserve cities four
times as fast as the volume of
cash, and throughout the country
ten times as fast as the volume of
cash, it is plain that the machinery
of credit is extremely sensitive to
variations in the amount Of cash
held by the banks For this reason
an institution like the United
States treasury, alternately accum
ulating and disbursing many mil
lions of cash, is likely to create
widespread disturbance in the
money market.
The funds held by the great Eu
ropeln governments vary from $25,-
00e, O0G to $5O,Oc0,O0O. The coin, bull
lion and paper money held as assets
in the United States treasury dur
ing the present administration has
varied from $3O9,000,O00 to $780,
eco. In other words, nearly Onetenth
of all the money in the country is
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