The Birmingham age-herald. [volume] (Birmingham, Ala.) 1902-1950, 1912-11-17

this is proven over and over by the ex-
perience of all commercial nations.
The volume of such notes or credits
in banks expands or contracts with the
varying activity of trade, and bank
notes should be predcated upon such
assets-the best of assets--and expand
when business activity and the public
welfare call for their use on the other
hand, contract and disappear when
their service is no longer required.
When a bank possesses ample capital
and surplus, is replete with commercial
assets representing the best names and
best credit-just such assets as the
bank was created to handle-and yet
cannot obtain currency to satisfy the
demands of its customers, except by
buying gold abroad at a premium and
importing the same, the trouble is 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 consequent losses
rests upon Congress and the public
Indifference, which fails to inspire ac-
ton by Congress. What other nations
have proven as to currency based upon
commercial assets we should incorpo-
rate into our law.
Market for Commercial Paper
Third-There should be market for
commercial paper available to all banks.
Interior banks may rediscount their
notes with correspondents in metropol-
itan cehters, but banks in our larger
cities have little recourse except in
foreign countries There should be n
central institution, under government
control, where short-time commercial
paper or loans that are good beyond
peradventure can be discounted and
the proceeds, IL need be, received in
banknote currency. Such a resource
does not exist now. 1t would afford
business necessary relief and avoid n
money stringency with its resulting
loss to all classes. capitalistic and
manualistic alike.
How Clearing Houses Stop Panics
Congress having neglected TO provide
such currency. the clearing houses
of the country have sought to meet and
have succeeded in meeting crises sue
cessfully, by combining their credit and
responsibility in the form of clearing
house certificates. In New York and
some other large cities clearing house
certificates are issued in denominations
of $4,000 and mutiples thereof. Such
certificates are good only in the hands
OF member banks, and are disable only
in settlement of debit balances at the
clearing house In other cases clearing
house certificates have been issued in
the form and 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.
| The first described certificates were
not subject to tax, but the latter were
CLEARLY subject to the 10 per cent tax
| imposed by Congress, which was de-
signed to tax state bank circulation
out of existence, and incidentally in
duee state banks to come into the ma
uonal system. The emergency, howev-
err which called such certificates into
use, was so great that the government,
| with full knowledge and record avail
able, has in no instance made any at
tempt TO enforce the 10 per cent tax.
The useful purpose served by such GER
! tincates and the good accomplished
were proclaimed by all
These certificates so used are simply
a form of asset currency. or the best
OF reasons the government neglected
= enforce the penalties provided by
law. although the violation of the law
was Migrant, and yet, strangest of all,
With this object lesson borne in upon
them with almost crushing emphasis.
the government neglects to provide for
currency, within the law, similar in
| character. but superior in efficacy
The need of a proper and flexible cur
rency was well illustrated by the expert
ence of the country in 1898. The great
protection which such currency would
afford to the country generally and to
every individual, by the protection OF