The Birmingham age-herald., 1913-05-01
Government Depositaries
Must Pay Interest at Rate
of 2 Per Cent After
June |
TEN MILLION DOLLAR
DEPOSIT INCREASE
IN NATIONAL BANKS
Indications Are That Secretary Me-
Adoo Intends to Release Still More
Surplus Money from Treasury
Yaults--Little Resistance
Expected

Washington, April so.--The fiscal sya-
tenn of the United States governing depos-
its of federal funds In national banks was
revolutionized today BY secretary Nc
Adoo of the treasury department with an
announcement that all government depos-
itaries, whether active or inactive. would
be required to pay interest at the rate
Of per cent per annum beginning June l
upon deposits Of the government
simultaneously with this action ths
Secretary authorized an immediate in-
crease Of Sl0,o0000o ia government de-
posits in the national banks. making the
total $o2,649s6i, from which the federal
treasury will earn. under the new interest
order, So5S,00o annually. There are indi-
cations that Secretary McAdoe intends to
release still more surplus money from
the treasury vaults aud place it IN gener-
al circulation through increased deposits
with the national banks. In statement
to eight he said:
With he banks paving interest on gov
err % deposits the Secretary may he
iuf N keeping larger balances in the
Ia al banks thereby Increasing tho
Ie of money in circulation and to
extent reducing the amount locked
in the treasury
Change in Securities
Mr.. MeAdoo also announced radical
change in the character Of securities
which the treasury department would ac-
oept for government deposits Instead af
requiring that the national banks secure
ftaa
States or provincial government bonds.
they viii be allowed IN fptufs to aeoofe
20 Der cent With government bonds sne
the remaining 30 per cent with high CLASS
state, city and county bonds. aeeeptabla
TO the Secretary Of the Treasury to -
taken as security at rs per cent Of their
market value. but not to exceed par
This is the first time in the history thar
the treasury department has called upon
the banks to pay interest on what ara
known as active deposits or accepted ex-
oept in periods of financial stress securi-
ty other than government bonds Ae-
tive depositarles are those which con-
duct a checking account for the govern
ment, cashing checks of the disbursing
offices and replenlshing their authorized
government deposits from customs and
internal revenue deposited with them.
There are 300 inactive depositaries. each
holding $1,000 of government funds Upon
these deposits which are not disturbed by
checking accounts, the government has
drawn per cent interest for the past fvs
years. These are tie only government
accounts which ever have earned inter-
est For years there has been agitation
In nd oftt af 4 taa l7o
tional banks interest on their government
deposits This invariably has been re-
sisted by previous administrations on the
theory that the banks with active ac-
counts performed much clerical work for
the government The House COMMITTEES
on expenditures in the treasury depart
ment at the last session Investigated the
question and recommended that the Seer
retary of the Treasury he required to
charge interest for the use Of the govern
ment's money.
Little Resistance Expected
Secretary McAdoo tonight declared he
die not anticipate any serious resistance
on the part of the banks to the new pol
lev If any bank was disposed to sur
render its account by reason of the order.
he said there were many Others willing
to take it up.
The per cent interest charge will be
based upon the average monthly balances
Of the governments account in each de-
positary, payable January ] and July |
of each year.
The sio,ooo,ooo today ordered trans
ferred from the treasury vaults TO the
national banks will be distributed over
the country.
The free balance in the general fund.
including money IN the Philippine treas
urv and IN the national bank depesitaries
amounted at the beginning Of husiiiess
today to slii. i.o25,263 or this. s727gi ,4o5.
which Will now be increased by $1,000
0o0, constituted nbney lying idle I'm the
vaults of the treasury or sub-treasuries.
Treasury experts estimate tlIat the miH-
imnm upon which the government can
transact its daily business is Si5,000.f 600 and
that substantial rortion Of the working
balance could with ease be deposited.