Evening star. [volume] (Washington, D.C.) 1854-1972, 1913-04-10
Revised Currency Measure In
troduced in House by Rep
resentative Prouty.
AID THROUGH TREASURY
IN EMERGENCY PERIODS
Issue of Circulating Notes to Ma
tional Banks, Under Condi-
tions, as Safeguard.

To protect absolutely the country from
financial panics. to put over half bill
lion dollars of emergency currency in the
vaults of banks and to reconstruct Ger
tain features Of the currency scheme with
simplicity and ease. the first of the pro-
posed revised currency measures was
introduced into the House of Representa-
tives today by Representative Prouty of
Iowa. republican. He offers the bill
largely as a substitute FOR the system
to prevent panics In what is known az
the Aldrich plan and which Mr. Prouty
believes is too cumbersome for practical
purposes. Representative Prouty's theory
is that every bank in every community
should be in control of its own resources
without being dependent on money CEN
ters.
The Prouty bill provides that the con-
trOler Of the currency, under the direc-
ton of the Secretary of the Treasury,
may issue circulating notes to any ma
tional bank that has 20 per cent or
more surplus. and is in good. sound
financial condition. The notes are to be
equal in amount to 40 per cent Of the
capital stock and surplus of the bank.
They are to be kept in the vaults Of the
bank and must not be issued without the
express authority of the controller of the
currency. A fine Of $4,000 and an i'm
prisonment of ten years are specified as
the limit of penalty for nfractions Of
the proposed law.
Interest Provision.
For the privilege of issuing these notes
in an emergency the bank shall pay
interest to the government at the rate
of ) per cent a year for the first three
months, q per cent for the next three
months and 10 per cent thereafter. This
increasing rate is designed to cause
banks to call in such notes soon as
possible To redeem these notes a bank
must deposit in the United States Treas
ury the amount of actual currency cor
responding to the amount Of emergency
notes to be redeemed.
The government would guarantee this
emergency currency, even If the bank
issuing any of them should fail Repre-
sentative Prouty's figures show that the
interest would take care of any possible
failures.
In effect, according to the author of
the bill. there would never be another
panic. The national banks would have
over half a billion dollars of notes in
their vaults. all guaranteed by the United
States government, and when hard
times appeared on the horizon the con-
troller of the currency would give the
word to release all Or any part of it..
before the frightened depositors came
clamoring to the doors of closed banks.
1t is scheme on which Representative
Prouty has been working for several
months and is the fruit of many years of
study of political economy, science on
which he lectured for several years.
Measure Explained.
That the government would suffer no
loss lin guaranteeing this huge sum is
explained in detail by Representative
Prouty In statement to a Star reporter
There have been 525 failures of ma
tional banNs since the enactment of the
banking law of 1865 An analysis Of the
report Of the controller of the currency
shows that had this law been in force all
the time 1t would have required the fed
eral government to have put out for the
redemption of these notes 81, AZ, ,553 pro-
vided the full issue had been made by
all the failing banks. This is an average
of about $37 600 per year. AS there is now
about 81 053, ,OOOC of capital stock, the
amount of currency that could be issued
at the present time under this law would
be about $536 100000. One-tenth of / per
cent on this amount would yield to the
government $50, 600 or nearly twice as
much as would be required to stand the
pro rata loss.
''The showing since the panic of 1893 is
still much better. Had this law been i'm
effect since 1896. and all banks had is
sued the full amount of currency author
ized in my bill, the government would
have been required to put up only S191 80;
to protect this currency, an average of
a little less than S12OO0 i year, and the
interest even at the rate of 1 per cent
would produce about $4,000.
Reimbursement of Losses.
so it is perfectly apparent that the in
terest that would be paid by the banks
on this currency would many times reim
b,irse the federal government for any
losses it might sustain by reason of hav-
in; guaranteed this issue. OF course, un-
der this system the per cent of loss would
be very much reduced, as my figures are
all based on the failures OF all national
banks regardless of whether they had
surplus or were considered strong by the
controller 1t is perfectly apparent that
under this system there would be pracu-
cally no loss to the government, and 1T In
turn would receive large revenues should
the banks avail themselves of the benefits
of the law