Year: 1874




BHL-AN0THER INTERPRETATION.


Russell Sage, President of the Pacific Mail
and Panama said that the effect of the bill would be
good. While IL might not be all that could have been
desired yet the provisions in the main adapted 10
the wants Of the community. The passage Of the act
would have the effect OF restoring confidence to the COM
munity at large. The uncertainty attending the vol
ume OF the currency, heretofore diminished
or increased at the pleasure Of the Sec.
retary Of the Treasury, had had most
bauefu effect upon the aud trade Of the conn
try. The fixing Of the currency at t3s2.Oo0oO would
restore stability the operations OF trade and enable
dealers operate in future without the uncertainty and
anxiety that had hampered business. When asked
whether he did not believe that the five per cent re-
deeming OF the bill would promote contraction,
Mr. Sage said that at first sight this would seem to DO
the case but he believed that the tendency OF the act
would be to the volume OF the currency and
flood the channels Of business, now clogged and OBJ
suucted, with q circulation which was bound to be
beneficial.


A CONTRACTION VIEW.


A prominent Broadst. broker who declined to allow
his name TO used snayzed the finance act and un-
hestangly pronounced IL contraction measure OF the
most marked character Dwelling particularly on
that clause which provides that the banks shall keep
five per OF In the Treasury TO redeem their
circulation he said that this would contract in the most
serious manner The country banks could i'll afford to





would be almost impossible for the country banks to
keep out their circulation For example. the Treasury
s made the redeeming agent OF the National bank cir
cuation. The expense Of this redemption Is borne by
the individual banks. Now. then, suppose that bank
in interior discounts the paper OF some of its Gus
toners makes loan upon collateral security in the
shape of railroad bonds stocks, the bills which it
gives out are s own National bank notes. As
ceived by the dealer they Immediately put IN cou-
lation in the regular transaction OF his business. What
Is the result Almost immediately they arrive at the
redeeming point, where they are Immediately ex'
changed for the legal tenders n the five cent reserve
They arc done up in packages and are sent back to
the respective banks The process OF accommoda-
| ton Is repeated; the National bank notes are
again redeemed by legal tenders and finally
the bank IL loaded down with securities and discounted
paper but no legal tenders. Tney have reached that
point they afraid to venture more for they
discount more paper, make more loans, and pay out
their National bank notes they stand Oh the ortk OF
run for every additional note thus paid ont becomes
| liability which they cannot meet. True, they have
securities bnt where in the interior can
! they borrow money securities at
| moments notice as they do IN WaIisti
Money operations in the interior require time and
thought and are not made IN hurry a. In New-fork
The only remedy for bank thus loaded down with its
own notes. discounted paper, and securities is TO
shut down on loans and discounts and when loans and
discounts are thus stopped there virtual contrac-
tion n addition TO which trade and commerce IL ham
pered dealers obliged 10 succumb TO the pressure
Now then out of the 200 National Bank crcul
ton present, the country banks Will be required 10
take $243oOOO0. How many OF them are able TO meet
their share remains to be The fact that they
Obliged 10 the cost OF redemption will Increase tho
volume presented for redemption, aud the true condi'
on OF the banks OF the country will then be II
absurd suppose that this act more or less
| than II rigid contraction measure, haSIDS the most
I serious prospective results.