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THE JEFFERSONIAN
Vol. 111. No. 4.
‘Bankers Trame Currency Bill Tor Congress
Chicago, January 19. —The resolution com
mittee of the currency commission of the
American Bankers’ Association tonight issued
a full report of yesterday’s meeting of the
commission, at which the various asset cur
rency plans now before congress were dis
cussed and rejected. The report, which is a
lengthy document, summarizes the commis
sion’s objections to the Aldrich bill and the
present Fowler bill, and then presents a bill
in thirteen sections "which the commission,
with the backing of the association, will rec
ommend to congress. The Aldrich bill is de
clared to be 11 impracticable, unwise and fi
nancially unsound.” The Fowler bill, accord
ing to the report, (1 introduces schemes so far
reaching in their scope and touching so many
-collateral interests not germane to the real
solution of our currency difficulties, that we
believe its passage would unsettle rather than
improve financial conditions.”
Objections to Aldrich Bill.
Six principal objections are urged against
the Aldrich bill. The first asserts that the
measure would overthrow; I ‘a safe system of
note issues which has been enjoyed since the
foundation of the United States monetary
system,” and the proposed law is called a
‘ 1 step backwards to the conditions which gave
rise to the ‘wild-cat’ currency before the
Civil War.
“It may be the entering wedge to the ac
ceptance of undesirable bonds as security for
note issues,” says the commission. “There
are recent examples in the laws of New York
state legalizing such bonds for savings banks. ’ ’
In the second place, it is urged that the
bill would cripple the lending power of banks
by largely decreasing the banks’ reserves in
lawful money in order that notes might be
issued.
If the bonds behind these notes were bor
rowed instead of purchased, it would have the
effect of increasing the liabilities of the
banks,” adds the report, “which is wrong in
principle. ’ ’
In the third place, it is said that the bill
would tend to create a fictitious bond market
and thus lead municipalities to enlarge their
obligations.
The fourth objection is that the technical
requirements which the bill provides must be
observed before notes can be issued would
entail “such delays as to make the notes
available only after the emergency had
passed. ’ ’
The fifth objection has. to do with the tax
ing provisions of the Aldrich bill. These sec
tions, it is declared, would result in the bank’s
suffering of net loss of 2 per cent on the
A Weekly Paper Edited by THOS. E. WATSON and J. D. WATSON.
Atlanta, Ga., Thursday, January 23, 1908.
notes issued, whether they were taken out
aj •snoji •ujluj 5 Oyj -owed bonds.
£Qi3ticg"[ uu f er t s that the cost of
taking out tne notes would be paid ultimately
by the needy borrower who would be bur
dened by increased interest charges at a time
of year, usually in the autumn, when he can
ill afford them.
Situation Summed Up.
After some general criticism of the Fowler
bill, the commission sums up the situation as
follows:
11 Let us not be unmindful of the fact that
in response to the demands of the people, un
sound and radical legislation has had its
precedents in our monetary history. After
the panic of 1873, congress passed a bill in
creasing greenbacks by $44,000,000, a project
which was wisely vetoed by President Grant.
After the panic of 1893, congress approved
a measure providing for the coinage of $55,-
000,000 in silver, which was vetoed by Presi
dent Cleveland. In these two instances we
have had examples of hasty measures follow
ing financial panics, and in the two bills here
in discussed we have what appears to us to
be similarly unwise measures following the
recent crisis.”
The solution proposed by the commission
differs from the first Fowler bill, which was
based upon principles approved by the con
vention of the American Bankers’ Association
at Atlantic City, September 23, 1907, in that
the holder of a credit note, “instead of be
ing a general credit, shall be a prior lien on
the assets of the issuing bank.” 'The se
curity provided by pledging the whole- of the
assets of a bank instead of only a portion of
them would afford more protection to the note
holder. It is also said that the addition
of the plan would insure “an ample supply
of currency to the public; relief from the dis
turbed commercial conditions, suclUas those
through which we recently passed; and finally
the certain retirement of the notes when they
have fulfilled their purpose.”
Bill Proposed by Commission.
The bill proposed by the commission is as
follows:
“Be it enacted by the Senate and House of
Representatives of the United States of
America, in congress assembled, that from
and after the passage of this act, any national
banking association which has been in busi
ness for one year, and has a surplus fund
equal to 20 percentum of its capital, may take
out for issue and circulation national bank
notes without a deposit of United States
bonds as now provided by law. Said notes
shall be known as ‘national bank guaranteed
credit notes.’ Said notes shall be issued in
such form and denominations and under such
rules and regulations as the comptroller of
the currency shall fix. The amount of paid
notes so taken out by any , national banking
association may equal to 40 percentum of the
amount of its national bank notes at any
time outstanding, which are secured by the
deposit of government bonds, but shall not
exceed in amount 25 percentum of its capital,
provided, however, that if at any time in the
future, the present proportion of the total
outstanding unmatured United States bonds
of the total capitalization of all national bank
ing associations in active operation shall di
minish, then the authorized issue of national
bank guaranteed credit notes shall be increas
ed to a correspondingly greater percentage of
the bond received notes.
“Sec. 2. That every national banking as
sociation taking out national bank guaranteed
credit notes in accordance with the foregoing
section, shall pay to the treasurer of the
United States in the months of January and
July, a tax of 1 1-4 percentum upon the aver
age amount of such notes in circulation dur
ing the preceding half year.
“Sec. 3. That any national banking asso
ciation- which has taken out national bank
guaranteed credit notes in accordance with
the provisions of section 1, of this act, may
take out a further amount of national bank
guaranteed credit notes equal to 12 1-2 per
eentum of its capital, but it shall pay to the
treasurer of the United States in the months
of January and July a tax of 2 1-2 percentum
upon the average amount of such notes in cir
culation during the preceding half year.
Total Amount of Notes.
“Sec. 4. That the total amount of bank
notes issued by any national banking asso
ciation, including bank guaranteed credit notes
taken out in accordance with the provisions
of this act, shall not exceed the amount of its
paid-up capital.
“See. 5. That any national banking asso
ciation situated and doing business in any
central reserve city, or a reserve city, shall
at all times have on hand in lawful money
of the United States an amount equal to at
least 25 percentum of its national bank guar
anteed credit notes in circulation; and every
other national banking association shall at all
times have on hand in lawful money of the
United States an amount equal to at least 15
percentum of its guaranteed credit notes in
circulation; provided, hovrever, that any na
tional banking association situated and doing
business in a reserve city may keep one-half
of its lawful money reserve on deposit in a
national bank in a central reserve city, or in
(Continued on Page Five.)
Price Five Cents.