Democratic Sentinel, Volume 18, Number 48, Rensselaer, Jasper County, 14 December 1894 — ECKELS ON BANK ISSUE. [ARTICLE]

ECKELS ON BANK ISSUE.

HeDiscnssea Currency and the Defects and Limitations of Present System* The report of the Hon. James H. Eckels, Comptroller of the Currency, submitted to Congress, gives full information in regard to the organization, supervision, and liquidation of the national banks for the year ended Oct. 31, 1804. It shows that during this period but fifty banks were with a capital stock of $5,285,000, the smallest number chartered, as well as the minimum amount of capital, in any one year since 1879. Of these banks twenty-seven nro in the Northern and Eastern States, ton in the Southern States,and thirteen in the Western or trans-Mississippi division. On Oct. 31, 1894, the total number of national bunks in operation was 3,756, with an authorized capital stock of $672,671,305, represented by 7,955,076 shares of stock owned by 287,892 shareholders. On Oct. 2,1894, the date of their last re- i port of condition, the total resources of the banks were $3,473,922,055, of which their loans and discounts amounted to $2,007,122,191, and money of all kinds in bank, $422,428,192. Of their liabilities $1,728,418,819 represented individual de- ' posits, $334,121,082 surplus and net undivided profits, and $172,331,978 circulating notes outstanding. The total circulation of national banka on Oct. 31, 1894, amounted to $207,472,603, n net decrease during the year of $1,741,503 and a gross decrease of $8,614,864 in circulation secured by bonds. During the year seventy-nine banks, with an aggregate capital stock of $lO,475,000, passed out of the system by voluntary liquidation; twenty-one—including two which failed in 1893—with a capital stock of $2,770,000, became insolvent and were placed In charge of receivers. The feature of the Comptroller's report is his discussion of the currency question and the defects which are said to exist in the note-issuing powers vested in national banks. On this subject he says: No section of the law should be disturbed which cannot be materially Improved upon and no amendment engrafted unless such amendment will work out better results than flow from the existing order of things. For the present law It must be conceded It has been successful In every material feature, excepting In the matter of bank-note Issues, and here the failure has been a partial one. The notes Issued by the banks under governmental supervision have been uniform In appearance and under any and nil circumstances of the full face value which they purport to carry. They have possessed the flrst requisite of a good bunk note Issue—lmmediate convertibility Into coin' upon presentation. It Is probable that there could be no bettor plan for simply Insuring the note holder against loss than the present requirement of a deposit of bonds to secure n bank's circulation, but It Is equally certain, however, that n method could be devised, not less safe In this respect, and In addition thereto possessing that which Is essential and Is now wholly wanting—elasticity of Issue. The complaint, therefore, made against the present system Is that, lacking in elastlcy of Issue, it fulls to meet as fully as it ought the varying wants of the country’s trade and commerce. This defect must attach to every scheme for n currency Isued by the banks against a deposit of bonds, the market value of which fluctuates while the percentage of Issue, less than the value of the bonds granted the banks, remains unchanged. But serious as Is thin fault and retnrdfnl ns It Is to the business Interests of the country, any attempt to remedy It which should lose sight of or In any wise make less certain the present unquestioned credit and convertibility of the bank Issues of the country could not be justified. It Is a duty of governments to see that the currency which circulates among the people,shall always bo of the very highest character, the soundness of which should never bo a subject of Inquiry. For thirty years the American people have had such a bank currency, and having seen the value of It both here and abroad they will not bo content to have any Innovation made unless such now departure Insures not only equal but better results. It Is respectfully suggested that not only ns good but better results would be attained if the present bunk act were amended by repealing the provision thereof requiring ouch bank as a prerequisite to entering the system and issuing bank-note currency to deposit government bonds. In lieu of such provision should be substituted one permitting the banks to issue circulating notes against their assets to an amount equal to at least 50 per cent, of their unimpaired capital. The Comptroller follows this suggestion with the further one for the maintenance’ of a safety fund to be provided by graduated taxation upon the outstanding circulation of the banks until the same shall be equal to not less than 5 per cent, of the total of such outstanding circulation, this fund to be held by the Government ns an agent only, and for the purpose of immediately redeeming the notes of insolvent banks. It is to be immediately replenished out of the assets of the banks, on which it shall be a first and paramount lien, nnd from assessment to the extent of the double liability on the shareholders.