Rensselaer Journal, Volume 12, Number 19, Rensselaer, Jasper County, 16 October 1902 — CANNOT ADOPT SHAW'S SCHEME [ARTICLE]

CANNOT ADOPT SHAW'S SCHEME

Plan to Release 25 Per Cent Reserve Is Found to Be Impracticable. SECRETARY LACKS THE POWER Proposition, However, Berved the Purpose of Restoring Confidence in New York and Averted a Panto on the Btock Exchange. Secretary Shaw’s offer to release the 25 per cent reserve set aside by banks holding government deposits to secure the same turns out to be impossible of adoption. Not only is it declared to be contrary to the statutes, but further it does not lie within the authority of the treasury department to issue any orders relative to such reserve. The matter in question is within the jurisdiction of the comptroller of the currency alone, and he hasn’t issued any orders bearing on the subject. Ignores Subject It is significant that the official circular issued from the treasury department omits any mention of this Important question of releasing the 25 per cent reserve. As It was this proposition which took the secretary to New York and which relieved a serious situation, it is evident the department has found that the relief proposed cannot be legally afforded. The monthly treasury statement shows there are government deposits of $136,625,170. The banks holding this money keep aside 25 per cent of the total, being an amount, as deposits stand at present, of $34,156,292. It was this sum which the treasury department proposed to permit the banks to lend instead of keeping in their vaults. However, not a cent of it can legally be released. Restores Confidence. The result of the offer shows what an extraordinary Influence sentiment exerts. The New York stock market was demoralized and the best people here expected a panicky feeling to exist. Money closed at 35 per cent, and the banks expected to call more loans. Secretary Shaw announced he would release $30,000,000, and that this would be equivalent to an extension of credit amounting to $130,000,000, though the latter figures may be left out of consideration. No one knew what the secretary proposed doing, and when the papers contained announcements that $30,000,000 would be at once released the entire situation changed. Stocks jumped from 1 to 4 points between sales, and money dropped 17 per cent. Change Bank Statement. But It was all sentiment. No new money had been or could be released, and nothing whatever has been added to loanable funds. The panic, however, is over. It all goes to show that counterfeit is as good as genuine money, so long as the users do not know the difference. Iu the present instance there was not even the semblance of money—nothing but human breath. As a tribute to the secretary and a further effort to save themselves worry It Is proposed to have the bank statement show a reserve calculated against deposits other than government money. That Is to say, $40,000,000 government funds are held by New York banks. The legal reserve against this is $10,000,000. By not reckoning this amount the total reserve shown will he $10,000,000 higher than otherwise, and this will make a good bank statement.