| Show EXPERT EXPLAINS Charles H. H Huttig Bai Banke kei Explains Law and Its Mission WILL REGULATE Needed Hank Can Issue li 1 of ot Tax Tac In IlL Advance b- b t request lo to write a brief Ih In of ot tho 1110 proposed cur legislation and to avoid the us of- of technical terms Is by reason o oj j the nature of or the subject one hat haj-d o fu I I shall however r. r under tako to set st forth the facts In th tb plainest manner maimer possible The Ibe first question to bo be Is h What Is meant by the expression currency g The rue it Isa is A money moncy whIch will permit of or an Increase ii Ir its volume as the requirements o ol business and the tho demands for or mono grow and Whet when such demands lessen there shoud be corresponding do Crease ease In IlL tho of circulation then It naturally follows that thai portion of the whole o ci money in use which was not hOt needed would be lie eti anti and disappear from ci Li on Your next question would be is J It necessary and desirable to U hav hava a monetary system which will ex expand j nUll and contract the volume oi II money The rue During lie answer crop inov ing period and by this Is h meant the greater part of the last halt half of the year the amount of money nechi Ii in active circulation is ordinarily fi from orn to more than at nt other seasons Jn In periods ol 01 great prosperity such as we are onT on- on T now nil all of our money is ir h full use during the spring and summer sum stun mer iner months consequently when th thi extra demand above referred l ti comes on us LI wo WI are arc compelled t tI ti I cash from i other countries t help hell us out Up to o this we have c been able to to do 10 so SO but we VC can not noty y now turn to our utIl natural foreign allies England 1 anti and Germany for the roas oi oil l I hat bat they to too o are aro practically In iii tin Timo j-Timo financial position e VC are arc flu 1 3 Hank of England rate is at present T I per cent anti and the lie government bank of Germany fixes its ils rate rale at 7 pel peli i cent thus forcing us to rely lely on our j resources and Ingenuity lo to finance out nui r and agricultural tural tm-al prosperity No Nt Intent to 0 Change S t It is well veIl known that thai the Iho monclar C system of the country is is unscientific I bul lita the confidence of the people ii r the Iho stability of or the government am an the tho soundness and and- of it banking Institutions have made It unnecessary un on- necessary to reform the tho system It 1 h hnot not now proposed to make any chang chang- I ca further than to add athi to our present t money supply through an Issue ol ci ola l a credit L currency by national S r li ot the farm farm- arm arm- f communities call fur for J funds As their requirements Ish llio tho volume of money will correspondingly r Like all innovations and reforms I 1 the lea Idea of credit currency was by the leading hankers bankers 01 0 the country when it was fit first some yeats ago I remember listening c to a speech delivered red by Fowler chairman of the committee oi ci banking in the house of lives tives at an annual meeting ot gf 5 American America Bankers Bankers' association held li Ii t New Orleans over four years ago or orf t f ti subject and not one banker Ir it L fifty lifty was In accord with him at tint tha 3 time Since in then en the financial men ol 01 v the United States Slates have not nol only made madea a sudy of it but the fact has beer V- V forced on their attention that il it bI ii b I necessary lo to take lake SOnIC some action In thi direction of giving greater elasticity tc i our currency system r 4 S The subject has bos been clouded by L L maze of theories wholly and economically unsound Al At the last meeting of the association held in Si St Louis In the middle of October a f t passed great greal anti and Important body 1011 I which provided for the appointment ol a currency of liEU fifteen t tr i. i be lie by the executive Commit tee Ice of the and the subject was turned over to them with instructions to evolve a plan and submit sub mit same Sante to congress for enactment J. J The had Its ils first m el eling big ing at the rd lintel hotel Washington s Dy D C. C November in 10 member being be log ing present anti and In Iii attendance at session of tit the commission which coy coy- wed a period of four lays days Each mem mein- her was intensely interested In Ih r anc and thoroughly M mi iTis 11 was decided not lo to attempt to tak Up tip tot for consideration the plan idan nUtt by not ilot only members mem hers bers of the commission but by t the from all over H lit st and agree on curtain certain fun fun- 1 involved in lh tIL 1 subject S Out if of the tho fol moi- ld declaration ot of principles u t Confidence In e currency proper propel und and rc- rc that it V. V bank note banknote note and a demand In hi a hank bank nrc are the he iy same name in ILL for or that S i thu sumo reserve should bo be against noie redemption of j- j dully tie Iho nole must be provided for tat the lie establishment of re- re agencies in some of the principal in tile the country t Mu further L That u guarantee fund ot of amplo am- am plo be 1 S with the government w r reni- reni of th notes ly 11 with the issue v Committee rises s Credit PC Growing out of thes ideas the corn corn- by a unanimous vote ote recommended i mended 1 That any national bank having boon a actively doing bu B for one year yeni- with a surplus of 20 fL per cent 0 nf tf UH lt capital can Issue credit note noCe I In an amount equal to per cent of Its Itu capitalization against which s a tax taC of 3 per er cent Is levied which mus must be It paid palti to lh t-ni t treasurer IC f the United States to cover this the cost of ot printing and aud other incidental expenses in iii connection con con- with the Issue of these al aDo o to provide a fund for fund for tho pro pro- ro note tf t of A ir provision Jis mode thai lint f r national bank banit desiring Co o Isue notes noles must have at least 12 2 pei cent of its capital represented In bond secured circulation It Is uNo provided that a further l Is no of at credit nol s equal to 12 2 1 10 cent of the banks capital can be madi subject to of 5 per cent It is 18 thee fur stated staled tha thai tu llio tott of credit notes and not shall not bo ho greater than the bank capital also that that- the same ain cash re reserve serve sCIO which is now carried again deposits in the vaults of tho ho ban bani must be ho hold against these notes In order that the Iho guaranty guaranty guaranty-funti fund ma inn mabo bo be from the tho beginning an batik bank taking out credit notes must dc do with tho treasurer ci of the Unite States in gold an amount equal to toper per cent of tILe issue This fund Js I Ibe Ii be paid hack back to the tho bank conti it us as soon as a guaranty fund equal I h this Is secured through the on no the circulation These recommendations were con Burred in and by every of f tha commission One month later December 10 th tIn Commission had meeting ii ir Washington at which time the mem hers appeared before the banking com coth mille of the Iho house presented thou thel views and answered numerous ques- ques lions propounded by members of th congressional committee One rif of the lie fIrst queries involved lh tin of this credit money monny and I Ivas it vas accompanied by the charge that tho effect of the tue proposed be 10 to inflate the currency ency am amnot not give the desired flexibility that unless the plan offered tended to re ye- luco the volume of or currency dul when n 11 It were lessened the would not nol be Our answer and explanation was wa hat bal active dally daily redemption of credit was the only means r of f malt mak- ng ug it elastic th notes mites seeking n are arc driven out ol of by the the- lessened require require- of commerce Please boar bear In nind that they ve 4 the nature as cashiers cashier's checks hat they are nut not legal iogal reserve when meld by other national bunks banks against and that the cash cosh re- re orvo must be lie maintained for as is hold against deposits furthermore that thai the tax of 2 i per cut ent must be paid while they are arc In lim circulation u uIn In a central reserve city like St St St. ouis it would be unprofitable to keep keei hes notes in iii circulation when the rate rale fell below 5 per cont Would here I should like to rom a copy nf If my lily testimony before he ho congressional One of the benefits of tills this mens- mens ire should II it become n a law would bo be boi i I. lowering mid an equalization of In- In crest rates In the of or the thus far fai- tills this very important eat has boon all ail but overlooked n Ii my lilY opinion interest rates would not under this plan ilan of elastic clastic cur cur- ency as they hey have done in the past hey would be ie more stable as they are aren n Canada anti and Scotland where z tin the atlon of a currency system some some- hat chat on tho order of the one propos propos- d ti has lias boon been successful for many ears One of the tho members of the con con- committee who raised the ax as t to the effect thc ate on this currency eney have on the interest rate on de- de ran bo ho answered in this way lie he usual rate paid on time deposits a period of siv to twelve is l 3 i per cent th bank knows can safely loan out such deposits at higher rate of Interest for the same of time An issue of f credit would have this radIcal dif dif- once ence in Its lix loaning t Y cu be E anti and for for- reason It cull ate very Ilk a dc- dc which bich would be placed ItEm Ith a hank bank one day and withdrawn ic me next or oi the day then re re- and anI a few days later laler checked tit ut again A bank could not afford to tn toay ay 3 per pem cent on such a deposit be- be beluso luse luso of the uncertainly of lie length r r time line that it would be available for maning purposes I should like to em- em this thought that primarily lis us legislation is Jn hO time the of the anti and not nol the banks The banks simply be he furnished wIth the and machinery to meet the of business I can not nol chore the profits under this plan be large ll It is I nat hat the maximum ralo ratu of interest be G C per cent because the doland do- do land for money and credit would bo be by an aim increase i. i the supply of currency Temporarily Added 1 to illustrate time the op- op ru on of the plan by assuming that L billion dollars is in active circulation n U the pockets of time the people and and- andIn In use that during the tho crop ug period an additional Is rc ro- ro there then lien be lie u ii total of in active e use and ion thIs this volume would be maintained in mill tho lie demand for for- currency y dc- dc which naturally follow at ten he he- crops have been marketed then marketed then the amounting to I wO would gradually bo ho I K have performed UK itic ml ioa lon nd i-nd no longer In lii active clr Ir would be forced int into retire retire- I. I The pi se bofil cit if f national banks is iii w Vt t the lie inquiry tim th ques- ques lon Ion was M-as isk-Hl isk me why our bond se currency ho made more moru to tho ho or of mess There are two tv otson i for bit it iuIs iu- iu Is Iii limit so fur as mis I he lie Individual ank JK is concerned It Is of mi no real I PIU It lo to that lint batik bank lo to take tako 1111 bond i circulation on tin the lie mater mat mat- er ci from the Ilic- standpoint of supply of money and il it i Is n a this way vi y the bank k detailing hilI t LI lake I ut bout bond circulation I must pur- pur lins s OU of get ROV- bonds Cor Or it thou then ta tamos 14 mos of secured bond iii bib of increasing the lie supply A of ji i asli on OIL mind hand U it Is decreased er by It is true bitt the volume of money n IL the tiie country I ry Is UK d t thereby but mit ci iCi Increase Its iii only to the acl that hint the bunt finds H II profitable l o take out bond circulation hero be- be beIn being In K a mt net et return of 1 10 1 I ent on 01 tho hO amount of mon sy in please that or Inking i- i mil bond bond s l circulation circulations circulation's s 's to this net tiet profit und the tho whole transaction is purely dod and simply nc TC of investment lt it Is not ot d by in d demand for currency Its purpose not nol to lit MU supply supply the the- hc effect This is au ail expansion o of tile the ney here heru would be no corresponding nip mp- lve to contract the volume it at least it MO 10 other purpose than that which ia Is permitted by time the Investment of he tile transaction I believe a t splendid catlon of plait can be lie found at LL the present pros pres COt ent time time in In the operation of th secured ii df tin tin- national banks of New ew York By fly of if the r. ihn fint ar are within five hours of V which Is the th only place for redemption note and b Ii a further reason our nt bank flote- flote hike the proposed currency tall nOtes can can- be hid as a serve reserve against deposit thi v Ne York national ban bunks UK art are to tOl for redemption df Of the notes of national banks getting In Iii exchange legal leg reserve money Owing to thOse these facts the New York national banks have taken out but u a i Iler- Iler er- er of their In bond circulation L I do nOt believe that proper emphasis has bethi given to th of tills proposed measure It is of vital lo to nfl all of tiLe the as and In- In interests mind and indirectly to tu all the is people of th the country the whole subject Is one ons hard to ev- ev and aint difficult lo to understand Consequently Con Con- it la Is well nigh impo io to get the interest of a great number r of It lo to forecast coni action I reter confident that thin bill bm oms ft a l tint w Us mi rit anddie in Cs df yb tm-yb will Its iLa 5 |
