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The plans presented at the late meet
ing of the American Bankers associa
tion at Baltimore for a reconstruction
of our banking system have aroused
widespread interest, not only among
bankers, but with all classes of business men.
Tho banking interests of almost the entire
country wero represented at this convention,
and its recommendations are likely to have considerable influenco
in shaping tho financial policy of the next congress.
A large part of the timo
of the convention was occu
pied in considering the
currency plan presented by
the Baltimore clearinghouse
association and the recom
mendations as outlined in
this scheme were adopted
by the convention. There
was also a plan, somewhat
similar, presented by Mr.
Bradford Rhodes, editor of
Jthodes Journal of Bitnk-intj.
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with tho treasurer of the United States lawful monoy in amount
equal to tho sums desired to bo withdrawn. The tax wll then cease,
upon the circulation so retired.
The plan proposed by Mr. Rhodes is, in brief, to change the
psesent national banking laws so as to no longer require a deposit of
bondH to secure circulation, but instead to require u deinwit of the
non-interest bearing securities of tho United States, treasury note
of 181V), silver certificates. United States notet, silver dollars, gold
coin or gold certificates. The amount of these securities deposited
is to bo the same as tho amount of bonds under the present law
and circulation is to be issued in the same manner as u now issued
on bonds, but in order to induce banks to take out this circulation
and to compensate them for the loss of interest on tho securities,
tho bankB shall have issued to them, instead of ninety per cent, as
at present, one hundred and twenty-five per cent, of the face value
of the securities. Tho wholo amount of circulation to be issued to
one bank is to bo restricted as at present, to ninety per cent of its
capital stock. The government will havo a prior lion as at present
upon tho assets of failed bankp. This plan also provides for u.
"safety fund" to be raised by a tax of one-quarter of one per cent
upon tno outstanding cir-
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culation of each bank.
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The Baltimore plan is in
the form of amendments to
tho national banking act
and provide.
First. The repeal of tho
provision requiring a depos
it of bonds to securo circu
lating notes.
Second. To allow banks
to issue circulating notes
to the amount of 50 per
cent, of their paid up unim
paired i apital, subject to a
tax of one-half of one per
cent, per annum upon the
average amount of circula
tion out-standing. Also to
allow an additional or
"emergency circulation or
25 per cent, of their paid up unimpaired capital, subject . h oaj
half per cent, tax and also to a heavy tax to be imposed by the comp
troller in addition.
Third. To create a "guarantee fund" through tho deposit by
each bank of two per cent upon the amout.t of circulation received
the first year. After the firrt year to impose a tax of one half of
one per cent upon the circulation outstanding until the emergency
fund shall equal five per cent, of the entire outstanding circulation;
then the collection of the tax to be suspended until it is deemed
necessary by the comptroller of the currency to resume its col
lection. The notes of all banks are to be redeemed as at present by the
treasure i of the United States and tho notes of insolvent banks are
to be paid out of the "guarantee fund.
The government is to have a prior lien upon the assets of each
failed bank and upon the liability of the stockholders for the pur
pose of restoring to the "guarantee fund" the amount withdrawn to
rebeem its circulation.
Circulation can be retired by the bank at any time by depositing
1 Mr. Large Footer (reading): Yes, it's a f;i t. Many a thing is
thrown into tho wasto-biokct thoughtlessly.
Letter Carrier (throwing !u;.y Liiiid.'w): Mail! Mail! Mail!
Bang
A number of prominent
bankers addressed the con
vention endorsing tue Balti
more plan, among them
Hon. A. B. Hepburn, ex
comptroller of the currency,
who was strongly in favor
of it. While bankers gener
ally seem to favor the plan
both on account of the need
of some change in our cur
rency system, and the in
creased profit this method
would bring the banks, still
it is noticeable that many
of the best known and old
est bankers have not, as yet.
fully endorsed the scheme.
This proposed change, while
it provides for a largo infla
tion of our currency does
not provide for the retire
ment in any way of any of
the various issues of gov
ernment paper, and it hard
ly seems, at the present
time, when money is piling
up in the large centers and
loaning at 1 per cent, in
New York, that we need
any increase in our circula
tion. The inevitable result
of inflation is increased speculation and the building up of a stil
larger financial structure based upon credit and the recurrence of
panics similar to the one just past. There is no doubt but that the
plan provides for a good currency, as good and as safe as the present
national bank notes, and also one more elastic than either the bank
notes or the government issues, but with the present method of re
demption it would not be nearly as elastic as a perfect currency
should be. There will be no trouble in issuing it and supplying the
demand for a large per capita circulation. The difficulty will come
when a decline in business requires a contraction of the volume or
currency. The additional or "emergency" circulation will bo some
what of a safeguard but, at the same time the knowledge that a bank
was compelled to use this "emergency" and heavily taxetl circula
tion might become a very great source of danger instead of strength.
The Rhodes plan is somewhat more conservative, but i:ot so pro
fitable to the banks, at least at present. It would result in placing
in the hands of the government its own non-interest bearing obli
gations and would thus relieve it of the dangeuof being called upon