174 



CONGRESS. (THE CURRENCY.) 



of 48 States. If it be Mid that in 



maximum limit of iwue, 

 the deposit of a guarantor fund. |*ramal liability 

 of shareholders, and fl r*t lien on asset*, it i> uro- 

 pnesd l> rvuwrr thai Slate Uuks of itit Khali 

 OUUftHBI to Ilir Mat Us* of lUltioiml banks as a con- 

 dition of exempt i. M. from the I0-per-cent tax, I 

 reply that, in the flnrt place, these are only a 

 part of the requirement* for national Uiu 

 thai, crm if they were all. the failure t.. j 

 for effective national supervision would make 

 UM requirements practically nugatory. 

 Practically it would bo f...u,d imp 

 rim any effective national control over State 



banks of issue wider *uch 

 posed, as State banks receive their fnu. 

 from the wrens! States and are suLj. . t to .state 

 control and supervision : and even the right of 

 the national Comptroller of the Currency to in- 

 vestigate from time to tune the ...nditK 

 State bank to ascertain whet her t he four nat i< >nal 

 conditions of issue have been complied with is 

 /in uncertain implication, rather 

 than positive provision, of law. ( Vrtainly, gen- 

 tlemen who talte the ground, as many friends of 

 State banks do, that the National Government 

 has n with State bank- of 



issue, will not be likely to pn>\ ide hereafter any 

 Federal restrictions on the issues of such 



-The fact must not be overlooked that the 

 conditions proposed practically offer a premium 

 for even existing national banks to change to 

 Stele banks of issue, by exempting State banks 

 of issue, not only from the easvntial Imt exact- 

 faf Go% eminent 'supervi-ion. but also from the 

 payment .,f the general tax of half of 1 per cent. 

 per annum, and also the payment of tin- special 

 safety-fund tax of the same amount. When it 

 is borne in mind that hanking is a business, pur- 

 sued because of the expectation of profit like 

 other kinds of business, it will be seen that if 

 this bill should become a law there would U 

 serious dan p-r that under the guise of extend- 

 ing the national hanking system it would prove 

 to be a potent inducement for its destruction 

 and for the substitution of r, State-bank sys- 



I do not propose at this time to recall at 

 length the argument* f< r 1 national- rat her than 

 46 State-bank systems which led this House at 

 the la* session by 70 majority to declare against 

 the rehabilitation of Mate banks as banks of 

 issue in any form. I merely indicate some of 

 the pMintfl of these arguments. 



>r ewentiab of a good bank cu- 

 are. flr-t. ultimate safety or payment of issues; 

 second, immediate convertibility into coin or its 

 equivalent ; thinl. uniformity, convenience, and 

 economy ; and fourth, el.-, iue that 



. ! h ,- I,--. 



- Tf>. fir.t three of these essentials have been 

 found in the circulation of our national bank 

 as they never have been and never can be found 

 in the emulating notes of 45 different State- 

 bank nyntems. 



Itimate safety, contrast the fact that 



in thirty years* experience with State systems 



before the war. according to the Comptroller of 



irrrnry. the losses through the notes of 



the failed banks averaged one fifth of the aggre- 



gate circulation : while not one dollar has been 

 lost by holders of notes of national Lank- in the 

 thirty yean -m.-- the national banking system 



I a::;- o-ln ral. 



" As to convertiLih ftftj tin- fact that, 



the notes of State Lank- \seiv constantly fn-m 

 one half of 1 prr cent, to A per cent, discount, 



they were received at all, outside of the 

 States of issue, with the fact that dtim 

 thirty years in which \\e have had the 08 

 system* the notes of national Lank- in T. 



D have !M'. : 

 New Y"ik a- in the State! \\h. re i ncd. 



to uniformity. MOIIIV. 



contrast the fact that in ti 

 cut State system- Lefoiv t i 



circulating ix.tes made counterfeiting easy, pro- 

 ini-tcd di-trust. and limited the usefulness of 



f i>-ue. and the al-eii. Mimon 



control and common regulations and a common 

 tie increased the friction and cost of exchanges; 

 while in the thirty years sine.- the uar. under 

 the national system, counterfeiting ha 

 made difficult and the detection of counterfeit- 

 ers easy it has Lcen unnecessary for the 

 eler or business man to consider for a moment. 

 whether the national notes which lie < 



--ued in Vermont or .Montana or .V 

 sippi. and has so promoted and economi, 

 changes that the Comptroller of the Cm 

 estimai ing of at least $120.<MMU'" 



annum on Lills of exchange alone in the con- 

 duet of the Lu-iness of the country. 



"In directions affect ing elasticity of issue alone' 

 the national system needs amendment to adapt. 

 it to changed conditions. When established it, 

 was reasonably elastic as to issue. L. . -au-e I nited 

 States bonds were abundant and obtainable at 

 or below par, so that a profit could be, made on 

 note issues which could be loaned. But in 

 progress of time such bonds have become scarce 

 and command a premium, and this. coupled with 

 the fact that the law still permits an issue of 

 only fK) per cent, of the par value of the bonds, 

 has made the issue of circulating note- <.n -uch 

 bund security unprofitable, and in making it un- 

 profitable has made it unresponsive to business 



demands. 



" If. in-tead of devising a bill to rehabilitate 

 State banks of issue, the Commit tec on hanking 

 and Currency had assumed, what they should 

 have assume-], that any legislation dealing \\ith 

 banks of issue mu-t be" on the lines of a uniform 

 national system, under the sole control and con- 

 stant supervision of the nation, and had pro- 

 ceeded to make such chnnu r -- in the national 

 system as would have provided reasonable secu- 

 rity on the one hand and reasonable da-ticity of 

 issue on the other hand, they would have done 

 themselves more credit and the count r\ 



:i if their work ha<l not resulted in 

 legislation at this session. 



" I'ut in bringing into th- ILn- a hastily 

 framed bill, which has not even had the benefit 

 of the criticisms and amendments of the mem- 

 bers of that committee in the committee room, 

 whose central Idea is the rehabilitation of State 

 banks as banks of issue, they have failed to st rike 

 note of the legislation which the country 

 expects. 



" I can not understand, Mr. Chairman, why it 



