FINANCIAL REVIEW OF 1902. 



239 



Money. As was the case in the previous year, 

 the feature of the monetary situation in 1902 

 was the continuous and increasing absorption by 

 the Treasury of money from the banks through 

 the fiscal operations of the Government. In De- 

 cember, 1901, the excess of receipts over expendi- 

 tures was $9,742,966.53, and in January, 1902, 

 this excess was $8,033,856.26. In the following 

 month there was a reduction in the surplus rev- 

 enues to $2,060,448.37, followed in March by a 

 recovery to $8,398,976.67. In April the surplus 

 fell off to $4,416,127.24, recovering in May to 

 $10,762,651.58, and in June the excess of receipts 

 over expenditures was $15,839,609.45, though pro- 

 vision had been made by Congress for the aboli- 

 tion of the war-revenue taxes imposed by the act 

 of 1898, the repeal to take effect July 1. After 

 the beginning of the new fiscal year the effect of 

 the repeal of internal-revenue taxes was observ- 

 able in the excess of expenditures over receipts in 

 July by $7,507,876.49, for the first time since Au- 

 gust, 1900, when the deficiency in the revenues 

 was $820,244.12. In August, 1902, however, the 

 above-noted deficiency was reduced to $2,015,- 

 674.14, the excess of receipts over expenditures 

 for that month being $5,492,202.35. Thereafter 

 customs payments were quite large, reflecting in- 

 creasing imports, and internal-revenue collections 

 were heavy, due to prosperous conditions of such 

 industries as were taxable under those internal 

 imposts which were in effect, and at the end of 

 November the surplus revenues for five months of 

 the fiscal year were $14,149,179, against $32,- 

 882,941.12 for the corresponding five months in 

 1901, when the majority of the internal taxes 

 were in force. This absorption of money through 

 the fiscal operations of the Treasury had a direct 

 influence upon the New York banks because of 

 the fact that about 70 per cent, of the Govern- 

 ment business is conducted at this center. In 

 addition to the drain upon the banks in New 

 York through fiscal operations there was in De- 

 cember, 1901, a notable movement into the Treas- 

 ury caused by the action of banks in the interior 

 remitting, through their correspondents in this 

 city, lawful money to the redemption bureau at 

 Washington for the purpose of substituting such 

 lawful money for United States bonds held as 

 security for circulating notes, the bonds so with- 

 drawn being sold in order to realize the high 

 prices for them then ruling. This movement con- 

 tinued with but little interruption until about 

 the middle of March, when Secretary Shaw, who 

 succeeded Secretary Gage at the beginning of the 

 mcvjith, suspended the purchases of United States 

 bonds, Avhich had been inaugurated by his prede- 

 cessor, such suspension being mainly for the 

 purpose of checking the withdrawal for sale of 

 those of these securities which were pledged for 

 circulating notes. With a view to relieve the 

 monetary situation, which had become somewhat 

 tense by reason of withdrawals of gold for ex- 

 port, and the above-noted absorption of money 

 by the Treasury, Secretary Shaw sought to in- 

 crease deposits of public funds in tne depository 

 banks throughout the country, but he was only 

 partially successful, because of the fact that the 

 bonds required as pledge for these deposits com- 

 manded such high prices that few of the banks 

 would procure them for the purpose of qualify- 

 ing for the reception of public funds. Moreover, 

 the tense monetary conditions were, for the rea- 

 sons above assigned, chiefly confined to this cen- 

 ter, and they did not generally prevail in the 

 interior; consequently there was little induce- 

 ment for country banks to apply for Government 

 deposits. In the early summer months the mone- 



tary tension relaxed, but by the middle of Au- 

 gust stringent conditions again developed, owing 

 to the concurrent absorption of money from the 

 banks into the Treasury through fiscal opera- 

 tions and a movement of funds to the interior for 

 crop and for business purposes, and also an 

 enormous expansion of bank credits. In the fol- 

 lowing month the situation became so acute be- 

 cause of the low bank reserves that the Secretary 

 of the Treasury was impelled to resort to expe- 

 dients for relief. On Sept. 13 he announced 

 a policy of designating as temporary depositories 

 of public funds such banks as had free United 

 States bonds, or those which were not pledged 

 for deposits or for circulation. The Secretary 

 also anticipated the payment of interest upon 

 the public debt due Oct. 1, and on Sept. 20 he 

 announced that he would divert to depository 

 banks the full amount of internal-revenue and 

 miscellaneous receipts, amounting to more than 

 $500,000 per day for thirty or sixty days, or 

 longer, should such a course be necessary. On 

 Sept. 25 the Secretary directed the prepayment, 

 with a rebate of &. of 1 per cent, per month, 

 of all interest on the public debt from Oct. 1 to 

 and including July 1, 1903. He also offered to 

 buy at 105 any of the United States 5-per-cent. 

 bonds of 1904 which might be offered on or be- 

 fore Oct. 15; the price offered for these bonds 

 was, however, so low that only $23,500 out of 

 the $19,410,350 outstanding were presente'd for re- 

 demption. The above-noted measures of relief 

 having proved entirely ineffective in relieving the 

 monetary tension, which was most severely felt 

 at New York, the Secretary on Sept. 30 an- 

 nounced that he would accept as pledge for pub- 

 lic deposits in the banks municipal or such other 

 bonds as were permissible as investments by sav- 

 ings-banks of the various States, these bonds to' 

 be substituted for those of the Government on 

 condition that the United States bonds so re- 

 leased be immediately deposited as security for 

 new circulation; the object which the Secretary 

 had in view was an increase in the volume of 

 bank-notes. At the same time Secretary Shaw, 

 as part of his general plan for the relief of the 

 money market, announced that no reserve would 

 be required to be held by depository banks 

 against deposits of those of the public funds 

 which were secured by United States bonds. It 

 was expected that the release of this cash reserve 

 w r ould result in the expansion of bank credits 

 generally throughout the country by four times 

 the sum of such cash. The depository banks in 

 this city did not take advantage of this permis- 

 sion to release the reserve against public de- 

 posits and expand their credits, chiefly for the 

 reason that it was deemed prudent to check as 

 much as possible undue speculation in the stock- 

 market, and the surplus reserves of the associ- 

 ated banks continued to be computed upon the 

 basis of net deposits, including those of the Gov- 

 ernment, as formerly, though the amount of the 

 public funds was separately stated, and the 

 changes in the surplus, on the basis of net de- 

 posits, less those of public funds, were noted in 

 the official weekly statements. The above-men- 

 tioned measures of Treasury relief to the situa- 

 tion proved only partially effective, there having 

 been up to Oct. 18 only about $15,500,000 of 

 municipal bonds substituted for those of the 

 Government as pledge for public .deposits, releas- 

 ing $11,625.000 of United States bonds as security 

 for new circulation. The payments of rebated 

 interest at that date did not exceed $3,200,000. 

 About $8,000.000 of gold had been received from 

 Europe, South Africa, and Australia, and $1,500,- 



