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Col lection Title
NdsoiLV
Series/Volume
Shelf/Accession No.
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Col lection Title -----------------------------------------------
Nelscm W. Aldnch
Series/Volume
Shelf/Accession No.LC 77-38 (1/70)
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Waushington, D. C. April 14, 1008.
'TO' BIT3V- 8 ... 3 0: 1 .SFOdSfiff D BY J. HOWARD COVI SHTff jp o ?
B- fo r B: S l a g l e Currency Committee o f House o f
7 YORK-
Kppr-oent.v t iv e s .
P r o v id e d t h a t t h e S e c re t , r y o f th e T r e a s u r y , i n h i s
xi s c r - . j t i o n , may a c c e p t t h e a p p l i c t i o n of c»ny .'Tt.tioru-1 Baruc
for nev, no t s o f such bank w i th o u t th * d e p o s i t o f s e c u r i t i e s *
such £p p l i c a t i o n b e i n g accompanied by t h e gu r v nty cl the
Cl-, r i n g House A s s o c i a t i o n of which su ch bank s r i l i e *
member, t h e s a i d g u a ra n ty b e in g t o t h e e f f e c t t h a t t h e s a i d
n o t e s so i s s u e d or t h e i r e tu i v*: 1 en t i n la^xu.i money sricill be
r e t u r n -b to t h e Tr ’ su rv w i t h i n s i x months top th r * i t h
ti t x. herein levis ■, i ai provid id, however, t a d e r i n . House A. s o c i t i o n she 13 b ? p rmi t t i t o so g u a ra n te e
t o fu rther jx tent than 60^ o f the combined c a p i t a l and
3u r h lu s o f th-1 ban k s com; osing su ch a s s o c i ation, • \i provide
ai .--Iso t h a t a l l o f t h e b*nks i n su c h a s s o c i a t i o n s h a l l j o i n
i n t h e s 4 id g u - r e n t y .
Argument shows th<-t the A.„dri c>h Bi.: 1 i f
s above { nd sactions 8 end 13 tliraint> t •: i
pco oaed) -voud x giVv the Unit- d mos
, m •; nd ad
-*lre..dy
t i eg or taut
fa tar * o f Europe n
n ity fo r banks to h
c •.ntr 1 b anki ng • hich 1 s t *. o o r t u-
v- c o r im e rc i a 1 p . r r - d i s c o u n t :i.
lio Closuring House A ssoc ia tion would guarantee a member
bank,without the possession o f that bank* 3 s e c u r i t ie s or i t s
co: j ia ro ia l paper;or wltriout t'nat Vank'a pur^i43ion to d i s t r i -
bate the now money to other member banks.
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Cl)Mr. Andrew Carnegie.
Gentlemen:These are the days when hanking and currency hare the
floor. Our »ystem has had great shock. The number of
doctors and quacks ready with certain remedies are legion.
They are divided into two classes---- experienced and inexper
ienced advisers* The latter reoall the quack who sold pills
warranted to cure'earth quakes* ^let us dismiss from our minds the idea that there is any
cure possible for financial troubles and panics. ii ise have
their root in human nature and are as certain as the tides,
or the storms, the warm stimulating sunshine of summer, suc
ceeded by the icy, froaen winter, and sure just as essential for the regulation, clearance and purification of business as
the changes are for the general health of human life. No
system of currency will enable us to escape seasons of de-
pressionfailures and losses. Prosperity is bound to Btretch
the lines beyond breaking point, and dull times needed to restore them; and just in proportion as the percentage of the total
of legitimate business grows smaller to that of ^peculation and
gambling upon margins financial d i s a ster^ fiorease in
number and severity. Let us therefore dismiss all panaceas
for panics such as we have just experienced and which were
due several years ago but delayed by an unequaled succession
of food crops and strong demands for our products abroad. ± ie
point that demands attention is that our banking system is_ ___ - -----— • m ■*
,ood b.nee to abandon it. a. w. .hail do s e e day. I agree thoroughly with those, h — Ter, who belisre that the pre.ent
l8 no tine to urge the oo*plete change we need, which i* the
substitution of gold for our reserves and currency based upon
a s s e t s , instead of upon government debt, the false foundation
upon which we hare built. W e can newer reap fro. banking the valuable results which other countries do until w* change that
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(2)
foundation. I t would necessarily corns by payment of the
public debt, which was our ambitition at the close of the re
b e llio n . We proudly proclaimed that we would show the world
one nation out of debt. This seems to have been lost sight
of by our leaders of today. Not a word is heard about this
from either party. Nevertheless, we m y, I think, expect the
people to r ise soon and re c a l l their statesmen to the true
path of economical expenditure.
The currency question w i l l never down tm til i t is founded
upon correct p rin c ip les . I f there be anything established,
it is that it should be based upon the assets, v iz ,, trade
b i l l s , which expand and contract as business does, the reserveQ,
b fing in gold. But this does not. seem to be the proper time
to urge so great a change as this implies . The part of w ii-
dom is to seize the opportunity which presents i t s e l f to get
a step taken in this direction and whan normal times return
make every e ffo rt to get successive steps forward as occasion
o ffe rs . Congress is ju st now in the mood to lis ten to those
who understand banking and currency and to le g is la te to some
extent in accordance with their views. The country has had
a lesson and is disposed to acquiesce. Our f i r s t e ffo rt
should be to get leg is la t io n turned from the wrong to the
right path by introducing to some extent asset currency. As
the people see the advantages of this system we may hope to
enlarge its use and gradually to abandon bond security and in
due time to begin the substitution of gold, rea l value for
our reserves instead of Government evidences of debt, thus
giving us the most p ro fitab le and serviceable form of banking,
as abundantly proven by the experience of other countries,
according to not a few authorities, Scotland, the foremost of
a l l . That l i t t l e country had 1065 in 1902, bringing banking
fa c i l i t ie s to every v il la g e in the land and extending to its
small customers, the farmers especia lly , cash credits to agreed
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upon amountb , in terest being charged only upon the advances
made, rate of in terest the sane thruout, the m illionaire in
the metropolis and the v illa g e blacksmith paying the same. I f
our farmers and small traders generally knew how much they would
be benefited by the Scotch system, we should encounter l i t t l e
delay in Washington.
Another change we greatly need. Its absence gives the
sudden and te r r ib le shook which characterises cur fin an c ia l
revulsions. Other countries have e l a s t i c i t y of issue of
banknotes. We have none. Our system is r ig id . This may be
illu s tra ted by the f a l l of one elevator which has only the
bard rock flo o r below
( 5 )
//
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i t io smashed and it s inmates injured or k ille d , while one
which strikes a safety a ir cushion allowing the weight to drop
slowly down, avoids serious consequencos. Our Tanks have no
expanding or contracting cushion. They have only a hard arid
fa st lim it - - a rock f lo o r . They strike the rock and wreck
and panic ensue.
tic cushion below then such as hanks h<we in other lands —
even in Canada from their right to expand or contract note
issues, they would avoid the violent and disastrous shock to
which they are now suddenly subjected in periods of financia l
d istress . In other words, to meet unusual demands of business
in excited times, instead of the hard stone flo o r of denial
upon wv-ich they must strike and he smashed, our banks would have
it in their power to issue a cortitin percentage of enter ency
currency — the soft p lia b le cushion, which would break the blow
and as a ru le prevent loss of confidence which precip itates
Panic, I f our fl nanciol institutions could promptly meet,
for wen a day, and sudden c a ll fo r unusual muss, panic would
sometimes be averted altogether.
Please riots that a fte r the cushion has once served its
purpose and Tb on crushed, it s a ir expelled, i t must again be
our hanks had an expanding and contracting e la s -
f i l le d and put in place exactly as before, prepared to recti ve
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And a f t « r the catastrophe has occurred, and not t i l l then,
vre get to work find improvise the cushion — for e la s t ic ity
we must have — and clearing house c e rt ific a te s appear and
avert ruin. Think of a people reported p ractica l and not
without sense, providing the indiopensible chshion a fte r
the accident occurs which i t is meant to rovont. How long
w il l the American people permit their le g is la to rs to con
tinue such fol^y? Bemetober, no central bank is necessary
to e ffec t a cure — but only the cushion, E la s t ic ity , which
the President recommends.
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and softens the next pressure that cornea upon it * no with
omorrency banknotes; a fte r the unusual demand o f panic, these
nuat be withdravm and held in reserve for the next strain upon
them. Take onoilluatration : every autumn the crops have to
he moved and between the two and three hundreds o f n illion n of
doolars o f additional currency are required fo r th is special
purpose. Thin causes a cootlj/1 disturbance of our resources,
our banks having no power of expansion, and yet her e at our
hand is an automatic device which wo Id adjust i t s e l f without
the s ligh test strain to the task and the fin an cia l world would never
fe e l a ja r . More than th is , our neighbor, Oonadu, has
the sane demand proportionately and is using the device suc
cess fu lly and our go-ahead country lags behind. TSuropeon
nations n il have i t ,
Mr. "Fowler who honors us by h is presence today has shown that
our present diecreditable bunking system a loss of at least one hun-
dres and f i f t y m illions of do lla rs per year from the unusual re
quirement that currency be scented by Oovornnont two per cent bondo
costing Par. The money required to purchase these bonds is vdth-
drawn from actual banking fa c i l i t ie s and l ie s in the vaults in the
form of useless Bonds, Other nations secure their note issues
without compelling bunks to lc00fth their powers to meet the deft
namls of business. They nuke currency notes f i r s t lienA
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• W A *
upon a l l th I r assets; ao brinks cannot issue such notes to an
amount exceeding their cap ita l, loon by note holders it) unknown.
Our Government could exact a fund from banks ample to secure ih<?
ru rrency, as the two b i l l s now before the country current, upon
emergency notes. The percentage upon the to ta l in duo would be
t r i f l in g . I t is estimated loan than one h a lf of one fmr cent
would be ample, so small is the risk . This would release one
thousand two hundred and f i f t y m illions of reserve money invented
in Government Bonds or held in reserve.
An explanation of our backwardness in th is department may per
haps be found in a p revailing prejudice inherited from the National
Bank question of the past. P o lit ic ian s re fle c t the fee lings of the
people and as a whale our people have not interested themselves in
banking. The Civic Pedoration, representing as it does both Capital
and T.abor, is especia lly fitted to perform a great service lie re , be
cause our labor delegates can roach the nasoes. I t is to be hoped
that this di se ss ion w ill throw ligh t upon the subject and impress
it s importance upon them viewed from the otandppint of tho workers.
I am certain that i f they knew what the v/orkero of Scotland enjoyed
d irectly and ind irectly as a result of it s Snaking System , they
would jo in with and holp us to inpress our le g is la to rs with the
necessity fo r prompt action.
While ups and downs in business in a developing country lik e
ours arc inevitah ls ,these can bo rendered much lens violent and
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HfN / B-
may even in none canes be prevented by adopting the proper
ranking nyutem. Kesolutiono panood by the Federation on
behalf of both Labor and C o i t a l c a llin g the attention of
Congress to this subject night prove highly b en e fic ia l.
c-entlenen, i t is not creditable to our country,
foremoot in many departments of human activ ity au she io ,
that such an old-fashioned, rickety piece o f antiquated machine
as our present currency system should be exhibited in the world
TTow for the prooent po licy :
Two plana have been la id before ub which are en titled
to careful/attention and an I think, to our support. F ir s t ,
the h i l l favorably recommended December lust, by the Comnitt.ee
on banking and Currency of the
✓ b
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House of which. Hr. bowler is Chairman.
Second, tho report of the Committee November lb lust year,
appointed hy the American B ilkers Association, Mr. Hepburn, Chair
man. (ff p i eeewfc iiientimret M a ) Both these measureo meet the
v ia t l point of the issue of emergency currency bused upon assets.
Heither touch the q u e s t i o n of gold reserves except that both pro
vide that the taxes lev ied by government upon the extra i snues of
notes shall bo paid in gold coin which is at least a beginning.
X fear the taxes propoes are in su ffic ien t to ensure the prompt
withdrawal of the emergency notes as business resumes ordinary
conditions, and this is v it a l . 2 -l/2 o/o per annum taxes are
proposed by one plan and three per cent by tho other tor the f i r s t
40 o/o of notes issued end 5 o/o fo r the la s t 12-1/2 o/o. These
w ill both, I judge, have to be increased, but th is is a d e ta il.
Borne minor changes w i l l no doubt be made by Congress. Keanv'hilo
T favo r our concentrating upon these two kindred b i l l s and steodi
ly refusing to bo led into scattering, and X fear wasting our
e ffo rts , upom more ambitious schemes at present. Prom what I
have said you w il l in fe r that I regard these measures as simply
turning us upon the rifgit path. We shall have to march upon it
some distance before an en tire ly satis factory renult in readied
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/ *
tor in th is department o f a ffa ir# we are not only worn© o f f
than any other o f the chief nations, we have wandered fa r upon
the wrong path. T aw sorry to nay we have not only the very
worst hut also the most expensive system known among c iv ilis e d
people# The people w il l soon see, however, that the changes
proposed, i f adopted, are highly ben e fic ia l and Mr# T o ile r , n •
*repburn and other pioneers who honor us by their presence today
w ill have earned the reward o f being esteemed wise counsellors
who have done the state some service. They w il l be listened to
hereafter and X trust that before their days of high service end
they w in see our beloved Hopublic not the farthest behind among
c iv ilis e d nations in her currency and banking system, us she
certain ly is today, but f in a l ly occupying her r igh tfu l place
in this as in other branches of industrialism , in the van.
4
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The c r-i l a n i ort,
in *,h* ion of'■ ■rliic tho tv %**nion* hnr* boon
v & r \ ou» ph tso# o f tho ingsortimt. work*is *5 i £**«<$ to Vhow b;-' tho Aot o f :%
o f t^no h&# ht%n?t ia&ap, sip in
inc InformUon upon % Uoh tholr
VH1 b« btistxL
*lr &>» 230o, a Xar/50 portion
<irm 8 Muring plan* for soisur-
ultiniito roport to non^ro r?*?
** W<4S d**** '? of the «tnost inportanee that steps b« t«k-
*” to eeenre a thoro*#. and, as ne.tr as poseible, exhaustive
exaMtnation of the rwnstary and bankina system of tho teadi»«
*<»„-,«rel.,-a nations. Preparation for th is vork w** entrusted
to a <m be«»m «* eenr,ietln3 of Senators Mdrieh, Kale, ’no*,
'UK '“ *' ** Ant* •5opror,ORt,i.tlTOS Yrseland, Overstreet, -Sirton, ft*®! ?/%d tt.
Thi* ootsiittss will took to f?e«iire from eoMpetent and
authoritative sourees a ll available htstorieai and s t a t is t i-
eal data with reference to tho owrrenoy ^ b«,*ins ext-erleneo
o f sre.* aritfttn, *»ra«hy, and ?mn«e. They w ill also a*ke
*P*«1.U eswsinatton of the Seoteh, Canadian, and Swedish sy*-
voti.. »«k; t,he OhsngBs whioh have recently been adopted in
S"H**rjtanrf.
U U *he intention o f tho f-41 Oomisston to v is it can-
*<!-< a . .sn early day fa r t>ie pnr.ose o f Making a opeelal exatt-
1 notion into tho Canadian systen.
In the prose ration of their work, the subaomittee w ill
eo abroad in the near fntssre, sa ilin g on the Kronprlnsessin
neeilio „n thn * th o f Jto&uU.
t4
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o
Another subcommittee, consisting o f Senators A llison .
Burrows, T e lle r, ?!oney, and Bailey and Representatives Weeks,
Bonynge, Smith, Burgess, and Rujo, w ill take up fo r immediate
consideration the question of necessary amendments to the ad-
mini stratiye features o f our national banking laws. Secretary
o f the Treasury Cortelyou was in conference with the Commis
sion with reference to the character o f those amendments, and
the subcommittee la s t mentioned expect to be able to report
their recommendations to a meeting of the fu l l Commission to
be held In Washington on November 10.
The action of the Commission with reference to a l l ques
tions has been harmonious and unanimous.
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PROCEEDINGS OP THE NATIONAL MONETARY COMMISSION.
Washington, D. C.,
Hay 51, 1908.
Tha Act of May 30, 1908, en titled "An Act to Amend the
National Banking Laws," contains the follow ing provisions
creating the National Monetary Commission:
Sec. 17. That a Commission is hereby created, to be called the “ National Monetary Commission,” to be composed of nine members of the Senate, to be appointed by the Presiding Officer thereof, an nine members of the House of Representatives, to be appomted by the Speaker thereof; and any vacancy on the Commission shall be tiled inthe same manner as the original appointment. . .
Sec. 18. That it shall be the duty of this Commission to mquiie into and report to Congress at the earliest date practicable, what changes are necessary or desirable in the monetary system of the United States ur in the laws relating to banking and currency, and for this purposethey are authorized to sit during the sessionssuch times and places as they may deem desirable, to tend forsworn and papers, to administer oaths, to summons and compel the attend- ance1witnesses, and to employ a disbursing officer and such seere- farips exnerts stenographers, messengers, ana other assistants as shall be necessary to carry out the purposes for which said Commission was
' created. The Commission shall have the power, through subcommittee or otherwise, to examine witnesses and to make such investigations and examinations, in this or other countries, of the subjects committed to their charge as they shall deem necessaij. .
S e c 19 That a sum sufficient to carry out the purposes of sections seventeen and eighteen of this Act, and to pay the necessary expenses of the Commission and its members, is hereby appropriated, ou anv money in the Treasury not otherwise appropriated. Said appro prfationsLll be immediately available and shall be out °n theaudit and order of the chairman or acting chairman of said Commi. sion which audit and order shall be conclusive and binding upon all Demitments as to the correctness of the accounts of such Commission.
&c. 20. That this Act shall expire by limitation on the thirtieth dav of June, nineteen hundred and fourteen.
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In accordance with the provisions of this Act, the
follow ing were appointed as members of this Commission:
Senators Nelson V. A ldrich , Rhode Island.
William B. A llison , Iowa.
Julius C. Burrows, Michigan.
Eugene Ilale , Maine .
Philander C. Kiiox, Pennsylvania.
John W. Daniel, V irg in ia .
Henry K. T e lle r , Colorado.
Hernando D. Money, M ississippi.
Joseph W, Bailey , Texas.
Representatives Edward B. Vroeland, New York.
Jesse Overstreet, Indiana.
Theodore E. Burton, Ohio.
John W. Weeks, Massachusetts.
Robert vW. Bonynge,Colorado.
Sylvester C. Smith, C a lifo rn ia .
Lemuel P. Padgett, Tennessee.
George F, Burgess, Texas.
Arsene P, Pujo, Louisiana.
By agreement of the members, the Commission held i t s
f i r s t meeting in the rooms of the Senate Finance Committee,
at 12 o'olook tf. on the 31st o f May, 1908, for the purpose
of organisation.
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/ 3 .
There were present at th is meeting Senators Aldrich,
Burrows, Hale, Knox, Daniel, T e lle r, and Bailey ; and Repre
sentatives Vreeland, Burton, Weeks, Bonynge, Smith, Padgett,
Burge8S, and Pujo.
Mr. Aldrich oalied the meeting to order, and stated to
the members that the Commission had met for the purpose of
organization.
Mr. Bailey moved that Senator Aldrich be elected as
Chairman of the Commission. This motion was seconded and
unanimously adopted.
Mr. Hale moved that Mr. Vreeland be elected Vice Chair
man of the Commission. This motion was seconded and unan
imously adopted.t
Thereupon, Mr# Aldrich t~ok the chair.
A fter some discussion, it was deaidod that there be
elected either two secretaries or a secretary and an ass ist*
and secretary. Mr. Burrows then moved that Arthur B. Shelton
be elected as Secretary of the Commission, This motion was
seconded '.end adopted.
Mr. Burton moved that th3 selection of the additional
secretary or assistant secretary and the disbursing o ff ic e r
be lo f t to the Chairman and Vice-Chairman, with authority to
f i l l these positions on behalf o f the Commission. Thie mo
tion was seoonded and adopted.
The Chairman suggested that a subcommittee composed of
three Senators and three Representatives might be appointed
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i
/4.
by the Chair, to rap a plan of organisation .and of the work
t o be done by the Commission, and to f ix a time and plane
fo r future meetings of the Commission.
Mr, Burton moved that the suggestion of the Chairman
be agreed to, and th is motion was seconded and adopted.
The Chairman appointed as members o f th is subcommittee
Senators Aldrioh, Hale, and Ba iley , and Representatives
Vreeland, Burton, and Padgett.
I t was agreed that th is subcommittee should meet in
Hew York on the 11th o f June to formulate plans for the
future work o f the Commission.
The question o f a su itable time for the mooting o f
the fu l l Commission was discussed in form ally*, and it ap
peared to be the consensus of opinion that a date as near
as practicable to the 20th of July would most nearly su it
the convenience o f a l l the members.
Upon motion of Mr. Burton, the Commission then, at
1 : \f p.m,, adj ourne d.
At a conference held by the Chairman and Vice Chairman
irim-'diate ly a fte r the Commission adjourned, it was agreed
that Mr. R. ?, Mix on should be the disbursing o ff ic e r of
the Commiesion, and that the additional secretary or ansi st
and secretary should be named at some future time, at the
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5
convenience of the members of the Com iseion v*ho are Mem
bers of the House of Representatives,
Secretary.
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WHEREAS, the cause o f currency reform has been strengthened by the a c t ion o f the recent Republican conference in d ec la r in g , by an overwhelming vo te , i t s confidence in commercial paper as a safe l o g i ca l asse t fo r emergency.currency, and a lso by approving the appointment o f a commission to in v e s t ig a te f in a n c ia l conditions and to frame a permanent f in a n c ia l measure.? but
WHEREAS, Serious embarrassment and lo s s to the Rationa l Government* and grave disturbance to f in a n c ia l and commercial in te r e s ts are l i k e l y to fo l lo w the adoption o f a c r e d i t o r asset currency measure, unless the construction o f said measure is complete and s c i e n t i f i c , and such as woulid insure the automatic expansion and construction o f the volume o f currency in response to the normal demands o f trade, and would in sure the redemption o f sa id currency in go ld o r i t s equ iva len t w ith out threaten ing the in t e g r i t y o f the go ld reserve in the R ationa l T reasury ;
RESOLVED, That in view o f the c o n f l i c t in g opinions expressed by d i f f e r e n t members o f Congress, and the im probab ility o f the subject r e c e iv in g the exhaustive and d ispass ionate cons idera tion which i t s importance warrants, toge ther w ith the absence o f currency panic apprehension fo r th is year, the Trades League o f Ph ilad e lph ia b e l ie v e s that con stru c tive currency l e g i s la t i o n could be w is e ly d e fe rred u n t i l such a measure is duly framed by a competent commission; but i f i t be deemed e s s e n t ia l to enact some form o f constructive currency l e g i s la t io n at th is time, the Trades League ea rn es t ly advocates the adoption o f the Fowler C red it Currency B i l l , introduced in to the House May 9th, 1908, because, under said b i l l , the currency would be secured by the asBets o f the banks; p ro tec ted by the same reserve o f law fu l money which is now requ ired aga inst depos its ; guaranteed by a genera l * guaranty fund, and, by reason o f i t s prompt redemption, be automat i c a l l y r e t i r e d when not needed by the normal demands o f trade , and the redemption o f which currency would be independent o f the gold reserve in the Rationa l Treasury,
RESOLVED, That the Trades League o f Ph ilade lph ia fu r th er earne s t ly urges the enactment o f the Fowler Currency Commission B i l l , f o r the reason that wh ile said b i l l prov ides fo r rep resen ta t ives o f a l l le g i t im a te in te r e s ts , thereby l e g i c a l l y commanding the confid en ce o f a l l c lasses and a l l sections o f the country, the la rge m a jo r ity o f Congressional rep resen ta t ives and f in a n c ia l experts upon sa id commission would ju s t i f y expecta tion o f the framing o f a s c i e n t i f i c , comprehensive and p ra c t ic a l measure which would duly safeguard a l l le g i t im a te in te r e s ts and insure the g rea te s t secu r ity and u n ifo rm ity to the f in a n c ia l and commercial . in te re s ts o f the na tion .
Secretary
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N E L S O N W. A L D R IC H , R. I.,C h a i r m a n .
WILLIAM B. -A L L IS O N, I O W A .
J U L I U S C. B U R R O W S , M i c h . E U G E N E HALE, Me.P H I LA N D E R C. K N O X , Pa .J O H N W. DA NIE L, Va .H E N R Y M. T E L L E R . CO LO .
H E R N A N D O D. M O N E Y , N J O S E P H W. BA ILE Y, Tex .
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A R T H U R B. S H E L T O N ,S E C R E T A R Y .
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N E L S O N W. A L D R IC H , R. I. ,C h a i r m a n .
WILLIAM Bi A LLI SO N , IOWA. J U L I U S C. B U R R O W S , M i c h . E U G E N E HA LE, M e .P H I LA N D E R C. K N O X , P a .J O H N W. DA NIEL, Va .H E N R Y M. T E L L E R , COLO. H E R N A N D O D. M O N E Y , Miss. J O S E P H W. BA ILE Y, T e x .
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J E S S E O V E R S T R E E T . I n d . T H E O D O R E E. B U R T O N , OHIO. J O H N W. W E E K S . M a s s .R O B E R T W. BON YN GE, COLO. S Y L V E S T E R C. S M I T H , C a l . L E M U E L P, P A D G E T T , T e n n . GE ORGE F. B U R G E S S . T e x . A R S E N E P. P U JO , LA.
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N E L S O N W. A L D R IC H , R. I.,C h a i r m a n .
WILLIAM 6 , AL LI SO N , I O W A .
JU Ll 'u S .C . B U R R O W S , M i c h . E U G E N E HALE, M e .P H I LA N D E R C. K N O X , Pa .J O H N W. D ANIE L, Va .H E N R Y M. T E L L E R , COLO. H E R N A N D O D. M O N E Y , Miss. J O S E P H W. BA ILE Y, T E X .
N a t i o n a l M o n e t a r y C o m m i s s i o n .
EDWA RD B. VR EELAND, N. Y.,V i c e C h a i r m a n .
J E S S E O V E R S T R E E T , I N D .
T H E O D O R E E. B U R T O N , OHIO. J O H N W. W E E K S , Ma s s .R O B E R T W. B O N Y N G E , COLO. S Y L V E S T E R C. S M I T H , CAL. L E M U E L P. P A D G E T T , T E N N .
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PROCEEDINGS 0? THE HAII0..AL M0BB2ARY COMMISSIOH.
Hotel P laza, New York City,
June 12, 1908.
The subcommittee of the national Monetary Commission,
consisting o f Senators A ldrich, Hale, and Bailey , and Repre
sentatives Vreel&nd, Burton, and Padgett, which was appoint
ed by the Chairman at the meeting of the Commission on May
31, 1908, to map out a plan of organization and of the work
to be done by the Commission, and to f ix a time and place
for future meetings of the Commission, met at the Hotel P la
za, New York City, on the 11th of June.
A l l the members of the subcommittee were present ex
cept Senator Bailey , who w^s absent on account of i l ln e s s .
The subcommittee held two sessions, the f i r s t one from
2 p.m. to 5 p.m., June 11, and the la s t from 10 a.m. to 1
p.m., June 12,
The greater part of the sessions of the Buboommittee was
occupied in an informal discussion of the scope of the fu
ture work of the Commission.
At the request o f the Chairman, Professor A. P« Andrew ,
j r . , of Cambridge, Massachusetts, A ae is tan i Professor of
Economics at Harvard University, appeared before the subcom
mittee. After a conference with Mr. Andrew , the subcom
mittee appointed him as an assistant to the Commission, at a
salary of $3,000 per annum, h is appointment to take effect
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V* * 2
when he should report to the Chairman that he was ready to
take up h is work fo r the Commission*
(Note: Mr. Andrew reported in person to Mr. A ldrioh on
June 18, and h is services fo r the Commission began on that
d a te ).
I t was agreed that a fu l l meeting o f the Commission
should be ca lled on July 20, at some point on the New Eng
land coast, and that the Chairman should be authorized to
make the neoeosary arrangements fo r the meeting.
(Note: Mr. Aldrioh subsequently arranged fo r the meet
ing to be held at the Imperial Hotel, Narragansett P ie r,
Hhode Is la n d ).
The subcommittee authorized the Chairman to request the
Secretary of the Treasury to submit to the Commission h is
recommendations as to desirable or necessary amendments to
the administrative features of the national banking laws;
and also to request him to designate an o f f ic ia l of h is De
partment to report to the Commission, a fte r a personal in
vestigation here and abroad, a comparative statement of the
system of receipts and disbursements and handling of public
moneys of the United States, England, Prance, and Germany;
the expenses o f such o f f i c i a l , while abroad, to be paid by
the Commission.
The subcommittee, thereupon, at 5 p.m ., June 12, ad
journed.
Secretary.
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The Memorial of the "Congress Club o f Kings
County, N. Y ." to the Congress of the United States in
cludes a c learly outlined plan fo r an almost ideal currency,
but as ideal plans are not always practicable , I w i l l give
a concrete example to show that this one is perfectly so.
The annual report of the Treasurer shows that
on June 30th 1908 the debt of the United States was, in
d e ta il, as fo llow s:
Loan of 1925 4 per cent. $118,489,900.00" " 1908/18 3 " " 63,945,460.00
Panama Canal 2 " " 54,631,980.00C ertificates of
indebtedness 3 " ’ 14,186,500.00Consols of 1930 2 " " 646,250,150.00
Interest bearing debt $ 397,503,990.00
Funded loan of 1891 $ 56,500.00Loan of 1904 72,600.00Funded - 1907 3,065,550.00Refunding C ertifica tes 19,270.00Old debt 917,095.26
Debt upon which interest has ceased 4,130,015.26
U. S. Notes (Greenbacks) $346,633,016.00Old Demand Notes 53,282.50National Bank Notes,
Redemption Account 72,459,284.50Fractional Currency 6,962,814.28
Debt bearing no interest
Total
426,056,397.28
$1,327,090,402.54
the annual in terest charge being_j20^946,270.41.
At th is date,lJune 30th 1908/) the Government held
Gold against Gold C ertificates $822,923,869.00 u In Reserve Fund 150,000,000.00" " General Fund 31,964,813.00
Making a to ta l of $1, 004,888,682.00
which, i f placed in one Reserve Fund, would permit the issue
at once, of $2,009,777,364.00 of the proposed new notes, having a reserve of f i f t y per cent, of gold, and these new notes
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oould be used as fo l lo w s ~ R e t ire a l l National Bank Notes,
$698,332,917.00, and bonds held as secu r ity f o r these Notes,
besides $65,195,980.00 ad d it ion a l bonds and c e r t i f i c a t e s as
fo l lo w s (the bonds oould be held in the Treasury fo r necessary %
fu ture use, or r e t i r e d ) :
Loan o f 1925 4 per c e n t ." " 1908/18 3 " "
Panama Canal 2 "C e r t i f i c a t e s o f
indebtedness 3 " ”Consols 1930
(p a r t )
A leo pay debt or which
and r e t i r e **
A l l U. S. Notes (Greenbacks) Old Demand Notes National Bank redemption fund A l l Gold C e r t i f i c a t e s
$118,499,900.0063.945.460.0054.631.980.00
14.186.500.00
512,276,057.00-------$ 763,529,897.00
in te r e s t has ceased 4,130,015.00
$2,009,777,364.00
Place in treasury fo r gold taken 181,964,313.00which, w ith f r a c t io n a l currency 6,862,814.00
would make a n on -in te res t bearing debt o f $2,198,604,991.00and balance o f Consols o f 1930 at 2 per cent 133,974,093.00
T o ta l , in te r e s t and n on - in te res tbearing debt $2,332,579,084.00
Less - Gold in new Reserve Fund 1,004,888,682.00
Tota l $1,327,690,402,00
being the same in amount as in present rep o r t , but as
$763,529,897.00 w i l l have been changed from in te r e s t bearing
bonds to c ir c u la t in g notes , there would be a saving in the
annual in te r e s t account o f $18, 266,788.55, and th is is no
va in theory , but could be a reasonable fa c t .
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- - 4
A ll other Treasury balanoes would be precisely
as now, except that the $150,000,000.00 in old reserve
fund would be transferred to the general fund, increasing
the availab le cash balance from $245,171,347.73 to
$395,171,347.73•
The stock of money in the United States would
then be «
New Notes $2,009,777,346.00
S ilve r and S ilve rC ertifica tes 715,615,595.00
Gold Coin in C irculation 605,244,809.00
or about $48,000,000.00 less than shown by the Treasurer’ s
report, but as the banks would require no reserve fo r circu
la t ion , the new amount would be ample fo r present needs.
For increasing demands there would be the
$490,222,654.00 remaining unissued from the $2,500,000,000.00
authorized, and fo r emergencies the reserve fund already
provided fo r such occasions.
Our money would then be d ist in c tive ly American
in character, and good enough fo r c ircu lation in any
c iv iliz e d country.
Total #3,330, PV7,750.00
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The g e n e r a l p u rp o s e o f th e C om m iss ion b e in g
to make an exhaustive and comprehensive inquiry into the
various systems which are in operation in the leading^nat,ions
of the world; oxp^r^s should be employed in each
of such countries to prepare for the in formation o f the Com
mission concise, accurate historyr^o4 the development o f
t 'lltihr rrnirrrt systems in such countries,—i-n eluding a l l banks,
A
c±-r\fi ji f.vfeOj>s4rS o f those sy ....... ....... ...................... ...... ..• £ j£*ry%Jc>a) -c " 2 /cLc*. f
fre .ether w ifrh y s ta t is t ic a l information re lative\
to the same; such hij^Lorlcal and st a t i st i ca l in formation
in regard to theso various countries to fo l lo w , as fa r as
p o ss ib le , l in e s t hafr w i l l make n p.pmiutr lg o n p<»eaibi-e- ^itw-o^n
t-hrt riiffarflni avstems in use. f
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The general scope and purpose o f the Commission being
to make an exhaustive and comprehensive inquiry into the
various systems which are in operation in the leading nations
o f the world: an expert or exports should bo employed in each
of such countries to prex^are fo r the information o f the Com
mission a concise, accurate history o f the development o f
the present systems in such countries, including a l l banks,
and a syhopsis o f those systems that are now in operation,
together with a l l necessary s ta t is t ic a l information re la tive
to the sane? sueh h is to ric a l and s ta t is t ic a l information
in regard to theso various countries to fo llow , as fa r as
possib le , lin es that w il l make a comparison possible between
the d iffe ren t systems in use.
ii
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Tho general scope and purpose of the Commission being
to make an exhaustive and comprehensive inquiry into the
various aystens which are in operation in the leading nations
o f the world: an expert or exports should bo employed in each
of such countries to prepare for the Info m at Ion o f the Com
mission a concise, accurate history o f the development o f
the present aystoma in such countries, including a l l banka,
and a synopsis o f those systems that are now in operation,
together with a l l necessary s ta t is t ic a l information re la tive
to the same; such h is to ric a l and s ta t is t ic a l information
in regard to thoao various countries to fo llow , as fa r as
possib le , lin es that w i l l make a comparison possible between
the d iffe ren t systems in use.
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The general and purpose of the Commission being
to woke An exJiaustivs and corap re hen a ive inquiry into the
various systems which arc in operation in the loading nations
of the world: an expert or exports should bo miployed in *ach
of such countries to prepare for the info mat Ion of the Com
mission a concise, accurate history of the development of
the present systems in such countries, including a l l brinks,
and a syfeopsis of those systems that arc now in operation,
together with a ll necessary statistical information relative
to the samel such historical and statistical information
in regard to these various countries to follow, as far as
possible, lines that w ill make a comparison possible between
the different systems in use.
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Th« itmora-l scope and purpose o f the Commission being
to rank* an e x h a u stiv e and comprehensive tn ^ iir y in to th«
v a r io u s system s which a re in o p eratio n in the le a d in g n a tio n s
of the w orld , an e x p e rt o r exp o rts should be <w*>loyed in o.teh
o f such c o u n tr ie s to p rep are for the in form ation o f the Com
m issio n a c o n c ise , ac c u ra te h is to r y o f the development o f
the p resen t system s in such c o u n tr ie s , in c lu d in g a l l bank*,
and a syh o p sls o f those system s th a t a re now in o p e ra t io n ,
to g e th e r w ith a l l n e ce ssa ry s t a t i s t i c a l in form ation r e la t iv e
to the sane; such h i s t o r i c a l and s t a t i s t i c a l in fo rm atio n
In regard to th e se v a r io u s c o u n tr ie s to fo llo w , a s f a r a s
p o s s ib le , lin e r , that w i l l make a com parison p o s s ib le between
the d i f f e r e n t system s in use
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fk « f i i i r t l purpose o f the commission b e l l i to make am
exhaustive aad comprehensive inquiry lmto the various bank lag
and currency systems which a rt im operation in the lead lag
commercial nations e f the world9 competent pereene should be
employed in each e f eueh countries te prepare fo r the in fo r
mation e f the Commission eenelee9 accurate h isto ries e f the
development e f ex isting systems in such countries9 which
should include a l l inportant h is to r ic a l and s t a t is t ic a l in
formation re la t iv e te the same; such information in regard
te these various countries te f e l le v 9 as fa r as p o ss ib le y
sim ilar general l in e s 9 in order that the resu lts may be com
parable .
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MINUTES OP THE PROCEEDINGS OP TJU5 SUBCOJCHITTEE ON AMENDMENTS
TO THE .ADMINISTRATIVE PEATURES OP THE NATIONAL BANK ACT.
Hotel Imperial,
Narragansett Pier, R .I . ,
July 25, 1900.
The member* of the subcommittee are Senators Allison,
Burrows, Toller, Honoy, and Bailey and Representatives Weeks,
Bonynge, Smith, Burgess, and Pujo.
Present at the meeting: Messrs. Burrows, Teller, Weeks,
Bonynge, Smith, Burgess, and Pujo.
The committee organized by electing Senator Allison
Chairman and Representative Weeks Vice Chairman.
The committee took up the consideration of the suggest
ions made by the Secretary of the Treasury relative to the
changes in the national bank laws, and determined to request
the Secretary to oomplote the suggestions which he had made -
as he had requested opportunity to do - and to submit the
revised statements to the committee as soon as possible; but,
i f possible, as early as August IS.
The committee determined to propound a l i s t of questions
to national bankers, asking for their views on certain desired
changes in the national bank laws; and & committee, consisting
of the Vice chairman, Senator Teller, Representatives Bonynge,
and Burgess were appointed to attend the meeting of the Aweri-
oan Bankers' Association, to be held at Colorado Springs the
week of September 27.
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Minute8 of July 26. 2.
After replies are received and compiled from the nation
al bankers to the questions submitted, it is proposed that the
committee give public hearings in some of the larger c itie s ,
to add to its information on these subjects.
At this point the subcommittee adjourned, subject to the
ca ll of the Chaim an.
< w > • • -a
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j • • ^ A m m o m s s .AGENTS LOCAL EARLY
opinion that the upshot of the coiTiiiinjJ on’ s studies •Jill be
not to pramulyate a neu currency .10 .sure entirely, but
firmly to make additions and improvement3 to the present
so-called Aldrich-Yresiand 1 a : .
In banking circles the r e -s thin opinion of Senator
Aldrich has been received n't great interest, fc r it is
recognized that, as head, cf the conmi&sion 0. 1 sponsor for the
currency b i l l adopted in the closing hours of CongressT his
-7ord \/ill have great i; eight' The-- U-, of course, disappoint-
merit of an ^extreme kind among many fi ending barkers over the
outlook as limited by this situation, but hope is s t i l l
entertained that as a result of Senator Aldrich’ s invest!-
ration of Eurorear bank inn methods and its currency system he
may experience a charts of heart. .
Senator Aldrich,, -rith Senators Hale, Knor.. - ad Ttanielt?V , -
and Tiepresentativea Vreeliid, Ov-rsfre.-t, 3ur.cr 12:d Padf-crr;,
•.rill anil from this city on Tuesday next cn the Krpnprinz- .
- n ■. m - i p f A r ' a -ail*,-'. c s - . k Cu 1. »
O X : i - ;.usiivs • ?
* \ examinat ion of hlie currency . r> t pl .
t Otis of Croat
1 •• Britain, France, and Ctsrman, y . ■ .7 1 1 6 S e r f ( ]. .11 v tan, C.mditfh
1 * and Sviss neth6ds -il l 3d sc .be sgudibd, fH B fac ility
. t
. * /
V
placed 'at the disposal• 1 i ■0
of thi s P r>- 'V ' 1 * ’■ ^ £5 .
1 • ' 4—
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l u x m m z r a m s .agents. local early m m iitt'/.v y .
in the United States* At any rate, the members of the famous
London insurance company refused tc issue a policy for
^10,000 on a consignment of "shevth” got/ns recently imported
from Paris by a local department store'. .• iThe uptoun merchants, feeling someuhat skeptical as to
• .just hou ye ll the latest Parisian craze yould take v/ith
Tier York rbmen asked an insurance broker to obtain a policy
insuring the sale of the go.jns — in otjier rords, to insure
the popularity of the "sheath” go^n* .
The broker, knowing that the London Lloyds v/ere 'Tilling
to :riua a policy on anything, from a presidential election
to the safeguarding of an automobile racecourse, or the
fluctua ions of the stock market, promptly applied for a
policy^on the "sheath” goons* To his surprise, however,
he uas, to use h i! oun uords, "turned doun cold*.” He applied» /
to several ether companies ith the sare result’,
' x ' '
^ NE*? YOLY, ■ August 1 .—-Tlio TIMS. this morning sayar
For several days laacibors of the National Monetary
Consuission, 'appointed' at tb j I t at session of Congress' tc
devise olano i Tr.urrr.-'^ryrl ./J.n? at ten and Composed p£j?ip e '
dona1 ora. and niiio Congressman, 'have, boon in this c ity making
preparative fo r their rip to Europe'to study-foreign Linking * \
conditions and to confer \7ith bankers here! Ae a result,
it ha3 become fcnorr in ’"a ll Street that Senator Aldrich:
uh<4 is at the head of the commission, has ccme. to hold the4 "
' * 424a • /
»
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e d \Ata'pd b v r e e l a n d3 7T ? N . Y . D I S T R I C T
f a S J 'ft fy }
f la t a ‘ 7 7 1 * 1 ^ 0
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MONETARY7
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V1
To obtain nor# complete and accurate inform ation'withc < _
reference to the monetary and hanking implement! o f the le
ing commercial nations (than la now ava ilab le^ i s the p r in c i
pa l purpose o f the suhoemittee o f the National Monetary Com
mission oho are leaving today fo r London. The subcommittee
also intend to make thorough examination into the methods in
use fo r the co llection and d istribu tion o f the public reve
nues in each o f the leading countriea^of ^urope. The Secre
tary of the Treasury has detailed Mr/TBr Man son 9 Chief o f
the D ivision o f Accounts o f Issue and Redemption o f the
T reasu re rs O ff ic e , whs mi l l a s s is t the Committee in th is
work.
The active work of the Commission this summer w i l l be
carried on kk by the subcommittee who are going abroadt and
by another subcommittee, o f which Representative Veeks i s the
acting Chairman^ 01^ are now engaged in considering amend
ments to the adm inistrative features o f the national banking
laws*
This work i s but prelim inary to the report which the Com
mission are required to make to Congress o f a complete mone
tary mid banking system fo r the country* I t was not ex -
peeted that the le g is la t iv e provisions o f the act o f May 30 th,
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2 .
1908, would b « f in a l or, permanent. They vara adopted with
the aingla purpoaa o f providing against the recurrence o f
destructive oondltiona sim ilar to thosa from which the
country su ffered in October la s t . This act w i l l undoubtedly
be superseded In time by le g is la t io n estab lish ing a compre
hensive monetary systes^
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Memoranda o f sub jec ts to be i n v e s t i g a t e d in England,
(August 9, 1908)
CUIi...E!TCY AND BANK! NOTES
How and by whom should they be issued
We should t r y to secure statements from bes t a u th o r i t y , p r i or Ao 1 844----
a Of the exper ience o f England which l e d to the adoption o f the act o f 1844.
b Experience in Scot land and I r e la n d which l e d to the l e g i s l a t i o n o f 1845.
cTheor ies upon which these a c ts were constructed and adopted
d P r in c ip a l p o in t s in the c o n t r o v e r s i e s preceed ing and f o l low ing adoption o f Bank Act .
e as exper ience in the Un ited Kingdom with re fe rence to note issues ■aJiWW under t i s l e g i s l a t i o n been s a t i s f a c t o r y ?
f In t h i s are any amendments suggested by acknowledged a u th o r i t i e s , and i f so what are t h e i r nature?
g I s there any p r o p o s i t i o n , e i t h e r in the pub l ic i n t e r e s t o r to b e n e f i t banks, f o r the r e s t o r a t i o n o f the r i g h t o f issue to banks gen e ra l ly and uncondit i o n a l l y , or under l im i t a t i o n s ?
h I s there any conten t ion in banking or economic c i r c l e s that i t i s necessary to r e s t o r e or extend the r i g h t o f issue to ban’ s to enable them to a f f o r d adequate f a c i l i t i e s to borrower? or to meet
i In o ther words, have the banks which 1 the r i g h t o f issue s u f f e r e d , or have the comm account o f the d e p r iv a t io n .
j l s the r i g h t o f psftv&le note issue any lo n g e r important e i t h e r to banks or communities.
k S ta te B r i t i s h d o c t r in e , (p i t e Gladstone and o thers , ) that note issue i s a jaeoa-c, ary fu n c t ion o f the Government.
l e g i t im a t e business demands
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2
1 Trace the changes in the use and importance o f bank notes growing out o f the new and g r e a t e r use o f checks, b i l l s o f exchange, f o r e i g n and domestic d r a f t s , commercial paper, and o f c l e a r in g house f a c i l i t i e s , redder in^em ploym ent o f n o t e s unnecessary.
m S t a t i s t i c s showing growth in r e l a t i v e use' o f o ther in s t ru ments o f exchange, growth in amount o f business done, amount o f f o r e ign and domestic commerce., c l e a r in g house re tu rns ---- f o r as manyyears as a v a i l a b l e .
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3
B A N K S
1 The d i s t i n c t i v e fu nc t ions
a Of the Bank o f England
h Jo in t stock oomftan>* c
c Pr4v&&e hanks
d Government and p os ta l sav ings hanks
e Discount houses
f Finance companies and promoters
g B i l l Brokers
2 A v a i l a b l e s t a t i s t i c s o f amount o f business done by each c la s s .
3 We r e q u i r e the laws which govern each c la s s as ev idenced
a by l e g i s l a t i o n
b by understood and unw r i t ten laws.
4 These i n q u i r i e s should be d i r e c t e d to
a O rgan iza t ion
b Government and co n t ro l
c P r o v i s i o n s as to c a p i t a l and surplus ( r e s e rv e fund).
d P r o v i s i o n s as to l i a b i l i t y o f s tockho lde rs , o f f i c e r s , and d i r e c t o r s .
e Requirements, i f any, f o r government or o ther superv is ion , in sp ec t ion or examination o f any kind.
f Nature o f statements or r e tu rns , pub l ic or p r i v a t e , i f a y requ ired or pub l ished .
p Stamp taxes imposed on checks, b i l l s o f exchange, e t c . , and o ther d i r e c t and in d i r e c t charges upon banking, and the aggregate annual amount c o l l e c t e d .
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‘3 "unctionr o f these lank.; .ml r hi'* fere. it conditions affecting character of buz.il no 3d
• In :pai’cci> a’?’:■ Mod con unities*
b in j urely -.p;rj cultural cca :uniti«8
c I n I n d u s t r i a l ar- . : e : u f a c t m - i n r c o n t r o l , 2 I. he < v -c h e - s r « r*
d In • r<:pi oa rci 1 centroe, liv e Iv.ipool.
c .V-• . ■ . ' . - . - ■ ■ - ■ r. t* ■' ■ •;#
■ • ui;. i e- ice f ;• r c; mn'ien of g showing amount o f deposita inoac; cla a o ..'* ' ■ .*hE, cl a r i f i v- a , .?blic or . r iva le,
U<- 0 1*; y J H on f. ■ - ' •/:* on llr.iC.
htabc -V. c f inv-. cr.»ta if. cla • -or of 80c.,rlt,i©B, public, a---oi—i ■ u b l i e , and p , i v*e : e .
Ai • .> V.-w .■ : t o o i /,• Xr< dot.Ml oher a.. .. r of loa-ia» on gc , rciiOL on call or on t ’ "ac,;:,1, o re al < ;. t a t r , o t c ♦
— orc^v its. U;, on coHat r-
c lcI •ari p
t ■ i o . i oi m tioxta o'" er thanho;,^: a - eecl .tioev in e::ini ‘nee, a d • at lr their cv arac-
ter?
10 .t ia t: • (a , .rj .l tc.-.-oci. ae i o f camera? ,f
' ' ■ . 20 ■ ■ 2 .... ' - , * . / , m . . ~1 alreu . , . . j . , ■. ion
desirable?
12 iluaber and c , .-.c" • r of clearing hour>e organisotIona
10 All available etc.tiaiict nhovirii in detail i e rowth of bn- Ini?in nrV... ?r, Scotland an-.. Ireland, and the relative ;row in n utd <>f he Joi ■ M l d o • .
14 70c f f‘«:ct o f branch .. i-nSal •!■: on pro -a j-i t> and V rtev> lope ntc f co- •rvcniMcs, an.-:, on dank rate a,
10 Arc branch banka no e n ’.tiefacto y to c^nati t«K nci c ’.!ian in<le-neb nt loc -1 bani.c?
I f ir; ' •. e rel-- toe owy-.evrhif b* tv n large tauji a of dlaoount . ruv.;. d* o* it and o tf . ‘ :..r. corporate inter*:ata?
1 <>v/ are bwji?r xat r. controller., an« how nearly doc a th< bankratr or the joint rtoc> uotapanlea fo lio* the r»‘.te o ft *■ .. ‘ rf- Of . >1; 1
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;5
18 Secure ta b le o f comparative r a t e s f o r a s e r i e s o f yea rs o f Banko f England, Im per ia l Bank o f Germany, Bank o f Prance, and the r a t e s o f j o i n t stock companies and o ther banks in each countrjr.
19 Best in form at ion as to amount and charac te r o± r e s e r v e s he ldfrom time to time by Bank o f England and j o i n t stockbanks*
20 What methods are in use in main ta in ing the adequacy o f 3uchrese rves?
21 Are r e s e rv e s in ac tua l cash r e l a t i v e l y in c rea s in g or d ec ieas ingin recen t years?
22 W a t re at ion e x i s t s between r e s e r v e s and the bank ra te?
23 State course o f exchange and ac tua l m o v e m e n t s o f go ld for^as e r i e s o f y e a r s , g i v in g causes*, a lso s ta te e f f e c t o f changes in bank ra t e noon these ovements.
24 S tate character o f the p roposa ls and a g i t a t i o n f o r g r e a t e r cent r a l r e s e r v e s f o r the purpose o f secur ing g r e a t e r s t a b i l i t y o f Eng l ish f i n a n c i a l i n t e r e s t s , which in clude proposa ls f o r secondary r e s e r v e s and f o r enla r g e d " f i d u c i a r y " issues .
25 Also examine movement f o r a d d i t i o n a l bank statements or re turns .
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Memoranda o f su b je c ts to be in v e s t ig a te d in England.
(August 9, 1908)
How and by whom should they be i >ued.
Y-'e should t r y to secure statements from bes t a u th o r i t y , -)4rff—IcH *■ '' -
a Of the exper ience o f England which l e d to the adopt ion o f the act o f 1844,
b Exp r i e n ce in Scot land anc I r e la n d which l e d to the l e g i s l a t i o n o f 1841.
cTheor ies upon v' i ch these a c t s were cons truc ted and adopted
d P r in c ip a l p o in t s in the c o n t r o v e r s i e s p r eceed in r and f o } - iowing adopt ion o f Bank Act,
p Xn tii.it aro any a .end.neat?:, su ggested d: acknowledged a u t h o r i t ie s , and i f so what are t h e ir n ature?
r j s t ' cro any p ro p o s it io n , e ith e r i the p u b lic in te r e s t or to b e n e fit ban ks, fo r the r e s to r a t io n o f the .ripbt o f is su e to banka g e n era lly ana un con d itio . i l l y , or mder lim it a t io n s ?
h I s th ere any con ten tion in banking or economic c i r c le s th at i t i s n e ce ssa ry to r e s to r e or extend the r i ht o ' i s ue to ban e to enable them to a f fo r d adequate f a c i l i t i e s to borrow ers o i to icot
i In o th er words, have the 1 anha which have been d eprived o f I t t o f is su e s u ffe re d , or i f e the co u n i t i e s ^ u f '*crad on account o f the d e p r iv a t io n .
j l s the r ig h t o f p v iv& tc note i s ; ue any lo n g er im portant cither to an s or comm u n ities.
k f t ate B r i t i s h d o c t r in e , ( c i t e I AatMft M i oV c r e ) that note X; aue i s * ----------- -- func t ion o f the Government.
ec
exper ience in the Un ited Kingdom with r e f e r e n c e to note
le g it im a te b u s in e ss derm ds
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I Trace the e ;angec in the use and importance o f bank notes jcov/irif out o f ti e new and g r e a t e r use o f checko, b i l l s of exchange,
f o r e i g n an o stia r a fts , oi u c i a l paper, an< i f S li uring 1 • fa s ilitle fi, riil<jcitt§fittp l^yaiR t^if note eiunnecessary •
a driA>«v/tA«i^u.r: s t a t i s t i c s
10 , i '• £ o f exc arif e , s ign and. domestic y i a re *e • tv a i 1 ab .1 e
s ov/ir r f rowth in relative use o f growth in amount of busine .s done
o . cat cle irln hoi u .. -•*/f
o t ': r in s t ru - amount of f o r -
for * s many
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a i n .
1 The d i s t i n c t i v e fu nc t ions %
a Of the B .nk o f England
b Jo in t stock 8€nniftFi'Win-» ( j—tn.
c P r i v a t e banks
d Government and p os ta l sav ings banks
o Discount houses
f ? i n an c e c o mj < an i e a an d p r ono t e r e
f B i l l b rokers
2 A v a i l a b l e s t a t i s t i c s o f amount o f business done by each c la s s .
3 e re,, i r e the laws which pov rn each c la s s as ev idenced
a by l e g i s l a t i o n
b by understood and unwr i t ten laws.
4 These i n q u i r i e s should be d i r e c t e d to
a O rgan iza t ion
b Government and c o n t r o l .
c P r o v i s i o n s as to c a p i t a l a d urplus ( r e aery* fund).
d P r o v i s i o n s as to l i a b i l i t y o f s tockho lde rs , o f f i c e r s , andd i r e c t o r s .
c Requirements, i f any, fo r g o v . r n ^ n t or o ther su perv is ion , in sp ec t ion or ex ami a t ion o f any kind.
f Mature o f statements or r e tu rns , p u b l ic or p r i v a t e , i f a i r equ ired or publ ished.
p F>tam, taxes imposed on checks, b i l l s o f exchange, e t c . , and o th f r d i r e c t aid i n d i r e c t charges upon banking, and the agg rega teannual a ount c o l l e c t e d .
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5 function:-: o f these banhc nd .r di 'Tiv. re v;. c o n d i t i o n s a f f e c t i n gcharacter of businesr
a In : parody settled corn 'unities
b in purely agricu ltural com un ities
c In industrial and -anufacturing centres, lik e arches'.er*
d In great com.;. *•-re i d centres, lik e Liverpool,
e In the great intercontinental cxchan-e centre o f London.
6 s ta t is t ic s for a series o f years showing amount o f deposits ineach d a ta o f banks, cl a d r ie r as p u b l ic or private,and deposits payable on demand or on liras.
7 htatcpent c f invo r:tu«ntc in c l an cos o f secu rities , public, acrai*pub lie, anc. : r i vat e.
Also statement s; o i in d e ta il character o f loans*— mercantile, on ce -r.r c ia l |;upcr, on ctill or on t ime, on co lla te ra l , on real e st at e , etc.
h Are t ere any haul; organisations or assool at lone o;her than clearing house association? in existence, and r" at ie their charac
ter?10 What is the Central Association o f anlcera?
II I t. . . . -.ny coopera t ion or u n i f i c a t i o n o f . i v t e r e s ic under or - uin.fl.ry c i r cu ^s tan ces , one i s g r e a t e r c e n t r a l i s a t i o ndesirable?
12 Humber and ci-aracter o f c l e a r in g house o rg a n isa t ion s
Id A ll available s t a t i s t i c s showing in d e t a i l t e rowth o f b .nving in England, Scot land and I r e l a n d , and the r e l a t i v e growth in England o f the J o in t block and o h r banks.
14 7Le f fe c t o f branch conking on pro v r i ty and the developmento f comaunities, and on bank rates.
15 Arc branch ban hr. no e satis factory to const I t . -ncics than inde-pendt nt lo ca l banks? *
16 Ic “bore any rclr.tec ownership between large banks o f discount rind dopocit and other large corporate interests?
IV ow are bank r a t e s c o n t r o l l e d , ans bow nea r ly docs the bankrate o f the j o i n t stock companies f o l l o w the ra te o f the I' nk o f hngland.
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l a rteeure ta b le o f comparative r a t e s f o r a s e r i e s o f years o f B * - *o f England, Im per ia l Bank o f Germany, Bank o f France, and the r a t e s o f j o i n t stock companies and o ther BanVs in each count.
19 Best in fo rm at ion as to amount and charac te r o f r e s e r v e b heldf r o m time to time By Bank o f xingl&nd arid j o i n - fc.tockBanks,
iO >7. at methods are in use in m a in ta in ing the adequacy o f such reservea?
ill Arc r e s e r v e 8 In ac tua l cash r e l a t i v e l y In c r ea s in g or decreas ingi n r ec ent years?
22 W a t re a l i e n e x i s t s "between r e s e r v e s and the hank ra te ?
21 State course o f exchange and ac tua l movements ol go ld fox «as e r i e s o f y e a r s , g i v in g causes; a lso s ta t e c j f e e t o f charges in Bank ra te upon these ovements.
24 Gtate charac ter o f the p roposa ls and a g i t a t i o n f o r g r e a t e r cent r a l r e s e r v e s fo r the purpose o f securing, g r e a t e r s t a b i l i t y o f Eng l ish f i n a n c i a l i n t e r e s t s , which include proposals fo r secondary reserves and fo r enl a r g e d " f i d u c i a r y " issues .
25 Also examine movement f o r a d d i t i o n a l bank statements o r re tu rns .
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\
MINUTES ON HEARINGS OF THE NATIONAL MONETARY COMMISSION
COMMENCED AT LONDON, ENGLAND, AUG. 12, *08.
On Wednesday, August 12th, the Commission commenced hear
i n g s . The f i r s t man heard was Mr. R. W. W ha l ley , General
Manager o f P a r r * s Bank, an i n s t i t u t i o n which was o r i g i n a l l y
an outs ide bank in Lancash ire . He s ta ted that the j o i n t
stock hanks pay 1 l/fe$ l e s s i n t e r e s t on d ep os i t s o f current
accounts than .the bank r a t e , that i s , to r e g u la r customers.
He d id not make e x a c t l y c l e a r whether t h i s i n t e r e s t was paid
merely in the country o r i n the c i t y as w e l l . (See l a t e r
minutes W h a l le y . )
On Thursday o f each week a f t e r a change in bank r a t e ,
r e p re s e n ta t i v e s o f each bank in the c l e a r in g house meet and
f i x the ra te o f i n t e r e s t on d e p o s i t s .A charge i s made to cus
tomers who draw checks on what i s c a l l e d the ’’ turn ove r
from l/Qth o f 1% down to perhaps 1 /32 o f 1% on amounts
drawn out • In some cases a round sum i s charged f o r the
y e a r , say 100 pounds f o r doing t h i s b u s in ess .
There are two c la sses o f d is cou n ts : Trade b i l l s , on
which the ra te i s h igh e r ; and bank b i l l s .
The Bank o f England never consu lts the #o in t s tock
banks in regard to the bank r a t e .
In the c l e a r in g house, which has ijiore than a dozen mem
bers , no new members have been admitted during the l a s t twen
t y y e a r s .
est on dep os i t s when money i s redundant and ra te s e low .
He did not d e s i r e that any mention o f t h i s s h o u l d m a d e
when the r e p r e s e n ta t i v e s o f the Bank should be presen t before
the Commission. The r e s u l t o f t h i s pay ing o f i n t e r e s t i s
that money goes i n t o the Bank •
In some ra re ins tances the B&nk o f England pa; i n t e r
L a t e r he sa id that i n t e r e s t i s pa id in London only on
m r
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>*
money withdrawn on seven days n o t i c e .
A l a r g e r p rop o r t io n o f accounts are c r e d i t accounts .
In t h e i r s ta tements , money at c a l l , o r short n o t i c e , i s a
cons ide rab le i t e m . Short n o t i c e means three to seven days.
He said, he regarded i t as bad p o l i c y not to ca rry p e r
manent s e c u r i t i e s . The statements o f a l l the banks show a
c e r t a in amount o f permanent s e c u r i t i e s . That o f P a r r f o Beak
shows 1,000,000 pounds o f Consols va lued at 03, government
s e c u r i t i e s , B r i t i s h ra i lw ay debenture , and o ther f i r s t c la ss
s to ck s , 3,500,000 pounds. The statement i s a lso made up o f
B i l l s d iscounted and in c lu d in g trade and bank b i l l s , 1,000
000 pounds; Loans and advances to customers, 14,400,000
pounds. These are loans made aga ins t s e c u r i t i e s ; sometimes
aga ins t commercial paper d e p o s i t e d , and in rare in s ta n c e s ,
a ga in s t the persona l s e c u r i t y o f the borrower without c o l
l a t e r a l .
Three per c e n t , i n t e r e s t to t r a d e r s i s the ve ry lowest
r a t e . Four per c e n t , i s the usual minimum.
Mr. CHRISTOPHER R. NUGENT, MANAGER, THE
UNION DISCOUNT COMPANY OP LONDON.
Mr. Nugent a ls o appeared, r e p re s e n t in g the l e a d in g d is
count house, o f which there are ID or 14. They per form a
fu n c t ion s im i l a r to that o f b i l l brokers in the Un ited S ta tes .
The j o i n t s tock banks l i m i t t h e i r d iscounts and loans to reg
u la r customers, and do not go o u t s id e . A'hen -> ey h -ve a
plus o f money they depos i t w ith the d iscount houses, or pur
chase from them commercial paper and o th e r Ioann. The de
p o s i t s o f the d iscount companies are made up o f bhese sumo,
in t r u s t e d to them by hanks, at l e a s t , f o r the most p a r t .
They do not have genera l d ep os i t s from the p fcb l ic . -Te otu»-d
tha t these d iscount houses handled perhaps on e -h a l f o f the
d iscounts o f I.ondon. They go out a f t e r bus iness . ■ nc b..nko
do n o t . The banks are l e s s c o n s e rva t iv e than the discount
- 2 -
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V
houses. When the discount have a surplus supply o f paper
they go to the Bank o f England which u su a l ly p rov id es f o r
t h e i r purchase. They d i f f e r from the b i l l b rokers , o f whom
there are only three or f o u r l e f t , 1 . in that they r e c e i v e
dep os i t s from the banks: 2. They ca r ry the loans taken on own
t h e i r account ,wh i l e the b i l l brokers act as mere i n t e r n e d i -A
a r i e s . Most o f t h e i r loans are on c a l l or not more than 14
days, though loans are o f t e n a l lowed t o run f o r a very con
s id e ra b le time . They guarantee the paper turned, o ve r to the
banks which i s e n t i r e l y d i f f e r e n t from the course o f the
b i l l b rokers .
There i s usua l ly 00,000,000 to 100,000,000
d iscounted paper at London. The discount houses
o r more i n t e r e s t on d ep os i t s as the banks.
T h e i r d ep os i t s are a b s o lu te ly on c a l l wh i le
banks are seven to fou r te en days .
The banks ao not r e -d i s c o u n t . I t would be
pounds o f
pay as much
those o f the
regarded as
an in d i c a t i o n o f i n s t a b i l i t y .
The Bank o f England does not taker f o r e i g n b i l l s . Bor
in s tan ce , a b i l l payable in f rancs o r marks, and payable out
s ide o f England would not be r e c e iv ed by the Bank o f England.
On the o ther hand, i t does d iscount paper drawn in South Am
e r i c a or America, c r any ou ts ide country , on London, payable
in Eng l ish cu rrency . They take only paper accepted by a
B r i t i s h or C o lo n ia l house o r bank.
Jo int stock companies do not take f o r e i g n exchange
e i t h e r . The l a r g e merchants, such as Baring B ros . , Roths
c h i l d s , and Morgan do.
There i s a c la ss o f paper known as "Domic i led B i l l s "
which are drawn on persons in outs ide c o u n t r i e s , but payable
in London. (See statements P a r r ^ Bank and Discount Company.)
Thursday, August 15, 1908.
4
*iDigitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
Mr. EDWARD H. HOLDEN, W. P . - THE LONDON CITY AND
MIDLAND BANK , LIMITED *
In our statements " Cash i n Hand n may inc lude checks
to be p resen ted next day.
The g r e a t e s t demand f o r money i s i n the March q u a r t e r .
I t i s l e s s in Jume . Money i s most p l e n t i f u l i h December.
Purchases in the autumn and e a r l y w in t e r are payable in the
March q u a r t e r . A lso , money i s i n l a r g e demand f o r the pay
ment o f the income t a x .
Many country banks are taken over when they have e n la r
ged t h e i r d iscounts too much, and these may be sa id to be in
d i f f i c u l t y , but a l l banks in England are s a f e . There are
two methods employed when banks or p r i v a t e banking houses are
acqui red • 1 . an addi t i onal s tock i soue f *-■. an ac tua l pur
chase, i n which case a l lowance i s made f o r good w i l l .
There i s a gradual abandonment o f country banks. Some -
t imes we e s t a b l i s h branches, and sometimes buy out o r ab
sorb e x i s t i n g bunks.
For your i tems c a l l e d c a p i t a l , surp lus , and und iv ided
p r o f i t s we have c a p i t a l , r e s e rv e fund, and c r e d i t on p r o f i t
and l o s s account .
The ra te on d ep os i t s o f the j o i n t s tock unks i n London
i s approx imate ly 1 1 A f y below the discount ra te o f the Bank
o f England. In the country they must f i x the ra te o f i n t e r
es t on dep os i ts i n a measure w ith r e fe re n ce to the 2 1/2/«
paid by p o s ta l sav ings banks.
One reason f o r the abs’o r p t i o n o f the outs ide banks i s
that they cannot compete w i th the p o s ta l sav ings banks, that
i s , at c e r t a in seasons o f the y ea r they could w e l l a f f o r d to
pay the same i n t e r e s t , but at o the r t im es , when the demand
f o r money i s l e s s , i t would be burdensome to pay so high a
r a t e . In times when there i s a la r g e demand f o r money they
need to have recourse to a c e n t r a l supply at London. In
t imes when the demand i s small t h e i r funds can be in v e s ted
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in London where there i s a more ac t ive money market.
There i s a sav ings bank in Yorksh ire c a l l e d the "Penny
Rank” which pays 2 i n t e r e s t .
P o s ta l Savings funds have been l a r g e l y in v e s ted in con
s o ls which have dep rec ia ted so as to e n t a i l a lo s s o f 15 ,
000,000 pounds on the government.
Country basks are mow, some o f them, opening sav ings
accounts , tak ing one pound o r more. Th:s i s not regarded as
good banking, because the la r g e number o f small d e p o s i t o r s ,
i n time o f dep ress ion , w i l l be asking t h e i r money; a ls o with
a m u l t i p l i c i t y o f d ep os i t o rs there i s more danger o f a run.
When a country bank i s taken over the community i s ben-
e f i t t e d , because more ample funds are a v a i l a b l e f o r the ben
e f i t o f that community.
There are seventeen members o f the c l e a r in g house, i n
c lud ing some small banks, such as M a r t in ' s .
A new bank could not be e s tab l i sh ed w ith any p rospect
o f success . In the f i r s t p la c e , they could not en te r the
c l e a r in g house. Two banks have r e c e n t ly t r i e d to e s t a b l i s h
themselves and have f a i l e d .
There i s no a g i t a t i o n f o r note issue by the banks o ther
than the Bank o f England. The o ld i n s t i t u t i o n s , which have
the r i g h t o f i s s u e , oo not d e r i v e b e n e f i t from the p r i v i l e g e
because when the branch banks ob ta in t h e i r notes they p r e
sent them f o r redemption very prom pt ly .
MR. Holden advocated two re fo rm s : 1 . That the joir io
s tock banks should hold more gold, in t h e i r v a u l t s , say l o , -
000,000 pounds, and l e t them show sep a ra te ly by statements
what they have in go ld and what in b i l l s , s i l v e r , and balan
ces at the Rank o f England; then, (2 ) the Rank oi England
d ispose o f 11,000,000 pounds o f government s e c u r i t i e s and
have go ld i n s t e a d : . This would make an a du i t ion a l supply oi
g,0 id>’ 26,000,000 o f g o ld .
Last f a l l our bank sent lO,DDO,COO oi go ld to Hew York
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f o r which we were very much blamed, New York could draw on
us f o r an almost un l im ited amount.
MR. R. T . HAIMES, GENERAL MANAGER OF TFE NATIONAL
PROVINGI AT RANK OF ENGLAND, LTD.
- 6 -
This bank does not make a p r a c t i c e o f tak ing o ve r coun
t r y banks, though o r i g i n a l l y i t d id so . In some ten years
only two have been absorbed.
O r i g in a l l y the i n s t i t u t i o n was an outs ide one, and had
note i s su e , be ing more than 65 m i les from London.
Our subs id iary concerns are o f two k inds , f i r s t , a
branch which has a permanent s t a f f , and i s open e v e r y week
day; 2 , on a g e n c y which i s open one or two days a week and
does business through a branch.
One g rea t advantage o f the branch banking system over
the l o c a l banks i s that the l a t t e r are amenable to l o c a l
pressure and lend more on s p e c u la t i v e e n t e r p r i s e s . Bradford
i s an example. The Na t iona l P r o v in c i a l has not attempted
to e s t a b l i s h a bank th e r e .
The l o c a l hank there shows a very la r g e p ro p o r t io n o f
d iscounts to r e sou rces .
The N a t iona l P r o v in c i a l has a very la r g e amount o f p e r
manent d e p o s i t s , some o f which remain f o r the l i f e oi the
p a r t i e s , and on which i n t e r e s t i s pa id at 2 1 /'?, f t , These de
p o s i t s are e s p e c i a l l y n o t i c e a b le in ’’'a les ana some ol the ru
r a l d i s t r i c t s o f England.
We do not loan l a r g e l y on s to ck s . The usual i n t e r e s t on
stock exchange loans i s 2% . The usual discount ra te in the
country i s l/2 o f 1% over the bank ra te w i th a minimum oi
Our bank has an unusual p r op o r t io n o f i t s a sse ts i
manent investments whi ch pay an average o f 3 z / s r f .
we superv ise t r a n s fe r s o f s t o c k . A person cannot buy
s tock in th i s or o ther London j o i n t stock banks except with
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- 7 -
the approva l o f the Board o f D i r e c t o r s . Our l a r g e s t ho lder
has perhaps 1,000 shares . The stock s e l l s f o r 43 to 44 ,-
about 2 l/2 to 1 on the par va lu e .
I t i s the usual custom o f banks to hold as much as th e i r
c a p i t a l and r e se rv e in conso ls and g i l t edge s t o c k s . Con
s o l s were at 113 be fo re the Boer War. They are now s e l l i n g
f o r about 86 1 / 2 .
Of 55,000,000 pounds o f d e p o s i t s , a l l but 12,000,000 or
13,000,000 are in the country . Other banks have a l a r g e r
p r o p o r t io n h e r e . Our d iscounts are about 14,000,000 pounds.
Out* loans 17,000,000 pounds.
We g i v e d i s c r e t i o n to the l o c a l managers to a l im i t e d
ex ten t or amount, g i v in g them l a r g e r d i s c r e t i o n than others
do, that i s , up to c e r t a in amounts o f loand or d iscounts ,we
g i v e them abso lu te a u th o r i t y . Vre have 14 in s p e c to r s who ex
amine branches. Some London banks compel the sending o f the
a p p l i c a t i o n f o r a loan to the c e n t r a l o f f i c e where i t must be
approved . There i s no l o c a l board system, but one manager.
Our bank statements do not g iv e as a separate item the depos
i t s at branches. To do so would be to show com pet i to rs the
most f a v o r a b le f i e l d s and encourage en te r in t o compe
t i t i o n . The branches o f the Bank o f England repor t every day
and depend upon the c e n t r a l i n s t i t u t i o n f o r a l l tha'o they do.
Th is p reven ts the bank from being a se r ious com p e t i t o r .
The bank has a c i v i l s e r v i c e system based on the gov
ernment p lan , v i z . , l/60th o f the sa la ry on re t irem ent f o r
each year that a man s e r v e s , p r o v id in g the t o t a l pension
sha l l not exceed 2/3rds o f the sa la ry paid on r e t i r e m e n t .
Most persons who en tev* the employ o f the bank remain with i t
during t h e i r l i v e s . Employees beg in at 16 or 17 years o-
age . When there i s a vacancy in the p o s i t i o n or manager at
any po int t^e deputy manager i s not promoted to h is p l ^ c e .
To do so world be to e s t a b l i s h a p lan under wnicb the deputy
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would be j e a lo u s o f b is immedl t ~ ;upe~ ior . Then, t o o , be
would have come in touch with l o c t l i n t e r e s t s so that he
would to l i k e l y to be too p a r t i a l to b is neighbors .
( See statements o f banks and b r i e f accounts of managers
f i l e d h e r e w i th , - London C i ty & Midland, 2 s tatements-
f o r December and June l a s t r e s p e c t i v e l y . )
SIR GEORGE MURRAY K . C. B. , made a statement in
the a f te rnoon rega rd ing genera l f i n a n c i a l c o n d i t i o n s , i r e
customs, the in land revenue, and the pos ta l r e c e ip t s a l ik e
are paid in to the exchequer. The Treasury has the e igh t to
buy exchequer b i l l s up to I f ,C O O ,000 or 1?, 000,000 pds .
He gave much i n t e r e s t i n g d e t a i l in regard to trie work
in gs o f the Treasury Department, the P o s ta l Savings Banks,
and the s o - c a l l e d Trustee Banks. The Trustee Banks have ex
i s t e d f o r a long t im e . The P o s ta l Savings Banks were es tab
l i s h e d in 1861. The i n t e r e s t paid by the l a t t e r i s 2 1 , 2 > .
The former are subject to r e g u la t i o n s c l the Commissioneio
f o r the Reduction o f the Pu b l ic Debt, in to whose hands the
funds d ep os i t ed w ith the Trustee Sav ings banks are paid f o r
a p p l i c a t i o n on the n a t ion a l d e b t . Tie mentioned another body-
commissioners in regard to Loans, who have the r i g h t .o de
termine on loans made to l o c a l boards, such as to m u n i c i p a l
i t i e s f o r improvements, in c lu d in g harbor i m p r o v e . . In
case o f a p u b l ic body the government has a l i e n f o r re imbur-
sernent on the r a t e s .
Mr. Murray i s c a l l e d the permanent Secre ta ry o f the
Treasury , and was p r i v a te s e c re ta ry to t e t> Gladstone and
Roseberry . See b r i e f b io g ra p h ica l ske tch . ( Who’ s ,/h0 •)
Saturday, August 15, 1908.
Mr. V/h a l l e y , o f Power Ms Bank:
Most o f the managers o f j o i n t stock banks cane ±ro..) - ■
coun try . In the country we have two c la s s e s o f d e p o s i t s .
1 . Current accounts, on which the ra te i s 1 below bank
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9
r a t e ; 2 . More permanent accounts subject to t h i r t y days or
more n o t i c e , on which the ra te i s say 3/4th/k below bank ra te .
I t ranges about 2 to 3 1 /2% . Some times the banks agree
w ith patrons upon an in v a r i a b l e ra te o f 2 \ / 2 % .
In the c i t y there i s no in t e r e s t on current accounts .
On the second c la ss o f accounts, on seven days n o t ic e or
more, the ra te i s v a r i a b l e .
The banks o f the c l e a r in g house a s s o c ia t i o n meet every
Thursday a f t e r a change o f bank ra te to determine the ra te of
i n t e r e s t on d e p o s i t s .
There i s a v a r ia b l e p ropo r t ion o f the c i t y and country
d ep os i t s in the j o i n t stock banks in the c i t y . In the aggre
ga te i t would be about 2 / 3 country to 1 /s c i t y . That would
be the p rop o r t io n with Barclay & Co . The C a p i ta l and Coun
t i e s Bank would be 4/5 country ; L l o y d s ’ 5/7; London & County,
h a l f and h a l f ; P a r r ’ s , h a l f and h a l f ; London and Southwest
ern , l/4 country ; London & Westminster, no country d e p o s i t s .
The country d ep os i t s are more d e s i r a b l e f o e banking,
because the accounts are l e s s a c t i v e and the d e p o s i t s more
permanent.
Our bank came to London to f i n d an o u t l e t f o r our money.
The c i t y loans are out o f p rop o r t ion to the c i t y d e p o s i t s .
In the country the p rop o r t ion o f loand i s l a r g e s t i n the man
u fa c tu r in g d i s t r i c t s . The Manchester and L i v e r p o o l D i s t r i c t
Bahk i s the l a r g e s t country bank.
We have 8,000 to 9,000 shareholders in P a r r ’ s Bank.
We are more p a r t i c u l a r in lend ing to d i r e c t o r s than to
o th e r s . We always requ ire s e c u r i t y from them. Heread a l i s t
o f the d i r e c t o r s o f h is ( P a r r ' s ) bank, showing; that most o f
them were men who were not borrow ers . On the Board there i s
r e p re s e n ta t ion o f men who owned country banks taken over and
who are s t i l l s tockho lders fior ln ves tm en t , not be ing engaged
in a c t i v e bus iness . He mentioned one o f the d i r e c t o r s con
nected with a l a r g e manufacturing concern, and sa id o f the
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2 0
e st ab3 i shment with which he . &o connected, that t h e i r depos
i t s are usually la rg e , and th e i r loans comparatively small .
His statement would seem to show that those engaged in
manufacturing or other en terp r ises depend much le s s on bor
rowing than in our country; that they have ample permanent
capi t a l .
In speaking fu r th e r o f the management o f the bank he
stated that o f the e ighteen d i r e c to r s there were always* two
who met each day. The d i r e c to rs ro ta te in fu rn ish ing adv i
so rs . Each d i r e c t o r serves f o r two weeks. They ro ta te so
that one g ives way to another at the end of each week.
They make part of the managing boa^d or nine which meets oc-
casi o n a l l y •
Parr*s Bank lo s t 795 pounds in s ix months, l e s s than
1/250th of l/o of t h e i r d iscounts. This , i t i s t ru e , was ex
cept i o n a l .
At th is time Hr. Reynolds s ta ted that h is bank has
two hundred stockho lders . On a basis o f $50,000,000 of i.re
vestments our lo s ses ,a s id e from shrinkage cn investments , wereA
not more than $50,000 . The stock of h is bank, the Continen
t a l N a t iona l , i s $4 ,000,000,surplus $2,000,000 undivided prof
i t s , $1,500,000. Mr. Davidson said the Dosses o t *e h i r s t
National Bank of New York f o r a year were only $20,000.00.Mr. Padgett r e fe r red to C3are, s statement that good
b i l l s o f exchange n v a the best s e c u r i t i e s , k r . /h^ll«-c,
proved th is with a m od i f ica t ion that i t should r e f e r to b i l l s
o f exchange accepted by banks. The second-best c lass of
loans i s marie up o f advances on s e c u r i t i e s .
I t i s the usual custom of f i r s t - c l a s s banks to have as
much as th e i r c a p i ta l and reserves in f i r s t - c l a 3 3 secu r i
t i e s . Te would not regard i t a3 good l in k in g to have les^
than an amount o f s e cu r i t i e s equal to cur c a p i t a l and r ese r
ves .As regards taxes , nothing i s paid on an assessment o f
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11
the shares f o r l o c a l taxa t ion . The b-:nks, of course, pay
rates on th e i r rea l e s ta te , which, when the main banking o f
f i c e at London and the branches are taken in to account am
ounts to say 20,000 pounds f o r P a r r f s . The income tax i s
20,000 pounds a y ea r . The bank owns real es ta te of a value
o f about 800,000 pounds. The average taxes are about s ix
s h i l l in g s , e ight pence in the pound on the ren ta l va lu e . On
a note there i s a stamp tax of one s h i l l in g per hundred
pounds. The ex istence of th is la rge tax i s one reason why
an arrangement i s made with so many customers to charge then
with in t e r e s t on advances f o r overdra fts on th e i r accounts.
London, England.
Saturday a fternoon , Aug., 15, 1308.
THE BANK CP ENGLAND,- W. MIDDLETON CAMPBELL, GOVERNOR;
AND FREDERICK HUTH JACKSON, ALFRED C. COLE, AND
EDWARD 0. GRENFELL, DIRECTORS, WERE PRESENT.
Kr. Campbell. In our issue department other s e c u r i t i e s are
government o b l i g a t io n s , or ob l iga t ion s guaranteed by the gov
ernment. In computing tbe percentage of our rese rves , which
i s not done by us, but by the outside pub l ic , the percentage
i s not computed upon c a p i t a l or r e s t , but only upon our ob
l i g a t i o n s upon depos i ts , e t c . (For c a p i t a l , surplus, and
undivided p r o f i t s , the English equ iva lents in terms respec t
i v e l y are : C ap i ta l , Rest or Reserve, arrl c r ed i t on p r o f i t
and loss account.
The ra is in g of the bank ra t - a t t ra c ts go ld and changes
the course o f exchange . Money was lent f r e e l y l a s t f a l l . .
Trade had been good, though on Augtst 15th la s t the rate was
ra ised from 4 to 4 3 /2J&. We had no d i f f i c u l t y in meeting de
mands f o r go ld and discounts la s t f a l l , and w i l l not have at
any time prov id ing there i s good t rade , confidence and co
operation on the part of the banks. The bank must always act
■NMMHHMMMHMMMnMHMMNNVNHMMiHHRi
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quickly, before circumstances rather than upon circumstances.
I f you make a notable or materia l increase of discounts you
must ra ise the r a t s . We do not advocate any changes. We
oppose the increase i f the f id u c ia ry c i r c u la t i o n . We oppose
one-pound notes . I t i s b e t t e r that the reserve o f gold,
should be in t i e pockets o f the p eop le , - then, in case of a
great emergency, such as a fo r e ig n war, i f loans were asked
by the government, th is reserve would come in to Ike the
o b l ig a t io n s , and. i t i s b e t t e r with the people than to have
i t in the b ank s .
We oppose the s o -ca l l ed secondary reserve of 10,000,000
pounds or thereabouts, as has been proposed, in t ines oi
s tress other banks would demand i t , and i t would he d i f fu sed
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or exhausted in the business of the banks.
Our statements are based upon an Act of Parliament • Vo
do not separate deposits by bankers from depos its by i n d i
v iduals f o r the reason that there i s no law which compels us,
or even authorizes us to do i t . We have no r ight to publish
p r iva te depos i ts . The banks have no reason to complain be
cause we do not publish them separa te ly , because they have
the r ight to show th is in th e i r own statements to show th is
by se t t in g fo r th the amount of t h e i r depos its with the Bank
of Fngland. They have the en t ire r igh t to do th i s , and
should they do i t i t would accomplish the ob ject sought by
those who demand a separate statement by the bank.
I t i s not correct to say that p r i o r to 1875 we stated
these two classes of deposits s epa ra te ly , a be return in
1875 was in response to an Act of Parliament and r.,f .r ted
p r io r depos i ts .
3ome of the bankers, such as S i r F e l i x Schuster, with
} j r the London and Smith's publishes separate ly cash depos its i r
j^anl^and cash cn hand
^ X * up to a h . i l_ _ ^ ........... ..t i-e brokers were only allowed to discount at
> • W n 'd i v i d e n d s were about to be d e c la r e d . Ho*
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- 15 -
I!
are allowed to discount at any t ime.
E l a s t i c i t y i s provided by increas ing the r a t e . In times
of except ional annual demand, at d i f f e r e n t port ions of the
year , the bankd draw out th e i r balances. We ra ise the rate
at such a t im e .
Mr. Jackson suggested that another means to secure
e l a s t i c i t y and extend the market was by l im i t in g loans to a
shorter t ime, in some instances even to three days.
Mr. Campbell continued: When the outside rate i s low
er than the bank rate we borrow money and thereby .absorb the
surplus in c i r c u la t i o n . Sometimes we s e l l conso ls . This
br ings the money in to the bank. We do not s e l l f o r cash and
buy back f o r account, as i s stated in some of the books.
That may have been done at some time but we do not do i t now.
Every Friday notes go out from the bank and return on
Tuesday. This i s probably because persons go out l o r excur
sions at the week end, and because of the demand f o r money
f o r wages and weekly disbursements.
J C\ v
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Mr. Cole suggested that he did not b e l i e v e in the Her
man plan of a l lowing an increased c i r c u la t i o n on payment of
5% i n t e r e s t . 5^ i s not a panic r a t e . The tendency o f such
regu la t ion i s toward an increase o f is sues , sc that with
such promotion, the amount o f currency issued tends to be
come redundant .
Mr. Campbell resumed: The r ight to issue more notes
under such a regu la t ion would be f a t a l . A weak g o v e r n o r , in
response to demands f o r more money, would issue i t instead of
r a i s in g the rate or taking other means to provide f o r the
s i tu a t io n . In Germany there i s a moral r igh t to hold back
gold which we do not have. That fa c t makes th e i r s i tu a t ion
d i f f e r e n t from ours.
Mr. Jackson remarked that the tendency of the German
issue was to make an abnormal issue a normal one.
Mr. Campbell resumed: In lBfP t> e panic was l o c a l . In
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14
1907 i t was in t e rn a t io n a l .
Mr. Jackson again said that the d i f f e r e n ce between 1866
and 1908 was that in the former year there was a comparative
l y small amount o f gold ava i lab le . F igures were shown to the
e f f e c t that with the very high ra te o f discount in England
only one m i l l i o n pounds of gold was a t t rac ted h ither from
France from May to August, while in 1907 the supply o f gold
had enormously increased, and p r a c t i c a l l y a l l European count
r i e s had adopted the gold standard, thereby making a supply
o f gold ava i lab le not only in f a r g rea te r abundance, but from
a much la r g e r number o f sources. Twenty m i l l ion s o f go ld
was sent to America in 1907.
Of la t e there has been no f a i lu r e to bring in gold under
the in f luence o f an increased ba te . 2% i s the lowest rate
ever adopted by the bank. The ra te was 7% f o r nearly two
months from November , 1907 unt i l January 1908. Changes are
very ra r e ly made except on Thursday . On two or three occa
s ions, however, in case o f emergency, the change has been
made on other days. The rate which i s f i x e d i s a minimum one.
The governor may always charge more. For instance , i l he
knows on Tuesday that i t i s in s v i t a b le a change w i l l be made
bn Thursday, he ra is es the rate to customers and o thers .
In 1847 and 1857 the m in is try approached the bank with
the suggestion that the Bank Act be suspended. Extrac ts
were read from the o f f i c i a l record and there was some d is
cussion as to whether the bank had not s o l i c i t e d or taken
HEkXKK act ion lead ing to th is p ropos i t ion by the m i n i •
The statement was made that the bank makes very l i t t l e
p r o f i t on c i r c u la t i o n , but as the o f f i c i a l l i g u r e s could be
rea d i ly obtained no d e f in i t e statement was made from memory.
(Statements o f the Bank o f England, and London and
Westminster Bank, which see in enve lope . Also pamphlets oi
Freder ick Huth Jackson in same envelope.
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*
' S chweizerische Nationalbank * Banque Nationale S uisse
Banca Nazionale S vizzera
BERN, den 18. Aug. B E R N E , le 18 Aout 1908.
Ausweisder
Schweizerischen Nationalbankvom 15. August 1908.
Situationde la
T}anque Rationale Suisseeru 15 jTout 1908.
AKTIVA - J L C T I F1. Metallbestand
Encaisse m italliquea) Gold — O r ..............................b) Silber — A r g e n t .......................... 9,777,185.
. Noten anderer Banken 1 . . « 1B illets d ’autres banques ) .......................... ■ ’ ’ ’
}
banques3. Portefeuille............................................ 49,301,529. 324. Lombardvorschusse
Avances sur Nantissem ent5. Effekten
Titres6. Sonstige Aktiva
Autres posies de Fact i f
})
Zusammen
PASSIVA1. Eigene Gelder
Bonds propres f ..................2. Notenzirkulation i
B illets en circulation / * ‘ * *3. Kurzf&llige Schulden . ^
Engagem ents a courte dcheance \4. Sonstige Passiva t
Autres postes du p a s s if / ’ ‘ '
Franken — Francs 7 X0& } 1908VirlndimgiB nit dm 7. Augutt \ 1M1Changements depuis lev Aout f
115,408,104. 17 9,777,185. —
107,613,599. 77
9,843,195. —
+ 7,794,504. 40 66,010. —
4,595,186. 40 6,093,036. 70 — 1,497,850. 30
49,301,529. 32 49,847,672. 73 — 546,143. 41
1,246,906. 55 2,528,774. — — 1,281,867. 45
9,007,529. 45 9,639,512. 30 — 631,982. 85
16,795,382. 42 15,960,276. 82 + 835,105. 60
206,131,823. 31 201,526,067. 32
— P J L 8 S I F 1
25,000,000. — 25,000,000. —
142,887,000. — 145,994,000. — — 3,107,000. -
29,691,243. 23 21,978,655. 47 + 7,712,587. 76
8,553,580. 08 8,563,411. 86 + 168. 23
206,131,823. 31 201,526,067. 32
Die Uebereinstimmung mit den Buchungen bescheinigt:Certifle conforme m x ecritures:
Der HuptMlulttr: • Die DlreUoriim:La direction generate:
4Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
S chweizerische Nationalbank * Banque Nationale S uisse
Banca Nazionale S vizzera ¥ 3
Bern, den \9 . August B E R N E , l e i 9 aout iyu'
Ausweis Situationder de la
Schweizerischen Nationalbank Jjanque Rationale Suisseyom 7. August 1907. au 1907.
A K T I V A - A C T I F1. Metallbestand Franken — Francs 81. Juli 1907 VtrindiraMu alt dim 11. Jill 1107
Changements depuis le 31 juillet 1907Encaisse m Stallique
S i ju ille t 19 0 7
a) Gold — O r ...................... 42,928,930. 38 38,407,486. 25 + 4,521,444. 13b) Silber — A r g e n t ............... 4,052,090. — 4,238,270. — — 186,180. —
2. Noten anderer Banken \
B ille ts d ’autres banques )9,777,600. — 5,916,950. — + 3,860,650. —
3. Portefeuille................................. 49,891,730. 63 46,365,931. 22 3,525,799. 414. Lombardvorschiisse 1 81 938. 88Avances sur Nantissem ent / 1,402,138. 88 — 1,320,200. —
5. Effekten 1Titres )
1,200,798. 60 1,197,531. 25 -t- 3,267. 356. Sonstige Aktiva 1
A utres postes de Vcuctif /
, Zusammen —
11,778,036. 51 11,433,333. 93 4- 344,702. 58
Total 119,711,125. — 108,961,641. 63
P A S S I V A — P A S S I F1. Eigene Gelder 1
Propres fo n d s f 25,000,000. — 26,000,000. — —
2. Notenzirkulation i 69,585,050. —B illets en circulation / 69,560,350. — -1- 10,024,700. —
3. Kurzf&llige Schulden 1 Engagem ents a courte teh&ance /
23,959,587. 47 23,405,885. 70 + 553,701. 77
4. Sonstige Passiva *A utres postes du p a s s if i
Zusammen —
1,166,487. 53 996,406. 83 4-; 171,081. 70
Total 119,711,125. — 108,961,641. 63
Die Uebereinstimmung mit den Buchungen bescheinigt:Certifid conform# am ecritures:
Der H&nptMJialter: Das Direktoriiim:La direction g in ira le :
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Questions and Answers at the Bank o f France during the v i s i t of the f i r s t Sub-Committee o f the Monetary Commission, cover ing subjects
not included in the examination by the l a s t Sub-Committee.
Q.
A.
Q.
A.
Q.
A.
Q.
A.
Q.
A*
Q.
A.
Can you s ta te the number o f your share holders?
They number between 29,000 and 30,000, but only the 900 la rg e s t
share holders o f the Bank are a l lowed to vote fo r the General
Council o f the Bank, i t s Regents and i t s Censors.
For how long a per iod does your Charter run?
The Charter was renewed in 1097 and exp ires in 1920, but under i t s
p rov is ions Parliament, by tak ing act ion in 1911, may terminate the
Charter one year l a t e r , in 1912.
How is your note issue l im ited?
The maximum note issue at present authorized is 5,900,000,900 of4
francs . The actual note issue on August 04th was 4,000,000,000
francs . The issue outstanding va r ie s f requ en t ly in amount but
is always g rea tes t at the crop-moving per iod .
is there any l im i t a t i o n in the s i z e o f the accounts which w i l l be
taken at the Bank?
Anyone can open an account who is known to the Bank, the minimum
being 500 francs . A f t e r an account is once opened, the depos itor
may discount paper as low as 5 francs , provided i t meets with a l l
o f the other requirements.
What proport ion o f the b i l l s discounted at the Bank are presented
by other banks?
About 80 per cent, o f the paper now held bears the signature of some bank as one o f the endorsers.
Have you any estimate as to the t o t a l amount o f gold in the country?
The t o t a l gold in France is estimated at 6,000,000,000 f rancs ;
the Bank o f France holds 3,225,000,000 francs and the remainder
is in the pockets o f the people .
— is'*the privilege of note issue a source Of great profit to the------ - -worm l
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,Ac 1 J t t n r ' g yp Effttra - i n e l u d l i ^ ^ " t h y -Bank
afreut 1iho oame amount as interest on their- dypo*4ts.oo«ke the-in- deuendent banks,
Q. Is the Bank of France subject to examination by the Government?A. There is no regular system of examination, but the Minister of
Finance has the right to ask for information whenever he chooses.lal of a ll t hg fcante are r a • "hf
France ijsues^t.afca.lanoa^.shaet ewyryThuraday.Q. Does the Bank of France make the same charge for the discount of
bills and for loans upon collateral?
Q. Is the Bank of France ever attacked in the controversies between political parties?
A. No charge has ever been made that the Bank favored or aided any political party. There is never any claim that politics enters in any degree into the management of the Bank. Except for the renewal of the Charter in 1897, no legislation affecting the Bank has been made since 1857. There is no sentiment for any change in banking methods nor for any new legislation.
It should be added that neither the Governor nor Deputy- Governor is permitted to be a member of either body of Parliament.
A. The Bank usually charges somewhat than for the discount of bills.
more for loans upon collateral{u r *L L. Ct^ut ^
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Questions and Answers at the Bank o f France during the v i s i t o f
the f i r s t Sub-Committee o f the Monetary Commission, cover ing subjects
not included in the examination by the la s t Sub-Committee.
——— 0———
Q.
A.
Q.
A.
Q.
Q.
A •
Q.
Can you a La Loathe iiumbar s ?D « JL& dL **** k \rv t 0T H ^ _rmn^r> -hffit.CTnftr) mm nnnmmmA 70 nnnr >mt the CO0 la rges t
share holders o f the Bank are al lowed to vote f o r the General//^ - 4» ( .
Council » f the Dankfl i t k g Repents and i t s Censors.
For how long a per iod does your Charter run?
The Charter was renewed in 1 0 0 7 and expires in 1070, but under i t s
prov is ions Parliament, by tak ing act ion in 1911, may terminate tbe
Charter one year l a t o r , in 1017.
How is your note issue l im ited?
The maximum note issue at present authorized is 5,000,000,000 o f
francs . The actual note issue on August ~4th was 4 , $oo,ooo,oon
f r a n cs . mm ?t-•-1a^ i r<g vp.r an a ±. but
per i o d .
Is there any l im i t a t i o n in the s i z e o f the accounts which w i l l be
taken at tbc Bank?
Anyone can onon an account who is known to the Bank, the minimum
being 500 f rancs . A f t e r an account is once opened, tb© depos itor
may discount paper as low as 5 francs , provided i t meets with a l l
o f the other requirements.
,»hat proport ion o f the b i l l s discounted at the Bank are presented
by other banks?< ) J ^ i „JU~.Jt z O
A . About 80 per cent, o f the Pacer now hold bears tbe signature o f A
some bank as one o f the endorsers.
Q. Have you any estimate as to the t o t a l amount o f gold in the country?
A. The t o t a l gold in France is estimated at 6 ,000,non,000 francs:
the Bank o f France holds 3,275,000,000 francs and the remainder
is in the pockets o f the people .
— -— J.0 the-prd.viAoge of note ioaue a wmaroe e# gyeat-prefi4-4rO"the Djrifcf
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A.
(\
<
Q.
A.
The expense o f the note issue, inc luding o r in t in g , costs the Bank\ / \ ‘ \ / \ \ / \ /
about the sane amounts as In te res t on th e i r deposits costs the in-\ / \ / \ / \ , \ / ' /
dependent banks*
Is tho Bank o f France subject to examination by the Government?
There is no regu lar system o f examination, but the ’Minister o f
Finance has the r i g h t to ask f o r information whenever he chooses.
_q£ a3,l ,TtbO-bank&■ u r t r mnTtttg"; biyfc t hw 15STHT o f
Franc e i-srra c - « v«» r y Thuaaa-d a y .
Does the Bank o f France make the same charge f o r the discount o f
b i l l s and f o r loans unon c o l l a t e r a l ?
The Bank usual ly charges somewhat more f o r loans unon c o l l a t e r a l
than f o r the discount o f b i l l s . ^ f ^ 4 " ^
Is the Bank o f France ever attacked in the controvers ies between
p o l i t i c a l pa r t ie s?
No charge has ever been made that the Bank favored or aided any
p o l i t i c a l party . There is never any claim that o o l i t i c s enters
in any degree in to the management o f the Bank. Except f o r the
renewal o f the Charter in 1^97, no l e g i s l a t i o n a f f e c t in g the Bank
has been made since 1857. There is no sentiment f o r any change
in banking methods nor f o r any new l e g i s l a t i o n .
I t should be added that ne ither the Governor nor Denuty-
Governor is nermitted to bo a member o f e i th e r body o f Parliament.
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\Synopaib o f Exam ination of M. Georges Pallain,
Governor of the Bank of France,BY
Sub-Committee of the National Monetary Commission,Consisting of
Mr, Yr u el and of New York,Vice-Chairman,Mr. Overstmet, of Indiana,Senator Daniel, of Virginia,Memorandum made "by Mr. Or o r s t r e e t ,
Paris, Eranee,August 24th, 1903.
The capital of the Bank of France is 182,0OO,0OOF, dividedinto shares of 1,000 F each,held by shareholders mantoering between 29,000 and 30,000. The charter wan renewed in 1897 and expires in 1920. Under the provision the Parliment, by taking action in 1911, may terminate t o charter one year later, in 1912, A Governor and two Vice-Governors are proposed by the MinistVy a d serve indefinitely, In the absence of the Governor one of the Vice-Governorsrepresents him. The court or ge oral counsel of t « Bank consists fifteenof ikxxx re ents and throe censors, who ar shosen annually by the two hundred largest shareholders of the Bank. The Governor must own one hundred shares,the Vice-Governors fifty shares,and the regents thirty shares each. The court of regents and censors moots each Thursday, It is divided into corru ittevs of vary ing duties.The flank rate is proposed by the Governor and verj> generally accepted without change by the court(or board of Directors), and continues until changed by a new proposal from the Governor.
The maximum note issue authorized i s 5,800,000,000 F. The actual note issue on August 24th was 4, 660, 000,000 F . The total issue outstanding varies frequently, but is always greatest at the crop moving period. Ho was unable to state the difference in the issue at that period. There are no banks of issue other than the Bank ol France, Many years have passed since any suggestion has been made for a change in the method of issue. The lapt su -ration was by the father-in-law of the present manager of t3ie Credit Lyonais, who p oposed in Parliment a law opening note inrue to torn*
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p e t i t i o n . I t met with l i t t l e f’avo; then,
No payment in made to trio Government f o r note issue* or any other privilege. Thu taxes, however, are considerable, amount inf to api roximr tely 13 p«j cent o f t o profits of th - Bank, including interest on the e&rh roserYe, computing it at the Bank rate. The tax
on circulation is 50 C.on the 1,000 F. aad the tax on the carh in the Bank is 20 C.on the 1,000 F, Tin notes are considered inc i r c u la t io n wh-n paid out over the counter. Whan eceived at the Bank, they are not cance l led , but are ar ain paid out as long ar; they are in proper condition. She averag life of a nou, */• . arc.The Bank redeems its notes unaur the law in specie(eithen -old or s i l v e r ) , but since 1B60 redemption has been p r a c t i c a l l y in <-old.The Bank,however, determines th is . The name ru le is fo l lowed at the
severa l br anches. Sometimes t he Bank o f f e r s gold fo r s i l v e r at
a p omiurn, an an a l t e rn a t i v e ,
Independent banks sometimes keep or. deposit with the Bank o f
Trance th e i r surplus fends, but ^old w i l l not be rece ived fo r spec ia l
depor lt upon agreement to pay in kind, but must be treated l i k e a l l
other d /posits, by taking c red i t on the books fo r the d e p o i i t - a l l
dapo i;i f or s the r c by being on an a quali T.y.
Anyone can open an accourt f o r deror.it who it. known to the
Bank, the minimum b; inr* 300 F, A f tc i an account 1c cnee opened
t v - depositor may discount paper ar iow as 5 I* . , provided i t meets
■ ' ■: •' *■ • • ntc. No p ra c t ic e y n ctc i used, but
the debt l e evidenced by h i l l n c,r:d l e t u-rs o f exchange. The time
on b i l l r cannot exceed three months. Throe names o. endorsers
requ ired * About e igh ty percent o f the pa] e r now h i l l beare
the signature o f scene bank a r on- m t the th ree endorsers. The hank
n.’ y • - ay r in t e r e s t on d por i ta *
The use )•’ chocks i f the country in not genera l , and there
i .. no tendency to increase rueh uro, The revenue .• t amp on chi eke
does not re ta rd thel se M a te r ia lly * S etce a ie used more t.&n
coin, and thei e i. no isentimenl fe a lower no we than M l in use.
The lowest denomination is 50 F. Hoarding o f money is pract iced
le- : than fo •. f ly , but ir: s t i l l considerable , e sp ec ia l ly gold.The tot 1 <rold o f y ” xX ’ranee is estimated at 6 ,000,000,000.F,
The Bank o f 'ranee holds 3,225,000,000 F. and the re ainder is in the
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pock-- Lb o f t h e p e o p le . There a r e 127 l a r g e b r a n c h e s and 50 sm al l
b r a n c h e s . The sm al l br&ncher a r e con t ro l led by rome of '.he l a r g e r
b r a n c h e s , p a r t i c u l a r l y i n d i s c o u n t m a t t e r s . Each l a r g e b ran c h h as
a s p e c i a l b f d l d. i f . o re o r d i r e c t o r s # b u t none in t h e email
b r a n c h e s . T 8 Got or no r o f th». Ga k o f F ranco p r o p o s e s t h r o e
nance to the M i n i s t r y f o r manager o f each o f th e brf inches and the
M i n i s t r y must n a re one o t h e t h r e e .
In d ep e n d en t b a n k e r s r e -arc! the lank, o; F rance as a c o m p e t i t o r ,
hut :..nc<‘ c o n s i d e r s i t s e l f th e bank of b a r k s .
In d ep e n d en t Ski pflgf i n t e r e s t or, d- p o s i t s . T>u- t o t a l l i p i l l t s
on Au m s t 2 4 th , 1508, were 8 0 1 ,0 0 0 ,0 0 0 5*., o f which th e S t a t e
fu n d s amounted to 2 4 2 ,0 0 0 ,0 0 0 F. and a l l o t h e r s to 5 5 9 ,0 0 0 ,0 0 0 .
( The Governor requewtr • ( that t h i . in uau l ion be held c o n f id en t ia l ,
particularly with r c f i r i M to th 4 pssit of the Government) .
The ex ro n se o •’ th e note, i m ue , i n c l u d i n g p r i n t i n g , c o s t s the
Bank abou t th same a s t h e i n t e r e s t on their* d e p o s i t s c o s t s in depend
oat hfinks. There are now about two thousand m all independent
b a n k s , bu t the number l a d e c r e a s i n g . S t a l l banks a»*e absorbed
the ee a b l i a h m e n t e f branches is in s rea s in g . Peop le , n o t
t rad esm en nor b o r r o w e r s , a r e much p l e a s e d w i th the b ran c h b*nk sys tem ,
b o c a ’ ■'€. i t a f f o r d s g r e a t e r s e c u r i t y fo r ‘.heir p r i v a t e depof i t s - b u t
borrow-;; s and t r a d o s ia o i a r e no t p l e a s e d b eca u se in d tp unde: t bank
managers ar more le n ie n t , and in c l o s e r to u c h with l o c a l cor*, un i t i n s
y,t r-..noral . dvi o r e .
There a re no in e x i s t e n c e 550 p r i v a t e s a v in g s b a n k s (n o t
i n c l u d i n g p o s t a l b a n k s ) w i th 1500 b r a n c h e s . Pfc e ty depot i t boxes
a r e i r ie r e a r i n g r a p i d l y , u f i t i; b e l i e v e d much o f ■ 5 > -.old h oa rded
lay the p e o p l e I kept in the ft b oxes ,
Pavings: bank: have no cap i t 1 ana a l l the i v i d e n d s C° t °
e k h o l d e r s . Th - | i r %mn% inti r#St ■ q. i t s , b u t
1 /4 of one p e r c a n t i - h e ld &<s r e s e r v e * The p o r t - 1 s a v in g s bank
p ays 2 3 /4 p e r c e n t i n t e r e s t on deposits. The ri po& it t o f the
p o r t a l sav ing? b nk an i a l l o t h e r sav in g , banks a r e on th e i n c r e a s e ,
the; p o r t a l bank hov/ing more r a p i d i n c r e a s e . The t o t a l d e p o s i t s
Ot t h e s a v i n g s banks o t h e r th an t h e p o s t a l a r e a p rox im r . to ly 3 ,400^
000 ,000 F. The d e p o s i t ^ o f the p o s t a l bank w i th e i g h t tho u san d
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poBt o f f ! top arse branches i s 1,278,000,000 F. Th« postal-bank has
b vri in operation i no :* 1832,- the prirate t saving* bank? j ince 1815, The growth o f the postal -ank greatly in jures the growth of thepr iva te savin gi banks.
There i l iasited l i a b i l i t y o f sharoholde•-* in j o i n t rtock
' nks, the l im i t brin,~ th- amount o f the share* P r iv a te banks
nr no l im i ted in l i a b i l i t y , Kotieeo jpor withdrawal o f funds
ai * c o n tro l l e d by a v a r i e t y or e l e •' nts, inc lud ing time, amount,
an j general chargef r of th* account.ihe? c j. no exartinat ion by tno doveminert of j o i n t stock
b?fnkwi to ascerta in the proper p-yun^t o the rtanp dut ies .
There i n no general cx jnin; tion by the Government o f the hank o f
Frane®, but the M in is try o f Finance i s p r i v i l e g e d to a k o r i n f e r
mation from time vo time, Anminl statements o f both the independ
ent banks and the bank o f France arc made, but t h e bank o f fr a »M
i ‘ ‘-*ues a b u l l e t i n o f balances each Thursday.
Neither the bovernot nor Vice-Governor :i r. permit fed to be a
■ mbtr o • ei t iei body oi a r l imcnt, No charg® har c,;cr b &r . ?
r the -hank a id ing or fa vo r in g e i th e r p o l i t i c a l party . There i s
novel any claim thnt. p o l i t i c s enters in any degree into the m an a
meet o ' the bank. Excepting the renewal o f the charter in 1897,
no l e g i s l a t i o n fe e t in g the Hank has been had r inee 1857,
There 1; no m rr t lm nt fo r any change in bank methods,nor fo r p+ny new
l e g i s l a t ion*
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Synopsis of Kxamin? tion of M. flisurges Pallain, Governor o t < Tade of l^runo#,
w
Sub-Committee of the lotion .1 Monetary Comr'ir ioft, Consisting of
Hr. Vr eland, of Mew Yo-k, V ic e - 0 h < i i ;on,Hr. Overstreet, of Indiana,Senator ani 1, of Virginia*
Purls, Fr since,Au.fu t 24th, If06.
The c a p ita l I k 182,000,000
Trains*,divided into shares of 1,000 franca each, h e l d hy .shareholders numbering betwe n 29,000 and 30,000. The charter was renewed
in 1§97 and expiree in 1929. Under t e 5 rovieion, t e Parliment
by ’ akin* action in 1911 may tcriairia • t < c arter toe y e a r later,^in 1912. A 0 rernor and two Vice-Governors are proposed by the ministry and serve indefinitely. In t e absence of theGovernor one of the Vi ce-love.'noru represents hits. T; #» court or general counsel of t u- Bank consists of fifteen regents and thr e censors, who ar< chosen annually by the two hundred 1ar*; st shareholders of the Bank. The Governor must cv.n one hundred shires, tb* Vice-Governors fifty shares, an d the Ke^ents thirty shares each*
The court of regents and censors each Thursday. It isdivided into committees of v. r y l r i f duties. The dank rut / is proposed by the Governor and very ■■•rally aceeptea by the/court,(o board of Directors) an continues ui til chanr*■ t by /. new proposal by the Governor.
The maximum note it. me: authorised i s 5,600,0^0,000 franes .
The actual nor.: ir.t:uo on Auruut 24th was 4,600,000,000 f runos.T o total i sue out. tending varlci frcqucnbly,bu t i • always f cutest at tv r crop moving per iod. He wa: unaibl/ to b l u -.c t e dillorence in the iecue at that pi .tod* There arc no ba/ku of i> u»e other than t r hank of ?Vrjice* Uauy years have j Vb ^o since any hu - ' *t ion has b » n muds for a c anrit in t i f t/o i of i: i u s *The last fu ention wa made by e athcr-in-lAw of t•«* present man- Sf^r 0 the Credit Lyonais, /ho p oposod in Pa/liment a law opening
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i8 1j
• note '3 ; M<e to com p etitio n . I t met with H t i c fay or thou,
No payment has been made yo thoV hornritnent for note itssue or any o' her privllogo. The tax^e, howoyer, are corn,i terable,amou* t in g to u: p ro xi a i*ly 15 p<Vr oe t of the p r o f i l e o f the Bank, Including Intercut on t cash j^eserYe, compu' ng i t at the hunk
.ra te * The ta x on c ir c u la t io n ,h bO C* on t o 1,0 )0 ?* and the ta x
on the ca h in *hc Bank i s 20 t ,o n e 1,000 F. Thr n otes are
considered in c ir c u la t io n when t / are p^id. out oy r the co u n ter.
h>un recciT od at the Bank, 1 e> ar not c a n c e lle d , but are apain
paid out at lon g asr tncy arc lit prone c o n d itio n , T c average
l i f e o f a not . it th ree year**/ T c ank r cdeems it» note* under
t . law in pec ie ( e i t h e r ?tOx'
hat B n r. action .ly in ^old.or uilTer) but since i860 redemption
The Bank,however, determines t h i s .
Sometimes t o hank o f f e r s oirj fc n i l r e r - a t a premie®- af an a l t<rna
t i r e . T r tm c rule i f04 lo^d at t several branches. Independent hanku jo eti ei keep on dep©. ; t with the Bahk
of franco their aurplutt fund»,\b t gold will not b< rece ived forI
special deyo nit-up on agreement Vo p«y in kind-%ut must be treated Ilk ail ot or Spoilt*- by takiW credit on . books foe t e deposit all depositor* thereby bring on a!p equality.
Anyone car. open an account who i known to t/hr* Bank, the minim® b< Ing 500 ?. Af te an account is once opened the depositor may discount p ncr as low as 5 ?. provided it m ote with all other require cnt*. 1*0 praniecory note?/ arc used* but the debt
Th c t lxn# onla evidenced by bills ar.d let'.ere of c7.cm.ng0.bills cannot exceed three month*. Th$4e names or endorser* arc always required. About 80 per ce t J b f the piper now held bearsthe signature of to:. bank at one of the endorser*. The i ank never pay; i: Urort on deposits. /
The use o f c eck:; it not general in he country, and there
it no tendency to Increase such u/e, The,revenue b taupe on
checks does not re ta rd their uso m ateria lly/ Notes a re used
more t coin, a*id thcie is no bc tiv c m /i\.. lx lower note t an now
in use* The lowest denomination lr. sjO F* Hoard of money is
practiced lees t .an f ormrr ly , but ifc i l l conpidcrable,* c p d a i l y
^ \ ThC t o a l K°*(1 of. ire®oe i s estimated at 8,000,000f000 f.
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3Ttfe Bank of France holda 3,225,000,000 F. an the • er*aindei is in the pocketr of t te people. There are] 1 2 7 large branches and 50 email branches. TV e wall branches are control! d by t© meof the large broncho*, particularly in/dl©court ma tore. Each large branch har a special board of manager• or directors,but none in t c ©mall branches. The 0ot./nor of t e Bank o Franco proposes thr o mimes to the Ministry fur manor r of each of t ■ <? branches, arid t o -'ini t . must ngr/e o e of the t roe.
Independent bonks regard t r f ’o k of ranee as a competitor, but t «■» ’.fink of France considers the bunk of banks. Inde-• . • ’! .»<>• t "■JV ; ■ iMlv- -n t OH r •ybritC* f tOtul CterOi.lt f OnAugust 24th, 1005, were 801,000,000 / F ., of v*hich the Pt.ate funds amounted to 242,000,000 a n d all ot- err. to 559,000,000. The 00t o rnor rcqueutcc that thl: i to/-..ation e Id confidential, particularly . l :.h • fore .r-c o • i IS o' ' .o h,7v n • nt).
Th«' expense of t. < note i u, including printing,costs th - h ..rlt about o same as interest on their d posits costs Indopemds it bunks. 'Jf < r;. no • O'.i t fft Miout,;. . 1
y tp indejendent banks, but the number is decreasing. Smaller banks ir« b lug alBorlMli si: ! th e talli Is » •: branches is incroaring.p* ople not trade triinn M r borrowers are much p leased it-: the
branch bank rye to*, v>^cause i t a f fo rd * g rea te r security for the ir
privat deposits* but bo: -were and t r a d e r on ar not pi caned*
because independent bank managers arc more len ien t and in c loser
touch '’ ith lo ca l co u n it ie s general advduors.
There arc now in oxirtnnee 550 p r iva te savings b nks(not
inc luding posta l savings b-riles) with 1500 branches. Sa- ty
depof it boxes a re increa; in j rap id ly , a ; : i t As be lieved much o f the
gold hoarded Ip the t ople { r kept in these boxes.jfavings banks hav- ho c a p ita l , a a l l dividend© go to
the tockholdors. T uv jay 3 per cent in t o eat on deposits,
but l/4 of one per cent 1 held at. re©ervs. The posta l ravings bank pays 2 j/4 per cent in te rest on deposits . The deposits
o f the postal raving; bank and a l l ot'nor savings b nks are on the
Increase, the posta l bank showing more rapid inc roas* . The to ta l
deposits- o f the ©avingn banks* other than t p o s t a l0are a proximate-
l v 3.400.000.000 v.
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7
%
S'-L '~
C &
The depocitr. o 4' l ' " * posta l Mnk, M th o i rh t thousand pent * tees
. . ■ . . . t o i n 0 >0,000 F, f lu po t 1 hunk har b n in
Operation inc; lft.' 2, t e priv , . e a v i n -: h-nks luce 1615*
The v owth o f the posta l bank g r e a t ly injui o » the r o*fth o f the
T' iv; to ravines b t kB,
There i f l im i ted 1 M l it. o f r tockholdere in j o in t stock
batffcs, the l im i t b e in ' t a ount o f the a re . P r iv a te banks
are no- l im i ted in l i a b i l i t y , Not ices fo: withdrawal o f funds
are co n tro l l ed by a v a r i e t y o f e io > rrts, in d u s ln g time,amount
an ft ~ n or&l character o f t.h.- ac ount, There i . no exarUrt ♦ ion
by t- - "overnru nt o f Joint stock banka, except to ar.cort in the
proper p;,ym«Mt c f s 1. cap dut ies , T erv. i . no «■ »e*r a l examin t ion
by the Covernvie t o f t e v. k o f Y nco, but * in is try o f
•trance i t p r i v i l e g e d to ark for* is for: .at ion from tir.e to time,
Aeet» i - tat. r,tte o f both i i/niov ende» t hanks an the hjr.sk o f
r. nee are made, but • n.-sk/'f rano; issues a bulletin of 'M-nces each Thursday,
v i t < r i- :* - verno nor Drputy Gov - nor i . per- i t i r d to
be a member o f ei t or Jaa4T o f Par 11 a it, ho 0 ■;■.!' . a ever b- -XI
made o f t o :ahk fa vo r in g or ai f in • ei if « r p o l i t i c a l pa r ty ,
There t u -r. . a?y c ia n \m. t p o l i t i c s enters in any decree in to the
mr n..-* '. o f ' •« nk, Pxce- t in g v • renewal o f the charter in
1697, no l e r i s tation >. ac t ing the Bank has b en hrid since lftS7,
Tie re i ; no *<>nti nt for any c .n.r in bank ' et od « no? any
rev. 1 - g i f- x a t ion .
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