THE CHICAGO 'BAJVK.E'R
Founded in 1898
Volume xxvii	CHICAGO, DECEMBER 11, 1909	Number 24
C. H. Church Proposes Central Clearance Bank Plan
currency suddenly ceased circulating, and the public demanded money, which could not be procured in sufficient volume and quickly enough to meet requirements, as is self-evident the only alternative for banks in such an emergency would be to liquidate their loans, then deposits could be liquidated in the usual course of business. But as some depositors would not be satisfied with any delay and became panic stricken, it was necessary to resort to clearing house certificates, in all the large cities, as a substitute for the check currency. This partially supplied the deficiency, enabling the banks to continue business until the credit currency was again resumed, and the panic was over.
Let us imitate this clearing house plan on a national scale, and instead of certificates have the federal government issue national currency to banks, that will go into general circulation and will represent in a practical way emergency circulation.
With a practical provision made to be easily applied in an emergency the banks by unity of action, and co-operation, can immediately fortify themselves with ample protection for any exigency, and with the depositor assured of such provision, his demands will only be for actual needs and in the usual manner.
The Plan Proposed
The federal government to establish a central clearance bank to supervise the issue and redemption of all national bank circulation and all United States currency.
Second. The institution to be directed by a board of eleven commissioners consisting of the treasurer of the United States, the comptroller of the currency and nine commissioners to be appointed by the President of the United States, to have life service, and all vacancies to be supplied by the remaining members of the board.
Third. The national banks in each state to organize a state clearing association under rules and regulations of the central clearance bank, to appoint examiners and auditors, to divide the state into groups of not exceeding fifty banks, who shall organize a district clearing house, appoint a supervisor under rules and regulations of the state clearing house association.
Fourth. All national currency issued to be of uniform design and color.
Fifth. All national banks to be required to maintain to the maximum, United States bond secured circulation equal to one-half their capital stock, with the usual 5 per cent redemption fund, and one-half per cent annual tax.
Sixth. The national banks to be allowed to issue circulation equal to one-half their capital stock (in addition to their bond secured circulation) on the security of a first lien on the entire assets of the bank, a 5 per cent redemption fund to be maintained with an annual tax of one per cent.
Seventh. The central clearance bank is authorized to keep on hand in addition to the
=9 A synopsis of the plan by the Muncie, Ind., banker.
Provision for a central clearance bank not for deposit, but for rediscounting paper for national banks and supervision of circulation.
Provides for its management by nine life commissioners, eliminating political control.
Provides for state clearing associations with district clearing house, and voluntary special supervision, all in conjunction with the comptroller of the currency, possibly eliminating national bank failures.
Provides that half the national circulation shall be secured by United States bonds, and maintained to maximum, the other half secured by first lien on the bank’s entire assets optional to maintain the maximum.
Provides for issues of emergency currency to the extent of $500,000,000; additional based on current loans of bank as collateral at sixty per cent of face value, whereby the check currency system is protected and continued, assuring confidence of the public in the stability of all business interests.
Provides ample security to the government for their quaranty of the national currency.
Provides ample security to the government for the redemption of all national currency issued.
Provides an indemnity fund to protect the government and is self-sustaining.
Its liberal features commend itself to bankers, so a large increase in numbers and capital is to be expected, thereby increasing the demand for bonds to provide circulation, and resulting in more uniformity and centralization under our present system of finance.


the total amount of actual cash included does not exceed five thousand dollars, the balance being composed of drafts and checks, and the same with paying checks, but little currency is needed, as credit is preferred, which demonstrates the currency desired by the people is the check currency. We have practically fourteen billions of deposits, and we have only about four billions of actual money of all kinds in the country. The ten billions consist of credit currency, which is really represented by the loans and securities held by the banks, and by this system only are the banks enabled to provide for the continuance of the trade and commerce of the nation.
It is this system of credits that we should endeavor to preserve surrounded with all safeguards possible rather than experiment with impractical methods.
When the late crisis intervened the check
With the swing around the circle ended there appears nothing definite or tangible for consideration except the one idea. The announcement of an “educational tour, a sort of preparatory school” has caused the expectant public to surmise that all this preliminary sparring has a “something under cover,” owing to the vague and indefinite information presented. Possibly the unfavorable and cool reception of the bare announcement was sufficient to preclude details of the subject, as it seems apparent that the proposition in connection with our system of independent banking and bank credits would be entirely impracticable and require too radical changes.
It should be remembered, that any changes deemed necessary in our monetary system, be they radical or moderate, must meet the daily business requirements of the country, and, also, be fully established, that the change may be effective and durable.
It is doubtful if any foreign system of finance can be made available and practical for our requirements, as we are far in advance of any other country in the volume of interior exchanges, which has reached enormous proportions, as developed by the methods and custom of our people during the past half century.
To adopt a new monetary system means radical changes, new methods, and conditions, and while universal prosperity has come to our people and the whole country under our present system, would it not be wisdom to unite our efforts to preserve and improve our present facilities rather than try the system of any country, simply because it seems perfect to them under their conditions and customs?
Unfortunately our bankers are not all united under one legislative system. Having some twenty-five thousand financial institutions, we have less than one third under authority of national laws, with the other two thirds under laws of the several states wherein located. While we have practically uniformity in business methods and interest, still when legislation is proposed either by congress for the one class or by the states for the other classes, a conflict arises, that no advantage be gained by the one over the other. This situation arises from the strong competition and business interests involved in different localities, and it is a serious question if the general business interests of the country could not be served if all were practically under a uniform law.
If it is considered the national system is preferable, let us modify and improve it, until the entire banking business will become nationalized.
Manufacture of Bank Credits
All banks are daily engaged in the manufacture of bank credits or check currency for use and benefit of the public, which naturally increases in volume with increased prosperity of the people, and this system has become so universal that check currency is in daily use to the extent of ninety-five to ninety-seven per cent of the total banking business of the country. That is, when a bank’s daily deposit foot $100,000.00;