To secure the former many plans have been suggested, most, if not all,
of which look to me more like inflation on the one hand, or compelling
the Government, on the other, to pay interest, without corresponding
benefits, upon the surplus funds of the country during the seasons when
otherwise unemployed.
I submit for your consideration whether this difficulty might not be
overcome by authorizing the Secretary of the Treasury to issue at any
time to national banks of issue any amount of their own notes below
a fixed percentage of their issue (say 40 per cent), upon the banks'
depositing with the Treasurer of the United States an amount of
Government bonds equal to the amount of notes demanded, the banks to
forfeit to the Government, say, 4 per cent of the interest accruing on
the bonds so pledged during the time they remain with the Treasurer
as security for the increased circulation, the bonds so pledged to be
redeemable by the banks at their pleasure, either in whole or in part,
by returning their own bills for cancellation to an amount equal
to the face of the bonds withdrawn. I would further suggest for your
consideration the propriety of authorizing national banks to diminish
their standing issue at pleasure, by returning for cancellation their
own bills and withdrawing so many United States bonds as are pledged
for the bills returned.
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