New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1873-11-26
SENATOR SHERMAN ON THE FINANCIAL
PROBLEM


IPRoA A REGULAR CORRESPONDENT OF THE TRIBUSE'l
WASHINGTON Nov. 24-PrObably no public man
in the country is better informed financial legs-
lation than Senator Sherman of Ohio, who has been
continuously in Congress for almost twenty years,
and has served rs Chairman Of the Senate Commit
tee on Finance for twelve years. In converse
ton a few days ago with a correspondent OF lHE
TRIBUNE il was suggested that his views on the
financial situation, the causes of the panic, &c.
would be interesting at this time. He said he had
no objection to a conversation on the subject, but
thought there was little now in what he had to say.
The following is believed to be q correct report OF
his views:
As to specific legislative measures, the Senator
thinks it is too early either to form or express an
opinion. The bill reported by the Finance Com
mttee toward the close of the last session OF Con-
gress was wise measure and if it was now the law,
TO take effect in January next, it would do great
good and furnish incalculable relief. II doubt"
said he, &" if we quite ready for free banking,
and would hesitate to propose 1t without some
radical changes in the Banking law. Still, with the
right to convert greenbacks into FIVE per cent gold
bonds and to recOnvert them into greenbacks within
the limit of four hundred millions, we would have
the best standard of the value of paper money now
attainable, and one that would prevent any Excess
siye issue Of bank notes"
Then you are not in favor of increasing the limit
of our currency above four hundred miliionsT
1--WE have no right to increase the limit above
that amount" he replied; the faith of the Govern
ment is pledged for that amount, and it would be
UNJUST to our creditors and to the people to increase
it,
"Was not our recent panic occasioned by scarcity
of currencyf"
well" answered the Senator, "panics are insepa
rable from the modern system of banking. We must
take the evil with the good The great enterprises
of modern times could not be conducted except by
Just such credits as are furnished by banks and
bankers. In this way only can money be made to
circulate rapidly enough to conduct the enormous
business of a commercial OF trading people. You
can prevent panics only by destroying the credit
system and resorting to barter This would be a
retrogade step in civilization. You might as well
discontinue tho use oflocomotives and seam-engines
because they blow up occasionally Panics Will occur
whether gold or paper money is the standard Of
value They arc more destructive with our iniiexl-
bic gold standard than with paper money. The
present panic Is distingushabe from former panics
chiefly in che fact that our paper money remains
good The situation is growing better daily. The
people who lose by this panic either those who
have dangerously extended their business upon the
money of Others those who have voluntarily lent
their money to such persons. If you will examine
all the failures you will ind that they are included
within these classes This is a matter beyond legis
lative relief. All that the law do is to secure
the currency. 1t cannot say who shall and who
shall not receive deposits, OF who shall make them,
or to whom they shall be lent"
Your idea, then, is that the panic was not the re-
suit Of irredecmable paper money. but Of depOsts"
THAT is my idea exactly answered Mr.. Sherman.
In panic the result is the same whether gold or
Of dt9o
that the paper money bad the loss falls upon the
note-hOlder, who is ithe involuntary creditor of
broken bank. II the paper money is secured, the
loss falls upon the depostor, who is the voluntary
creditor of the bank or bankers whom he chooses to
trust with his money. In panic the first dis
position is to hoard moncy-the better it is the
it is boarded. 1t is this involuntary instinct to
hoard that will break any bank in Christendom
unless it is checked by restored confidence or "a
greatly enlarged Issue of money!"
"Do you favor an increase of the volume OF cur
rencyi'
Conditionally. One branch of the paper
money problem has been solved, and that is its alb
soute safety. We have two branches yet to solve
one 10 make tho paper money as good az gold, and
the ether 10 make provision for an enlargement of
the currency in of pane or increased business.
don't know" continued the Senator in answer to
question, n DcIbet WAY 10 Hldhe IlOlfs BoOu
- gold than 30 redeem such AZ are offered gold If
we have it, and if We 60 not have it, then TO redeem
them with the next best thing bond of the United
States likely to remain par with gold. This
gold value of Onr paper money being secured, We
can readily have an increase of it, when necessary,
by authorizing the payment OF greenbacks, par for
par for any outstanding bonds of the United States
The disposition TO hoard greenbacks would be
checked by the knowledge that they could be had at
any tine in exchange for bonds"
Bat how would this affect the banks ~
I" 1t won,d require them to redeem their notes in
greenbacks or in of their failure TO do So the
notes would be redeemed by the United States
Treasurer with the bonds deposited for their
security. If you fix the value of the greenback,
YOU fix the value of the bank-note The Banking
law amply provides for this"
" But, Senator, would this prevent panici"
"Of course not he replied. Il repeat that
panic is not caused by the state of the currency; it
caused by extended creditsamanly in the form of
deposits with banks and bankers. In easy times
money flows freely into banks; and not
only money, but all forms Of credits,
such as checks drafts, and certificates. These
are called deposits. They ara debts of
the bank. These debts of banks and bankers are
several times as much all the goldand paper money
of the country. When any event happens, like the
failure of great firm especially If it happens when
credits are largely expanded the immediate effect is
to inspire fear and each depositor begins to draw
out his money. There can be no law to check tins
process. Nothing but money will pay the deposit
ors and there is not enough tn pay one-fourth Of
them The result is hard times. II this process
goes OH very little while, the currency Is boarded
Each mau holds instnotiyey to what he has got,
and gets what he can"
ave have" continued Mr.. Sherman, very earn |
cstlv 1nO 900 Of faIners II each one holds on 70