The sun. [volume] (New York [N.Y.]) 1833-1916, 1899-08-25
"BkNK USURP<IIoN."
Bank Note Issue Pebble Duty, Net Bus-
insss for Profit.

speech before the Senate on the 18th OF March
1884. Daniel Webster said: Banks are made
| for the borrowers. They are made for the
good OF the many and not for the good OF the
feW." Exactly the opposite Of this opinion oil
our great statesman seems to be held BY many
| who act as II banks were created by the Gov
| eminent aud received their privileges and
powers solely for the purpose Of making money
for their stockholders. The true doctrine which
should govern all legislation in reference to
banks 10 that stated by Webster. that they are
formed to promote the business interests OF
the country and not exclusively or primarily
for their own profit
All proposed changes In our ban king system
should be Judged BY this criterion.
The proposition to Gits the right OF note issue
to thousands Of banks. big and little. all over
the country. IL fraught with danger TO the
entire nation. and that consideration alone
should shut of any further discussion OF the
subject Note issues By q few large banks.
with many branches. squeezing the life out OF
all local banks and creating q money arlstoc-
racy would be foreign TO our institutions and
Incompatible with the public good.
These are forms Of bank usurpation" which
can never be tolerated In q free country.
and they Justly encounter the opposition
OF The Sun. But tho question still re-
mains to be discussed whether or no bank note
Issues In some form may not be . benefit to the
community. Are there not m odes OF bank note
Issues whose first object Is tho protection OF
business from panic and disaster or its faoili-
tation In times Of special activity. and whose
secondary object 10 the profit to the banks2
Such modes would not be 'usurpation," but
the assumption by or the imposition on the
banks OF a bile duty.
Let US consider that aspect OF the question.
BY the credit system which has now been In
operation for over 200 years. banks and all
persons engaged in trade and comm cree trans
act their business. not by barter. but By m ain
tanning on hand in cash only suffleient per-
centaRe Of their debts to keep tho whole alive.
or liquid.
The amount Of credits and debts created by
the credit system Is Ave or six times the amount
OF the cash reserve. This method OF doing
business 10 authorized by appropriate legisla-
ton In the form OF banking and other laws.
Occasional junctures will happen. caused by
unusual catastrophes. when much more cur
rency is wanted by the community than the
law requires banks to keep on hand as 4 re-
serve. That Is. 1t may occasionally happen
that bank which has conformed to the re-
quirements OF the law 10 left I'm protected and
has the disagreeable alternative presented to
It Of going into the hands OF a receiver or
forcing lQuidations on its customers. the reby
creating panic with its untold sufYeHnrs. To
meet this domestic demand some experienced
writer's and bankers advocate giving to one
Federal clearing house in each State the power
possessed by the Government banks Of Eu-
rope, OF issuing to their bank IN EN- bers currency
secured by pledge Of banking assets with am
pie margin. such currency to be received at
par BY all banks for all dues to them. This 10
proposed. not for the profit there is In 1t to tho
banks. but for the security and benefit which
would flow thereirom to the people. Some
banks might object to this plan end the ans
wer to them is that 1t Is not Just to the bust
ness community to expose them to the danger
OF forced liquidation because no other way OF
supporting the banks is provided by law ex-
oept their destruction
Tho writer's Of the article on "Dank Usurpa-
ton" in your Issue OF the 10th insA and OF the
money article Of the 1+th inst. offer a. q solu-
ton OF the currency question that required
elasticity may be had in crises such as above
described by allowing people to deposit gold
with the U. q. Treasury and get an equal
amount OF currency to supply their wants.
The difficulty with the operation OF this plan Is
that in such circumstances the gold and other
legal tender money has vanished because Il is
all owed Eve times over and the creditors have
called for 1t. That is the cause OF the trouble
This "trIs scientific" scheme cannot there
fore be put In operation at its nrst STEP be-
cause it requires tho deposit OF gold. and there
10 no gold to deposit.
Must we go on forever with Alterations OF
OF confidence and panic. prosperity and dis
aster. and meekly acknowledge that no sou-
ton Of the banking question can be found?
Should we not rather endeavor to nd q m ethod
Of bank note issue which will be safe. scientific
and for the common weai While European
nations have solved the banking question in
accordance with their system OF Government,
can we not solve 1t In accordance with repub-
lican principles' Or do our national theories
fail when applied to the bank ing question:
The evidence is not clear that the banks are
endeavoring to usurp valuable preroaatlve at
the expense OF the business community. The
public looks to Congress for protection AGAINST
all bank usurpatton." There resides the only
power which can impose on the banks the duty
Of making note Issues not primarily for their
own profit, but for the benefit OF the nation.
The banks OF our country In all It's crises
from the Revolution down to tho war with
Spain. have always shown q sincere and true
patriotism. 1t only remains for Congress- to
devise plan to protect tho country from mone-
tary disorders. and the cordial cooperation OF
the banks may be rolled on. In the future az In
the past. to help carry 1t out whatever may be
The duties and responsibilities which the plan
THEODORE GILMAN.
NEW YORK. Aug. p. 1909.
Mr.. Gilman confounds legal tender money
with currency. and . scarcity OF currency
caused By demand for It in efYeotine OK
changes with contraction OF bank credits
which leads to panic. A panic 10 never
caused by a scarcity OF currency. and 10 cannot
be cured by Increasing the volume OF currency,
It Ii caused By an impairment OF mems CONN.,
1enee In one another's solvency. and comes to
IN end as soon as that confidence is restored,
It Is not true that In times Of panic. there 10
40 gold TO deposit" II It 10 lacking In one
country it can be found in another. and can DO
brought whore 1t 10 wanted. as 1t was
brought from Europe to this country IN 1893.
30 long as mon will indulge IN speeulations be-
Tond their means. we must go on forever, |
With alterations OF confidence and panic, |
prosperity and disaster" and no tinkering |
with bank currency will prevent it. The best |
hat can be done 10 to mitigate tho severity Of |
he catastrophoS. and that 10 accom- plishod. as
No have seen many times. By the action OF the
banks among themselves. under existing con-