The San Francisco call., 1899-12-26

but rapidly decreasing thTong o. those WHO re-
gard . bank as sinister and dangerous thing.
Discussing the financial measures now before Con
gress the Chronicle fears that they tend toward put
ting the volume OF currency control OF the banks,
and proceeds 10 argue that this will mean danger all
other interests i seems 10 see clearly that when the
bankers conclude that prices high they will
proceed 10 lower them by contracting the currency
Ruin vili result from this and the banks Will then
take their pick OF the property they hold security
This Is one OF the ideas always used in the creation oi
prejudice against banks.
The proposed legislation Is intended 20 increase
the volume OF national bank currency by permitting
the organization OF more banks and letting them
issue bills up 10 the par value OF the bonds deposited
20 secure them.
This measure will probably add one-thrd 70 the
volume OF national bank notes 10 circulate
rency. These are the only form OF currency over
which the banks have any control and that control
ceases with lis emission When emitted il goes into
circulation among the people and IS OF equal value
and It's par IS the gold par everywhere, because the
efficient declaration OF the gold standard gives the
bonds behind il always a gold par.
Now, how can these banks contract the currency?
No one ever tells how or why they should do it.
They have no means OF recalling their own issue and
locking il up. AS well might one try to call back
is stalk the down OF the thistle that has been free
70 fly with the wind The issue has gone into myriad
hands and Is deposited to be checked against in far
scattered banks. Nor can the banks hold money By
raising the OF interest prevent loans Tor the
maximum OF that rate is fixed By law and to exceed
should forfeit the charter OF the offending bank.
Did the Chronicle ever know bank that tried 10
make money by the deliberate ruin OF its debtors
by the distress OF the general community through
an artificial depression OF prices? Banks are the
rodians OF the surplus capital OF the community, the
loan fund OF the country. II belongs TO their depos
iors Modern business cannot depend upon any
other system for the use OF necessary credit.
Now, suppose the banks have the power. and con-
clude TO lower prices by contracting the currency.
As prices fall the need OF money increases and the
owners OF the loan fund the depositors in the banks.
Immediately begin drawing out their money. What
is known as "a run the banks" begins and il the
stringency be general and the as general every
bank in the country can be depleted OF its funds and
compelled to close lis doors and go into bankruptcy.
Instead OF destroying their debtors by such policy
the banks would destroy themselves.
We see in every panic that banks understand this
During the panic OF 1898, when confidence in this
State was shaken by the failure OF the Pacific Bank
and small banks doing legitimate business were run
rpon by their depositors the strong banks instead
@: contracting the currency, proceeded TO initiate it
by coming to the rescue OF every legitimate bank
that was imperiied by a run. Then was the time for
the strong banks TO betray the selfish policy which
alarms the Chronicle. They could not only have con
tracted the currency ruined debtors and depressed
prices but they could have wiped the small
banks which. considered as competitors in business
might be said to be in their way. But they pursued
exactly the opposite policy.
There is room Tor legitimate discussion OF the pol
icy OF permitting banks TO issue currency upon their
assets An examination OF the assets OF insolvent
banks discoses a percentage OF speculative assets
But It must be forgotten that if should adopt
the Scotch the Canadian system OF currency, based
on bank assets, il implies strict official oversight
OF such assets prevent their speculative sophistica
ton.
But the country has not yet reached that bridge
and therefore i is idle 70 specuate about crossing Il