New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1900-12-20
GAGE TO THE BANKERS.


=. vas supposed 10 rest. thus declining Ale
.-,s, and panic might set in at the most inon.
.-ure time. because il is precisely in time ~
- thai the Government must make the -.
.-sst financial exactions from its people II is
.s, then that we need The greatest strength
~ the most steadiness in the personal anairs
- our people. for it is from them We must draw
-ss,urces and supplies"
r hsve thought about this conversation Of
a. said the Secretary. and realize the truth
= thar proverb which ought 10 be found in
,rrea writings somewhere. A teachable shirt
& essential 10 the gaining Of wisdom"
As TO THE BANK NOTE.
The Secretary next discussed the subject Of
economic losses resulting from the present in
dependent treasury system, by which large
suns Of money are withdrawn from business
uses Bur The most striking part Of his ad-
dress related 10 the lost power Of the bank note
on this topic he said:
Rank credits. available through checks and
s-afgs supply commercial necessities. yet il is
nevertheless true that in the wide field where
surrency or paper money is essential the bank
.redit is powerless. The conditions Of law under
Vhich the hank may extend credit 10 its dealer
~ issuirc 20 him its own notes payable on de-
-ens are entirely different from the conditions
Saoks 70 hoe availed OF by checks and drafts.
vst there IS no difference in principle between
~ TWO Ir the one case the banker says in
sTsct. Draw your checks on me as understood.
vi redeem ana pay them" In the other he
rould say: Here are my own notes Of oenon-
nation 10 sun your convenience. Use them
-5ere YOU viii When they are presented for
-rrment they VIII be paid"
II he case az the credit made upon his books.
80 hsrkeT IS not required by law 10 put up Sc
,r-i-v fr- the payment Of his dealers checks.
= -s5uire mis- Of him would be 10 destroy the
e-s5r operations az the banking community.
rgsry loan would be loan Of capital not OF
Tha~ an fraHra en- .of
,-r.si would in advance be made in the securi-
- ,le5Ee5. That, however, is precisely what
rrsr present conditions the banker is obliged
n al before obugaJing himself in credit form by
-bs issue ~ his notes
consi6er The following illustration: Three
-en apply to a banker for loan, each for SlO.-
60S ne first desires credit upon the bankers
hooks seai-st which he may check as occasion
shsU require The second wishes the bankers
,srtfcate OF deposit which he may take with
hm "a 6.s.ant point 70 pay for certain prop
s-fy B0-h -lese applicants are accommodated,
because The banker is able 10 make use Of his
credit ard no take advantage OF the time wnlch
TIT De- consumed by the borrowers IN their
transactions But the third applicant wishes
$4,000 M cash. either golC, silver or paper cur
rsrev H. wants 10 pay loggers in a logging
ann OF cotton pickers in the South or harvest
hands in The West or fishermen on the Atlantic
Cast. or operatives in mill, foundry or mine
u the banker could issue his own notes he
would Dc as atIe 10 accommodate this man as
be was The others. but 10 DO so ne must a. once
depiste his cash reserves, which would weaken
him in the undertaking he has just entered into
vffb he orher two he is therefore obliged 70
decline The third application, and oiscrimina-
ion Of necessity exists in favor Of those who
n he larger affairs Of business make use
u checks and against those who, in smaller
but no less useful way, are engaged IN affairs
which cannot be handled by such instruments
requiring as they DO something that has the
form and ready negotiabLity Of money.
Here IS the point Of vital distinction between
ne two systems Of bank note issues-the one
known as currency against assets, and the other
as currency secured by the deposit Of bonds
The first named furnishes an instrument Of
credit costing nothing, as euectlNe n the eG-
change q property as real money the second is
al instrument Of capital, what 10 The lender
Q es---s.is as costly and expensive as capital
For LzIre-sfE years our business community
has hen denied the use 6f the credit currency
aeseI ped - II is Impossible 70 measure the
seonosnieloss IN dollars, but the borrowing class
Aas paio~ larger rate OF interest as a conse-
ouenee. and win continue 70 do so while the sys-
ZEN lasts.
BOTH EFFECTIVE AND SAFE
There is no reason to doubt that the banknote
could be so hedged about by limitations Yet
having sufficient liberty and all proper guaran-
TEES for its safety secured. There are many
models both in tbs country and in other eoun-
tries which time and experience have demon
stra-e5 10 be bo,h effective ala safe
Referring 10 the system Of few larger banks
with z multiplicity OF branches. the Secretary
said such a system could not probably be estab-
Ashe5 in this country, and added:
While recognizing the value Of il as 10
strength, we are too afraid Of centralized power
and authority. II antagoDizes the spirit Of our
ins-itut ons Our political system is representa-
tive. i begins IN small units-the townships
associated by representation constitute the coun-
~, the counties in like manner the States,
and from the States that incissOlUble fedora
ton the General Government With no powers
not specifically extended 10 il or clearly implied
the Federal authority nevertheless stands for
ne general defence and the general welfare
Something like this is vaguely defined in my
houeh, as possible II our banking system No
y, no powerful head WIN authority, 10 create,
oestroy or control, but association. with refer
e-ce 10 common defence against common dan
gers The individual bank an independent unit;
ne district clearing house. e centre Of associa-
Ion, where the surplus strength Of the strong
eould be made available 10 support, with entire
safety and with proper reward, the exposed posi-
ION 1f the uomeuTar!ly weak. The district
Gearing houses, associated in a similar way,
Aleht re made 10 constitute The National clear
ZIG mouse, aro thus, IN lines almost parallel 70
olT pc.--iCs. irsti1Urions. we mightsecure in the
le-c NJ banking what We enjoy IN our Nauonal
-ie namely Individual freedom with an asso-
.e-steo strength which IN the Nation has been
io4uc eq-a. 20 all emergencies.
The Secretary broke the thread Of the argu-
rrent here Co- moment 10 compliment the New
York Clearing House for the fine work il had
Gene M many occasions when financial panic
was rhreatz-eE
LOOK INTO THE FUTURE.
In closing his speech he took a look into the
future saying.
y me course II trade with foreign nations
nnlcn has marked the last three OF four years
y continue are 70 assume not long hence
l.anc-sl r=.atOnship heretofore unknown. In
lt oLe past we have been under tribute Of in
siTsl tcr The OF capital furnished from
1ilec; lhe promise is that shall soon be-
me rec .ents Of interest on capital furnished
q us Tor use abroad. To bring about this de-
l+atle end. new conditions are imposed. new
e-Sss.ohs arise. new knowledge IS 10 be acquired
ana IS VCUT horizon exuands Won must be ready