The Savannah morning news., 1903-09-25
ADDRESS TO BANKERS
MADE BY c. q. DAWES
mmends Currency plan of Secretary Shaw

Pittsburg, Pa, Sept. 24.-The dele
gates to the ninth annual convention
of the Pennsylvania Bankers Associa-
ton were addressed to-day by eX-Con-
troller Charles c.. Dawes, of Illinois, on
proposed changes in our banking
laws"
Mr.. Dawes, in part, said;
1.-The address of Secretary Shaw at
Chicago in favor of the authorization
of a small issue of heavily taxed bank
notes unsecured by the deposit of the
United States bonds as required under
present law indicates the new phase
which the discussion of currency re-
form has recently taken on in the
country 1t marks the passing from
serious public consideration of the COM
pick and radical measure advocated by
Congressman Fowler and many others,
and the inception of the discussion of
a simple and sane remedy for a gener-
ally recognized defect in our monetary
system.
For some years the topic of asset
currency has been chiefly discussed by
what may be termed the radical ele-
ment of currency reformers Their
work has in a general way been most
useful in inspiring interest in the sub
ject, but has not resulted in the pre-
sentation of any plan which has Sc
cured anything like unanimity of sup
port even among the radicals them
selves.
LAS has been ably pointed out by
Prof. Cleveland of the University of
Pennsylvania, their mistake has been
in misunderstanding the difference in
the nature, method and history of the
growth of the American system of in
dependent banks and that of the con-
tinental systems, and in attempting to
devise plans for grating on our diff
ferentiated system methods Of issue
which are the result of centuries of
evolution in systems of associated and
centralized banking.
Their plan for the authorization OF
lightly taxed national bank notes I'M
secured by government bonds, II adopt
ed at this time, would probably pre-
cipitate an early and most calamltous
crisis in the business of the nation.
1t is d matter of common knowledge
and the aggregate statements of the
national banking system published by
the controller show, that the Aggre-
gated liabilities of the system are at
present in a we'll expanded condition.
in other words, these liabilities taken
in the aggregate bear at present SUCH
ratio to the actual cash reserves
that to increase them much more
would result in a dangerous made
quacy in the proportion borne by the
cash reserves to liabilities.
Nov, in this expanded condition of
banking credits, and with a Well ex-
banded condition of general credits
other than banking credits-at Pc
Rod when the financial history of his
country and every other would indl-
cate that we should be preparing meth
DDS for facilitating the future iqulda-
ton of credits rather than methods
for creating additional present credits,
we hear the advocates of lightly tax
ed asset currency calmly advocating
as a bulwark of safety to the bank
ing and business interests of the coun-
try, the granting of an authority to
the banks to still further increase the
disproportion between their liabln-
ties and their cash reserves, by the
issuance of these notes. "a
ut Is principle of sound finance,
as it is of sound architecture, that
when a high structure seems a little
unstable the situation is one demand
ing masonry in the celler rather than
paint on the roof. Thanks to the law
of March IA, 1900, the nation has build
ed UP the gold foundation of the gov
eminent currency issues and our cur
rency system is sound. AS gold IN the
backs, so are the cash reserves or
banks to the credit of their liabili-
ties. While at present these cash re-
serves are sufficient to sustain these
liabilities, yet so long as the hablll-
ties remain at their present amount,
we want no leSSening OF the cash ana
no adding to the liabilities.
LET us now take up Secretary ShaWs
plan for a heavily taxed emergency as
set currency, considering further some
of the dangers of lightly taxed asset
currency which his plan would avoid.
When subject to only small tax, as
set secure the profits incident to its
issue. AS it is d form of banking
credit, it will form an addition to the
already large amount of banking cred
its now in existence. 1t will still fur
Their increase the burden resting upon.
existing cash reserves.
''Since il can be probably issued In
normal times, and since the country
can easily absorb an issue amounting
to at least Is per cent. of the capital
of national banks, this currency WILL
as a whole, be practically inelaStic, IT'S
total volume standing at about the
maximum allowed by the law. There
fore in times of panic 1t VIII be an
added burden on the banks, and inten-
sify rather than alleviate panic con-
ditions. Secretary Shaw plan, now
ever. for a per cent. or per cent:
restrictive tax upon such issues, VIII
prevent their present issuance since
they cannot be profitably issued un-
der that rate of taxation unless inter-
est rates are at the high, point. which
they only reach at times OF panic OF
financial disturbance. AS other forms
of banking credit are then in process
of liduidation. with resulting high IN
terest rates. these notes can then pc
issued and win be a great relief IN
doing the work formerly done by the
Inundated credits. Such process VIII
not, therefore. be one of imitation since
the notes at such a time VIII operate
to sustain the level of banking credits
and not to raise it.
LET us consider another danger from
lightly taxed asset notes in their erect
upon bank deposits and depositors. me
bulk of the business of the country is
done in checks and drafts drawn
against deposits in solvent banks
These deposits, aggregating over $S,o0U'-
600. 900. are left with banks through the
confidence of the depositor class. any
step in finance which tends in any way
to adversely affect confidence IN pank
deposits is without qualification, Ine
most unwise step possible to be TAKEN