The San Francisco call. [volume] (San Francisco [Calif.]) 1895-1913, 1906-12-06
DANCER Of PANIC
IS IMMINENT

The strong picture of the United
States Government standing as the
guarantor of the worlds financial in
tegrity. invincible against panic, is
drawn by Secretary of the Treasury
Leslie NJ. Shaw in his annual report to
Congress, which was placed in the
hands of its members yesterday. But
he points out, prompt relief in certain
quarters is necessary. and failure to
provide the same will most certainly
invite disaster"
IF the Secretary of the Treasury
were given $l00,0Oo,000 to be deposited
with the banks or withdrawn as he
might deem expedient," says Secretary
Shaw, and If in addition he were
clothed with authority over the re-
serves of the several banks. with power
to contract the national bank circula-
ton at pleasure in my Judgment no
panic, as distinguished from Industrial
stagnation: could threaten either the
United States or Europe that he could
not avert. No central or government
bank in the, world can so readily in
fuence financial conditions throughout
the world as can the Secretary of the
Treasury under the authority with
which he is now clothed"
No panic, as distinguished from in
dustrial stagnation, could threaten
either the United States or Europe that
he could not AVERT" This is the strong
est statement ever made by fnancier,
and coming as 1t does from a man adj
mittedly leader among the financiers
of the world. it tells a story of the
wealth of the American Government
that no figures could portray
IF 1T be said that such power, aug
mented with the authority which 1
have outlined, would be dangerous"
continues the Secretary. II reply that
no man has yet been at the head of
the Treasury Department, and no man
is likely to occupy that position. in
whose hands such authority would not
be safe. The best financial advice on
earth is at his command, and the sell
hshness or the unselfishness of the ad-
vice rendered, and therefore, the value
thereof, can be readily weighed The
advice which he can thus obtain is, in
my judgment, far better and would
prove far safer than would be the d.
rection which might be given by a
board of governors OF a large central
lied bank"
1t will be noted that in his statement
the Secretary lays special stress on the
point that Congress should delegate
authority over the reserves of the sew
eral national banks. with power to
contract their circulation, as necessary
TO the plan outlined. AS means to
this end he says:
Suppose the national banks were re-
CURED by statute or by direction of the
Secretary Of the Treasury to increase
their reserve and to carry the same in
their own vaults in an amount equal to
! per cent OF their capital stock every
hfteen days from the 1st day of April
70 the LIST day of September. This con-
traction under ordinary conditions pre-
vailing in these months would work no
hardship upon any institution and
would result in the collection of $780,
ooo. QOo OF reserve money with which to
meet the demands of increased bust
ness. 1t is probable. and under ordi-
nary circumstances well nigh certain
that the banks would find such a con-
traction profitable. for interest rates
during the summer would not be likely
then to drop excessively low. and II is
equally certain that the rates would
not be dangerously high in the fall and
winter
1t may be said that the banks can
now strengthen their reserve during
ne summer on their own motion The
best answer to this is the admitted fact
that they do not do 1t to any Consider
able extent and for the reason already
pointed out-want of cooperation. No
viii contract their reserve when ali
other banks are loaning the last avail
able dollar at the best rate obtainable.
hoWeyer low that rate may be.
-. q 4J oanh circulation might be
mace the basis OF contraction instead of
reserve. Suppose the Secretary of the
Treasury had authority to order the
national banks to make deposit to the
credit OF the redemption fund of an
amount equal to l per cent of their cir
culation every fifteen days during the
above mentioned period. This would
result IN contraction of national bank
circulation amounting to $50. O00. 900.
and by requiring the bonds to remain
on deposit this amount could cgain he
used during the fall and winter as ne
cessity required.
The danger that at present exists
through the failure of banks to carry
proper reserves and to properly CO.
operate is pointed out. and after dis
cussing various proposed methods for
relief and to provide a more elastic
currency. the Secretary hazards the
opinion that "a failure to provide some
prompt means of relief will most GER