Omaha daily bee., 1906-11-23

contrary, government bonds being cheap
our banks actually increased their circu-
/ lation from ylfGOJUO0Q in 1898 TO fzlLWQ'o
IN 1895. Again, consider what happened IN
the dull year following the shnnKage OF
prices In 1908. There was no real panic, but
tor twelve months the great onward move
ment OF this countrys trade and INDUSTRY
was checked. In consequence our STOCK OF
money became excessive and brought about
a large outflow OF gold the net exports OF
that metal IN 1904 amounting 20 sioVO0'VO;
During that same dull year the banks %
! this country, instead OF contracting their
| circulation, increased Il by Si,OO9WJ
In my opinion facts like these arc SUI
ficicnt condemnation OF the national bank
note. IL Is unsound In theory and has
proved failure IN practice;
What, then, shall be done? I do not pro-
fess to know exactly how that question
ought to be answered but II raises Two
points about which ] have most positive
convictions. In the first place. We must
sit down hard on the pure theorist, the
tellow who has a plan which In It's per
fections transcends the experience Of bank
ers in this and all other countries. man
who Is seeking to invent a new use for
electricity or a new method OF propulsion
Tor the steamship may theorize and specu-
late and experiment as much as he pleases.
He can do no harm and ne may accomplish
some good result. But the currency of a
country containing 100000 people Is some
thing so important 80 vitality interviewer
with the welfare OF every man and woman
and child that no mere theorist or specu-
lator OF eNperimenter should be allowed FOR
one moment to tinker with IL. There are
thousand or more men In this country
VINO have currency plans In their pockets,
and most of them are theoretical schemes
which have never been tried in this or any
country. Many Of them are suggested, in
deed, by practical men, but they are none
the better on that account The question
is a practical one and 10 must be settled
by appeal to experience.
The second point about which ! am GER
tain is this The redemption OF bank notes
must be made so easy. so inevitable, so
inexpensive that imitation will be impossible.
The conditions Of issue and redemption
~ IN m nat hn
ever think OF paying out the notes of an
other bank, or of counting them as part
on lts lawful money reserve. No bank note
system can be really sound and safe and
elastic unless the motives which compel
the redemption Of notes are as powerful as
those which cause their issue.
Now in order that we may have a con-
crete basis for discussion, let us consider
for few minutes the recommendations
New York Chamber Of Commerce. That
committee after a study Of the banking
history OF this country and of the nations
of Europe, was led to the conclusion that
the wlsest and safest solution OF our pres
ent currency problem would be reached
BY the establishment of a central note
Issuing bank managed by a directorate
responsible not to the noteholders but to
the people of the United States. This bank
should have branches in all parts OF the
country. and there should be at least one
in every state. The directors of this bank
should hold office for life, and should be
| appointed by the president Of the United
Sldles, ana SnOulQ De selected with due
regard 10 the. needs Of different parts Of
| the country. The bank should be the finan-
clal agent Of the government in the col
lection and disbursement of public revenues
| The secretary of the treasury, indeed, by
Virtue Of his office. should be a member OF
its board of directors
know the objections that are urged
| against central bank, and 1 admit that
1 they are of character which renders a
discussion OF the subject somewhat acad-
| emlc at the present time 1t is objected
/ for example, that such an institution could
never be created in this country because
/ OF the opposition OF national bankers II is
assumed that the big bank would be a
powerful competitor of existing national
| banks depriving them Of public deposits
and in various ways cutting into their
/ busir ess In my opinion. the operations Of
such bank would increase rather than
/ dimirish the profits OF existing banks. Pub
/ lie moneys would first be deposited in the
central bank, but that Institution would
not hold these funds idle in it's vaults
That money would be loaned to banks all
over the country. In other words, the di-
rectors of this bank would distribute the
/ treasury surplus throughout the country In
/ accordance with the laws OF, business, and
would accept as security normal banking
assets. This wotildi certainly be a better
! method; than the artificial one. now fol-
/ lowed by. the secretary of the treasury.
/ The banks of the country, II would seem,
would be benefited rather than injured by
/ this change. As the objection that the
central bank would get business now going
! to existing banks, 1t should be borne in
mind that the. large Constitution would in
I with individuals II would doubtless be a
. popular reserve agent for country banks,
but as the law should not permit It to pay
! interest on deposits the money 1t received
/ from country banks would as a result OF
! redi scounts soon find Its way into the
vaults Of national banks in the reserve
Before leaving this subject let me assume
for minute the dangerous role of
! prophet. I predict that within twenty
years there viii be in the United States one
banking institution as powerful mere as the
Bsnk OF gamq Is 81 Engend or as T ia
I bank VIII be either peoples bank, one
created by act OF congress and controlled
by ofticers OF the government, or II VIII be
the product of evolution and -combinat ton
among our private banking interests.
ce S3 5a howeve ef G mns be gdted 6a
the recommendation of a central bank OF
issue can have no practical result, Being
Of this opinion, ard believing that certain
improvements Of the currency system might
be made in the near future. the Chamber
of Commerce committee presented second
plan, whereby II is proposed that national
banks having a bond-secured circulation
equal to 80 per cent of their capital shall be
permitted 60 issue, without further deposit
! of security additional notes equal in amount
TO IS per cent Of their capital, such notes
being subject to a graduated tax. In order
, 20 prevent over issue of these notes tho
committee recommends that they be re-
| deemable, not merely at Washington, but
at all the subtreasuries, and as a measure
Of aroteetion for the note holder it rec
, ommends that the proceeds of the gradu-
, Z ated tax shall constitute in the custody Of
, the government a guaranty or safety fund
Cor the redemption of the notes of failed
! banks.
In conclusion, gentlemen, let me remind
, you that the bankers Of this country are
! not suffering most from the defects of oul
currency system. The public has an idea
: that you bankers are agitating the currency
, question In order that you may get Tho
privilege of p. nting money and so In
: crCasing your profits. This is a mistaken
idea. The bankers of the United States arr
I a prosperous set of men today and they
I know how 60 take care OF their Interests
during the autumnal pinch for money. =
high rate Of interest doesn't give the aver
1 age banker much anxiety. But how abou
the bankers customer? During threi
Z months Of every year the business men %
/ this country pay from l to per cent NOR
/ for money than they would have to pay /
! credit instead Of money were used 70 NOV
the crops. This means an absolute loss o
I between S25,O0OOO0 and S50000O00. You bank
/ ers don't get H. for while you are paid
! higher rate OF interest. vet you have les
/ money to lend. In fact no set OF men II
! this country makes a corresponding gain
! ! IL Is as II so much wealth were destroyed
/ Yet there is a real gain, as there is a rca
I ! loss. The loss Is not borne by the bank
I nor by the men who borrow from banks
1 Ii IS borne by the producers Of wealth q
! this country, by the men who are forced a
1 such time TO sell the product Of thei
4 labor and big part Of the loss falls OF
? . the American farmer, who Is forced 10 sci
!. by. a monetary stringency. And TO WHOM
goes the gain or advantage II goes, gen
! ! tlemen, to people on the other side or IN
. I Atlantic ocean. who buV the agriculture