Los Angeles herald., 1907-11-04
BANKING EXPERT EXPLAINS
STRlNGENCY
MORE ELASTICITY NEEDED, SAYS
FOWLER
Congressman from New Jersey Says
Underlying Business condl-
tlons Are Essentially
Sound


gency can only be had through a system
of credit currency adequate to meet the
requirements Of trade and redeemable IN
gold, was the opinion expressed today by
Representative Charles Fowler of New
Jersey, the chairman of the banking and
currency committee of the national house
of representatives, which will at the COM
ing session of congress endeavor to have
a law passed providing for credit cur
rency, issued by the national banks.
Until such permanent relief is made by
legislative enactment, Mr.. Fowler as
serted, the situation must be met by the
issuance of clearing house certificates.
cashiers checks and due bills of business
houses and manufacturers.
'"The underlying business conditions
he said today, ARE essentially sound, as
evidenced by the increased earnings of
railroads. and the fact that the values Of
our agricultural products this year are
$500, 100000 more than last year. which was
the highest year in our history, and are
bringing to our people about 81, ,000, ,000. 900.
but public confidence has been greatly
shaken and credit seriously affected.
Therefore every patriotic citizen from tho
president down should do all in his power
to restore that confidence which is esseri-
tial to national prosperity.
Cash Locked Up
'"The cause of the currency stringency
is that there Is scattered broadcast
throughout the country, at the mines, in
the wheat, corn and cotton fields, in the
pockets of the people, or locked up, about
81, ,30o. 100000 of the reserve money of the
United States, most of which under
proper condition would be in the banks,
serving as reserve. Temporary relief will
be through the forced use of currency
credit in the form of clearing house GER
tificates, cashiers checks and due bills
of business houses and manufacturers
during the ninety days. The permanent
credit currency expanding and contract
ing with the ordinary demands OF the
smaller trade precisely as checks ana
drafts do in the broader field of COM
merce.
1--WE have not proceeded far enough into
the present financial crisis to get pretty
clear perspective view of the condition.
1.-THE crisis is now reaching every nook
of the country. Second, if the gold GER
tificates, the United States silver GER
tifcates or the reserve money, which the
banks from the country have sent In
agricultural districts of all sections TO
settle up the years business. say, if
these reserves now scattered broadcast
over the land were in the banks where
been no money panic this fall.
1.-THE proof of this assertion is con-
elusive. During the past four months
there has been sent from the banks into
the country districts approximately $780,
0000 900 of currency. OF this amount $780,
600 900 approximately was reserve money,
which, If it were in the banks, would
serve as a basis of more than SIZE, 100000
credits and loans, and the present crisis
would have been averted.
"This result could have been accom-
plished without increasing our bank re-
serves to the extent of single dollar,
without increasing the liabilities of the
banks of the country to the extent of one
cent.
"I challenge any man to controvert this
statement and submit the following as
absolutely conclusive proof of the asser-
ton:
Submits Proof
"If the banks in which the $3.50, 900
had been deposited had been authorized
as they should have been to create bank
note credits, as we'll as bank book credits,
and they had proceeded to convert this
$3.50, 900, 900 of bank book credits into bank
note credits the banks would not have
been affected in any degree or In any
way whatever and the whole country
would have heen amply supplied with
| currency with which to transact all the
| fall business.
How could this have been done? Sim
ply by authorizing each bank to issue
cashiers checks, payable to bearer, which
| is a current credit, that is credit which
passes by mere delivery, requiring no in
dorsement. BY this process the $4,000, 600
| of bank book credits would have been
converted into bank note credits and as
| the reserve required for both forms OF
credit should be the same, there could
| have been no change whatever in the
situation. The bank debt is the same, the
amount of the reserve is the same. 1t
has been only a matter of bookkeeping.
IAN issue of credit currency adequate
to meet the requirements of trade and
currently redeemed in gold coin is prin-
| ciple followed by every civilized country
| In the world except our own.
''Hark this: The banking power of the
United States in 1890 was about s50OO,OOo,-
900, and now it exceeds $4,000, ,000,0 ,0O0-or
equal to the entire banking power of the
world in 1890 which Mulhall placed at
Sic, $50, ,0000 600. Today the banking power
of the entire world outside of the United
states. is only $4,000, 100000. and of this
amount 20 per cent, or more than $4,000
900, 900 is in cashiers checks, or currency
| credits = that is, credit currency -
and vet, while the United States
has three-seventh of the banking power
of the entire world, 1t has not one sim
gle dollar currency bank credit, although
the four-sevenths of the worlds banking
power has the advantage of S4,0O00O0,0OO
currency credits.
Entitled to Billions
"On the same basis we are entitled to
have 81, 100000 900 of currency credits, or
credit currency. If this principle were
broadly adopted in this country, as it
should be, our bank reserves might be
increased from an average 9.92 per cent
to about 20 per cent and our banking
liabilities remain practically the same.
"Can any one give a single reason
why we should use a check book for
credits to order and not use a currency
credit of the same bank upon which we
draw our checks? Is not the cashier
check upon the same bank, indeed, far
better when protected as 1t should be
by a guarantee fund deposited with the
United States government, many times
more than ample to insure its redemption
in gold coin?
"If the banking institutions of the
country could exchange one billion dollars
Of cashiers' checks for one billion dol