Evening star. [volume] (Washington, D.C.) 1854-1972, 1907-11-24
BOND ISSUE AN ERROR
Charles N. Fowler Takes Ad-
ministration to Task.
HOUSE FINANCIAL EXPERT
Chairman Of Committee on Banking
and Currency.
HIS REASONS FOR CRITICISM
Characterizes Action as "Surprising;
Extraordinary, Unwarranted and
Most Unfortunate"
HOUSE FINANCIAL EXPERT
HIS REASONS FOR CRITICISM

NEW 1oSh, 4>oNSIAOCi so.-AsSPAS
sentative Charles N. Fowler, chairman
of the House committee on banking and
| currency. today gave out the following
statement regarding the issue of Panama
canal bonds and reasury certificates:
PERSONALLY" said Mr.. Fowler. land
| from a party standpoint, it is, of course
unpleasant for me to disapprove the action
of the republican administration. but my
study of the questions involved and my
duty to the public compel me to set forth
| the reasons why the action of the admin
istration is surprising, extraordinary, I'M
warranted and most unfortunate.
ION Friday, November Is, the crisis of
the present currency panic had been
reached and successfully passed through
lean bankers in bringing gold to this coun
try to the extent of about $4,000. 900, at
very great cost to themselves, for it
was purchased generally at a premium of
about per cent. and also by responding
to the business necessities of the various
localities in issuing clearing house GER
titicates and cashiers checks in denomi-
nations of 81, 81, IS and SO, as well as
the larger denominations.
'At this juncture, when the nancial
and currency situation was already well
in hand, the administration interviewed
against the opinion of the best judges
of the situation. Therefore, primarily the
effect of the governments action must be
a most disturbing factor, although the
bankers of the country may prevent any
serious consequence at the moment.
In the second place the government
did not need the money. as it has $2io.-
100000 to its credit which it has taken
from the people through taxation. There
fore. the Understanding debt of the
government should not have been in
creased $15O.OOO.0 COO. especially when such
increase of debt is clearly in violation of
the intent and purpose of law. and in the
third place because the action of the
Treasury is a most violent violation Of
economic law, for which the people must
yet pay the penalty.
Bad Made Worse.
First let us deal with the $50. 100000 of
2 per cent Panama bonds which are to
be used as the basis of additional bank
\
as stated, S24OOC0,OOO in its Treasury or
to its credit and, therefore, it did not
need the proceeds to pay for the con-
struction of the Panama canal or to meet
the current expenditures of the govern
ment, and even If it did it could not take
any part Of the proceeds of the sales for
the present, as the banks could not af-
| ford to exchange their reserve money for
bank notes.
"And further, because instead of there
being a margin Of gain there must neces-
sarily be an actual loss of capital in the
transaction. Again. by this hypodermic
injection of another $50 600, 600 of fixed i'm
| mobile currency into our sodden mass of
bond-secured bank note circulation which
never responds to the varying conditions
| of commerce because not directly re-
| lated to the business of the country, we
have made bad condition worse. Think
| of pushing farther principle of currency
| expansion which, although our business
was constantly expanding from 1882 to
| 1891, fell from 1862. 100000 in 1882 to $685.
| 100000 in 1891. Why? Simply because 1t
was Improbable to hold the bonds for
| that purpose; aye. a principle which has
proved its utter lack of adaptation to our
needs since 1891 by showing an actual
contraction during the fall Of many of
| the intervening years and an actual ex-
| pansion during the spring months of many
others
Reaction Must Come.
Cant the American people observe and
| learn anything from experience in finance
and currency as they always do in other
matters, especially such violent expert
ences as we have been passing through
during the last thirty days?
again we shall find when the reaction
comes and the changed condition is re-
| fiected in our reserves beginning about
| the 18th of January. If not earlier and in
| r l1n he
| until the reserves in our banks will prob
ably exceed those of any preceding year
| since 1900. that this very $15O.OOO,0GO. If
unfortunately the increased debt shall be
converted into bank notes, that these
bank notes will not disappear and be au-
tomatically retired; but that they will
| find place in the reserves of the state
banks, In the reserves of the trust COM
panies, and to some extent-though they
| have no right therein the reserves of the
| national banks.
Now mark this! That every bank note
held as a reserve will displace just that
amount of gold and drive 1t out of the
country. This is just what our silver pur-
money always has and invariably will
drive out the better. There will be up
ward of per cent profit on the circula-
ton taken out on these bonds. and so the
banks will force them out persistently
and the counterpart will be that noisele S.
ly. imperceptibly. but with absolute GER
tainty, the gold will give place to the
bond-secured note to the extent that l,
finds its way into the reserves of the va.
rious financial institutions of the country
! Notes Will Stick.
} But, you may inquire, will the profit OF
u to l per cent be sufficient to work this
great injury to our finances? Let history
answer. From 1892 to 1888, with only 8
dinferential between gold and silver Of
from Y to 1 per cent all the gold wa
driven out Of the country.
During the next few months you will
note this striking contrast between thes,
ond-secured notes and the credit cur
rency expressed in clearing house certifi
Gates and cashiers checks: that Will,
all Of these bOnd-secured notes will re
main to perplex and curse us in the flu
, ture by not contracting 70 the extent o
a single dollar from January to July
every single dollar OF credit currency IL
the form of clearing house certificates
and cashiers checks which have com,
into existence naturally with q grea
, urgent need will disappear when they ar
required no longer.
~ assert, from thorough investigation
! of all the facts that surround the situa
ton, that If the $7OO.O bond secured
} bank notes We're what they ought to be-
current bank credit such as all the civ
| ilized world now uSeS-there would be
!. contraction from January to July aggre
eating from $3.50 100000 to. $500, 900 600.
l, Framed the Bond Law.