Evening star. [volume] (Washington, D.C.) 1854-1972, 1907-12-03
Safe and Secure Currency
With Greater Elasticity

/ Will OTtdlcC cidSllCily
In my message to the Congress a year
ago 1 spoke as follows of tn. currency:
Il especially call your attention to the
| condition Of our currency laws. The ma
tional bank act mas ably served a great
purpose in aiding the enormous business
development of the country, and within
ten years there has been an increase in
circulation per capita from $2l.41 to
$53.OS. For several years evidence has
been accommodating that additional legs
iation is. needed. The recurrence of each
crop season emphasizes the defects of the
present laws. There must soon be a re-
vision of them; because to leave them
business disaster.
Since your body adjourned there has
been f1uctuation in the interest on call
money from 2 per cent to 80 per cent,
and the fiuctuation was even greater dur
ing the preceding six months. The Sec
rotary of the Treasury had to step In and
by wise action put a stop to the most
violent period of oscillation. Even worse
than such fuctuatiOn is the advance in
commercial rates and the uncertainty felt
in the sufficiency Of credit even at high
rates. All commercial interests suffer
during each crop period. Excessive rates
for call money in New York attract
money from the interior banks into the
that would otherwise be available for
commercial uses. and commercial borrow
ers are forced to pay abnormal rates, so
that each fall a tax In the shape or I'M
creased interest charges is placed on s1e
whole commerce of the country '''
THE mere statement of these facts
shows that our present system is seriously
defective. There Is need Of a change
Unfortunately. however. many Of the pro-
posed changes must be ruled from consid-
Grafton because they are complicated, are
not easy of comprehension, and tend to
disturb existing rights and interests. We
must also rule out any plan which would
materially impair the value of the United
States per cent bonds now pledged to
secure circulation the issue of which was
made under conditions peculiarly credita-
BILE to the Treasury. I do not press any
especial plan.
posed by expert committees Of bankers.
Among the plans which are possibly FEAST
BILE and which certainly should receive
your consideration is that repeatedly
brought to your attention by the present
Secretary of the Treasury. the essential
features of which have been approved by
many prominent bankers and business
men. According to this plan national
banks should be permitted to issue a spe-
Cited proportion Of their capital In notes
Of given kind. the issue to be taxed
at so high rate as to drive the notes
back when not wanted in legitimate
trade. This plan would not permit the
Issue OF currency to give banks additional
prof1ts. but to meet the emergency pre-
sented by times of stringency.
Il do not say that this Is the right sys-
tenn l only advance 1t to emphasize my
belief that there Is need for the adoption
OF some system which shall be automatic
and open to all sound banks, so as to avoid
all possibility of discrimination and ia
Voritisn Such plan would tend to
prevent the spasms of high money and
l q nv0f Tow. Af<,l,
York market; for at present there is too
much currency at certain seasons Of the
year, and its accumulation at New York
tempts bankers to lend 1t at low rates
times when the crops are being moved
there Is urgent need for a large but tenn
porary Increase in the currency supply.
1T must never be forgotten that this
question concerns business men generally
quite as much as bankers; especially is
this true Of stockmen, farmers and bust
ness men In the west; for at present at
certain seasons Of the year the difference
in interest rates between the east and
the west is from 6 to 10 per cent whereas
In Canada the corresponding difference is
but per cent. Any plan must. Of course,
guard the interests of western and south
ern bankers as carefully as It guards the
interests of New York or Chicago bank
ers. and must be drawn from the stand
points of the farmer and the merchant
| no less than from the standpoints Of the
city banker and the country banker
Greater Elasticity Needed.
I again urge on the Congress the need
Of immediate attention to this matter
We need a greater elasticity in our cur
| rency; provided. Of course. that we rocog-
nize the even greater need Of a safe and
secure currency. There must always be
| the most rigid examination by the ma
| tional authorities. Provision should be
made for an emergency currency. The
| emergency issue should. Of course,
| be made with an effective guar
anty, and upon conditions carefully pre-
| scribed by the government. Such ener-
gency issue must be based on adequate
securities approved by the government,
and must be issued under heavy tax
\ This would permit currency being issued
| when the demand for 1t was urgent, while
| securing it's retirement as the demand
fell OF. 1t Is worth investigating to de-
termine whether officers and directors of
national banks should ever be allowed to
| should be subject to the same supervision
| as banks; legislation to this effect should
be enacted for the District Of Columbia
end the territories.
the wisest legislation on the subject can
| only accomplish certain amount No
| legislation can by any possibility guaran-
| tee the business community against the
results OF speculative folly any more than
It can guarantee an individual against the
| results Of extravaganza. When an indiyid-
| ual mortgages his house to buy an auto
| mobile he invites disaster; and when
| wealthy men. or men who pose as such,
| or are unscrupulously or fOolishly eager
| to become such, indulge In reckless spacu-
lation-especiafly If 1t Is accompanied by
ldishonesty-they jeoparaize not only their
own future but the future of all their
innocent fellow-citizsns. for They expose
the whole business community to panic
ana distress
The income account of the nation is in
q most satisfactory condition. For the