Los Angeles herald., 1907-12-02
CURRENCY
REFORM is
DEMANDED
CHAIRMAN FOWLER DECLARES
THERE MUST BE CHANGE
FEARS FOR FUTURE UNDER THE
PRESENT SYSTEM
Remedial Legislation Necessary " a
Disastrous Panic Is to Be Avcrted,
says Prominent Con-
gressnan


BY Associated Press
NEW YORK, Dec. f.--Chairnan Fowler
cf the house committee on banking and
currency made the following statement,
today respecting the outlook for financial
legislation in the sixtieth congress:
There certainly should be some RENE
dial legislation, and can assure you that
tho members of the committee on bank
ing and currency will bend their energies
to that end. What we shall be able 70
accomplish no man can answer. But that
there Is urgent need for help no man can
ceny.
..At the dinner of tho American Bankers
association at st. Louis year ago pre-
c.icted that the thing which has happened
must happen unless some immediate
action was taken; that there was not
tanker In the United States who would
hot regret it If something was not done
'sAt the close of the last session of con-
gress I said the condition Of our finances
and currency was such that 1t would OF
necessity lead to the destruction OF our
s.aenenerify
Again. | now declare that if this gov
rent continues it's present policy of inje2-
tion into the arteries of trade and COM
nerce a fixed bond-secured currency-by
exchanging security, by bond speculation.
by treasury manipulation, by executive
order or by any other form of thimble-
rigging, we shall continue to move, but
with greatly accelerated speed, toward
commercial crisis compared with which
the present panic is only pleasant sum
rner outing. Our condition this fall las
been one of real prosperity Our crops are
worth about $1,000 100000; the products of
our mines about s1,oO O0.o00.000; our manu-
factured products about yl1OO0,00Oooo-a
total of s25.o oOO0O0,60o.
Prices High
.sNIeanwhile we have had the advantage
of an extraordinary consumption OF food
stuffs and are enjoying exceptionally high
prices If all this were not true, but IN
the other hand our business conditions
had been bad, our crops poor and foreign
prices low. imagine what would have
sranspired!
Notwithstanding all this, and wholly
because of the maladministration of our
finances. we are IN a state OF panic
1--WE have today in the banks of this
country about $12,0O0,Oo0,0Oo of deposits
and about the same amount of outstand-
ing loans Against this fabulous sum the
banks hold as reserve about $900000.000. or
less than per cent. And even of this
per cent reserve nearly one-quarter-s2O0.-
coz, 000--is bank notes, mere credit,
mere promise to pay.
Stating 1t in another way, the reserves
held against two and one half billions of
our bank deposits today are bank notes.
and not gold. which is admittedly the
only proper reserve in any country with j
gold standard.
Fears for Future
''Yet, if we continue our present policy,
where is ii going to end? Not long VIII
it be before all our bank deposits will
rest upon credit reserves This is obvi
ously the worst and widest form of intia-
ton. Yet 1t is rumored that sheer mad
ress is to follow; that a scheme is now
being wrought out to add to this already
overwhelming burden another load In the
form of state, municipal and railroad
bonds as the basis of our bank currency
liability, including bank notes, should be
gold. Yet, amazing as 1t may seem, at
the annual meeting of the American
Bankers association a year ago a resolu-
ton was introduced declaring that a ma
tional bank note. being secured by gov
ernment bonds. was just as good reserve
as greenback, and the greenback is
lawful reserve.
But this IS begging the question, be-
cause the greenback itself is only tolerated
as reserve because the government stands
ready at all times to redeem 1t in gold.
THE security for the national bank note,
cn the other hand, is per cent govern
ment bond, payable twenty-five years
hence, which as an investment based upon
it's rate of interest would sell for about
60 cents on the dollar. Its present price
is due to special demand for it as security
for the bank note issue.
ITO suggest as q remedy for our finan-
cial troubles that we add to the already
existing burden of about SO0,000,0O0 of
bond secured bank issues, an unlimited
amount of bank notes based upon state.
municipal or railroad bonds. will prove
The last straw. 1t will still further force
gold out of our reserve and out Of the
country.
.srhe New York city bonds are of the
highest character, and would necessarily
be included. Yet of these 1t should be
said that the 3 per cent bonds, some years
ago, sold for between 110 and Ill, while
today they are selling at 65, and New
York city Is finding it difficulty to float
the new loan at per cent
'InfIation Must Stop
This sort of imitation must be stopped.
Bank liabilities, whether to depositors or
note holders. must be based upon gold,
rot upon fiuctuating credits. Expansion
IS simply increasing the liabilities of a
Lank without a corresponding increase of
cash reserve, and this may take place,
3lIlOuRn the TeSeTNtS DC III SOlu NOliA- ~
is simply question of the relation OF
the liability to the reserve and not the
form OF the liability
Limitation, on the other hand. is basine
one credit upon another. 1t is wholly i'm
material what the basic credit is, whether
a government bond, state bond, municipal
or railroad bond.
"A cashiers check does not lead to ex-
I,ansIon, nor imitation. for the reason that
ny the very nature of the instrument IT
Is sent home for redemption at once. No
bank holds cashiers check, whether Of
the weakest or the strongest bank, as a
part OF its reserves but sends 1t to the
banker as directly and swiftly as possible
for redemption. A bank issue consisting
Of cashiers checks, payable to bearer,
win always keep the currency of the
country down to the lowest point of
necessity. and yet will always meet the
largest demands of trade and commerce.
'.The entire banking resources of the
world aggregate about SS700O.OO0.0O0. OF
this sci 900. 100000 is employed in foreign
countries and sl60O0. 100000 in the United
states or the $21.OOO0OO.OoO employed
abroad about % per cent consists of credit
bank notes, or cashiers checks. or cur