New-York tribune., 1907-12-02
CREDIT CURRENCY PLEA
= y. FOWLER'S VfEWS,
TeefuG.ion Needed to Preuent Com
merciol Crisis, He Says.

Charles ~ Fowler, chairman OF the House Com,
.rIttee on Banking and Currency, made the fol-
.n5ng statement yesterday respecting the outloosr
81 financial legislation in the Goth conz--as.-
.-7-,ere certainly should be some rer7edtaI ,.ss
,,.;oa and I assure You that the members =,
:. C5cnlnrttee Banking Currency will bsn6
.bsjr energies to that end. What we shall be able
- accomplish. man can answer But that .be-e
: urgent need for help no mar can deny
AT the dinner OF the executive council n. .be
american Bankers Association at St Louis a
,ssr ago predicted that the thing which has hap
nene5 r!-lst happen unless some immediate action
--as taken: that there was not q banker In the
s-7ited States would not regret il if something
-.ere done
Al The close OF the last session OF Congress-
sid that the condition Of our finances and cur
-srcy was such that il would OF necessity lead TO
,ha destruction OF prosperity.
Again, / declare that If this government
continues its present icy OF injecting into the
arteries OF trade and commerce fixed bond Sc
erred currency-by exchanging securities by bond
speculation, by Treasury manipulation. by ex-
scutive order by any other form Of thiulble-
iry4ng-we shall continue 30 move but with great
" accelerated speed. toward commercial crisis
compared with which the present panic is only
rleasant summer outing Our condition this fall has
been one OF real prosperity. Our crops are worth
sbou; s7eeD0aoooo. 1he products Of mines about
u40aco-eeo our manufactured products about ST.
..,.eoep-a total OF So coo 0eoeN
Meanwhile we have had the advantage OF an
extraordinary consumption Of foodstuffs as a re-
suit OF the Russo-Japanese war, the disturbed con-
5iticn OF Russia has LED TO reduced wheat acre
age there, q food scarcity prevails abroad and
consequently enjoying exceptionally high
r-;ces II all this true, but on the other
hand. our business conditions had been bad our
crops poor and foreign prices low. imagine what
would have transpirsd-
Notwithstanding all this and wholly because OF
fhe raladninistratior of our finances We are in a
r.ate OF pa-@c-
We have to-day IN the banks OF this country
about 600 Oes Of deposits and about the same
amour OF outstanding loans Against this fabu-
Tols sum the banks hold reserve about c9oo.-
oneU or Jess than per cert And even OF this
per reserve. nearly one-quarter- 500 oa ol
Is IN bsnknotes. mere credit mere promiss TO
pay.
against ESQ ooe6oo OF our bank deposits in fthe
United States to-day banknotes and not gold.
which IS admittedly the only proper reserve in
country with d gold standard.
Yet If continue present policy. Ehere is
It going to end? How long Will it he before all OF
our bank deposits viii rest upon credit reserves?
This Is obviously the worst and widest form Of
imitation Yet IL is ruInored that sheer madness is
70 follow in scheme now being brought out 10
add 20 this already overwhelming burden-another
lead IN the OF state. municipal and railroad
bonds as the basis of our bank currency liability.
No one who has studied this question doubts that
al OF our reserves. whether for deposit
other form Of bank liability. Including banknotes-
should be gold Yet amazing as it may seem. at
the annual meeting OF the American Bankers As-
xociation year ago q resolution was introduced
declaring that national bank notes fl
serve The argument was that national bank
note being secured By government bonds, was just
as good q reserve as a greenback. and the green
hack is g lawful reserve. BIT this is begging the
ouestfor as the greenback itself is only tol-
-rated as reserve because the government stands
ready q ali times TO redeem II in gold
The security for the national bank note, on the
other hand is per cent government bond. paya-
fle twenty-five years hence. which an investment
based UPON its rate of interest would sell for about
6 cents on the dollar present price is due 20
special demand for Il security for the panknote
issues
sTc suggest as = remedy for our financial trouble
,h.a ,,e ado to the already existing burden Of
about 500 oyoea Of bond secured bank issue an
unlimited amount of banknotes based upon STATE
rnunicpaI or railroad bonds vii prove le lasl
straw Il will still further force goid ou1 OF ouE
reserve and out OF the country
New York City bonds are ot the hlghes1 ciiaI-
srfer in xhe country and would necessarily be n
cluoed Yet OF these II should be SAID thal 'iie
per cents some years ago sold for between ll' ana
III while to-day they are selling at So ana Ne"
York CITY IS finding il difficult 20 float the ne"
1oa, a. 8 ,,ar cent This sort imitation must he
sto--ed Bank liabilities whether TO depositors OF
note holders must be based upon eolc anu n''
upon fuct,atiny credits Expansion IS Simply IA
c-easir- the liabilities of a bank without cur
res,or6iuz increase Of its reserve. ana TINS may
ralze Mace although the reserve be in soid com
Il Is simply question Of the Telauoh oL tie !
fslirv 10 the reserve and not the form OF the la
hllity-
Imitation On the other hand, is baslng one cFe.il
1r.a,7 ana-be- II is wholly irnmaterial what the
basic credit is whether government Doho' S'4'
bond. municipal or a railroad bond.
.-r,e entire banking resources OF the Worlo as-
- .,,,- 80 90 400 go OF this. S2ioco.5"JcD
Is e-nuloved in foreign countries and sIo"y'"'''"
IN the United States Of the szi"'"''''o 'If
rlove5 abroad about % per cent consists OF circuit
hank notes or cashiers checks, payabie 10 DediS'
ar c,,--e,,- credits While with enormous bahA-
s-, ----.ee which exceed trree-sevenths OF the
entire banking resources OF the world, we haNe
not : single dollar of such current credits. eAcep
the clearing house certificates and CASHIERS cie'NS
how in circulation"