The Montgomery advertiser., 1907-11-24
BOND ISSUE
 UNFORTUNATE Congressman Fowler Scores Administration ECONOMIC LAW IS VIOLATED Says Intervention of Government
 Was Not Necessary. Mir. Fowler, Who is Chairman of House Committee on Banking and Cur
 reney, Gives Oat Long Interview.


 Charles N. Fowler. chairman of the House Committee on Banking and Cur rency, today gave out the following statement regarding the issue of Pan- anna canal bonds and treasury certifi- cates: "Personally,' said Mir. Fowler. "and from a party standpoint 1t 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 reason why the actions of the administration are surprising. ex- traordinary unwarranted and most un- fortunate.
 "On Friday. November Is, the crisis of the present currency panic, had been reached and successfully passed through the splendid achievements of American bankers in bringing gold to this country to the extent of about SIS. 900, 900 at a very great cost to themselves, for 1t was purchased gen. erally at premium of about two per cent and alsp by responding to the business necessities of the various To- calities in issuing clearing house cer- tificates and cashiers checks in denom- nations of s1, s2. $5 and $10. as well as the larger denominations.
 At this juncture when the financial and currency situation was already well fn hand, the administration inter- vened against the opinion of the best judges of the situation. Therefore pri- marily the effect of the governments action must be most disturbing fac tor. although the bankers of the coun- try may prevent any serious conse- quence at the moment.
 "In the second place the government did not need the money as 1t had S240,- 0ou, 900 to its credit which 1t has taken from the people through taxation. Therefore the interest bearing debt of the government should not have been Increased sf50.0oo.ooo. especially when such increase of debt ts clearly in vio- sation of the intans and purpose of the .aaw; and in the third place because the action of the treasury is most vio- lent violation of economic law for alty.
 First, let us deal with the $50, ,0O0, 900 of per cent Panama bonds which are to be used as the basis of additional hank notes circulation. The govern ment has, as stated, $240, 900 in it's treasury or to it's credit. and therefore 1t did not need the proceeds to pay for the construction of the Panama canal or to meet the current expenditures of the government. And even if 1t did 1t could not take any part of the proceeds of these sales for the present as the banks could not afford to exchange their reserve money for bank notes.
 And, further instead of there being a margin of gain there must necessarily be an actual loss of capital in the transaction. Again. by this hypodermic injection of another $50.000.o00 of fixed immobile currency into our sodden mass of bond secured bank note ctrcu- lation which never responds to the varying conditions of commerce be. cause not directly related to the busi- ness of the country, we have made had %eondition worse. Think of push ing farther a principle of currency ex" pansion which, although our business was constantly expanding, from 1882 to 1891, fell from s362, 100000 in 1882 to SIPS, ,O6O, 900 in 1891. Why? Simply be- cause 1t was unprofitable to hold the bonds for that purpose; aye, a princi- pie which has proved it's 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 expansion during the spring months of many others.
 
 and learn anything from experience in finance and currency as they always do in other matters, especially such vi- olent experiences as we have been passing through during the last thirty days?
 Again. we shall find. when the re- action comes. and the changed condi- tion Is reflected in our reserves be- ginning about the 18th of January. if
  during the spring months. until the reserves in our banks will probably exceed those of any preceding year since 1900-that this very $l50.000. 900. if, unfortunately the increased debt shall be converted into bank notes, that these bank notes will not disap- pear and be automatically retired. but that they will find a place in the re- serves of the State banks. reserves of the trust companies, and to some extent, though they have no right there in 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 purchases did In 1879 to 1894. The poorer money always has and invariably will drive out the bet ter.
 Let History Answer
 But. you may inquire, will the profit of one-half to one per cent be sufficient to work this great injury to our finances? Let history answer. From 1792 to 1883. with only a dif- fercntial between gold and silver of from a half to one per cent, the gold was driven out of the country. Dur ing the next few months you will note this striking contrast between those bond secured notes and the credit cur rency expressed in clearing house certificates and cashiers checks. that while all of these bond-secured notes will remain to perplex and curse us in the future by not contracting to the extent of a single dollar from January tc July. every single dollar of credit currency in the form of clearing house certificates and cashiers checks which have come into existence naturally with a great urgent need. will disap- pear when they are required no longer.
 q am not aware of any statute by which the Government certificates can be construed to be lawful basis for bank note circulation. Be this how ,t may +ha most unfortunate incident