The Montgomery advertiser., 1907-12-02
RF:zEDIAL XLEGISLATION Outlook for Work by
 Congress. CHAIRMAN FOWLER TALKS Says He Predicted the Present
 Condition.
Head of the House Committee on Banking and Currency Dis- cusses situation of the
 Country.


 and Currency made the following state- ment today respecting the outlook for financial legislation in the Sixtieth Congress-:
 There certainly should be somei remedial legislation and I can assure you that the members of the Commit tee on Banking and Currency will bend their energies to that end. What we shall be able to accomplish no man can answer. But that there is urgent need for help no man can deny.
 At the dinner of the American Bankers Association at St. Louis year ago, I predicted that the thing which has happened must happen un- less some immediate action was taken: that there was not banker in the United States who would not regret if something was not done.
 At the close of the last session of Congress said that the condition of our finances and currency was such that it would of necessity lead to the dstruction of our prosperity.
 . Again I now declare that if this Government continues its present poll icy of injecting into the arteries of trade and commerce fixed bond se- cured currency--by exchanging securi- ties, by bond speculation, by treasury manipulation. by executive order or by any other form of thimble- -rigging--we shall continue to move. but with great ly accelerated speed. toward com mercial crists compared with which the present panic is only pleasant summer outing. Our condition this fall has been one of real prosperity. Our crops are worth about S7,000 .000.. 900; the products of our mines about $1, 400. .000, ,000; our manufactured prod ucts about s17.O00 100000. total of $25 900, ,000 900.
 Afno ry,iI Ia had the dv vantage of an extraordinary consump- tion of foodstuffs and are enjoying exceptionally high prices. If all this were not true, but on the other hand. our business conditions had been bad our crops poor and foreign prices low. imagine what would have transpifed.
 Tn State of Panic.
 Notwithstanding all this. and wholly because of the nialadministra- tion of our financial affairs, we are In a state of panic,
 We have today in the banks of this country about twelve billions of dol lars of deposits and about the same amount of outstanding loans. Against this fabulous sum the banks hold as reserve about nine hundred million dol lars or less than eight per cent. And even of this eight per cent reserve, nearly one quarter-two hundred mill lion dollars--is in bank notes. mere credit. a mere promise to pay.
 "Stating 1t in another way, the re- serves 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 tp apy country with a gold standard.
 "Yet, if we continue our present pol. icy where is, 1t going to end! Not long will 1t be before all of our bank dep0sits will rest upon credit reserves. ;o ahQ hQ,in inc worst and WlkQ- est form of imitation. Yet 1t Is rumored that sheer madness is to follow, as a scheme is now being wrought out tc add to this already overwhelming bur- den another load in the form of State municipal and railroad bonds on the basis of our bank currency liability. Nc ono whe has studied this question doubts that all of our reserves, whe- ther for deposit or for any other form of hank liability, including bank notes, should be gold. Yet amazing as 1t may seem, at the annual meeting or the American Bankers Association year ago, a resolution was introduced de- ciaring that national bank notes were a fit reserve
 "The argument was that national hank note. being secured by govern ment bonds. was just as good e reserve as greenback and the greenbaclS iS a lawful reserve. But this Is begging the question because the greenback itself is only tolerated as reserve because the government stands ready at all times to redeem 1t In gold. Srhe security for the bank note on the other hand Is a two per cent government bond payable twetity-fiye years hence, which, as an investment based upon its rate of inter- est would sell for about sixty-five cents on the dollar. Its present price is due to support demand for 1t as security for the bank note issues.
 The Last straw.
 "To suggest as a remedy for our fin. ancial trouble that we add to the al- ready existing burden of about $703.- OoO. 900 of bond-secured bank issue. sn unlimited amount Of bank notes based upon State. municipal or railroad bonds, will prove the last straw. It will still further force gold out of our reserve and out of the country. The New York city bonds are of the highest character and would necessa- | rily be included. Yet of those it should be said that the per cents, some years | ago sold for between 1I0 and Ill, while today they are selling A 65 and New | York city Is finding it difficult to float | the new loan at 6 per cent. This sort l of imitation must be stopped. Bank lia- l bilIties. whether to depositors or note | holders, must be based upon gold and not upon luctuating credits. Expan- | sion lR simply lHCTcdSihB tne uhDlliLleS l of bank without a corresponding in- l crease of it's reserve. and this may take place although the reserves be in gold | coin. It is simply question of the re- l latIon of the liability to the reserve and | not the form of the liability.
 "Infiation on the other hand is bas- | ing one credit upon another. It is wholly lmmaterial what the basis cred | if is. whether government bond, State | bond. municipal or a railroad bond. "A cashiers check does not lead to expansion nor imitation for the reason that by the very nature of the instru- ment 1t is sent home for redemption at once. No bank holds a cashiers check whether of the weakest or the strong est bank as a part of it's reserves, but sends 1t to the maker as directly and swiftly as possible for redemption. A bond issue consisting of cashiers checks payable to bearer will always keep the currency of the country down '