The Washington herald., 1908-02-20
Johnston Advocates Change
in Aldrich Bill.
NEW SOLON IS HUMOROUS
Declares Rhode Island Senator
Awaits Democratic Moses TO Make
Way for Him Across Financial
Stream - Would Make National
Banks Hold More Reserve Money.

atOr Johnston, OF Alabama who yester-
day addressed the Senate upon his pro-
posed amendment to the Aldrich currency
bill
Himself an experienced banker. Mr.
Johnston dealt with his subject in an
able manner. ard held the attention OF
his colleagues during the entire period
Of his address.
In TWO or three instances he SHE'D
kindly but pointed darts Of a humorous
tendency at Senator AIdrich, Of Rhode
Island, author Of the bill. and his wit
was Easy and natural, and brought laugh
each time n was employed. Senator Aid
rich seemed 10 enjoy the thrusts, even
when they hit the hardest. for he smiled
broadly each time.
Senator Johnston's amendment, which
| il is understood the Committee on Fl
nance will adopt perhaps with slight
changes, provides that on and after jan
uary ] next two-thirds OF the reserves
of national banks as required by law
shall be kept in their vaults. either in
the funds now required by law or IN
bonds which may be exchanged for the
emergency currency 10 be created by the
Aldrich bin. not more than half Of the
reserve so required TO be kept in such
bonds. Senator Johnston produced an
array Of figures 10 support his contention
for the adoption Of the amendment.
Takes Democratic View.
The speaker said. in part.
! We have had quite an interesting dis
cussion as 10 what the reserve Of bank
is, and its uses and abuses. I quite agree
with the views expressed by the two Sen
ators from Texas. the Senator from Ma
/ ryland. and the Senator from Idaho in
/ their views; and ! think they do not differ
/ essentially from the views Of the Senator
from Rhode Island. II is true ne limits
the use Of the reserve in paying depos-
itOrs In an emergency: but I think the
Senator viii agree that whenever a de-
| positoT presents a check 10 a bank and
demands payment, and the bank cannot
pay without using a part Of its reserve.
the emergency is then present. fuIl-grown
4 and threatening
1t seems 20 me that Il would be absurd
10 say that the law in such a case pre-
seuts two alternatives 70 the bank-one
10 refuse payment and commit an act
which. II II We're "A State bank, would be
an act OF bankruptcy; and the other TO
pay out Of its reserves and have the
/ Comptroller appoint a receiver.
such an absurdity is certainly not con-
( templated. FOR the act expressly says that
the impaired reserve must presently be
made good. II a reserve can neither be
loaned out nor used 10 pay dcpOsitors. #
is the most illogical requirement imagina-
BILE The only other purpose possible would
be 10 hold il as a nest egg for the re-
ceiver OF the bank 70 administer II such
be the purpose. II would be safer 70 re-
Quire it TO be deposited in the United
States Treasury and remove all tempta-
zion 70 use il.
Speaks a. a Banker,
4 have had some experience in bank
ing. passing through the panic of 1903.
and have some knowledge and informa-
tion as to the use and abuse Of reserves.
The Il per cent reserve required by
law IS. in my judgment. sufficient. though
banks in my section, both national and
State. usually hold in their vaults and
with reserve agents a larger amount; but
think the great error in the present law
is that too much OF this reserve may be.
and is. deposited I'm banks a thousand
miles from the home bank, and that TOO
often in times OF peril IL Is 10 all intents
and purposes, as useless TO the home bank
as II IL were deposited il Japan or some
other locality quite as remote from the
operation Of our laws II would be better
for the banks 20 lay up their treasures
IN Heaven. where neither moth nor rust
doth corrupt, and where thieves do not
break through nor steal than 10 have il
with reserve agents when a financial
panic prevails.
1T is this condition OF affairs that ]
propose to improve by requiring a larger
holding Of reserve, actual or potential, in
the vaults OF the banks.
states AIdrIch's Position.
The argument in favor Of the amend
? ment I propose has been ably presented
by the Senator from Rhode Island, but II
finds no expression whatever in the bill
reported by him. I have heard Of men
: who favored a law. but were opposed tC
its enforcement. in this case the Senator
seems to favor the Law, but is opposed
10 its enactment. The Senator gives
many reasons why banks should be re-
quired 10 invest in the bonds mentioned
. in the bill. but when We search the bill
for some logical and apt statutory ex-
preston of the argument We do not find
a single line or sentence Of finished
work.
The Senator says these securities, the
bonds mentioned in the act, would form
part Of the banks best assets anc
would constitute. from every standpoint
judicious investment that upon de,
mand for additional notes the bank could
J obtain for every $4,000 invested in bonds
1900 in emergency currency. He ask!
, If It would be hardship upon the bank.
to require them. if they desired 10 avail
themselves Of the privileges conferred by
the BILL to hold TO a limited extent this
class of securities as part of their assets
MY amendment does not go so far a,
, that 1t puts no hardships upon any
bank, because they are at liberty K
pcsits either wholly in money or part il
money, and not more than half in thes,
bonds
Bill Should Contain Section.
Now. it ,seems to me. Mr.. President
that IL the Congress has the supervisor,
power over investments of national banks
which seems not 10 be questioned: i
prudent bank managers everywhere al
ways invest in such bonds: II the failur,
TO do this causes nearly all the disastrou.
: bank failures in our own and other coun
tries; if this requirement would be in tn,
interest OF the public and stockholder.
; alike: II these bonds would form part o.
the banks assets, and it would be NJ
hardship on the banks to require this o,
: them; If all this cornucopia Of good, wise
and prudent results can be given by Con
gress to the banks with benefit to tn,