Bismarck daily tribune. [volume] (Bismarck, Dakota [N.D.]) 1881-1916, 1908-07-03

York. Now you will notice that your
Fargo reserve is also a ST. Paul re-
serve. How can the same dollar be
reserve in two different banks at
the same time? Common sense
says 1t cannot. Nothing can be a re-
serve that you have not actually got
in your possession. And yet the
law permits the dollar to count in
two banks, yes, we may even state,
in three banks at the same time.
But some fine day in October, when
the word is passed down to you that
St. Paul cannot let you have your
reserve because st. Paul cannot get
: it from New York. you realize that
your reserve is a little like the shell
game at the county fair. Now you
see it and now you don't. On such
occasions we see the dependence of
the Dakota bank on Wall street, ais
referred to before, and we see Wall
street itself the victim of wrong
system.
So much for the wording of the
law If the law would state clear
" that the reserves are to be 6 per
cent, II 1-2 per cent and % per cent,
as it clearly means, these amounts
to be held in the vaults Of the banks,
and should leave the question of de-
post in other banks entirely to the
individual banks, the whole question
would be generally simplified. If
these reserves are not large enough,
or are too large, is a question which
would then be settled on it's own mer-
its. It now confuses the entire pub
lie. One point is clear, a reserve is
not a reserve unless actually in the
vaults of the bank. B. "A. Cleveland
makes this criticism: The national
bank act and also the state laws are
defective, in that they permit all the
banks outside Of the central reserve
cities to loan their illegal reserves, 2
and still count those as reserves for
meeting obligations to pay depositors
This has permitted banks to unduly
expand their credit, and also has
made a large part of the money and
credit Of reserve institutions avail
able for speculation only, thus en-
5couraging margin trading" during
periods Of low interest rates, unset
Ting the investment markets and
$endangering the whole system of
commercial credits for the protec-
tion Of which the reserves are cred
tied. ..3ss
2. Elasticity. The issue Of clear
ing house certificates was good EVIL
dence Of the need and efficiency of an
elastic currency. This need must be
supplied by the law in some man
ner. &.8g
g.. Central Bank am firmly of
the opinion that one lesson of the
panic was the need Of some one cen
trail banking institution, and that 1t
is very, unfortunate to call on the
United States treasury for this kind
of help.
Recommendations.
/. Reserve. Reserves are now
largely borrowed money. This is an
evil In time the reserve require
ments should be changed into cap
itaf requirement. This is somewhat
radical, but would put us on par
with our neighbors. Approximately
It would add $500, 900 900 to the capt.
tai OF national banks and the same
amount to state institutions. That is,
1t would increase bank capital Of the
United States by 81. ooo, O00, 600. This
would provide safe elastic credit
currency Of $4,000, 900, 600 at the very
least. Even though it add to the
capital cost of bank credit, would it
not be an economy to the business
world? Should not immediate steps
be taken to make the foundation of
our credit sure, and provide for ade-
squate expansion without endangering
the public 2"
2. Asset currency Our banks be-
ing provided with a large capital,
latter the Canadian and foreign
planl some form OF bank note issue
should be provided according to
sound laws of finance, OF which the
following are believed to be correct
principles:
No government can or should fix
the Quantity OF money, but only its
Quality. Business needs of the
world determines quantity
Permanent issues of bank notes or
other paper displaces metal money.
Thus we have coined some Sc, 900, 0oO,-
600 Of gold, but likely have not half
of it left.
All our greenbacks. silver cirtifi-
Gates, and national bank notes should
he gradually retired. They are rub
bish and not sound money.
An asset currency, similar to the
Canadian, should not be issued by
5000 or 1000 separate banks, but
49,.