The San Francisco call., 1909-12-04
REASONS ARE GIVEN
FOR CENTRAL BANK
Lack of Elasticity in Currency
System Attributed TO Preiu-
dice and Fundamental Error
By FRANK B. ANDERSON,
President Bank of California

The great basic trouble with this
country from a financial standpoint is
its currency system; it has no elasticity
and it fails when the need is most i'm
perative. We are working under ira
ditions which have been outgrown and
which to a great extent are based upon
prejudice and fundamental error. Our
banks have no means of relieving
themselves when the demands of busi-
ness and for crop moving strain their
resources. 1t makes no difference how
legitimate the demands may be, or how
great the resources of the banks, there
is but one course open when the strain
course tends to paralyze commerce. to
frighten the public and to intensity the
trouble.
CENTRAL BANK PLANS
We have had many committees and
commissions appointed to solve the
question of currency reform. and the
American bankers association has
wrestled with the subject for several
years.
The result of most of the suggestions
is that, historically and scientifically
the best solution is in the establish
ment of central bank controlled by
the government). with branches in the
main financial centers. Any other So
luton is simply adding one more patch
to a system that is all patches.
Such a bank need not interfere with
the institutions already established; it
would be bank for banks and not for
dealings with the public: it's capital
stock should be subscribed by the
banks of the country: it should have
two boards of directors. one chosen by
the government and one by the stock
holders, the government directors con-
sisting of leading officials of the treas
ury department
AID IN MOVING CROPS
Let these two boards select the ac-
tive officers of the bank and cooperate
in its mana cement, turn over all of the
government deposits to this bank and
let the government check against its
balances just as any individual does.
Confine its loans. if you will. to bills
receivable based upon products on their
way to market; we can then move the
crops, and under our present system il
is getting more and more difficult to
do so.
We now have about $4,000 banks in
this country. each with its little pile of
gold and currency locked up-an inert
mass-held out of circulation and add
ed TO in time of panic according to the
variety Of scare which each executive
officer may develop.
Under central bank system these
scattered piles of gold. representing
the reserves of the banks. to a great
extent would be kept with the central
bank. which would have the power to
issue notes against them
PROBLEM OF BALANCES
Even the problems of balances be-
tween banks could be handled in the
reserve cities by having the clearings
made through the central banks
branches, adjustments being made by
debit and credit rather than by the ex-
change of gold.
upon the relief that would come from
the release of this great amount of cir
culating medium. which is now locked
up and idle.
Give US an intelligent system that
will place the locked up money in the
hands of a great central Institution,
with the power to issue notes as busi-
ness and commerce demand them, and
the problem will be solved.
We do not want more money. We
want to get rid of some that we have,
especially the cheap varieties that are
injected into our system, and particu-
Iarly the emergency variety which will
get into our circulation and encourage
imitation of credits, speculation and ex-
travagance. while insidiously working
to drive out the real money that we
Hossess.