The sun., 1909-11-29
CENTRAL BANKS A NECESSITY
IN EUROPEAN COUNTRIES,
LOUIS SCHWARZ SAYS.
they Are Not csAIy Not Cempstitors Of |
Private Bsnks. but by Their AbIl-
Ity GO Mobilize Credit ana Transfer |
Money IBID Them valuable Service. |

WASHINGTON. Nov. 2s.-Louis Schwarz.
publisher OF FinGns and Hdndets Rerus
Of Vienna and Berlin. who came here with
letters OF Introduction from the Ameri-
can Embassy in Vienna to officials in
Washington. has had conversations in
the last few days with Secretary Nagel
OF the Department OF Commerce and La
Dor. Assistant Secretary Of State Will
son, Assistant Secretary OF the Treasury
Norton, Senator Aldrich. Representative
Vreeland. Prof. A. Piatt Andrew. Direc-
tor Of the Mint and other prominent off,
cials. Mr.. Schwarz will be presented.
probably next Wednesday. by Representa-
tive Vreeland to President Taft, to whom
he will give some explanations about
the organization OF the postal savings
banks In some Of the European countries.
In his conversations with Senator Al
drich and Representative Vreeland Mr..
| Schwarz told them OF the roganization
OF the Austro- Hungarian Central Bank
and agreed to furnish the National None
tary Commission with the details Of the
recent inquiry held by the Hungarian
Government In regard to the question OF
creating Hungarian central bank.
As to the inquiries Of the National
Monetary Commission In regard to the
banking and currency systems in Europe.
MIR. Schwarx said that MIR. Aldrich pointed
cut that thetnterviews about these matters
which are to be published soon will show
that the European financial authorities
consider the central bank q necessity OF
the commercial and industrial life Of their
countries.
Mr.. Sohwarz said also that the central
banks in Europe. by their mighty pro-
lection OF the national industry and
commerce through the possibility OF
mobilizing the individual credit by dis
counting bills OF exchange. were not
only not competitors OF the existing pri-
vate banking institutions but by their
vast organizations and ability to mobi-
lire credit and transfer money from one
place TO the other did valuable service to
the private banking institutions them
selves. which were in no way hindered
by the central banks from doing q large
and profitable domestic and foreign
business.
Representative vreeland. chairman OF
the House Committee on Banking and
Currency and vice-chairman OF the
monetary commi ssion. explained to Mr..
Schwsrz his views as to the plan OF estab-
fishing a central bank.
Mr. Schwarz said that when Mr. vree-
land asked him to point out his own
views with reference to the creating OF
central bank in this country he made
the response:
AS to my opinion. the bulk OF the whole
question lies in the judiciary foundation
OF promlssory notes. There 10 no ques-
tion that the system OF a central bank
allowing to mobilize values bought by
the merchants OF this country ON credit
through discountinR promissory notes,
that is to say. commercial bills on a larger
scale. by the possibility Of those notes
being rsdiscounted by central bank.
could easily lead to the contrary effect
OF the aim OF u central bank II the judi
ciaTy' qualities OF the promissory notes
would remain unaltered, az they are now.
This strength OF the central banks In
the European countries. the reservoirs
Of credit OF the domestic industry and COM
neree, lies to a great extent in the fact
that the big portfolios Of bills OF exchange
lpromissory notes)of our EuropeanIcentra
banks. are not only printed paper with
more or less Trustworthy signatures. but
are In the overwhelming ma jority, repre-
sentinE in fact real values, real capital
real merchandise and property OF a valua-
ble kind, which could be attached any
moment in case Of the failing OF the
drawee, the drawer or any other firm or
person who backed the bill of exchange
without any suit in court.
The bill of exchange in our countries
Ia an ackno wledged unobjectionable debt
The bills can be sued upon in case Of non-
payment. but the owner OF n bill can
attach as security any moment the prop
erty OF the failing party before ha wing
yet gotten a judiciary judgment This
to the bills Of exchange in our countries
and to the portfolios OF our central banks
q quality Of undeniable and undoubta-
BILE intrinsic value. easily convertible In
case Of need into cash q { any time, whether
In the respective country or even by
rediscounting such portfolios in other
countries well founded commercial
paper is one Of the most important bases
OF the industrial and commercial credit
in our countries.
-If the judiciary form and quality
your promissory notes would indeed
remain unaltered in case OF the estab-
fishing OF central bank would be
rather OF the opinion that their nego-
counted would be lessened by lhe present
judicial form; or II, Notwithstanding
they would form the bulk Of the redis
counting business Of the central hank,
am afraind that their being easily
rediscounted in the present unalthsred
judicial form would probably lead 10
an undesired rapid expansion OF credit
and production and would very likely
have the effect OF a monetary stress and
stringenoy-an effect you will just avoid
by the establishing Of central bank.
whether you would be able to put
through q unification OF the different
laws in this country in regard to the
judiciary qualities OF the promissory
notes, I as a foreigner cannot myself
form an opinion on that question. As
understand even you consider it very
difficult to educate the people for the idea
Of a central bank itself. and the public
opinion OF this country would perhaps
much easier understand the necessity Of a
central bank IL the broad mass OF the
people could be decidedly sure that no
monopoly might be- brought by one or tho
other big financial concerns or group OF
concerns into the central bank organiza-
tion, which in fact could work only then
to the common welfare and well under
stood prosperity Of this country, IL m0nop-
olizing the credit system would from the
very beginning Of such q central organiIa-
tion be explicitly and absolutely excluded.
Il would suggest that even before going
into the details of establishing a central
bank preparatory steps should be taken
rs to developing the domestic money
clearance. eventually by a postal savings
bank, and furthermore as TO the develop