The San Francisco call., 1910-02-12

ARGUMENT AGAINST
CENTRAL BANK PLAN
Federal Official Suggests Meth
cd for Government Assist
anCe TO Bankers

The following is a synopsis Of
paper read last night before the Sa
francisco chapter. American Institut
7f Banking, by W. c. RaIston. assis,
tat treasurer OF the United States.
Is a central bank necessary
venture To answer No kS,-n-
aieS ~ central bank have pub
-IS-el their views quite extensively
WAich- no doubt, are familiar 10
you az Many are in favor of the
'N-e otSnment OF 4 central bank
under the dual control Of the treas
NEE department and the banks. but
OBJECT however. 10 the establish
Aeni OF branch banks. believing
taai The latter would seriously in
t. leiLete win tne locsl banks. This
proposed ceneral bank to be copied
% a. certain extent after the pat
tern or the Bank Of France and the
lmperlal Bank Of Germany.
4 RGJ MENT AGAINST PLAN
one of the ablest arguments
against the central bank plan has
reen made by Victor Morawetz Of
New York city, formerly chairman
~ the executive committee of the
Atcnison. Topeka and Santa Fe
lallrOad company. He says in part:
in order 10 establish in the United
49, ~ e2aAAA 81 0r Il n on lAe EURO
pean plan II would be necessary to
create bank Of colossal ma gni-
iuae- he resources OF the central
Ink would be drawn in large part
from The existing banks and trust
companies. They could not be ere
ated our Of nothing. A vital ques-
zion 10 be determined before Gre
atng such a bank is. How would
he resources Of the central bank
De- useo2 Would the bank have
power TO discriminate among bor-
lowers making loans and discounts.
or would il be obliged to treat all
ali ker Would the bank have dis
dictionary power, by loans or by
rediscount OF paper, TO help par
1EculaT banks. or the banks in par
tirular localities, or would il be
obliged TO treat all banks and all
localities upon precisely similar
terms without discrimination or
UarIialitH?
The south would want the bank
Utlat is. the central bank to fur
uish credit 10 enable the planters
30 carry their cotton and tobacco
So as 10 force higher prices. The
west would want the bank to use
irs resources TO enable the farmers
90 raise the price of corn and
wheat. The large money centers
would want the bank 10 help bank
rrs and brokers TO carry stocks and
aonls when speculation runs high
sr the stock exchanges Every re-
fuSaI Of the central bank 10 extend
credit would be likely TO result in
larges OF favoritism or Of inl-
proper Influences or Of selfish mo-
-ONTROL OF THE BANK
Another question of vital import
aure is Who would control the
.entra bank with its vast patron
Ee and power2 The practical con-
troll OF such 4 bank. as in the case
of every successful institution,
probably would soon pass into the
hands Of one strong man or very
small number of strong men Al
though today the best man or set
Of men might be in control, there
would always be danger that the
control might pass into undesir-
able hands
OPINIONS OF BANNERS
With the object OF ascertaining
the opinions Of the officers Of the
financial institutions on the Pacific
coast. a circular letter was ad-
dressed by me to many OF them
asking for their candid opinions
and views upon the central bank
plan. in the majority of cases
where expressions OF opinion were
made ii appears that the writers
are in favor Of a central hank, but
il nearly every instance that state
n1eur Is accompanied with the re-
The central bank 10 be in the hands
Of the government, and 10 have II
SO constituted that ii would be I'M
possible for its control 10 fall into
The hands of the money powers Of
In this last sentence is ex-
pressed the sentiment OF nearly
every one who has given the ques-
lion much serious thought The
problem To be solved - TO make the
currency Of the country more elias
tie In times of stress and TO allow
banks in all sections OF this coun-
Try TO advance large sums of
money when necessary. during
crop moving periods
40 one seems Yet to have sUg-
gested the method as TO how a CEN
fral bank can assist other banks
in different sections of the United
States by advancing money on the
securities held by these banks. and
upon which they have loaned their
lepositors money. without having
"a branch central bank in each sec
1iOn- While many are in favor of
IL central bank they object TO
branch banks.
ASSISTANCE
have the following ideas TO
present for consideration. not only
10 the bankers OF san Francisco.
but 20 the bankers of the United
States
NJ nFN TIC idllE RL ItVt AOOh
place the banks in the leading cit
les Of the United States awakened
To the realization Of the fact that
they were unable to have returned
10 them the money which they had
placed in the reserve centerS.
Being compelled TO act quickly, the
various clearing house assOcia-
tiOns met and each appointed a
committee with the fun power TO
decide on the market value Of Sc
curities presented to il by the va
riOus banks belonging to each as
sOciation, and further instructed
this committee TO advance clearing
house certificates to the extent Of
80 or SO per cent OF the market
value OF these securities, request
ing the banks and the public to
accept said certificates in lieu Of
lawful money Of. the United States
That this method adopted by the
clearing house associations was q
great success. every one knows:
that il permitted business to con-
tinue in its regular way, we fully
remember. We all know that here
in san Francisco at that time in
the midst of our endeaVor to re-
build the city, and with conditions
existing by which a financial panic
would more affect as than any
other city in the United States,
bese clearing house certificates
were accepted without a murmur,
SLOWING the absolute confidence
the people had in their financial
institutions as represented by the
clearing house associations.