The Birmingham age-herald. [volume] (Birmingham, Ala.) 1902-1950, 1911-02-05
ALDR|CH'S MONETARY
PLAN FAR REACHING
Most Comprehensive Financial
Law Since Hamilton
BANKING DEFICIENCIES
AIdrich's Reserve Association Plan Is
Completion of What Alexander
Hamilton Started to do and
Would Remedy Evils
BANKING DEFICIENCIES
BY JoNorHAN WINFIELD

BY JONOTHAN WINFIELD
Washington, February 4.-More far
reaching than Is generally understood Is
the plan of Senator Nelson A. Aldrich,
chairman of the monetary commission, for
an improved method of banking. His plan
| for the rehabilitation of our financial
system was given wide publicity, but It's
| Intricate methods have not been thor
oughly understood.
In brief 1t marks the most profound and
comprehensive attempt at constructive fl
nancIal legislation which this country has
witnessed since the time of Alexander
Hamilton. Hamiltons plan was the first
| step looking toward the unification of
our banking system; through Aldrich's
scheme this 'unification is brought to conf
pletion by combining the reserves, the
discount market, and other functions of
modern banking into one coherent or
ganzation.
| One has only to compare the plans for
| financial reform proposed decade or
| more ago with that proposed by the
chairman of the monetary commission to
realize what a striking enlargement of
view has been achieved by those who are
studying means of improving our bank
| ing system. The best financial thought
| of the nineties, as embodied for instance,
| In the Baltimore PLAN of the American
Bankers association, contented itself
with suggestions for more elastic note
issue. During sthe last three years, how
ever, under the auspices of the national
monetary commission, the needs and
practices of American banking have been
subjected to fresh and far more search
ing analysis than has ever been made be-
fore. Very rarely is it found that the
banking arrangements of a country can
be satisfactorily revised by merely amend
Ing the note issue regulation. The con-
trary has been true, for there exists q
demand for other and far reaching re-
forms.
, According to Assistant Secretary of the
Treasury A. Piatt Andrew, the general
deficiencies in our banking system can be
grouped under six heads First, the lack
of any mechanism of sufficient range and
power to secure. cooperation and uninter-
rupted exchange among the banks; Sec
ond, the rigidity of banking reserve regu-
lations which result from that fact; third,
the lack Of any we'll organized market
for commercial paper; fourth, the absence
of flexibility of our note issue; fifth, the
fntermittant interference of government
finance with business; and sixth, the lack
of uniformity of banking privileges
i Through the proposed Reserve associa-
ton of America, an institution to be own
ed exclusively by the banks, and to deal
exclusively with them, common bond
would be maintained, so that the banks
can be mutually served. The six defici-
encies enumerated would be mimimized.
Through it's preponderantN capital, re-
sources, and its peculiar privileges, it
would exert wide influence over the
activities of all banks,> Banks would clear
their mutual accounts, not only within
the same city but between different
cities, and would furnish an ever ready
and unfailing market for commercial pa
per. With such an institution, solvent
banks would never be forced to suspend,
and domestic exchanges would never
cease to operate.
The association would take over all
bonds held by the banks along with re-
sponsbility for redemption of their out
standing notes, and as these notes are
presented for redemption it would issue
notes of It's own in their stead. The as
ISOLATION Is then to be authorized by Con-
gress to dispose of $50.000600 of these
bonds per year, in addition to Whatever
bonds may be recalled and redeemed by
the government. or may be purchased by
tenn In this way the plan contemplates
the complete retirement of our bond Sc
cured currency. In the meantime the
fluctuating needs of the country in diff
ferent seasons would be provided for by
additional issues, upon payment or
graduated tax. increasing from per cent
for the first 500, 600 600, to per cent to
the fourth.
To provide against the boarding OF
money in the federal treasury, and TO
avoid the inconvenience of the present an
tiouated system, the money that now piles
up in the treasury would be deposited IN
the reserve association. In this way 1t
could be utilized for all emergencies.
During the recent years the national
banking system of the country has sui
fered because of the rigidity of the fed
eral banking laws. State laws are much
freer in regard to the amount of capital
and of reserve required. AS a result state
chartered institutions have Increased fnl
size and number much more rapidly than
national banks. The Aldrich plan COLI
templates the restoration of the national
banking system by allowing certain
classes of national banks to open savings
departments and to lend upon real es-
tate, others to conduct business in foreign
countries, and still others to exercise
functions of trust companies under proper
restrictions.
Inc directorate ID 10 Uc SoioStou Wy
distribution Of voting power among local
associations of banks In different geo.
graphical areas. mo political party could
gain control or influence over the asso-
citation The governor is to be selected
by the President and like the chief JUS
tice of the United States supreme court,
will serve for life. No national or state
legislator could serve as director.
This plan embodies most of the fea-
lures common to the banking system of
other countries, and in which this coun-
try has been lacking, yet no attempt has
been made to copy any one existing sys-
tenn. The association is not unlike the
Reichbank of Germany. the Bank OF
France or the Bank of England, and 1t
has features common to these institu-
tons.
AS regarded by officials Of the treas
ury department, the Reserve association
would meet the financial requirements OF
the country and place our financial sys-
tenn on a much better footing. 1t would
relieve all money stringency, and be able,
through It's wide spread influence to pre-
vent panics or money depressfons in any
section of the country