Evening journal., 1911-11-07
NATION NEEDS
BANK REFORM
Mint Director Says Reserve
Association Must Not Pro-
mote Stock Speculation
BUSINESS PAPER
ONLY BASIS FOR LOANS

WASHINGTON. ID. c., Nov. IL
George q. Roberts, Director of the
Mint. says that the country's banking
system must be reformed in the in
terest OF speculation He disagrees
with James j. Hill that the National
Reserve Association. the proposed
plan OF reform, should accept Stock
Exchange collateral as security for
loans, and says the Association should
only loan on commercial paper aris-
ing out of day-to-day trade transac-
tions.
Il think the organization of the Ma
tional Citizens League is one of the
most promising signs of the times
looking to banking and currency re-
form, says Mr.. Roberts.
"This movement got its first impetus
from the panic Of 1907. Everybody
knew while that panic was on that
something was wrong with our bank
ing system. There are two things
that are fundamental in banking; the
banks should be always ready to meet
their cash obligations on demand and
they should be always ready TO loan
for the legitimate current needs OF
their customers at some reasonable
rate. In view Of our experience in
past those two conditions may seem
TO make very large contract, but IN
every other important country of the
world those conditions are met. There
is plenty of proof thaa properly or
ganized banking system can meet
them
There is an end to bank runs
whenever it is known that the indi-
vidual banks will be adequately sup
ported. and the amount Of credit re-
auired TO handle the current exchanges
can always be supplied. OF course,
no banking system can undertake to
furnish all the credit that may be
wanted for speculation or extravagant
construction, but il can and should
furnish all that.is needed to move the
crops and make the current exchanges
Of trade.
Our system broke down in 1907
when great railway systems could not
get money for their pay rolls; the
movement Of such staples as cotton
and wheat came to a standstil and
hundreds of thousands Of wage-earn-
ers were thrown out OF employment
Every consideration demands that
the country be safeguarded against a
repetition of this experience. IL Is
more than a bankers problem OF
merchants problem; it involves stable
markets for the farmer and steadi
emplovment for the wage-earner. 1
is more important to wage-earnefi
than any other single question, mor'
important to farmers than a year,
crop. more important to all classe
than any disposition of the tarih o
trust questions can possibly be.
is now up for action and ought 70 hav
right-of7way over every other issu
until it is settled by a comprehensiV
and final treatment.
"There is no wide disagreement
among the friends Of banking reform
II is agreed that our system lack
unity and cohesion and reserve pow
ers. There is general confidence tha
orr banks are solvent. but no conf
dence IN a crisis that they will be abl
10 maintain cash payments or gran
needed accommodations. The bank
feel their own helplessness, and thei
struggle to keep up their cash re
serves and reduce their loans do eve
more TO demoralize the situation tina
the actions of the public.
"What is wanted is some responsible
organization. with reserve resource
which command complete confidence
that will stand back of the individua
banks and support them when help
needed by taking over some of thei
assets and advancing cash thereon
Experience elsewhere has demon
strated that the demands upon sue
an institution can be effectually coI
trolled by raising the discount rat
That is the general principle 10 whic
the rest of the world has come, and
IS now commonly accepted in tn
country. The only disagreement
seem to be over the details of tn
organization.
Il see no reasC to fear that sue
an Organization will be controlled
the interest Of locality or cliqu
The controlling board Will be chose
from all sections of the country, vii
proper checks and safeguards, but u
most important safeguard is a regul
ton as TO the character Of paper tn
shall be handled.
'sI see that Mr.. Hill argues tn
good bonds should be accepted
collateral No doubt the bonds
good railway and industrial corpo
ations are safe security for loar
hut fnHIn Is lIh1AiNolA@ hF hhAA' ~ -
suppIy, and the only real danger tn
exists that the organization might
used for stock operations or prom
tion schemes. turks in the use of II
n class of collateral
II "Warehouse receipts for wheat al
cotton are totally different. The su
plv of these commodities is seld1
much beyond years consumpti'
the stuff must be sold and the loa
must be paid. If the reserve assoc
tion is limited to commercial par
arising from legitimate husinf
II transactions and all offerings Of II
kind Of paper are taken over on III
form terms the association will
kept I'm perfectly LIQUID condition a
there will be no favoritism. ~
licity. together with a strict regu
tion Of the class Of paper to
handled. will abundantly safegus