The Washington herald., 1911-07-10
GERMANS SCORE
AMERICAN BANKS
Legislation Is Based on Mis-
taken Policy.

That banking legislation In the United
States has been based upon the mistaken
policy Of putting security of assets in the
place of first Importance at the expense
Of fiuidity is one of the many interest
ing observations to be found in q new
volume Just published by the National
Monetary Commission. 1t is an English
translation OF the stenographic notes Of
the proceedings Of the German Monetary
Commission.
In the discussion Of resources It was
pointed out that It was only necessary
to secure that degree of fiuidity demand
ed by q banks position in a national
system or by the character Of the times.
Herr Stroll, holding that the central
bank was one of the most reliable means
Of averting all crises. declared:
"As far as I can make out, no bank
has ever been ruined through lack OF
cash. It has always been the rotten as
sets. the worthless debtors, and the loss
of credit
The German commission consisted of
twenty-five members, chosen because OF
their prominence as economists, practical
bankers. or men Of affairs Herr Haven
stein, president of the Reichsbank. was
chairman; Prof. Adolph Wagner, Of Ber-
lin University, and W. Lexis, Of the Uni
versity OF Gottingen; Arthur Fischel. Of
Mendelssohn & Co.. and A. Schmidt, of
the Krupp Company, were representative
members Of the commission. The discus
sions OF the commission were general in
nature and had reference to classes of
German banks and credit institutions
from the land mortgage associations, sg-
ricultural Improvement banks, and CO.
operative credit societies, to the eight
great Joint stock banks and the Reichs-
bank.
Against Government Interf(Fence.
OF the suggestions made the one con-
cerning the establishment OF a govern
ment bureau Of supervision was debated
at greatest length. The commission
seemed to be strongly against govern
ment interference OF any other sort. A
number of the commissioners (among
them were Mommsen, Gontard. Weber.
Schlnckel, Lexis, and Riesser) appeared
to be opposed to any governmental inter-
ference whatsoever until Herr Roland
Lucke, a landed proprietor, suggested the
appointment OF q permanent bank COM
mission. This commission was to be
made up OF practical bankers. business
men, and economists. It's functions were
to be merely advisory. The commission
was to keep informed OF the current
banking practice and the general hnan'
cial condition Of the country and to offel
suggestions to the various financial in,
stitutions whenever q change ,pf banking
procedure was thought advisable. 1t was
thought that suggestions offered TO the
president OF the ReIchsbank could bt
handed on to the other banking institu
tions, and that the suggestions would
be carried out because of the nature Of
their source. The proposition that q
permanent advisory commission be ap'
pointed by the government was received
with favor by the majority of the banl
inquiry commission. Those members op.
posed to a bureau holding mandatory
powers as we'll as those favoring such
bureau united In favor Of the PROPOSE
ton.
Reserves Are Productive.
That 1t is a fallacy to regard bank re-
serves as unproductive was clearly shown
by Prof. Wagner. Nothing could be