The Detroit times., 1912-04-27
SAYS MONEY TRUST DANGER
WOULD Be ABOLISHED BY
UNITED RESERVE ASSN
Prof. J.Laurence Laughlin Com
mends Modified Aldrieh Plan
Before Commerce Board
GOOD FOR SMALL BANKS
Would Free Them From Feudal
Dependence on Large City
Institutions
GOOD FOR SMALL BANKS

Prof j. Laurence Laughlin, OF the
University Of Chicago. spoke before
the members OF the Board OF Com
MERGE at luncheon in the Hotel Cad
lilac, Friday noon. There were about
600 members present. James Inglis,
former president OF the Board OF Com
meroe, introduced the speaker, who
announced his subject as Banking
reform"
Prof Laughlin took up the United
Reserve association plan, a modifica
ton OF the Aldrich plan, which was
proposed in the report OF the national
monetary commission. and is now be-
fore congress. He spoke in part as
follows:
lin looking at the defects OF the
existing currency system, the general
discussion must center about the In
elasticity OF our note issues, and the
inelasticity of our credit organize
ton.
Our silver circulation is rigidly
fxed: our greenbacks have a rigid
limit at $346,O00.000 and national
bank notes secured by government
bonds are inelastic, changing only ac-
cording TO the unrelated accidents OF
government credit, price OF bonds and
the changing market rate OF dis
count. The only elastic forms of
money are gold and checks drawn
upon deposits.
important, however, as is the need
of an elastic note issue, there Is the
greater need OF elasticity in our credit
system. Under our present system or
reserves there Is no elasticity or
credit; lending can go on only SO
long as there are surplus reserves.
When the legal percentage OF reserves
TO deposits Is reached. lending is sud
denly stopped, business is held up,
loans are called. no new loans can
be made; then every man tries 10 save
himself. no matter what happens TO
others, and we have panic conditions
created not by bad business or bad
banking, but by bad system.
The proposed reform of United
Reserve association will wipe out the
rightly of our reserve system. The
plan is primarily in the interest OF
the borrower rather than OF the lend
ing bank. Our present system drives
each institution on the slightest
alarm to grasp at lawful money and
fill I'D its cash reserves. The alter
native is TO reduce its loans. The
bank under our present system, to
protect itself, is obliged TO sacrifice
its customers by calling in loans or
refusing necessary loans.
Would Provide Uniform Discounts.
Moreover, the United Reserve as
ISOLATION would provide uniform
rate of discount for all banks, large
and small, in whatever section OF the
country they may be situated. that is,
a sparsely settled part Of the coun-
try where capital is scarce would get
the same rate of discount TO its banks
as would be obtained In New York
city"
Prof. Laughlin then went on TO
explain why IL was inadvisable for
the government to increase the vol
ume OF currency when required by
the issue OF treasury notes.
Government issues are always
costly to the people because non-ex-
pert management is always expen-
sive," he said, and politics always
obtrudes into government manage
ment. To maintain reserves for
.S246,6S1, ole greenbscks between
1878 and 1896 we actually increased
our public debt $357,Sl5,400. on
which the new charge to the tax
payer is $15,632.6l6. Moreover. by
the endless chain act of 1878 we
actually redeemed more than $40T,-
600, 900 OF greenbacks, more than the
total original issue, and yet we have
the whole amount Of indebtedness
still outstanding. 1t sounds silly, but
IL is literally true"
The speaker explained why the
control of the power To issue notes
did not involve a control of the price
II money, and that the government
could not provide an elastic credit
system even II IL did issue notes in
Times of emergency.
Prof. Laughlin went on TO discuss
the money trust as follows:
isThere is a widely spread fear OF