The Washington herald., 1912-01-08
MONETARY REPORT
OUTLINES RESERVE
Would Take Banking System
Out OF Politics.

The National Monetary Cofnnisslohei
report. representing four years labor IN
studying the financial systems or this and
the principal countries OF Europe, out
lines a plan FOO the establishment OF
national reserve association along the
lines that have alreaay been set forth
In tehse dispatches:
The commission In its report which VIII
be sent to Congress to-day makes some
interesting comment, however. on the
purposes of the system, ITS probable ef-
fects. and on the question OF control
In regard TO the fear that the proposed
new banking system might become IN
| volved in politics, the commission says:
| gThe fear has been expressed that the
selection Of the governor by the Presi-
dent and the provisions making the sec
retary OF the Treasury, the Secretary OF
lAgriculture, the Secretary OF commerce
and Labor. and the Comptroller OF the
Currency ex-oficiO members OF the board
Of directors OF the reserve association
might lead TO an attempt TO control the
organization for political purposes
We believe that the participation OF
| these officials ia the management OF the
I Institution to the limited extent pre-
| scribed is necessary TO secure a proper
recognition OF the vital interests which
the public has in the management OF the
association II Is a corporation with
| private stockholders. but Il is proposed
TO make Il the principal fiscal agent OF
the United States and the depository OF
its funds
| in providing for the creation for spe-
citic purposes Of fhis new representative
Organization. II has been the aim of the
Monetary Commission TO follow in its
/ distribution of powers and control our
/ governmental structure and. to co-ordi-
nate independent local and district or
gAnizatiOns through an effective central
/ agency for mutual cooperation. In this
respect. well as in its functions. the
National Reserve Association differs
radically from the conception Of CEN
trail bank on European lines. Its sources
! OF authority are democratic and not au-
tOcratic. Instead OF overshadUwing
banks. Il Is their representative: its con-
| trolling forces are Individual banks that
( impose policies upon and grant powers to
its managers.
Exercise of Federal Power.
The National Reserve Association is
made the channel through which local
1 banking institutions exercise their fed
! Grated powers. II is. in effect. an evolu-
\ tiOn OF the clearing house idea, extended
to include an effective central organiza-
| tion. IL Is not bank but a cooperative
union Of all the banks of the country.
/ with very limited and clearly defined
/ functions.
! In times OF trouble It takes individual
banks from a condition Of helpless isO-
Iation and dependence and places them
I in a position where their integrity and
Independence Is assured through an un-
] falling source Of support. II is outside
| Of and supplemental to the existing sys-
| tenn and not competitor in any sense
/ with existing banks. II provides for an
! equality Of privileges and advantages TO
| all banks. great and small, wherever To-
| Gated. Its dominating principle Is CO.
| operation and not Capitalization. Its /
| organization is Of form and character
! that will effectually prevent the control
] Of its operations by political or other
intereFts. local or national
| Fog obvious reasons the National Re-
! serve ASSOCIATION is required TO keep its
| assets in liquid form and its rediscOunts
discounts, and investments are confined
to short-tfme papS= or government secur-
titles
The NatioRaI Reserve Associa tion is
given ample power TO protect its own re-
| serves in order that il may be able at
all times To exercise its most important
| functiOn-that of sustaining the CONNER
cial and public credit Of the country
Eliminate Wall street.
On the question Of control, the report
says:
J In preparing the bill to establish thsSI
/ National Reserve Association, the COM
mission has been impressed with the ne
cessity OF inserting provisions that would
prevent beyond question the possibility Of
| its control by any corporation or COM
binatiOn OF corpratiOns, banks. or other |
| wise, by any individual or combination
Of individuals for selfish OF sinister pur-
poses No provision OF the bill to recon-
struct our monetary system is Of more |
vital Importance than this. To-day the |
financial interests Of the whole country !
depend, in times Of trouble. upon what is |
pOpularly known as Wall street.
In the provisions of the bill for the !
election Of directors Of the National Re
serve Association We provide for thirty |
nine directors, two TO be elected by each |
of the fifteen districts defined in the bill |
and nine additional directors to be elected |
! by representatives of stock holdings in |
| the association. We propose to limit the |
| representation Of any one district to !
three out of the thirty-nfne directors |
elected, and under this plan every dis |
] trict will have two and none can have |
more than three directors.
No Local Domination.
In order to effect a combination to |
secure a majority of the directors, a |
NSAAAbAAdNAOh VI NABhA hASAAASAS "ONAu bc |
necessary, and with New England hav-
4 ing one, the Eastern States two. and |
| the Middle West four, one other district |
would be necessary, showing that no |
combination OF Eastern and Middle West |
with other interests could be made which |
did not include more than 50 per cent of |
| the banking power Of the country.
We think that this statement must |
Of itself show conclusively that there can |
be no local domination-no domination OF |
selfish interests in this organization, and |
that fear of possible Wall street control |
can have no substantial foundation
On the subject OF expansion OF credit |
the report says:
''The proposal to Great National Re
serve Association has been criticized on /
the ground that its enactment would lead |
| to an undue expansion of credit and a |
| dangerous imitation of currency. We |
have already stated our reasons for be- I
| Iieving that this contention as applied |
| to note issues has no foundation. 1t is /
| true that We propose to create new IN |
strumentalities and provide new facilities |
| for an expansion Of credit whenever this /
! is necessary for the welfare OF our tn
dustries, or 70 prevent panics or avert |
dangerous monetary disturbances. We
believe that credit properly organized and
managed is one of the most potent fac
tors in the development of communities /
and nations. The broad question we 1
have to consider is whether the facilities