Evening star. [volume] (Washington, D.C.) 1854-1972, 1912-12-15
SOUND BANKING SYSTEM
VITAL NEED OF NATION

stock exchange. The result Of this is
that there has developed a dangerous
system OF 1oaning q large part Of the
surplus cash reserve of the nation on
the speculative exchanges.
Many good Americans believe that the
New York banks encourage speculation
from choice. This is not true. The New
York banks loan the country's money te
system. they have no other means OF
putting the money at work. The practice
Is most dangerous and finds q parallel ir
no other country. In Europe commercial
paper is made the chief basis Of loans
and the speculative exchanges play a
comparatively small part in the loan mar.
ket In reforming our banking system
we must create a broad market for COM
merctal paper, as they have done in
Europe, in order that the surplus money
Of the country will go first to business
and afterward to speculation.
Money to Move the Crops.
Despite the fact that nine-tenths of
our business is done with credit in
struments. the problem of providing for
actual currency is of importance. Every
year at harvest time the west and south
need something like $200,000,000 in ac-
tua1 money to move the crops In the
agricultural sections many people do not
have bank accounts. When the corn
and wheat and cotton are sold by the
farmers. they must have cash. This
seasonal demand for cash in the west
and south draws down the cash in bank
vaults. and especially in New York.
where the surplus cash reserves are
carried between the harvests.
In q year Of bumper crops an unusu-
shipped to the farmers. It therefore hap
pens not infrequently that the demands
for money to move the crops come just
at a time when the banks Of the country,
and especially those Of New York. have
already made heavy loans to business
called SO that the cash can be sent west
and south. In recent years we have seen
the unusual spectacle Of small panic
in Wall street and high rates for bust
1t surely is a bad currency system that
breeds panic out Of prosperity. 1t IL
therefore essential In reforming our bank
ing and currency system that we pro-
vide an elastic currency-a currency that
will expand and contract to meet the de-
mands Of commerce. The periodic draw
ing down Of bank reserves and the enor-
nous shipment of money to the west and
south is a relic Of primitive banking.
People Of all shades Of opinion are agreed
vide for an automatic expansion and
contraction of. the currency.
A great defect in our banking system Is
our present dependence on Europe Tor
the financing or our 10re18n tId00. VIC
are now doing $4,000, OOO 600 trade q year
with foreign nations. but through lack OF
modern banking facilities We are COM
PEELED to pay Europe millions OF dollars
tribute for financing payments for goods
shipped to and from our shores. Over
looking the mere question Of the money
involved in this tribute to European
banks. we ought, as q matter OF national
pride, to provide our banks with means
Of financing our own foreign commerce.
That q reform Of our banking and cur
rency laws is imperatively needed is not
to be questioned. The only obstacle to
this reform is the fear on the part of
many good Americans that the proposed
cooperative association might be mis-
used by politicians or by the moneyed in
terests. In the plan Of the national none
tary commission extraordinary efforts
seem to have been made to prevent such
misuse of the banking power. I believe
that Congress will so shape the plan that
the people Of the country will see that
the cooperative association Is founded
on sound democratic principles doubly
guarded against low politics and high
finance.
This reform touches everybody's well
fare. We have in this country $4,000. w
bank depositors. every one Of whom has
personal interest In insurance against
panics, and we have 30,O0O,O COO workers.
every one Of whom has q personal inter-
est in the sound credit system.