Evening times-Republican. [volume] (Marshalltown, Iowa) 1890-1923, 1912-02-23
FarweII on the Money Trust.

JOlH v. flFWell. OF AnlCdgO, pTeSl-
! dent of the National Citizens League
! for the Promotion of Sound Banking
System, who has recently been investi-
ga ting conditions in Washington, gave
! out an interview in which he urged
that an unprejudiced, businesslike in
vestigation of the so-called money
trust" by the banking and currency
committee of the house of representa-
| tives ought to be welcomed by all bank
ers and business men.
while l agree with George NJ. Rey
nolds that there is no such thing as
money trust" said Mr.. Farwell
/ nevertheless our banking system has
caused a Capitalization of money and
credit in few great banks. This cen
tralization is bound to become greater
and greater, so long as we neglect to
reform our banking system.
IF the enormous deposits by country
banks in New York were used solely
for the promotion OF agriculture. indus
try and commerce, the west and the
south would have very little fault to
find with the system. But the New
York banks are forced. because of the
weakness of our banking system. to In
vest hundreds of millions of dollars in
stock exchange loans. Money piles up
in New York banks periodically: 1t is
loaned to Wall street spectators at
very low rates of interest-sometimes
as low as l per cent: this cheap money
stimulates the purchase OF securities on
margin, initiates prices far beyond in
trinsic values, and periodically brings
on stock market panic when the in
fated bubble collapses.
Tt is not the fault of the banks that
so much Of the country's reserve mon
ey is used in the stock market. The
banks holding the ultimate reserves
must keep their investments In very
liquid form, in order that they may
always be able to respond to the de-
manG of the rest Of the country for
cash. The call loan market on the
stock exchange is the only big market
now available for the use of the re-
serves.
The big banks abroad do not thus
invest the bulk Of their funds in loans
on speculative securities. The bank
ing systems Of Europe have establish
ed very broad markets for commercial
PAPER arising out of the agricultural.
industrial and commercial transactions
Of the people. Commercial paper
abroad is more sought after as bank
investment than government bonds.
I'VE can provide such a market for
our American banks by a revision of
our banking laws. It is such a provis
ion as is now proposed by the national
monetary commission.
When we establish modern dis
count market-that is. market for
commercial bills OF exchange-tlren the
banks will divert hundreds of millions
Of their funds from the stock market
to business.
1T is proposed that the national re-
serve association nationalize American
commercial paper by freely purchasing
from home banks paper arising out Of
comm ercial transactions giving them
either its circulating notes OF book
credits.
I'm the panic Of 1907 the banks had
resources far in excess of their liabili-
ties, but they had TO stop paying cash
and making business loans, because
they could not replenish their reserves
by the sale of their best assets-com
mercial paper. Could the banks have
rediscounted their prime commercial
paper there would have been no money
panic. Europe long ago freed itself
from money panics by establishing
broad discount markets and providing
for the rediscount of commercial bills
with central institutions.
"Our system Of pouring money into
the stock market results periodically
In a huge imitation Of security prices.
But there can be no imitation Of the
prices OF good commercial paper. In q
boom market 10000 worth Of railway
shares may be inflated to market
price of $4,000. But, remember, a
$4,000 ninety-day prime commercial
bill can not be inflated in price. How
much safer as a basis for our nation
al credits!
81 believe that under the leadership
Of the conservative democrats, who are
now in the saddle in the house Of rep
resentatives. the investigation of none
tary conditions in this country will in
evitably result in countrywide de-
mand for a reform Of our banking and
currency laws. along the fundamental
lines advocated by the National Citi-
zens' League"
He Got Even.
! ~