The Birmingham age-herald., 1912-12-22

| merchants and impartial as to Amer 1 ican exporters.
 ,. They would correctly present to foreign customers the standing of our
 own export houses
 1. They would furnish capital or credit at the foreign market. ,. They would bring American finan- | cial interests fin touch with foreign
 enterprises. which. if exploited, would create business for the American ex- porter.
 Four Billions of Foreign Trade Our foreign trade today amounts yearly to S4,0OO. .000. .0o0. American goods tnow traverse the world. In some staples we control the foreign supply There
 Are no geographical barriers to our world markets.
 i. But what of our banking system? It lis still circumscribed by the boundar- Hes of the United States. We, the ,wealthiest country in the world, have no world credit. We cannot control our gold supply. We alone of all civilized l countries collapse periodically under
 money pantcs.
 Our banking system is unique. un- like any other country we have inde-
 pendent banks. They have no way of
 cooperation. But complete banking CO., operation is absolutely necessary to control arising panics. other countries have proven this. Our banks have dem-
 onstrated it. by being compelled In
 times of stress to fall back upon their | local clearing house associations. the l only means--but a crude means-of CO.,
 operation that we have. The necessity Of cooperation is q Fundamental bank ling principle. It is not to be argued
 against. But aside from this theoretical | truth, we have the obvious to guide
 us They do not have panics abroad; ;
 we do.
 aftH
 the consequent fixing of a uniform rate
 of discount, to be raised or lowered as | circumstances demand, that we can control the flow of gold to and from this | country. This is Fundamental to inter
 national credit. It is also banking | principle.
 Broadening Business Credit l A second striking peculiarity of our I banking system is that we have no broad discount market such as they have in ! Europe. Our banks are forbidden by flaw to accept business bills for discount l Instead they take. for instance, the brsi- ness mans promissory note. In other words a merchant in this country who . has sold a bill of goods and wishes to realize at once on the sale cannot change this prime evidence of exchange into a credit instrument He gets credit at his ] bank on his paper "promise to pay But 1 this latter instrument, showing no trans | action of goods is confined to the one bank that takes it. The makers ability
 to pay is unknown at other banks So 1 this kind of credit instrument has no 1 circulation powers whatever.
 1 In Europe, on the contrary, the busi- ness bill becomes in itself a credit in- l strument. The bank accepting it stamps 1 fl as a banking instrument It is good
 at any other bank in that country. it may 1 be rediscounted at the central bank Of
 all these banks; or 1t may travel to other l European countries.
 1 Now, aside from the ready elasticity or 1 credit that such a discount and redis- count market gives to business at home, 1 it must be apparent that 1t has also q direct effect upon foreign trade. Today
 our local credit instruments do nor pass
 current in the worlds market As a
 consequence ,the American shipper is l forced to buy foreign exchange. Aside
 from the fact that for this unnecessary | accommodation we pay annual tribute to l Europe of millions of dollars. it must be apparent that the whole period of our | foreign trade expansion has been seri-
 ously hampered by banking accommoda- 1 tions which are necessarily worked upon
 a limited scale and which assuredly have
 no reference to the broader needs of this country.
 The general and further result of tho | workings of our discredited monetary 1 system is the isolation, in a measure, of
 the whole American market.
 1907 Disgrace International enterprises prefer to es- l tablish their headquarters in countries | whose banking systems are upon n more l stable basis. They cannot afford the | risks of such occurrences as our disgrace | ful panic in 1907. with its suspensions of | payment, shortage of accommodation and general financial disturbances. Again, l because We have no uniform system or
 standard for financial transactions. Grch
 as exists abroad, American securities are
 naturally looked upon with doubt by Tor
 eign investors and are listed only with hesitation by foreign exchanges. | Our national monetary commission re- | gently presented plan of reform. The object is to preserve the independence
 and usefulness of our excellent banks, | but also to give them a system based upon economic laws and the needs of
 the nation. The plan proposes the torma- 1 ton of a reserve agency, not in any way 1 a European central bank. but a co-opera- 1 tion association of all our banks The 1 banks individually shall be permitted to | discount bills drawn for agricultural, | commercial and industrial purposes--in | other words prime, day to day business | bills--Just as is now done in Europe The
 reserve agency will hold the bank re-
 serves of all the banks, and use them for
 the rediscount for the individual banks 1 of this commercial paper--this instead Of 1 holding this reserve money idle or send 1 ing it to New York for speculative loans,
 as at present.
 l Here, then, we have what we now lack namely, U perfect elasticity of credit, | @ standard banking instruments which will pass current throughout the world, l and (3) a great united banking resource held ready and sufficient to control and regulate any threatened financial crisis. A Great National Issue The benefits of this reform to the American shipper must be apparent. in the first place he would be spared the losses of our recurrent money panics. 1 do not know what percentage of the hun dreds of millions lost by American bnsi- ness houses in the panic of 1907 fell upon the export and import trade. But in the aggregate they must have been
 very great Every shipper will recall clearly enough his individual losses, and he is cognizant, too. of the dull market that followed for sevearl years this finan- cial upheayal.
 Seconly, a standardized business
 paper would give to the American fner- chant the very same banking accomino- datons he now seeks abroad In selling goods, for instance, to a buyer in Benos Ayres, he would draw at specified num-
 Der of days upon his correspondent in
 that city. He could have this draft dis counted at his home bank, assuming ob- ligation for the amount of the loan only in case of default by the buyer In Buenos Ayres.