Graham guardian., 1912-03-29
A CHANGE NEEDED
National Banking System Of
the United States Is Nearly
so years Old

war.
The country has outgrown the
system. (
Its defects have been proved
many times.
1t does not meet the requirements
of modern business.
The currency it provides does not
automatically expand and contract
to meet special or seasonal demands.
1t compels banks, for self pretec-
ton, to hoard reserve money, and
so makes idle the millions that could
be used to advantage. So do most
of our state banking laws.
In times of business stress the
system so operates that the boarding
is increased and banks must refuse
to make loans when loans are most
needed.
There is no reserve agency through
whose operation the resources of
banks can be concentrated to insure
stability and confidence. .
In 1907, with 81, 100, 100000 in gold
catered through out the country,
the bank of England came to our
rescue and the Bank of England had
only $l50.000,000 in gold. The
$3.50, 100000 concentrated, was bet
ter than 81, 100, 100000 scattered.
Our scattered reserve system
breeds panics.
The United States has the great.
est commerce in the world.
1t is the wealthiest country in the
world.
1t has the greatest supply of gold
in the world.
1t has banking resources greater
than those of any other nation.
1t has the best banks.
1t has the worst banking system.
1t is the only country that has
financial panics.
1t is proposed to refrom this bank
ing system by bringing the banks of
the country into cooperative union
without destroying or impairing
banking competition or independ-
ence
This is to be done through the in
corporation of National Reserve
Association.
Such an association would be an
enlarged clearing house with defined
powers.
In the stressful time OF 1907, by
cooperating through their voluntary
clearing house association. the banks
stayed in the panic and restored con-
fdence.
The proposed plan is the same
amplified and nationalized.
The National Reserve Association
would be owned by other banks and
deal only with those other banks
and with the government. I
1t would have capital of not less
than $2OO,0OO,O0O.
There would be Is branch associa-
tions and numerous local associations
would be self-governing. They
would elect the directors of the
branch associations, which would
elect the directors of the National
association, and would therefore con-
troll the whole. 1t would be demo-
cratic system.
The Secretary of the Treasury,
Secretary of Agriculture, Secretary
of Commerce and Labor and the
Comptroller of the Currency would
be exofficio directors of the National
Reserve Association.
The National Reserve Association
would be the fiscal agent Of the gov
ernment, which would have repre-
on the board of directors. |
Shares of the National Reserve
Association would not be transfer
able. They could not be hypothe-
Gated, and they could be owned only
by subscribing banks.
The earnings of the National Re- !
serve Association in excess of per |,
cent would go to the government.
The National Reserve Association ;
would deal only in notes and bills of ,
exchange drawn for agricultural.
industrial and commercial purpose.
The National Reserve Association
would be expressly forbidden to deal
in notes or bills issued or drawn
for the purpose of carrying stocks,
bonds or other investment secur-
ties" .-s
The PERCENTAGE of reserves ma
tional banks must hold against their
demand deposits would be un-
changed. ss Il
Under the new plan, national
banks could loan 80 per cent Of their
heir time deposited on real estate.
The National Reserve Association
would hold in reserve against its de-
nand liabilities so percent in gold
,r lawful money.
Under the new plan, further is
ue of noter by national banks would
md.
The National Reserve association
would be authorized to issue notes,
which would be legal tender. But
When its issue of notes in excess Of (
900, 100000 was covered by an
qual amount of gold or lawful
money in its rnserNns its nntes