Arizona republican., 1912-12-02

of interest has been more pronounc- ed since the panic of 1907. The great banks of New York in the fall of that year, despite their command over the liquid funds of the country, were unable to prevent a money panic in a time of peace and prosperity.
 It was this painful realization of the defenslessness of our banks, when under fire, that accelerated the movement toward powerful banking coalitions. The several groups of big banks controlling institutions in various parts of the country, through stock ownership, or inter-locking di- rectorates, have been greatly stren- gthened in the past four years, not because of any design to form Money Trust" but to the end that the banks could protect themselves in future panics.
 System Favors Stock Speculation
 Our banking system now tends to develop a Money Trust" It is not the fault of the banks, but of the system. Our system forces the re- serve funds of the bank into a few large bank in he central reserve cities; and it then forces these re- serve holding banks to invest their re- sources largely in loans on stock eX- change collateral, instead of in com mercial discounts. The captains of finance, engaged in the flotatiOn of new ventures, are bank customers as borrowers on the securities which these flotations bring into the market. The system. therefore. which forces the reserve holding banks to seek stock exchange loans in preference to commercial loans directly benefits the captains of finance who are pop ularly supposed to be members of the alleged Money Trust"
 -DeculatOrs and other borrowers on stocks and bonds pay the lowest rates for loans in this country. Busi- ness men pay higher rates. In Eu rope, where they have scientific banking systems. the lower rates are paid by business men, the higher by spectators.
 The big banks of the financial centers. holding hundreds of millions l of reserves for thousands of smaller | banks, must keep these reserves liq uid that is, in such shape that they may be convertible into cash at a moments notice, to meet the de- mands of the depOsiting banks for | funds. The big banks cannot invest
 the bulk of their resources in com
 mercial discounts. as is the Europ- | Iax ,,<
 broad liquid market in this coun- try for such discounts. The only big, liquid loan market is the stock l exchange And so the banks must | whether they like it or not. foster | speculation at the expense of busi- | ness.
 Credit Pyramid Built on Gold Our bank reserve system is fancy All money lying in bank vaults is idle money A bank therefore, keep: no more money on hand than it need! l to insure it's ability to meet the eX-
 pected demands of it's depositors fol cash The larger the proportion O money in the resources of a bank, tn
 more must the bank charge it's cust omers for credit, in order to pa,
 for the carrying of this idle none. in it's vaults.
 A sound banking system is bull iup on a foundation of the preciou
 metals-especially gold. The effici
 ency of a banking system is largel
 measured by it's capacity to provid
 with absoulte safety for payments be !. tween the people with a minimum use of the precious metals. Ever country must invest a certain par
 of it's wealth in the machinery 0
 exchange. and it is economy to kee this investment as small as possibl , consistent with the highest effici ency.
 | The structure of credit is as deli . cate as it is wonderful. Enormou
 credits against property are bull , upon a foundation of a very littl
 cash and great deal of public con fidence. Our 16,OOO million dollars C
 bank credits on a foundation of 1,5O
 million dollars cash in the banks , entirely safe so long as there , confidence in the banking syster The credit structure would not col lapse as it did in 1907, if confidenc
 were not shaken.
 Barbaric Struggle for Cash
 The banking system of England , built on a much smaller proportio of cash than is ours, but it does nc 9 periodically collapse, as does our , because the English people hay 6 great confidence in their banking sys tenn. They do not rush madly to the f banks in times of financial stres l as we do, for the purpose of convert l | ing property into gold
 l No banking system can Withstan a mad scramble for gold. Of tf , $125, ,000, 900, 900 of wealth in the Uni
 ed States, only $1,SO0,OO0,O0O Is
 the form of gold coin and bullio
 Any general attempt to conve
 wealth into gold must quickly resu r l in a disastrous collapse of the cred :, machinery. If the railroads turne