The Birmingham age-herald., 1912-12-07

s 1913 of more than $5,OO0,000.
 Q The estimates for Panama canal con l struetion for 1914 are $17 7,0O0,OO0 less than . for 1913.
 Banking and Currency System
 time when panics seem far removed . is the best time for us to prepare our . financial system to withstand a storm, . The most crying need this country has { is proper banking and currency sys-
 tenn. The existing one is inadequate, and e everyone who has studied the question e admits it.
 2 It is the business of the national govern : ment to provide a medium, automatically y contracting and expanding in volume to f meet the needs of trade Our present system lacks the indispensable quality ' of elasticity.
 ? The only part of our monetary medium
 that has elasticity is the bank note cur rency. The peculiar provisions of the v law requiring national banks to main , tain reserves to meet the call of the de- e positors operates to increase the money - | stringency when it arises rather than 2 to expand the supply of currency and re- r. lieve it. It operates upon each bank , and furnishes a motive for the with . drawal of currency from the channels
 of trade by each bank to save itself and v offers no inducement whatever for the
 use of the reserve to expand the supply ' of currency to meet the exceptional de- mand. ! After the panic of 1907 Congress realized | that the present system was not adapted to the countFy'S needs and that under 1t ' panics were possible that might properly be avoided by legislative provision. Ac- t cordingly monetary commission was
 appointed which made a report in Feb
 ruary, 1912. The system which they rec
 commended involved a National Reserve 1, association, which was in certain of it's ot faculties and functions bank, and which was given through it's governing authori- ties the power, by issuing circulating notes for approved commercial papers, by , fixing discounts, and by other methods of transfer of currency, to expand the 5 supply of the monetary medium where it , was most needed to prevent the export i. or hoarding of gold and generally co exercise such supervision over the supply : of money in every part of the country as to prevent a stringency and a panic. The e stock in this association was to be dis tributed to the banks of the whole United S States, state and national in mixed e proportion of bank units and to capital V stocks paid in. The central of the asso- f citation was vested in board of directors @ to be elected by representatives of the | banks, except certain eX-offcio directors, s three cabinet officers and the comptroller
 of the currency. The President was to appoint the governor of the association n from three persons to be selected by the a directors, while the two deputy governors were to be elected by the board of direc- tors. The details of the plan were worked
 out with great care and ability, and !, the plan in general seems to me to fur
 nish the basis for proper solution of
 our present difficulties. | feel that the n government might very properly be given r a greater voice in the executive commit a tee of the board of directors without dan ger of injecting politics into it's manage
 hut fhn fade lion tenn of banks is a good one, provided . proper precautions are taken to prevent
 banks of large capital from absorbing power through ownership of stock In
 other banks. The objections to a central
 bank it seems to me are obvlated if the
 ownership of the reserve association is } distributed among all the banks of a country in which banking is free. The earnings of the reserve association are
 limited in percentage to a reasonable and e fixed amount, and the profits over and above this are to be turned into the gov Q ernment treasury. It Is quite probable that still greater security against con . trol of money centers may be worked e into the plan.
 q Post Objections Would Not Apply Certain 1t is, however, that the Jpjec- o tions which were made in the past history l. of this country to central bank as O furnishing g monopoly of financial power
 
 n to an association whose ownership and l. control is so widely distributed and is r. divided between all the banks Of the
 country. state and national, on the one e hand, and the chief executive through n three department heads and his comp | troller of the currency, on the other. The ancient hostility to a national bank, with
 it's branches, in whicn IS concentrated
 the privilege of doing banking business
 and carrying on the financial trangac-
 tions of the government. has prevented
 the establishment of such bank since
 it was abolished in the Jackson admins-
 tration. Our present national banking
 law has obvated objections growing 1ut
 of the same cause by providing free
 banking system in which any set of stock
 holders can establish a national bank
 if they comply with the conditions of
 law. 1t seems to me that the National
 Reserve association meets the same cb-
 jection in similar way; that is, by giving
 to each bank, state and national, in ac-
 cordance with it's size, a certain share
 Tn the stock of the reserve association,
 non-transferable and only to be held by
 the bank while it performs it's functions
 as partner in the reserve association.
 The report of the commission recom-
 mends provisions for the imposition of a
 graduated tax on the expanded currency
 of such character as to furnish mo-
 tive for reducing the issue of notes when- ever their presence in the money market
 is not required by the exigencies of
 trade. In other words, the whole system
 has been worked out with the greatest
 care. Theoretically it presents a plan
 that ought to command support. Prac-
 tically 1t may require modification in
 various of it's provisions in order to make
 the security against abuses by combina-
 tions among the banks impossible But
 in the face of the crying necessity that
 there is for improvement in our present
 system. l urgently invite the attention
 of Congress to the proposed plan and
 the report of the commission. with the
 hope that an earnest consideration may
 suggest amendments and changes within
 the general plan which will lead to it's adoption for the benefit of the country.
 There is no class in the community more
 interested in a safe and sane banking and currency system, one which will pre-
 vent pancs and automatically furnish in
 each trade center the currency needed
 in the carrying on of the business at
 that center than the wage earner. There
 is no class in the community whose ex-
 perience better qualities them to make
 suggestions as to the sufficiency of a
 currency and banking system than the
 bankers and business men. Ought we,
 therefore to ignore their recommends ltions and reject their financial judgment
 as to the proper method of reforming
 our financial system merely because of
 the suspicion which exists against them
 in the minds of many of our fellow citi-
 zens? Is 1t not the duty of Congress lob ,N1.. tad t..,.,