The Birmingham age-herald., 1913-10-31
Banker Sounds Note of
Warning to Country's
Business Interests
POLICY OF FIAT
MONEY ATTACKED
Frank A. Vanderlip Speaks Before
Bankers Convention-Fatal De-
feet in the Currency Bill.
Central Bank Urged

night at the banquet that closed the
convention of the Investment Bankers
association of America. each sounded
a note of warning to the business in
terests of the country.
Mr.. Hill. whose subject was railroad
financing of the future" declared that
"the country is waterlogged with bonds.
Confidence cannot be restored" he said,
until the name bond has won back
something of its old standard
| Mr.. Vanderbilt said that Congress
was in danger of saddling on the coun-
try ruinous policy of fiat money. The
Senate. he said. was hesitating and
wishes of the House.
Defect in Currency Bill
Mr.. Vanderlip. speaking of the pend
ing banking legislation, said:
THE fatal defect of the Glass bill is
that it starts the country on an issue
, of fiat currency. The notes proposed
are fiat notes. They have no reserve
whatever provided by the government
and they are to be lent without limit
to number of banks.
"There is no case in all history where
a nation has started on an issue of fiat
money that the result has not been
complete breakdown of the financial
system of that country"
! Mr.. Vanderlip urged instead of re-
gional banks a single central bank
owned by the people and under govern
ment control Regional banks We're
dangerous, as the same climate and
crop stresses would affect the entire
region, bringing too heavy strain on
the resources of the bank. Competi-
ton for reserves among regional banks
and forced investment by national
! banks in regional bank securities were
also fatal objections. he declared,
whereas the central bank met every re-
quirement.
Serious Obstacles
Il believe the intellectual Judgment
of every member of the Senate COM
mittee approves such a PLAN" said Mr..
Vanderlip. Politically, however, some
! or the members set serious obstacles
The fact that the House is committed
to a regional system is a serious OBJ
stacle. The disposition of the Presi-
dent not TO CONSIDER or to even discuss
any other plan than the Glass Owen
bill is obstacle. The declaration of
the Baltimore convention against / Il
central bank is difficulty. Were IL
not for these three things I have no
doubt that the Senate committee would
| be we'll on their way today toward
completing the bill for such central
institution"
| Hope for Removal
The hope for the removal OF these
| obstacles to sound legislation" said
Mr.. vanderlir lay in the creation of
public opinion that would be felt by
the Senate. The Senate was intellec-
tually convinced today, he said, and
needed only to know that the public
was convinced.
| "If the true story of all municipal in
debtedness now concealed behind various
temporary makeshifts. so as to maintain
an ostensible credit and help push out
the annual crop of new or refunding
bonds, could be told it would shock the
country and give paucity even to the
advocates of unlimited expenditure for
public purposes"
3 Such was the assertion of James ].
! Hill in the course of an address at
| banquet of the Investment Bankers as
sociat'on of America tonight.
1.-THE situation with regard to bonds
generally spoken of as industrias,' is
worse said he 1.-THE field is so laree
and diverse as to defv statistical tabul..-
: ton. Hundreds of millions of bonds have
heen issued 70 promote consol'dat' 'ons,
these securities being part of the pur-
! chase prize of the smaller concerns a.
! be united in one big corporation. Other
hundreds of millions have been issue
against property still to be developed
such as mines, timber lands, irrigated
/ lands. and even real estate, where many
| separate holdings are combined in thD
hands of an active selling or developing
! concern. These are OF VARYING deere rs
of soundness. From the bond with ord
nary pro"ertv behind It that would fetch
face valve at forced sale at any time to
mere Speculative pledges of future real
i7ation of increment that is little better
/ than the insertion of guess
Enormous Mass Recorded
Finally, there is the enormous mass
recorded only locally and beyond only
reliable estimate in amount of bonds that
are not in view of the fimsy or insufficient
security behind them, entitled to be called
bonds at all offered or bid
Mr.. Hill said the place of the stocks
holdines has changed little. Continu ng
his criticism of bonds he further said
"For-,erlv and always in any prouerly
financed speculative undertaking the i'm
/ it of a bond issue is the total cash
j value of tangible property. 1t must be
/ in possession. Its value is not to be
] used for the purpose ASSIGNED. but is
to be put to the valve of an immediat te
asset by conversion of forced sale at any
/ time INTO cash that is visible.
| "Irnder this rule tre investor might rest
! secure. The worst that could happen to
| him would be to have to take over tn s
propertv In case of receivership wind
up the bus'ne~s and get back his money.
! about all that he could lose would
be the interest on his investment FOR
J the unreaized term Of the life Of his
how'd as security. Vow. 1t is alto~ether
| n ese-ent Not only wild cat conc carrs
which are outside the pale Of this dis
! Question but COMMA nies of real merit ard
8 solrency. con 7ucted bv men who would
sNorn to do an act commonly recoon' ed
as d'shoncrab'e. do not hesitate to bond
their business fer very much more than
corld re obta red f~oro either forced
sale or a careful liquidat'on.
Calls for Discrimination
"Criticism or ever pro"er under
standing of the situation calls for dis
crimination between the classes int,
! which bonds are divided. First are
those of public bodies: the government.
states. counties. cities and sometimes
townships
Here a frightful inflation Is going
on. An old fashioned puNlic aversion
70 debt still holds the nation and 10
| -ome extent the states in restraint. al
though many of the latter evade it by
| n~rketinr certificates of indebte dness
which differ from bonds only in the
i shorter time they have to run and the
l'-ferior weight of the sanction behind
.hem
without undue preference for the
interest to which most Of nv active y -