The diamond drill. (Crystal Falls, Iron County, Mich.) 1887-1996, 1913-02-08
Principle
CONTINUED from page ~

vestnient securities.
We have not 30 standardized our
commercial discounts. and the only
''short money" market on which tho
New York banks can rely for secondary
reserves is the call loan market on tho
Stock Exchange. The New York banks.
as the holders of the final reserves OF
our banking system. are obliged 10
keep their resources highly liquid. and
40 they are forced to make enormous
demand loans to the speculative market
Our banking system will continue 20
collapse periodically 80 long AS ws
make the New York banks the holders
OF our ultimate reserves and force them
at the same time 10 90 10 the Stock
Exchange as q market for ''short mon
ey. -
We must divorce our banking re-
serves from stock speculation. and we
can only do this by giving TO quasi
public institution, absolutely free from
the stock market. the duty of holding
the banking reserves
The problem of providing an ads
quate system leads at once to the close
ly allied problem of providing broad
market for short.time loans availabls
for the investment OF bank funds, based
on goods moving in trade, instead OF
investment securities
The chief function Of sound bank
ing system Is 10 provide credit for
commerce, not for investment or specu-
latIon. So long IA we fail to provids
in this country national market for
commercial discounts ana fail to sub
stitu 20 business loans for speculative
loans az our secondary banking reserves
we must continue 10 pay the penalty
in higher rates for commercial credit
tand therefore higher costs of produc-
'tionl in disastrous speculative orgies
and in periodic collapses Of our credit
machinery.
We can nationalizo our market for
commercial discounts hv giving ID the
quasi public Institution holding the re-.
esrves the duty OF rediscounting for
hanks. at published rates of discount.
the same 10 all hanks in all sections Of
the country, high.yrade, short time
commercial paper Issued for agricul-
tursl, industrial and commercial pur-
poses Commercial paper has now >
inferior position ~ an American hank
Investment becapse IL IL not liquid.
The bank buving IL must hold IL 10
maturity Give TO tte hanks nation.
al market in which high grade. short
time commercial paper can always lie
sold at a reasonable rate Of discount.
and commercial paper will at once to-
come In this country. IA il is abroad.
the prime bank investment.
Ia providing broad market for SOM
mercial paper, we ran also adopt an
other device for the extension OF credit
which has proved signally successful
in foreign banking pracitcs. This 81
the bank acceptance European bnsi-
ness houses, especially those engaged In
foreign trade. arc accustomed 10 buying
bank credit in the form OF bills drawn
on and accepted by banks. Our mo-
tional banking law prohibits such no
ceptances in banks. Tho legal,zstion
OK such acceptances would not only
provide In this country broader mar
ket tor bank Investments hut would
enable our productive industries 10
torrow at lower rates Bankers bills
"a Europe command the lowest rates
Il any form OF hank paper
In Matchmaking onr market for com
mercial paper we onRht also to stand
ardize this paner p, that throughout
the country its character will he M
readily recognized - the lonq time In
vestmens securities for which wa have
created aucn broad market through
the stock exchanges Our rrnotlre Ia
been 70 make p'omiesory notes, lar
" based on the credit OF the borro~er.
rather than hills ~ exchange fstAf
Continued Next Week