Evening star., 1913-10-05
SENATOR SHAFROTH
TALKS0F CURRENCY
Compares Present System
With That Proposed in the
Glass Bill.
BELIEVES THE MEASURE
WILL Benefit COUNTRY
Address Before University Club on
Alleged Defects in Current
Banking Methods.

Alleging defects in the present currency
system of the United States, the laws
were explained to members of the Uni
versity Club last night by Senator Sha-
froth of Colorado. Unadorned by the
technical terms of the banks, the f1nan-
cial plans in vogue were explained to the
members of the club in detail, and when
the senator expressed the belief that he
was taking too much tinne there were
cries all through the assembly hall OF
go ahead" Simple Illustrations were
used by the senator in demonstrating to
his audience just what the present cur
rency system was responsible for.
He told of the faulty reserve system
which caused money to be scarce every
where if it should happen to get scarce
in any one place. The scheme forces q
condition which 1t Is intended to correct,
according to Senator Shafroth. The
money is now centered In one place, New
York. he said. and the new currency bill
would serve to establish twelve money
centers. The concentration of money in
New York. he believed, only keeps up the
speculation In stocks and bonds there.
The money that is concentrated in New
York belongs in the interior, and these
twelve money centers will correct this
condition If there is an enterprise to be
started, he said, it is within the power
of the moneyed interests of New York
city to make or break 1t. If there were
twelve centerS persons promoting any en-
terprise would not have to depend on one
place for the money. but If it was turned
down by one there would be eleven other
chances of having some one take 1t up
and foster it.
Banking on Small Reserve.
'The banking system of our country
said Senator Shafroth. lis done on q
small reserve. For instance, there is a
bank in Cripple Creek capitalized al
100000. That bank is required to take
say, per cent Of that and deposit 1t in
a reserve city bank Well, that is So 600.
Now that reserve bank is required to
deposit a certain reserve to guarantee
its deposits in a central reserve bank.
Now what do we have? If for any
reason there Is q pressure for money
on this Cripple Creek bank to pay its
depositors it calls upon the reserve city
bank. That bank will turn over the
5000 which belongs to the Cripple Greek
bank and will say: There's your $1,000
That Is all we can let you have, as our
This results in the reserve city bank
calling for its reserve deposit In the
central reserve bank, and that bank
turns over the amount of the reserve
WHICH DElnBS tuc CeIltI6l TcScTVe DdIh
son. also. that 1t has reached Its limit,
city bank any more money for the rea-
son, also. that 1t has reached Its limit,
and then money is tight and this Is
what brings on panics. 1t Is the fault
of the system, which is not elastic
enough.
TT is a wonder to me that there has
not been more panics than have been
on account of these reserves. You can
readily see that run at any time
L.
to the marvellous confidence of the
American people that there have not
been more panics."
Stringency and Emergencies.
Our present system, he said further.
does not relieve the stringency In
time of emergency for money. There
is no place where banks can take
their commercial paper and have it re-
deemed. He then took up the Glass
currency bill and pointed out how the
various systems were destined to cor
rect the defects In the present sys-
tenn He declared he regarded this
bill as an excellent one The bill, he
said, provides for the issue Of notes by
the United States Treasury In time OF
stringencies when secured by commercial
paper.
they would be left under the control Of
the state governments il they wanted to
remain there. However, he expressed
the belief that under the proposed new
law they will come into the banking sys-
tenn of the federal government. because
he said he could not believe that any
bank would stay away when 1T can get
money from the federal government.
Senator Shafroth spoke for more than
an hour and a half, and at the conclu-
sion of his address the members of the