Evening star. [volume] (Washington, D.C.) 1854-1972, 1913-09-12
Takes Up Criticisms Directed
Against Pending Currency
Measure.
EXPLAINS new PLAN
TO GAIN ELASTICITY
Whole Structure Depends on Dis
position Of Reserves, Repre-
sentative Declares.

Representative Robert ]. Bulkley of
Cleveland. Ohio. democrat and member Of
| the banking and currency committee.
| made answer for one hour in the House
today to the criticisms directed against
the Glass currency bill by the committee
of the American Bankers Association
which al Ipeared before the congressional
currency committees.
Mr.. Bulkley's speech gave an explana-
| ton OF the proposed method of making
currency more drastic than at present
And then he said:
THE whole structure depends upon the
proper disposition Of reserves. II reserves
are really mobilized, the amount required
| to be carried as reserve by the individual
| bank may safely be reduced, as each
member bank will have facilities for con-
| verting its good paper into ready cash.
and by this reduction in the reserve re-
| quirements of the individual banks ad-
ditional credits will become available for
| the legitimate development of business
!! through the enlarged loaning power of
| the banks.
IF the reserves are really mobilized,
the federal reserve banks will be pow
| er to stop panics, they will have the
basis for an elastic currency and the
funds to support a broad market for
agricultural, Industrial and commercial
paper. But all depends on really mobiliz-
| ing the reserves.
"Must Cut Out Cancer"
1T will not do to evade the question
as was done by the Aldrich plan, which
| provided that banks might have the
privilege of depOsiting their reserves In
q central reservoir without interest. while
they were still permitted to deposit them
with reserve agents who would pay in
| terest. 1t will not do to meet the ques.
ton half way, as the Chicago bankers
conference now asks us to meet 1t, by
permitting the reserves to be carried one
third In vault, One-third with regional
reserve banks. and one-third with re-
serve agents AS the chairman OF oul
COMMITTEES has said, we must cut the
cancer out, we must not permit balance:
with other banks to be counted as re
serve, because experience has shown tha
they are not reserves when reserve II
Representative Bulkley took up bank
ers' objections one by one. In answer t.
that OF George N. Reynolds. president o
the Continental and Commercial Nationa
Bank of Chicago. he said:
AFTER proposing the plan recommend
ed by the Chicago conference provldlnt
that reserves should be carried one-thirt
in vault, one-third in regional reserve
banks and one-third with reserve agents
Mr.. Reynolds submitted figures to snow
how the plan would work, and then sum
med up his theory about the matter. al
follows:
my theory and the theory Of the peo
pie who made this Recommendation was
that while we might agree with you II
principle that the pyramiding OF reserve:
was not a proper banking principle, Still
we have a condition and not theory
and our theory in asking for this changt
is that we may be given more time &c
comply with the change which is being
provided for in this bill as it now stands
What Is Significance.
What is the significance of these
i statements? The president OF the banf
which carries more country accounts thar
any other bank, the man selected by the
i Chicago bankers conference to present
i their case for modification of this Sec
i ton. has frankly and manfully admitted
i that we are right in principle. As agains,
this principle he suggests theory thai
the hanks can not conveniently make
these adjustments in the course OF three
| wears after the organization OF the pro
i nosed banks, or perhaps four years from
now Vet hitherto no expert has ven
tured to say that a longer time is neces-
sary for these readJustments' ana l sup
i NIT that it does not do full justice to the
bankers of this country TO say tnat anes
i cannot prepare LOT this enanse AZ 'eh
"Sonsiderable publicity has been given
u +o a statement by Mr.. James 3. Forgan
ITO the effect that the enactment OF TINS
i hill would cause a contraction or creolts
in the country to the amount OF 81 oOO.
i nno ono AS Mr.. Forgan is one OF the
leading bankers Of the United States, the
| nresident Of the First National Bank OF
/ Chicago and was designated Dy ene re,
i cant Chicago bankers conference as
! | chairman of the committee appointed py
1 that conference to place It's views oefore
| Congress. his statement Is worthy Oh
i careful attention.
! Fallacy of Calculation.
"rhe fallacy Of Mr.. Forgans caicula-
i tion lies in this: He counts money turned
| over to the regional reserve banks as IL II
! were no longer reserve money. He says
| If we have II per cent of lawful money
| against all deposits and turn one-thlrd OF
| IT over to the federal reserve banks. that
leaves us only per cent of lawful money
against deposits 1t seems hardly neces-
| sarv to do more than state this PROPOSE
tion in order to show the absurdity of 1t.
1.-The $500, 100000 in question is just as
| much. q part of the country's reserves when
| nna-third of it is held by the new regional
| reserve banks as when all of 1t Is held
| nv the national banks, and We must not
forget that nearly $15OOOO.OOO will actual
! ly be added by the provisions OF TINS OIL
| when the lawful money now held in the
| United States Treasury shall be deposited
with the federal reserve banks. So the
| nroportion Of lawful money held in re-
| serve against deposits will be increased.
rather than diminished
| "If Mr. Forgan wishes to argue that
| tha creation of these deposit accounts
| with the federal reserve banks will In
| crease the total of deposit liabilities. and
| thus decrease the proportion of reserves
| held against them. will answer that as
hank deposits with the federal reserve
| banks are increased deposits with reserve
| agents will be diminished. and that the
one will practically offset the other.
| "These gentlemen contend that when
/ the Minneapolis banks are to be re-
| ouired to carry New Orleans cotton the
| shiftine Of funds should be made sim
nly- easily, naturally. without ostenta-
| tion and without notoriety to the end
| that on the well known principle Of
| what YOU don't know won't hurt you,
| the Minneapolis wheat men may not be
] damaged at all
| Plan Once Approved.
| "The Chicago conference unanimously
| condemned the requirement that banks
entering the proposed system shall
subscribe to the capital stock o. the re-
serve banks an amount equal to 20 per
cent Of their own capital stock. half Of