The Washington herald., 1913-10-29
THE OPEN FORUM
CURRENCY LEGISLATION.
Herald Correspondent Calls Atten-
tion to ..the Real Facts.'

Herald Correspondents Calls Atten-
tion to '.the Real Facts,
To the Editor: The statement Of Chair
man Glass, published in the newspapers
this morning. seems to miss or avoid
the point as to the principal features OF
the plan for currency legislation to the
Senate committee by Mr.. Vanderlip last
week. The principal features at variance
with those of the House bill are:
L AS to management: Mr.. VanderliI
proposes a board Of seven directors, APP
pointed by the President. with the ad-
vice and consent OF the Senate, with
terms Of fourteen years each, director
retiring every two years, and with no
ex-oficio administration members. This
plan would seem to assure continuity OF
management. independent of political or
partisan control. The Owens-Glass bill pro-
vides for a board of seven, three Of whom
are officers of the government, and sub
ject to change by each new President:
at least one of the four to be appointed.
Probably two. and possibly all four.
would also be within the appointment
OF every President. This would almost
certainly assure a partisan and political
board Of control.
. As to note issues: Mr. Vanderlip pro-
poses that these be issued by a central
bank. The Owen-Glass bill provides that
they shall be issued by ana De the ooliga-
tion of the United States government
Nothing can be added TO the arguments
which have been made in opposition to
any plan for the government to lend
greenbacks to the banks. against col
lateral to be provided. The function of
the government ought to be that recog-
nized by all civilized countries and tested
b,- ha rf naF1alK- the
coinage Of metal money of a fixed stand
ard of weight and fineness, and the pro-
lection of its citizens thereby from the
imposition of fraudulent standards Of
value. The function OF the bank should
be to issue a credit instrument redeem
able in coin of the standard established
and protected by the government. II a
committee OF Congress today arbitrarily
fixes 100 per cent of discount paper, with
a % 1-3 per cent gold reserve as safe
protection. how do We know that ten
years hence it may not decide that munic-
inpal and State bonds, or real estate
mortgages, or any kind of bonds, or even
stocks, may AFFORD adequate protection?
Or how do we know but what IL will be
satisfied with a 10 per cent gold reserve,
or none at all? The greatest safeguard
against either an over-issue OF currency
or a reduction in its credit value Is the
Js16hiChl VI AAlG pCOptC- 1iGs
will daily decide whether a bank note is
adequately protected by collateral and
whether II will be redeemed in gold on
presentation. Therein lies the greatest
responsibility Of the management and.
consequently, the greatest Insurance TO
the public that the parity of the note
Of the bank with gold will be maintained.
}. Mr.. Vanderhp proposes one institu-
ton with branches, the Glass-Owen bill
proposals must be considered in connec-
tion with the difficulty heretofore con-
sidered unsurmountable of fixing a uni
form discount rate. The experience of
the Bank Of France peculiarly illustrates
the advantage of a uniform and stable
rate of discount. Sentiment in this couE-
try would favor such a condition; prac-
teal considerations seem to render il i'm
possible. Mr.. Vanderlip's plan. however.
as contrasted with the Owen-Glass plan,
seems to afford a satisfactory solution of
this difficulty, and one far better than
an ineffective tax applied to the earnings
of the institution, which in large part
would go to the government. and a tax
upon which would not afford any check
upon expansion. The rstraint must be
applied to the borrowers and expressed
in the discount rate. but should not be
made to penalize those institutions which
have not over-borrowed. and which
should not be required to pay higher
rates because of the over-borrowing of
others in their district. Mr.. Vanderlip's
plan, providing for one institution, with
branches, with a uniform minimum dis
count rate. applying to a small percent
age of the total amount which a bank
is authorized to rediscount and progress
sively increasing as amounts in excess
OF such original percentage are increased.
appears to solve the knottiest practical
problem In monetary legislation The
"sur-tax'' is applied to each institution
as its borrowings increase, and will be
effective in either checking its borrow
ings or force IL to a cheaper money
market. This is as IL should be.
Mr.. Glass statement above referred to
misses the point in each case. He does,