The Washington herald. [volume] (Washington, D.C.) 1906-1939, 1913-12-04
should RELIEVE
MONEY Stress
currency Law VIII Prevent
Recurring Panics with Re-
discount Feature.
BOOM In WALL STREET
1verage Gains of Two Points, Shorts
Covering Heavily, Closing
at Top.
BOOM In WALL STREET
by i. 4. FLEMING.

by i. A. FLEMING.
When the currency legislation now in
rogress of evolution shall finally emerge
rom the Senate, pass the test of the
onferees OF the two houses and receive
he Presidents signature, it will be a
ocument that will fill the bill, not per-
pct Tor there are few laws that have
OF some defects, but II will furnish an
astic currency and remove the danger
the oft recurring panics
Panics are bred by the laws of self
reservation. Each banker feels it his
MY when the signs of the times are
mnious to begin the CUrtailment OF
redit These signs generally develop i'm
hediately following unusually prosperous
mes when the credits of the business
Forld are perhaps unduly expanded.
Experience has taught the small bank
that while his city correspondent will
10 much to help him when depositors
commence to demand their cash and his
ssets cannot be quickly Iiquidated, there
bones time. if the situation is serious
aough, that self-preservation is neces-
sary as the alternative Of failure.
Naturally he demands repayment of
oans, the city banker is forced to follow
his lead, the reserve city finds the calls
Rom country banks heavy and impera-
i've, and calling of loans is resorted TO.
Merchants have to square up or secure
extension; Wall Street, personifying the
great security center of the continent,
has no alternative but to pay up its call
oans, and securities are sacrificed. the
story of the smashing decline in prices
going all over the United States and
Europe and intensifying the uneasiness.
Wall Street usually anticipates before
the business world realizes, and the lat
ter takes the action there as indicative
OF what is to come.
And Wall Street rarely makes mistakes
unless they are part of the maneuvers of
bosses of the street.
Would Welcome Preventative.
Anything that will prevent panics, fire.
Qdently in the very heyday of prosperity
WI serve the people to their greatest
satisfaction.
The original measure as presented in
tRe House of Representatives contained
many serious faults, many Of which have
been rectihed in amendments that have
practically been accepted.
Had this measure been enacted in
HCriginal form it would have been re-
sIonsibIe for much confusion. for the
enforcement of hundreds of millions of
losses to the national banks and ultra
conservative investors who have pinned
OF the governments through the emascu--
hSing Of the per cent bonds by cut
ting on their rights. under the national
bank act, TO the circulating privilege,
the only feature that has given them
anything near a par value. There werc
scores of other errors more or less
serious,J the results of drafts ard
addendas attached and inserted in the
bill by men who lacked banking ex-
perience.
1t is perhaps possible that the trainers
of the bill held in mind the disclosures
at the investigation of the so-called
money trust" One thing desired was
to see to lit that New York City and
Wall Street were short Of the power of
attracting tine countrys money and that
il should find greater employment IN
localities contingent to its ownership.
Collateral Loans.
In furtherance of this movement col
lateral loans are not TO be accorded re-
Giscounting privilege, should the member
Eank wish to take assets from its vault
to the regional bank for rediscount IN
New York City, presuprUsing that there
will be one there.
II is a question whether or not col
lateral loans. saleable at any time during
business hours. are not much more de-
sirable than what is termed commercial
naper" in England and the accepted bills
ar business men in this country, as
Sated by Senator Owen, almost any
! Id PAPER
Commercial paper in the strictest sense
here is the paper of business houses,
given in payment of merchandise, or
|the plain notes of hand of firms and
Individuals, with ratings in Bradstreet
~ Dun.
d VIII Re More Discriminating.
The admission of commercial paper 20
rediscount in the regional banks will GER
tainIy lead to more discrimination on the
part of banks in the matter of making
leans. in order that they may have paper
of the approved character when redis-
counting is necessary.
This feature of the bill, as it stands
today, is one that is believed to offer ex-
cellent support and sustaining strength TO |
the country bankers when he needs it |
most-his assets il all right, being readily |
exchanEeable for cash at his regional |
bank. should enable him II necessary to
nav all obligations to depositors, and in |
like manner the larger banks can also |
redfscount and in this way the chances |
for panics in a business sense are min |
imized-if there are failures it will be be- |
cause Of the lack of good paper to re- |
of poor management OF the
hank itself.
AS for Wall Street and New York City, |
ore need not worry, they will take care
of themselves Collateral will still be as
LIQUID as ever, there will be big trust
companies that will always have the /
money for securities.
In times of panic on the street, in his
Jay, Russell Sage never hesitated to lend
millions after the applicant had answered
the inevitable query, What have you got
to offer in exchange?'
bankers will not be compelled to carry
such large reserves to protect themselves
IN times of stpess-one of the panic,
stringency breeding maneuvers Of all
bankers when they drew in their re-
sources in anticipation of trouble. thereby
accelerating the approaching danger.
Knowing that the regional bank is pre-
pared to rediscount, they may make freer
use of their funds. -
Governmental control of the Federal
Reserve Board of Control, one of the
most opposed features in the early stages
4 discussion, has practically been grace
'ully yielded to since the agreement TO
leep the Secretary of Agriculture and the
of the Currency OF the Fed
.ral board.
The men in the Senate who have made
/ fight for time to debate the all-impor-
amt question, who have refused to rush
he bill to enactment, who have de-
naaded that the rough edges be smooth
d, and that the suggestions OF practical
Sankers, meeting the committee having
I in charge in spirit OF sympathy and