The Birmingham age-herald., 1913-02-16

Dulld up from the bottom. instead of
down from the top-a plan clearly more
in accord with the genius of the Ameri-
can people That this is their plan is
shown by Mr. Glass. frequent references
to regional reserve associations. with a
supervisory board of control "a Treas
unx board" he called it at times) and
with the reserves of the member banks
pooled in limited number of regions.
zones or districts. The treasury board,
it seems, is not to hold the reserves. If
this plan finally wins the favor of the
committee, but is to superintend the oper-
ations of all the regional banks as a trus-
tee.
Even this crude sketch arouses inter-
esting questions. VIII the regional banks
issue the currency or will the supervisory
board issue it? BY what method will the
regional Banks effect their clearings?
Surely not by the awkward and expen-
sive shipment of currency. Is any use to
be made of our valuable clearing house
experiences? Will there be uniform dis
count rate, or discount rate for each
district? How are the government bonds
which are now the basis of bank note
issue to be retired?
These are superficial problems which
suggest themselves at once to the stu
dent OF monetary reform l did not in
clude the question of how the supervisory
board is to be chosen, because. to my
mind. 1t is not highly important. | do
not care whether a majority are appoint
ed as the members of the supreme court
are appointed or elected by the regional
association. II seems to me certain that
we can trust ourselves to select for posi-
tions of such grave responsibility men.
VINO are patriotic, disinterested and far
sighted. TO say that we can trust our
selves to do that is to declare the failure
of democratic institutions
The Question of Issue
1t does not seem to me that it would
be wise to provide that each regional as
sociation Should issue its own currency.
IL that were done. we would have as
many different kinds of currency as there
were associations. 1t would be, in a
measure. ca backward step toward the
conditions which prevailed prior to the
civil war The supervisory board should
have the control of issue, in my opinion
and ] will be Interested to see what plan
the Glass committee adopts to solve this
psoblem.
1t Is quite possible to effect a system of
offsettipg of credits between regional as
sociatiohs. Our clearing house system
could be applied nationally among them.
RMS suggests itself to me as the readiest
answer to that question. And it seems to
Ai'f III tiliS cbHiletIlOI. lldt IneTt SnOuiu
be some provision against the issue of
clearing house certficates-an expedient
which has always been extra-legal at the
best. With a sound banking system there
would be no occasion, / am satisfied, for
such a step.
The retirement of the government bonds
complicated problem. II
thought that devised by the National
Monetary Commission very ingenious. The
banks must, in Justice. be protected
against loss.
Essentials of Reform
have previously outlined my views of
the fundamental principles, which must
be included in any sound banking and
currency system as follows:
J. A discount market where short-time
paper can be made liquid by
Transforming it into a demand credit or
into currency notes.
2. cooperative control of a large
proportion of the dead cash reserves of
banks, SO as to produce the effect of
common ownershop and prevent the pres
ent struggle between banks to grab re-
serves from one another in times of
stress.
3. An elastic currency based, not on
government bonds. but on the assets O
all the banks cooperating, which wouIG
originate, as far as expansion is con
cemed, from the process of diseountinr
in the discount market. and would b,
issued, not by individual banks, but by
common agency
4 A provision for international bank
ing.
.. The Institutions organized for these
purposes should not be money akine
institutions, but should act as trustee
of prosperity for all the people"
The first of these principles could b
put into action by the establishment O
district discount associations. similar
a general way to those created by tn
monetary commission bill.
/ wish to emphasize the fact that
should make adequate provision in an
banking reform legislation, for fnanein
our foreign trade. Our shortcomings i
that direction are tax upon the bus
ness of the country | explained to tn
Glass committee that when my firm buy
goods in Japan, it pays FOR them with
bill drawn on London. Such a bill wi
sell better than bill drawn on Chicag,
The committee seemed interested in this
and the members questioned me in deta
about il. One reason for it is that Eng
land, having trade in all parts of the
world, has organized her splendid bank
ing system to take care of just such
drafts. And every merchant in the world
don, il is instantly convertible into gold
whatever the amount
Differs From Aldrich Plan
We should have a common agency SINH
lar, in some respects only to the Ma ation