The Washington herald. [volume] (Washington, D.C.) 1906-1939, 1913-10-05
CURRENCY BILL
IS MADE CLEAR
Senator Shafroth Discusses
Its Problems Before Uni
versity Club.
CHANGE WAS NECESSARY
Speaker Points Out What He Thinks
Serious Faults in Present
Banking System.
CHANGE WAS NECESSARY

Senator John +. Shafroth of Colorado,
in an address before members OF the
University Club last night, wrapped the
currency bill and its attending problems
and technicalities around his fingers and
shredded it so that it might have been
understood by child.
The system Of banking and the pro-
posed improvements were explained
Senator ShafrOth succeeded in making
everything so plain, in fact, that lie was
urged to continue after he had consumed
an hour in explaining some of the rea-
sons for changes in the banking system.
Senator ShafrOth said in part:
1T Is almost universally conceded that
the present system is not OF much good
The reason is that at present we have
not a system OF banks on which we
may place reliance in time of stress.
The Federal reserve banks would supply
this want.
1T is no indication of insolvency or
distress that bank cannot, at all times,
pay deposits. No bank can live when
people lose confidence IN II and COM
mence run" There is not at pres
ent any place where assets may be
cashed to meet runs. This is because,
when the Tightening of money comes,
money is needed by large banks az
well as small ones, and at present there
is no one behind the big banks.
Great Improvement Expected.
These conditions do not exist in for
eign countries. When the currency bill
is passed, though. I think our system
probably will be better than that in for
eiEn countries.
"One defect is the lack OF mobilization.
OF concentration. of money. Under the
Federal reserve plan there will be
twelve regional banks, which will be
centers for the gold reserve Of the coun-
try. In this way We shall be able to build
up a system of credit disCOunting that
will be reliable.
Under our present system, when the
! limit OF reserve Is reached a bank can
! not loan money. The object of 10 per
cent reserve OF deposits seems to be that
in case anything happens the bank
creditors will get some of their money
| back.
"One object of the currency bill Is TO
| enable the government in time OF stress
| TO loan money on commercial paper. or
! drafts and such securities as are abso-
| luteIy safe. though not instantly cashed.
At the present time. there is a panic I'M
| less the currency can respond to all de-
| mands on it, The credits have to be
paid. and because our currency dOesn I
respond to demands on it 1t becomes In
elastic. The government. under the cur
rency bill. would be able to discount
these credits by reason OF the 30 per cent
gold reserve.
No Doubt as to Legality.
While the banks are protesting against
the bill. think they all will come under
! its protecting wing. There is no doubt
as to the legality Of the bill. The only
! protest which can be made is that We
must be fair 10 the bankers. The only
| banks which possibly could be affected
adversely by the passage Of the cur
renCy bill are the New York banks.
which loan their money to stock gam
blers. Only the banks which encourage
speculation could, by any possibility, lose.
I believe that the bill is an excel
lent one. Many criticisms have been
made. and some of them are good. The
just criticisms probably will be met by
revision Of the criticised parts.
The entertainment at the club last
night was one of a series that has been
arranged for this winter by the enter
tainment committee.