The Denison review. [volume] (Denison, Iowa) 1867-current, 1913-03-12
Leslie NJ Shaw Gives His Views Of Finance and Needed Legislation

! best. me plan | Will try to ma Ike
clear to you is old, and it's merit lies
in itself, not in the name of its
author. A member Of the committee
on banking and currency told me Mr.
Bryan had advocated it. If that be
true, it must at least have some meri
torious features. have been told thai
President-elect Wilson thinks favor
ably Of it. | have no right to quote
this, but if he does think favorably
of it | shall not be disposed to dis
credit his analytical mind. The for
mer president OF the largest bank in
New York City discussed it with me
with at least an open if not favorable
mind. Its strength lies in the fact
| that it involves no new machinery
and can be applied without the sus.
gestiOn Of disturbance. This is very
essential. Here, then, is the plan
favor:
"Our treasury system has frequent
ly been referred to as a central bank.
Let us assume it to be central bank,
and let us also assume that the ma
tiOnal banks OF the country are its
branches. 1t will not do to bestow
upon the treasury the essential func-
tons possessed by the Bank of Eng
land or the Bank of France or the
Imperial Bank of Germany. | can see
no objection, however, to bestowing
upon the national banks in well safe
guarded ways these functions in a
limited measure, SO that from the ag-
gregate good of national banks we
will get the aggregate good of cen
trail bank without any of it's draw
! backs Here is the real solution Of
the problem: Permit the national
banks in times Of stress to issue a
certain prescribed volume of bank
notes, identical with the notes they
ordinarily issue, without deposit Of
bonds or other collateral, but subject
to a tax of or per cent per annum."
How 1t Would Work in Panics.
well, but, Mr.. Shaw, how would
that have worked out in the panic of
1907, for eXample?" l asked.
That's just it," he answered "The
best way to test the efficiency of a
measure is to apply it to conditions
that have existed. Suppose in 1907
the banks of New York City had had
in their vaults volume of national
bank notes equal to twice their CAPT
tai, and the banks OF every other large
city had had volume equal to their
capital, and the banks of smaller
cities a smaller proportion, all ready
to be issued when the controller OF
the currency and the secretary of the
treasury consented, but subject, new
ertheless, to the tax | have suggest
ed, would it not have saved the situa-
ton and would it not have done it
noiselessly? Only once in ten or
twenty years will it be necessary to
resort to this relief, but whenever
resort to it is had the relief will be
instantaneous"
what objections have been raised
to this plan?' | asked. Mr.. Shaw
said:
Some banks suggest that what we
need in the way of relief is not cur
rency, but reserve money; but when
interior banks are telegraphing for
money they rarely specify the kind of
paper money they want, and in times
of stress are glad to take whatever
they can get. National bank notes
suit their conveniences just as we'll
as gold certificates. If the banks OF
New York could have issued in the
fall of 1907 say $100,0OO,O00 in supple
mental bank notes and other large
cities of the country a proportional
amount there would have been no
scare, no panic and the stress would
have been relieved in thirty days at
the outside, and the aggregate issue
of supplemental currency would not
have been one-fourth of the amount of
clearing house certificates that were
issued"
Supplemental Bank Notes.
"But how do you propose to provide
bank notes which this plan demands?"
1T will be a very easy matter for
the treasury department to return to
the banks their bank notes sent in for
redemption and not seriously worn, so
that the banks can have in their vaults
at all times large volume OF slightly
sOiled but not worn national bank
notes. These can be sent by express
wherever needed or paid over the
counter without the slightest sugges-
ton of alarm or panic"
Eyes, but would not these notes be
unsafe? Would they not be issued
when not absolutely needed?"
Mr.. Shaw swung his chair around
and again faced me. He said, speak.
ing deliberately and in rather low
voice: "Of course there are objections,
but we will come to them later. But
now l want you to contine your
thought to the relief to be afforded
and for the moment forget all else.
The relief demanded is an increase OF
currency whenever needed, wherever
needed and in any volume needed, OF
character identical with currency IN
general use. so as not to excite sus-
picion by the advent of new kind
of money. Then this expansion must
remain so long as business conditions
require it and it must then retire as
suddenly as it came. There is the
problem.
"Now, the supplemental national
bank currency that l am urg-
ing will meet all these conditions; 1t
requires no new machinery or associ-
alton of banks to make it workable.
1t is thoroughly practicable. If the
extra pressure is in New York the
supplemental currency will be issued