Semi-weekly herald., 1914-01-19
CURRENCY PANIcs IMPOSSIBLE


public at large is set forth in an edi-
torial in the January Bird issue of
the Outlook, to which Theodore
Roosevelt is contributing editor.
The Outlook explains that under
the new law there will never be
time again when business institu-
tions with good credit will have to
pay their bills with clearing house
certificates, as was done in 1907.
That part of the editorial, explain
ing the bill, follows:
'To the average man or woman
who has bank balance or check
book there will be no visible changes
whatever in the banking system of
the country, except such as may pos
sibly appear in the form or typo
graphy of the five-dollar national
bank note. Receiving telers will go
on accepting deposits, paying tellers
will cash checks and presidents, vice
presidents, cashiers and boards of di-
rectors will continus to make loans
under the new currency law just as
they do today under the national bank
act. The daily operations Of the ma
tional banks will be unmodified; the
depositor or borrower will have no
new window to go to, no new officer
to see, no different kind of sigma
ture to make to his check or his note,
and no new formulas or red tape to
understand. The man who will feei
the immediate difference is the mer-
chant or the manufacturer or the
farmer who is a legitimate borrower
of money and who has assets or cred
it which entitle him to borrow money
"There is another type of man who
will welcome the operation of the
law, and that is the banker of mod
crate capital in moderate sized
ers personally and wishes to take
care of their legitimate needs, and
who has been prevented from doing
so in times of stress under the old
national banking act. In 1893, ana
again 1907, many of the richest and
biggest national banks in the coun-
TRY practically suspended payment
that is to say, were technically bank
rupts-because they could not get the
bank note currency necessary to pay
their depositors' demands.
During those panics practically
every bank in New York adopted the
rule not to pay out more than a very
limited amount in bank notes to any
one customer, no matter what the
customers credit and assets were.
These banks adopted this rule be
cause they themselves could not
get the currency. Under the new
law no such currency panic will be
possible. A merchant who has tang
ible assets and mistaken credit may
go to his local bank at any time and
borrow money on his personal note
properly indorsed. If the local bank
has not the currency to give him, ii
may go to the federal reserve bank H.
its district and, presenting the bor-
rower's note as security, it may gel
bank notes for him which will circu-
late all over the country. If the fed
eral reserve bank has not the neces-
sary bank notes, it can go to the Uni
ted States treasury and get them,
provided the original borrowers as
sets or credits are good.
This is "a simple statement, shorn
of all technicalities, of the funda-
mental and important operation OF
the law in commercial and financial
transactions. 1t will be no easier
than before for the man with poor as
sets or bad credit to borrow, but il
will be immeasurably easier for the
man engaged in legitimate and pro.
fitable business to turn his wealth
or his credit into form which will
be accepted without question through
out the country. The Outlook com
pany will probably never again have
to pay its employees in checks because
its bank has not the bank notes with
which to meet the Outlook's legiti-
mate demand on its. weekly pay day
for the money which it has deposited
in the bank during the week. The
technical statement Of the matter is
that at last we have an elastic bank
note currency, the volume Of which
expands as the number Of the trade
transactions throughout the country
increase and which contracts as the
number of nation wide trade trans
actions decreases. We do not won
der that President Wilson, who sign
ed the bill ON the night of December
23rd, expressed "a very deep graft
fication" at being able to sign it. He
was entirely justified, by the provis-
ions Of the bill itself, by its history
and by the spirit with which both
houses of congress have treated it, n
calling it great constructive meas