Daily capital journal. (Salem, Oregon) 1903-1919, 1918-02-09
R'ADOO'S PLAN WOULD
FORESTALL ANY ISSUE.
OF PAPER CURRENCY.
Otherwise Should Var Con-
tiHe Paper Msaey viii Not
Be Backed by Gold

Washington, Feb. s.-Warning that if
the war lasted long enough the govern
ment might have to issue form of
money with no gold reserve back of it
was given the senate finance committee
today by Secretary of the Treasury Nc
Adoo.
McAdoo said, however, that the pro
posed $500,000,000 government finance
corporation would forestall such a
course.
"The bill does not contemplate in
any sense an issue of uncovered paper'j
declared McAdoo in response to a cues
tion by Senator Smoot. "We NAV have
to come to that, but this possibility is
most easily met by the system proposed
in the bill.7
McAdoo explained that the main pur-
pose of the bill was to marshal the ma
tons credit for war purposes, to pre-
vent unnecessary expansion in any di
rect1on not essential to war work and
to prevent the banks extending credit
on anything but sound securities.
The provision of the bill which gives
the secretary of the treasury the power
to appoint the directors of the corpor
alton, was critised by Senator Penrose
McAdoo answered by saying that the
president already was overburdened and
that he did not think further burdens
should be placed upon him.
Well, the secretary of the treasury
is also director general of the railroads.
said Penrose. els he not overburden-
edY"
The secretary appeared before the
committee to explain the measure which
was drawn by him.
The present practice of the govern |
ment in advancing as much as 80 per
cent of the war contracts to contrac-
tors at a low rate of interest, was draw
ing more heavily on the treasury, he
said.
The $500,oO0,OO0 government corpor-
alton, proposed in the bill, is designed to
take care of this needed credit, he ex-
planned.
''Do you mean to say that present
going concerns not engaged in war
work shall be prevented from issuing
refunding paper9" asked Senator Town
send.
Ono, not exactly that,'' said Nc.
Adoo. ''We think that all such issues
should be first submitted to the gov
ernment for its approval, though" f"
MeAdoo then explained that while
many concerns will voluntarily seek
government approval before issuing
credit, it is necessary to require all of
them to do so, if the situation is to be
controlled. ~ go
"This bill would act in a financial
way as the draft law does,'' he said.
1t would compel those. who will not
come to the government for
approval to do so along with those who
come"
He further explained that the pro-
posed law would reassure savings banks
md mutual savings banks among which
here was some uneasiness now.
The government corporation would
)e able to extend credit to this class
# banks in the event Of heavy with
he said.
Commercial banks which are compell- .
ID to extend credit to war industries
md take in return on-rediscountable
ecurities, would be protected through
assistance which the corporation would !
,e empowered to extend, he said.
Withdrawals from savings banks for
Investment in government war bonds
nay create embarrassment among this
lass Of banks, McAdoo said, and it was
Necessary to provide some means of pro-
ection in case Of such a contingency.
f'This is altogether probable if future
government paper is issued with higher
interest than the bank rates." said
dcAdoo.
"We must protect the savings of
Millions of American workingmen-an
interest which is vital to the whole fl
Iancial structure" he added.
"Insurance companies are also sim
larly protected" " he said.