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XUNE ,2J-1007
The Commoner
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A CANDID BANKER
The Omaha' Beo recently printed this ed
itorial: i "Mr. Cortelyou, secretary of the treasury
department, is taking special interest in plans
that are being discussed by bankers' organiza
tions and other financial experts for amendments
to the currency laws of the nation. In a recent
interview, published in a financial paper, ho
called attention to the peculiar position in which
he is placed by the necessities of existing laws
relating to the management of the federal funds.
The national debt, in round numbers, is now
$900,000,000, and the treasury has a balance in
excess of $250,000,000 for which it has neither
immediate nor prospective use. The treasury
department could wipe out one-fourth of this
debt without any inconvenience, but such action
would instantly start a panic in the financial
world. The treasury notes and all the national
bank notes of the country are based on govern
ment bonds issued to provide for the $900,000,
000 national indebtedness. Any real reduction
of the national debt would reduce the basis of
national bank and treasury note circulation
which, it is generally admitted, is no more than
adequate to meet the growing commercial de
mands of the country. The result is that the
government is compelled to pay about $1,000,
000 a year interest on a debt it could reduce
ly one-fourth, in order to not disturb the finan
cial, equilibrium. In other words, the nation
may have money only by remaining in debt.
Under the existing arrangement and laws, when
the demand for additional currency becomes im
perative, the country would have to devise some
new plan for increasing its debt to meet the
emergency. The' condition is a peculiar one and
well worth the study of the experts who are de
voting their time to it."
Henry "W. Yates, president of the Nebraska
National bank, Omaha, has written for "The
.Western Banker," an interesting article refer
ring to the Bee editorial and the statements
-attributed to Secretary Cortelyou. Every Com
moner reader ought to give thoughtful consid
eration to Mr. Yates' article. It is as follows:
"The above is an editorial which appeared
recently in the Omaha Bee. The assertions
therein, made are most remarkable, and they are
especially so when coming from the head of the
treasury department.
i. MA contraction of .national bank note cir
culation caused by the payment from, funds in
the treasury of United States bonds securing
circulation could not possibly produce a panic,
as stated in the article. This fact is so well
understood among bankers that it scarcely needs
saying, but the general public may not so easily
see the fallacy in the statement. Concede, for
instance, that the treasury holds, as stated,
$250,000,000 which is applicable to the reduc
tion of the bonded 'debt, and in order to make
the case as strong as possible, also concede that
the bonds subject to payment are on deposit
.with the treasurer to secure circulation, what
'follows if the cash in the treasury is applied to
the payment of these bonds? The treasury will
hold $250,000,000 less cash and the banks de
ciding to use the funds for retiring circulation
.-will have $25Q;000,000 less circulation. It
;would not be necessary to call in a single loan
and no commercial, interest would in the slight
est manner be affected by the transaction. It
.would not even cause a ripple in the treasury
"department. The $250,000,000 would be takn
from cash and credited to 'bank note redemption '
. account,' and the notes 'would not bs-tctually
redeemed until presented for paynient in the
course of time, which is a slow process. So far
from causing any contraction of capital, an ex
pansion would actually follow, for the reason
that the five per cent reserve held by the treas
urer against the circulation would be returned
to the banks, thereby increasing their loanable
funds to the extent of $12,500,000.
"This writer has been unable to obtain a
copy of the financial paper said to contain the
interview, and is inclined to believe that Mr.
.Cortelyou is not correctly reported and that the
writer of the editorial has misunderstood the
purport of -what he did say. The predicament
in which it is stated Mr. Cortelyou finds himself
concerns public deposits, not circulating bank
notes, and this is- a much more serious matter.
"Mr. W, E, Curtis.'in the Chicago' Record
Herald of May 22, states the whole case, al
though, he naturally leans to the side of the
frenzied' financiers, who .are constantly demand
irig that the United States should adopt the
custom which prevails with foreign governments
and deposit air its funds in banks, so that com
merce may obtain the benefit of them all the
time and not solely at sporadic periods when the
government is forced' to come to the relief of
the money market.
"Deposits -can : now- be made with banks,
butrrruntil as recently administered the law
requires United States bonds for security, and
d as f these cost more money than the volume of
deposits to bo obtained, tho arrangement dons
,not operate as a remedial measure during money
stringencies. The financiers demand that tho
deposits be made without security, or in any
event with such security as it may bo conven
ient for the banks to supply. Mr. Cortelyou has
appointed a committee of exports to consider tho
question and advise him in what mannor ho may
safely and satisfactorily distribute these de
posits. The statement in the Bee editorial will bo
very pertinent if it is made to apply to bank
deposits and not bank circulation. If the gov
ernment funds are deposited in banks upon no
security, or upon other security than government
bonds, the peculiar condition referred to can
easily be conceived. The government in time
of financial stringency might not dare to call
for its funds, for fear of producing thereby a
disastrous panic, and it can bo easily Imagined
that it might be even forced to borrow money
to meet its urgent obligations. In this manner
it might be said to pay a 'premium upon its own
debt' or interest upon Its own funds. This con
dition, however, has not yet arisen. The dis
cussion brings up an old question in fact, two
of them, It was the withdrawal of the public
deposits from the United States bank which
brought on tho panic of 1837 and the subse
quent loss to the government by the failure of
the 'pet banks.' This led to the establishment
of the independent treasury during tho admin
istration of President Van Buren, which has
served us ever since. It is now proposed prac
tically to abolish this Independent treasury and
return to the old depositing system, which car
ries with it, to be-consistent, tho establishment
of another United States bank or a system 'of real
national banks.
"History may in this manner repeat itself,
and, in connection with this action, another
.question would inevitably come to a head, which
in the past has received no little attention as a
political question. It may well be asked why
the necessity of collecting so much money in
the public treasury not needed to meet its cur
rent requirements? Why not reduce taxation
and thereby lessen or remove thot menace con
veyed in such an enormous accumulation of
public funds? This spells 'tariff reform, and the
'powers that be' will hesitato to re-open""such
burning questions when there are so many other
things.. with which they may keep the minds
of the people engaged."
oooo
OREGON'S GREAT PROGRESS
In the opinion of United States Senator Ful
ton, republican, of Oregan, the state government
of Oregon more nearly approaches a pure democ
racy than does that of any other .state of the
Union and Senator Fulton says: "This Is due
to the amendment to its (Oregon) constitution
adopted by vote of the people in 1902 and known
as the 'initiative and referendum amendment.' "
Senator Fulton has written, for the North
American Review, annteresting article entitled,
"The People as Legislators." From this article
The Commoner is privileged to make some ex
tracts, to which it invites the thoughtful consid
eration of its readers. Senator Fulton says:
"Under this provision, the 'power to pro-
pose laws and amendments to the constitution
I -and to enact or reject the "same at the polls,
independent of the legislative assembly,' is re
served to the people. It is provided that eight
p"er cent of the. legal voters may, by petition filed
with the secretary of state, propose any measure
desired. It is required that the petition shall
includevthe full text of the; law and be filed, not
less than four months prior to the election at
which the proposed law is to be voted upon. If
approved by a majority of the votes cast, the
measure immediately becomes a law and is not
.subject to the governor's veto. Such is the in
itiative. "The referendum may be applied to any law
enacted, by the legislature, except such as are
'necessary for the immeC.ate preservation of the
. public peace, health or safety.' It may bo
ordered by a petition signed by five per cent
of the voters, or by the legislature itself. When
ordered, the measure tp which it is directed does
not become a law until it has been approved by
, a majority of the votes cast thereon.
-"Thus t will be seen that, excepting such
' constitutional limitations as are imposed on the
legislative power and apply to the legislature as
well, there is no limit whatever to the right pr
pow.er of the people to legisjlatj by direct enact
ment independently of the legislature, and but
slight limit to their power to veto- laws enacted
by the legislative assembly. ' .
"The first exercise of. the power to initiate
and enact legislation by the people was at the
June election In 1904, whon, by n vote of moro
than three to oncJkoy enacted tho direct pri
mary law, wherobyaTT nominations of candidates
for public ofllco, excepting school district offices,
and municipal olllces in towns of loss than two
thousand Inhabitants, are required to bo made
by direct voto of tho people. Tho primary elec
tion is held and conducted almost entirely undor
tho general election laws and, practically, in
'tho sarao manner as are tho xogujar elections,
tho exceptions being only such as aro rendered
necessary by reason of tho relation of political
parties thereto. Tho purpose bolng that tho
members . of each political organization shall
nominate tho candidates of their respec
tive parties; a voter is required, if ho de
sires to participate, to cause to be entered
in the registration hook, at tho timo ho reglstors
as a voter, tho name of tho political party of
which he is a mombor. A soparato ballot box
Is provided for tho votors of each party, but tho
primary election is "held at tho Bamo time and
place for all parties, and presided over by one
set. of judges, who are, aswell, the Judges ap
pointed to preside at the general election next
ensuing.
"An important and interesting feature of
tho direct primary law Is that it expressly pro
vides for tho nomination of candidates for
United States sonator. Provision is made for
placing on tho ofilclal ballot to bo used at tho
ejection, following tho primary the names of all
nominees, including names of nominees for son
ator. R is also provided that a candidate seek
ing a nomination for tho legislature may file in
a designated office one of two statements. "One
of these statements Is In tho following terms:
'I will, during my term of ofllco, ulways voto
for that candidate for Unltecl States senator in
congress who has received tho highest number
of the people's votes for that position at tho gen
eral election next preceding tho election of a
senator in congress, without regard to my Indi
vidual preference.' This Is known as 'statement
No. 1.' Statement No. 2 Is: 'During my
term of ofllce, I shall consider tho voto of tho
people for United States senator in congress as
nothing more than a recommendation, which J
shall bo at liberty to wholly disregard if tho
reason for so doing seems to me to be sufficient
If a candidate shall decline to sign either state
ment, his name must, nevertheless, if petitioned
for, be placed on the nomination ballot.
"The first nominating election under this law
occurred in April, 1906, to nominate candidates
to be voted for at the general election to be hold
in Juno of that year. A senator in congress
was to be chosen by the legislature then to be
elected. A very considerable majority of tho
candidates for the legislature signed statement
No. 1, and whon the legislature was elected it
was found that signers of that statement con
stituted a clear majority on joint ballot. Tho
result was that a United States sonator from
Oregon was, for the first time in many years,
elcctqd on the first ballot. . It was, indeed, a
most welcome change, for so bitter had been
the factional differences in the republican ranks
in Oregon during the preceding twenty years
that people had ceased to expect an election of
a senator to occur before the last ballot on tho
last night of the session; andVJt was always
possible that there would be no election, as in
deed was the case in two instances. In fact, I
am confident that the bitter and long-drawn-out
contests that had become the unbroken custom
in senatorial elections in Oregon contributed
more than all else to arouse the people to take
tho matter into their own hands. Of course, tho
people know hat the legislature can not consti
tutionally be required to elect to the senate tho
candidate in favor of whom thoy declare, but
. they also know that few members will care to
jeopardize their political future by declining so
to do. Furthermore, if a candidate for the legis
lature signs statement No. 1, he is, in case of
election, bound by an obligation as solemn ag
his oath of office to conform to it, and it is quite
apparent that a candidate who signs that state
ment will always occupy a much stronger posi
tion before tho voters than one who declines
to sign it. Consequently, we may reasonably
expect that every legislature will be composed
ot members of whom a majority were elected
on that pledge. Hence it may be said with per
fect accuracy that, in .Oregon, United States sen
ators are elected directly by the people. It is
the only state in which that is done. In some
others, nominations are made, directly by party
voters, but in no other, to my knowledge, is
the nominee required to go before the peoplo
for election. At the last session of the legisla
ture, an attempt was made to amend statement
No. 1 so that tho legislative candidate's pledge
would be to vote for such, member of his own
party-as should receive :he highest vote in' the
primary but the amendment was not adopted."
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