Image provided by: University of Nebraska-Lincoln Libraries, Lincoln, NE
About The commoner. (Lincoln, Neb.) 1901-1923 | View Entire Issue (June 5, 1908)
- 4viifr$t. yiwmw ' " ''''i'wqif'Mf11'' '''Ti,ii'"'piHr!y The Commoner. VOLUME 8, NUMBER- 21 I p toty. i mtov loaned forward and extended hla arm into his lighting position. "Will anyono toll mo that the law was en forced in Now York during tho panic?" ho cried. Ho waited. There was no answer. Mr. Forgan said nothing. "I will stako my reputation," cried Mr. Bryan, more vehemently than over and speak ing slowly, "that tho law was not enforced in New York during tho panic." Another pause. Tho room was entirely quiet. Cankers looked at Mr. Forgan. Mr. Forgan looked at tho pink carnation heforo Jilin. Mr. Bryan regarded tho chandelier. '.'And I will say further," resumed. Mr. Bryan, smilingly, "that if tho law had heen en forced in New York during tho panic, tho panic -would havo been a groat deal worse." Everybody laughed at that, including Mr. Forgan, and tho atmosphere became, clear again. Mr. Bryan then proceeded to unfold his theory that tho criminal law should ho applied to bankers who infringe tho ten per cent pro vision. "In my most emphatic belief," ho said, "it should bo mado a criminal offense for a bank official to loan more than ten per cent of tho capital and surplus to ono person. Tho criminal law should be applied to . such a person. Don't you agrco with mo?" Another pause. One banker cried "Yes." Two cried "No." Mr. Bryan -went ahead again. "Well," ho said, "whothor you agreo -with mo or not, let mo tell you that 15,000,000 de positors aro ready to apply tho criminal law. to tho. man who jeopardizes tho community by ignoring tho safeguards "which have been placed around 'it by law. Is it harsh to suggest appli cation of tho criminal law?" ?J,tjC ...... TJIE BANKING BUSINESS On tho evening of May 22nd, Mr. Bryan addressed tho bankers of Chicago at a banquet given at tho Auditorium Annex. Hon. Chas. G. Dawes, former comptroller of the treasury, pre sided and in tho course of his speech emphasized tho importance of tlio banking business, calling attention to tho fact that there aro some twenty thousand bankB in the country and about fifteen million depositors.' '!t Mr. Bryan took for ills sub ject, 'Tho Banking Business," and in the absence of a stenographic report prepared the following abstract of his remarks: has in&--v.,vitQ tho invitation extended by the authority he can m and am glad to present what 'I think 1 'may fairly say o the views of a considerable portion of the American peo ple upon the subject. It is well that such meet ings are held, for by the exchange of opinion we arrive at what is best. A great deal of tho will' 6voQ of opinion to be found among us tho people iu understanding of each other and boss as the con.- potion. If representatives of ' thp'vHiJ.tu.,. socuv" of tho country could attend Tour mootlngs and '-representatives of tho bank ing fraternity address meetings in different parts of the country it -would bo easier to find com mon ground upon which to Btand. I can as sure you in tho outset that those for whom I .speak do not approach tho subject in a hostile spirit or with unfriendliness to bankers. Tho banking business is not only an important husi neBs, but very necessary to tho community. Tho fact that fifteen millions of people deposit in tho banks is sufficient proof that tho entire country Is deeply Interested in all that concerns tho bank and tho hank's management. Tho great troublo is that the subject is too often considered merely from tho bankers' standpoint Without sufficient regard to tho opinions and tho rights of tho depositors In fact I had thought of taking as my subject, "The Banker's Friend," .but tho present subject was announced before my letter reached the toastmastor. Had 1 been announced to speak upon "The Banker's Friend, I would have commenced with tho as aortlon that tho depositor Is tho best friend that the banker has, and ray second proposition would have been that those who attempt to cure the defects In hanking and put it upon a more sub stantial basis aro better friends than those who conceal the faults of the system and engage in indiscriminate praise. . I do not agree with those who declare that our hanking system is the worst in tho world nor with those who aro constantly asking us to substitute for oui system some old world svs- tern. Our banking system must be the product of our own conditions and consistent with our institutions. Jefferson was once naked to write a constitution for a French colony which located in one of the southern states and. although ho had had rare experience In publio life ho al clined to write the proposed cons itution on tfe ground that a constitution must ho tho out growth of tho history and traditions of tho peoplo and that no outside person was com petent to write a constitution for them. So no European banking system can bo trans planted here. Wo do not need a great central bank with branches stretching out to remote cities and strangling independent banks. It is bettor to preBervo tho integrity of the individual banks and put them as far as possible upon equal footing so that tho competition between them may be a fair competition and the rivalry a healthy rivalry. It is better to correct such defects as our system may have than to attempt to revolutionize it by imitating tho banking systems which, however suited to the conditions of other countries, would not lit into our con ditions. In all legislation in this country tho first thing to remember is that authority comes from the peoplo and that no legislation can be per manent which Is not satisfactory to tho people. I object to the appointment of commissions, when such commissions aro intended merely to postpone action and keep the question out of tho campaign. If tho people are deceived dur ing a campaign and then taken advantage of at tho close of the campaign, tho result is not apt to bo satisfactory. The bankers try to keep on good terms with their depositors and they will find it to their advantage to take the public into their confidence and confer frankly and fully about proposed changes in the law Xiet me divide my Bubject into two parts and first speak to you for a moment about bank currency and then I shall deal more at length on bank deposits. There has 'for 'some years been a demand for an emergency currency and this demand has been accentuated tiy the recent panic. I think that there is a general disposi tion to provide for the emergency currency in time, but the willingness of some of our finan ciers to postpone action until after the election rather than permit the adoption of any plan which they may oppose, arouses the suspicion that tho currency question may not be as serious as we have been led to believe. But assuming that there is need for an emergency currency -1 believe that it is well for us to make provision ' for such currency how shall it be issue'd and libw supplied to tho country?1 Both of the plans before congress involve a change in the basis upon which our Dank notes reBt. Tho Aldrich bill would substitute honds; tho Fowler bill provides for issue upon the hanks' assets. Both of these plans, however, as will- be seen, involve a distinct departure from the present system. Tho bank notes now in circulation rest upon government bonds and as they rest, upon the government's obligation, they are guaranteed by the government and have always maintained their place by the side of the greenback. If a new kind of bank note is issued, it establishes a new ByBtein and an emergency currency ought to be provided hy some plan consistent with,;the present system. An emergency currency can be provided without any new departure, without any violation to existing systems and without raising any now questions. We now have in circulation some three hundred and forty-six millions of dollars in United States notes com monly called greenbacks, and to issue similar notes as an emergency currency would be merely an extension of a plan now in use. We also loan money to the banks and these emergency greenbacks could be loaned to the banks with out resort to any new system or the establish ment of any new principle. Then, too, the issue of government notes as an emergency currency would enable tho government to supply locaj needs more fully than is possible under a bank currency, Only national banks are allowed to issue laank currency and the measures under consideration in congress do not contemplate any enlargement of this right. There are more state banks than national banks and they per form a real service to their respective commu nities and fill a legitimate place. If tho emer gency currency is to be a bank currency it can only bo put in circulation through national hanks and those .communities which have only state banks can not be relieved in times of stress. -Why not provide an emergency currency that can be loaned to state hanks as well as national banks and thus treat all communities alike and give relief everywhere? This plan recognizes the usefulness of the state bank and in the matter of emergency currency puts it upon the same footing as tho national bank. Why Bhould the national bank claim a fnonopoly of the right to relievo a financial stringency? If a government emergency currency is con ceded there will bo no difficulty about the se curity. Tho money can be loaned to individual banks on a specific deposit of honds, or it can bo loaned to district clearing-houses without specific security, for if the clearing-house is given power to hind all the banks in- that district their assets will be sufficient to protect the gov ernment from loss and no specific security need bo supplied. As to emergency paper then, the govern ment should stand ready to supply United States notes as needed, these to be loaned to national or state banks upon prescribed sectirity and at a rate which will compel retirement when tho emergency is over. And the: security should be such that either an individual bank1 or a group of hanks may secure the nloney needed for the business of the community But 1 am more interested in the protection depositors than in the emergency currency. First, because the emergency currency is needed only occasion ally while protection to depositors a perma nent need, and second, because I' 'believe that the guaranty of depositors would call forth so much money from hoarding and hiding that we would have less occasion to resort to emer gency currency. Banks invite deposits and deposits are in vited of course upon the theory that the money deposited can be withdrawn at any time. That this is the assumption can easily be demon strated. While the banks publish a list of their directors to give a sense of security to the de positors, the directors will not agree to be bound uJSS. rePayment f deposits heyond the legal liability, attached to them as stockholders. Ask them for such an agreement and they will tell you that the danger of loss is very remote" and yet, remote as if is, none of them 'will 'agree to assume the risk. Why should not the deposi tor have complete protection? If. the bank re ceives government money on deposit, the gov ernment demands security. If the government demands security when it can. inspect the banks at-will, why should not the laborer or the seamstress have security? Must the ordinary depositor risks his all in the bank when the government is not willing to risk anything? v 4. Fha,fc PbJectiop is made? The banker says that he does not want to be responsible for the action of other banks. : But. -if banks will -not trust each other, can they blame the depositor for feeling a little timid? The bank receives its deposits largely be cause of the presumption of security that the government furnishes. The fact that the bank is incorporated by law 1s in itself an advantage, for the law rests upon a presumption which does not exist in the case of an individual who an nounces himself as willing to accept deposits. All the laws regulating banking are made main ly for the benefit of the depositors. Why Is the hank compelled to keep a certain percentage of Its deposits as a reserve fund? It is for the security of depositors. Why are hanks inspect ed? For the security of depositors. Why is a banker forbidden to loan more than one tenth Of the capital and surplus to one person? For the protection of depositors. It will be seen that the regulation of hanks is in the in terest of deposits and yet this regulation only raises a presumption of security it does not provide security and experience shows that the depositor can not know certainly about the affairs of a bank until the hank closes np. In addressing a meeting in New York City recently, I stated that nearly every bank failure was due to the misuse of the funds by the offi cers or directors, and ex-Secretary Gage and Mr. Balder, president of the First National Bantc of New York, were present and verified my state ment. And yet in spite of this fact it is diffi c,ult P secure effective legislation protecting depositors fr6nv the misconduct of directors and officials. In the Walsh trial in this, city a banjc examiner testified that the law forbidding the .loan of more than ten per cent of the. capital and surplus was only directory and that if a bank, violated the law it was notified of ih& violation and that if it continued to violate the law it was notified .again. This la.w is npt eiy "frS?d,-r,(Al,tyB polnt Mr- J118 B. Forgan, f?1!? N10111 Bank q Chicago interrupt-. edwithih,? statement, "That is not frue now,!' and the following dialogue followed? Mr. Bryan: Since when?" Mr. Forgan: "Since the law in creasing the loan to ten per cent of, the capital and surplus." Mr. Bryan: "Was the law .en forced in New York during the, panic last fall?' No answer being given, Mr. Bryan continued!: I will venture my reputation; upon the 'state ment that the law yas not enforced atthat time in New York, and J wilt add that the -papTip would have been worse if the, laChadeen en forced." Mr. Bryan proceeded".) There 'oughf b"b . ,.m iHil . W.' 4&taMMM , Ml j -. . ... -J