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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
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