Image provided by: University of Nebraska-Lincoln Libraries, Lincoln, NE
About The commoner. (Lincoln, Neb.) 1901-1923 | View Entire Issue (May 17, 1912)
6 1 'H Slu ing and doubtless Instructive to some, but it can not bo regarded as supremely pertinent to tho question under consideration. This much, however, may bo said concerning Intrinsic value: When a man owns a farm from which a sure incomo Is obtalnod, ho has something which possesses intrinsic value; likewise tho holder of a first mortgage upon the farm; tho mortgage has Intrinsic value because it represents the farm. Tho same is truo for a bank noto issued against tho security of a government bond. If tho promlBo to pay fails, tho bond will protect tho holder of tho noto. Tho noto therefor has intrinsic valuo bocauso it represents tho bond. Bank notes which are more promises to pay without security aro forced loans from tho public and for which when tho notes aro not taxod tho public receives no consideration. They have no Intrinsic value. When onco put Into circulation in any largo volume the bank issuing such notes will hold a club ovor tho country which will onablo it to continuo tho issue, and as inflation fattens on itsolf, tho volume must needs bo increased until tho ond comes. Its arbitrary withdrawal will occasion the same class of ovlls which followed the bursting of tho Mississippi bubble and the bank failures of 1857. Tho public, however, can not bo so much in terested in tho personal views of any individual upon subjocts only collateral to tho main con troversy, especially when such a discussion may bo used to obscure or ovado the real Issue. It Is, howovor, vitally interested in the de tails and practical operation of a proposed law which would revolutionize our currency and banking systom. A causo must bo very weak which is forced to resort to the methods employed in tho so callod reply to this writer's objections to tho plan. Tho main points raised by him in tho papers from which tho quotations are taken are en tirely ovadod. Without going into those objec tions in dotall, the -writer will only mention two or throe of them which cover tho special claims mado in favor of tho Aldrich propositions. 1. Concerning the membership in tho Associa tion. This writer has assorted that instead of being a co-operative union of tho banks of the coun try, big and little," which is constantly affirmed in its favor, not only in "Banking Reform," but In tho stereotyped speeches of its orators; tho membership in this association will bo limited to a comparatively few banks, and ho has shown by tho bill pending tho reason for this asser tion. Every bank joining tho association must sub scribe to the extent of one-fifth of its own capi tal in tho capital stock of the association and onco a momber a bank can not withdraw from membership except through tho process of liquidation. The only inducement offered is the facility of obtaining rediscounts, but as the banks throughout the country must loan on longer iimff "i twenty-eight days, this privilege limited in tho manner it is would bo of little valuo to them. S0111 point Banking Reform, replying WiY' 7' S,?elano in this samo issue under tho heading, "A Confusion of Terms," develops a much greater confusion of ideas in its en deavor to make this limitation applicable to SaS?rB nlT' TnVamer il says' may eitr make long term loans, called "investment paper," which it says must be left to one siSo and not recognized in the scheme, or ho may mako short time commercial paper whose dis- ?nU ,F,ro nlCes funds t0 lmy tho cost of labor in cultivating and harvesting his crops and moving them to market," just as if all th-S-En? ? f ?n ft two"ty-oigUt days! Mr! Vree land in his able speech in congress, deals in nd such nonsense, for he says the paper shou d represent "the products of the farm and of t o factory on their way to market," which is n very different matter and usually can-bo man aged in less than twenty-eight days. BnnWninC??B,Bte,lcy 0f the statement mado by Banking Reform concerning farmers' nannr occurs to tho editor, however, before the close of his article, for ho again says: ?If To (tho farmer) does not now mako short time com mercial paper, he will mako it when his bSSc demands it," in order that it may use the nannr in tho ro-discount market. l aper In other words, this ninoo of , , . made to order as wanted and f not -in tho ord! nary process of business. Mr. VnSoland also The Commoner. had something to say along this line, for in reply to a question ho said tho paper could be renewed In case of need. Commercial paper manufactured for the pur poso of being discounted would scarcely realize that ideal "liquidity" upon which bo much stress is placed; a paper which is to come into being with actual commercial transactions and to end when tho transaction is closed. Most banks would not care to engage in this leger demain kind of business. They do not have loans on stocks and bonds as city banks have, but must rely solely for their earnings on the discount of such paper as -their clients will give them, and for this reason if no other they prefer tho longer time loans, which nevertheless aro just as strictly commercial paper as paper drawn for twenty-eight dajys. If this can bo deemed a reply to the objec tion along this line, then the public should con sider it closely and see to what it may easily lead. The only banks which can supply bona-fide short-time commercial paper are those in the largo financial, commercial and industrial centers, and the plan in operation must result in a combination of the large banks all working together under different local organizations, but perhaps under a single control, and using the reserve bank with its gigantic note issuing privi lege as an appendage to their respective insti tutions. " If a banking trust does not now exist, cer tainly tho opportunity for one would be pre sented to an extent sufficient to satisfy the dreams of tho greatest of our captains of finance. In a later issue Banking Reform touches again upon tho twenty-eight day limitation by asserting that banks, if they have any paper at all, must have twenty-eight day maturities. Of course, some paper would be maturing in that time, but it is a fact known to everyone con versant at all with business conditions that in tho agricultural districts there is always an increased demand for money at about harvest time, when farmers need advances to hold their crops and not be forced to market at once, and when those who wish to use their produce for fattening stock require money for the purchase of feeders. If banks in the agricultural districts ever need re-discounts this is the one time, and it would bo absurd to suppose that they would hold maturing paper of the same character to an extent sufficient to meet this increased de mand. 2 In the Matter of Loans It is claimed that in no case can a bank bor row of the reserve association upon the security of stocks and bonds. Technically speaking, this is true for ordinary transactions, and at first sight it would look like a clear discrimination against such loans. In fact, Banking Reform asserts that the pending plan drives Wall street and its invest ment collaterals out of the commercial field " When we consider that "Wall street and its in vestment collaterals" comprehends some of the largest commercial banks in the world and some of the best securities in the world, this thkv n SGGmS VeFy brad What WG find In o restriction of this kind is imposed upon the discount operations of the member banks and in operation the plan will relieve these ?naliS ff th,eiTt commercial paper, which, to a arge extent, is a necessary incident to their business, and leaves them free to use the r ent re resources in loans based upon stock Sther'X. r ther SGCUritieS' It-edge? or When their own resources are exhausted in this manner they may then have recourse to the reserve bank and obtain loans direct not only upon commercial paper, but upon paper secured by the pledge of these securities Under these circumstances the paper must come through and be indorsed by a local associatkm but this association may be composed solely tho same group of banks. y issulOOKn76? t0 Jh rcsorve bank to issue ?l,200,000,000 of untaxed notes and as many more as it may please, subject to tax w 1 anyone say that this may not lead tolhe wildest speculation and make possible a no 1 inflation of unbounded extent? 3. Prevention of Panics oo,T?iB tho Wrongest card played I will not oyt!rotptopg,aeme-bUt '" thlS B-Called "" Tho public is sensitive upon this subject and many are disposed to jump at anything which VOLUME 12, NUMBER 1 promises to secure them from these harrowing experiences. -It means, however, a great deal to tho public to realize what it may have to pay for tho protection under this plan. It is conceded by all favoring the plan that panics are caused by excessive loans by banks upon stock exchange and other speculative securities. Instead of putting a check in some direct manner upon this admitted weakness, the plan meets this difficulty, as has already been shown by a contrivance which will relieve the banks embarrassed in this manner and thereby stimu lates and encourages the practices which theso reformers apparently condemn. There are safe ways of preventing panics without incurring the risks covered in this scheme. Mr. Vreeland, in his 'speech, admits what this writer has repeatedly affirmed, that the Aldrich Vreeland bill now provides ample protection against any such happenings as those of 1907. He says, "the fact that $500,000,000 in case of a great impending crisis could immediately be brought into circulation would prevent the fear of a money famine." Granting with Mr. Vreeland that it is in effective to prevent the trouble until it comes to a head, it yet can be easily seen that separate reserve associations organized wherever a cur rency association can be formed under the Ald-rich-Vreeland bill, with power to loan 50 per cent of their reserves and a taxed circulation under specified conditions, would give all tho protection needed. It would not necessarily put the business of the entire country under a central control, but would distribute the relief wherever it would be most wanted, and perhaps keepv local money at home to a greater extent than is now done. This has been suggested, but of course noth ing can be brought forward with any promise of success so long as tho Aldrich plan is urged and supported with men and money to the ex clusion of every other proposition. The Citizens league, it is said, is organized for the purpose of enlightening .the public upon the subject of currency and banking reform. Why should it, therefore, hide behind the eva sive declaration that it is supporting no particu lar plan? If it has no plan then it ought to get one as soon as possible. It is, however, well known that at this time there is only one plan pending which is being pressed for adoption, and it is notorious that among the league's chief orators now engaged in this so-called "education" are some who were members of the commission which reported the bill to congress and that its orators without exception talk of nothing else than this measure If the league is in favor of the Aldrich plan, as seems to be undeniably the case, then the high-sounding declarations of its orators along general lines should be made to fit the practi cal application of the bill introduced in con gress. Instead of abusing and misrepresenting thoso who dare to say anything in opposition to the scheme, the public, it would seem, should ex pect it to come out in the "open" and answer, if it can be done, the objections raised by this writer and others in plain and unmistakablo lnaguage. Henry W. Yates, Omaha, Neb. "A MAN'S A MAN FOR A' THAT" Editorial in Lincoln (Neb.) Journal: "Why are we so cool?" asks one passenger on tho sinking Titanic of another, "Because we are Anglo-Saxons," he answered, according to the story told by a literary survivor of the wreck. How nice! We Anglo-Saxons have many things to be proud of, and our coolness and heroism in the face of danger is one of them. We should be sorry for people not born of our particular recipe of Angles, Saxons and Jutes, stirred and mixed thoroughly. Yet others, fortunately, are not wholly base. Why were Isador Straus and his wife so cool? Because they were Jews, presumably. And that man who put his babies in tho lifeboats and stepped back without a word? Because he was a French man apparently. Socrates, cool with hemlock m ms hand, had not heard of the Anglo-Saxons. Because they are Mongolians, Chinamen and Japanese are remarkably cool in the face of ueatn. it was a very black Anglo-Saxon who cooiy stopped a runaway team in Lincoln the other day, rescuing lighter colored folks. "This ASai x5ulB same," said Guggenheim not an ?f rSSon,name' strange to say on the deck n JSJ! .?,t5?1f'Vand l am goine t0 play lfc lik0 a man. Not like an Anglo-Saxon; like a man.