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.
