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The Commoner,
$y
v.
ft.
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Aldrich Currency Scheme Means a Bankers Trust
Mr. J. P. Blount, president of tho Denton
County National Bank, at Denton, Texas, has
written for tho Dallas Nows an Interesting article
relating to tho Aldrich currency scheme. Mr.
Blount Is an experienced banker and his article
Is entitled to careful reading by every American
citlzon. Tho article follows:
Denton, Tex., July 21. In tho columns of
tho Nows lately was an editorial of criticism of
Hon, W. J. Bryan in his supposed opposition to
tho Aldrich proposal for currency reform.
Tho Nows states that "oven Mr. Bryan's most
devoted admirer must bo senslblo that finance Is
tho one subject concerning which his ignorance
would fill a library' and "about the attributes
of credit, ho knows apparently nothing," and
warns tho democratic party that there is no "pit
fall agahiBt which tho democracy will need to bo
moro on guard than this of its attitude toward
tho bill for tho creation of a1 currency reserve
association."
Not in a spirit of criticism of the Nowb' ani
madversion of Mr. Bryan's supposed position
as developed by the editorial, with the News'
permission, I desire to submit some general
observations for consideration.
'It is unquestionably true that tho monetary
commission, of which Senator Aldrich is chair
man, has evolved a plan by which to reform 'tho
currency, and the banks of tho country are be
ing organized for the purpose of carrying
through congress the Aldrich plan; that com
mercial organizations, especially in tho larger
cities are being exploited upon the same sub
ject. The distinguished president of one of the
largo banks of Chicago, in his address before
the state bankers, in convention at Dallas in the
month of March last, elucidated certain general
principles of the legislation sought to carry into
effect the so-called Aldrich plan for currency re
form. The address met with the approbation
of and was indorsed by practically a unanimous
vote.
I desire to submit what I conceive to be a fair
statement of the purpose of the plan under con
sideration, with some of the reasons assigned
for its adoption by advocates of the Aldrich bill,
coupled with the supposed special defects in our
present system of bank currency. The objec
tion to our present system is the practical in
ability of uniting so large a number of banks
under a common policy of action such as to an
ticipate financial trouble and allay the public
distrust. In other words, lack of cohesion or
co-operation with or among the units of the
system, and the wasteful use of reserve money
caused by the present system requiring each
bank to keep or control its own reserve. To
remedy these defects the proposition is the for
mation of a machinery by which tho united
action of banks can be secured and tho re
serves of banks centered in some central or
ganization. To accomplish this a central or na
tional reserve association is to bo established,
composed of local associations of banks of not
less than ten members or banks the capital and
surplus of such banks to aggregate not less than
$5,000,000.
Tho local associations to be grouped into fif
teen divisions to be known as districts or
branches of the reserve association. Banks do
siring to participate in the benefits supposed to
be derived from the organization must join tho
association of their districts and pay into the
national reserve association 20 per cent of their
capital stock and in addition keep a part of
their reserve money in the central or reserve
association, as may be determined by its direc
tory. The supposed ingenuity in formulating the
plan of selecting the governing board or direc
tory, to prevent special or Wall street interests
from dominating tho reserve association, is moro
specious than practical of such results, and at
best is but a play to tho country and will prove
impotent in producing such results.
Plowever, I shall not take the space to analyze
the plan of selecting the directory.
The purpose of the Aldrich plan, if enacted
into law, from its name would imply that it was
to be a reserve bank for all the other banks par
ticipating, but an analysis shows the special
function to bo to monopolize the note or cur
rency issuing power for all the banks based
ultimately upon commercial paper.
It will not be questioned that tho issuance
and control of tho currency is an exceedingly
important problem, whether 'viewed from the
Aldrich standpoint or not. " There ought to be
some special merit In tho Aldrich plan to re
ceive tho indorsement of not only tho state
bankers of Texas, but many other state bankers'
conventions throughout the United States.
Availing ourselves of the lamp of experience
and reason, such a" monopoly as would be
created by tho Aldrich plan will not, in my
opinion, impress the country or legitimate com
mercial business with its profound wisdom. I
am not attempting a critical analysis, as space
forbids, but desire only to submit a few observa
tions in relation to the general scope and prac
tical results of the Aldrich plan. I think it
proper to state in this connection that Senator
Aldrich and those advocating his theory of cur
rency reform say they regard the present bank
ing system as barbaric and the worst of any
civilized country. Surely this contention is not
based on the ground of want of stability and
soundness, the essential elements of any bank
ing or currency system.
The trouble in my judgment is not the present
system of currency issue, but rather because the
legitimate functions of the banks have been per
verted, especially by the large speculating,
under-writing and promoting banks.
If such banks can not; be controlled to per
form tho functions for which they -were created
and the ruinous practice of speculation and promotion,-ending
in the dislocations of the ex
changes of the country if it can not be stopped,
then indeed it looks hopeless.
Under the 'Aldrich scheme it would but in
crease the power of such banks to turn- over to
them the absolute control in the issuance of the
currency, predicated as it is under that plan on
commercial paper, limited only by the capital
stocks of banks. The crux of the contention of
the advocates of the Aldrich plan being to turn
over to the reserve association the control of
the issuance of all the currency as well as per
form the duties of fiscal agent of the general
government- If we are to abandon the present
system, based as it is on the principle of safety
and stability, with limitations as to amount of
currency that may be issued, surely no change
should be made on this pre-eminently grave
question without due consideration. In my
opinion, no more important revolutionary or
dangerous legislation has been proposed to the
Judgment of the American people than the Aid
rich plan of currency reform. The people ought
to remember that some times it is the indirect,
unintentional and unforeseen consequences of
legislation that change the character and trans
form the institutions of their country. If the
proposed monetary legislation is had, the ine
vitable consequences in time will be to centralize
our government and socialize our industries. It
will not be denied that the banking business, in
volume, value and importance, transcends that
of any or all other kinds of business. To give
any reserve association composed of banks a
tenure of existence for fifty years, as provided
in the Aldrich plan, to fix, regulate nad control
the issuance of the currency of this country; to
expand and contract the issue, making money
plenty or scarce at the will of a directory, with
out harm to the business of the country and its
productions, is impossible so long as greed and
avarice permeate the minds of men.
No congress ought to endow any association
of banks with this power. All human experience
teaches that it would be a menace to the coun
try; under such a system the power that controls
the Issuance of the currency, the life blood of
commerce, the domestic exchanges, will also
have the power to fix prices of products by mak
ing currency scarce or plenty as suits the guid
ing hands of the directory of the reserve as
sociation, whether dominated by Wall street
influence or not.
A distinguished banker addressing the bank
ers convention at Dallas this year said some
thing must be done, as consolidations were go
ing on among tho larger banking institutions of
this country that will eventually control bank
ing conditions, yet there is no bank that has
gotten control of and absorbed more other like
institutions than the most excellent bank of
which he is president, with a directory in con
trol of the splendid bank over which he presides
representing three or moro of the great so-called
trusts of the country. I do not say this in dis
paragement of tho strong and excellent bank
over which ho Is doubtless the controlling
genius, but to show that he is in reality a good
diagnostician of the situation.
Senator 'Aldrich has declared that it will be
impossible for thcstate banks to come in with
VOLUME 11, NUMBER 3
their state charters, and this view was pro
claimed by President Taft.
If they were permitted to como in, it would
doubtless result in tho destruction of the right
of control and supervision by the state of a
creature of its own making and would destroy
the protection of depositors in states where tho
guarantee law is in force. Wherever may bo
the repository of sovereignty, whether in tho
national government, American people as a unit
or the states, our government is one of co
equal states. Enact the Aldrich plan into law,
our state banks, greater in number and resources
than the national banks, to get the benefit of
such a law, currency issue on a pledge or dis
count of commercial paper, must be subject to
national authority, as no currency is issued to
any bank unless it belongs to and subscribes 20
per cent of its capital stock to create the reserve
association and keeps a part of its reserve
with it.
Indeed, the state in its monetary affairs will
be stripped of every attribute of sovereignty,
as unimportant as counties in a state. May the
day never come when our banking system shall
be melted down into a Chinese uniformity to
end finally in Chinese stagnation and death.
That the agitation for the Aldrich plan is
largely the work of the speculating and promot
ing banks of the country will not be denied; the
representatives of the larger banks are in evi
dence at every state bankers' convention, plead
ing for indorsement of the Aldrich scheme.
The- trouble is that mankind is prone to seek
powers to further its own selfish interests; out
of this desire has grown the trusts, monopoliz
ing tho industries of the country, and a bank
monopoly will be no exception in their own
special lines. It is the curse of the country
that in the discussion or consideration of great
questions reason is silenced by self-interest by
men who too frequently mistake agitation for
self-interest as a veritable movement of an
ocean, when it is but the blubbering of a "mud
puddle." It is not believed such a plan as the
one under consideration will ever pass the
American congress.
The original outline of the Aldrich plan, only
commercial banks were to hold stock in the re
serve association, but it is now contemplated to
create two new classes of national banks, to
exercise the functions of savings banks and trust
companies. This would be, to say the least, of
it, of- doubtful expediency. No savings bank
or trust company-.should ever be permitted the
indiscriminate use of their funds for commercial
and speculative purposes, and will but be a dis
turbing factor and complicate the situation
should the Aldrich plan be adopted. But, pass
ing from this, would the management of, such
a reserve association be liberated from all poli
tical influences? Could we hope for pure and
disinterested service on the part of those who
- shall control? Will the increased power given
banks under this plan lessen the ambition or
quicken tho impulse of unselfish devotion to the
public? Would the party in power spurn the
influence of such an institution in seeking re
election? Passing over all possibility of the
prostitution of such an association either to
selfish purposes df special interests, with hun
dreds of millions to loan, under the right of
note issue granted, is it not perfectly clear that
such .a reserve association would control the
financial and political situation to make money
scarce or plenty, as the exigencies of Wall street
might demand to further its own interests? In
deed, it might be pertinent to ask: "What hid
den hand is pulling the wires?" What occult
influence is trying to shape our financial fate?
Is the country by threats and possibly by panic
to be driven into a position of necessity? Is
such legislation to be forced upon the country
by combinations as has been intimated?
The plea that we need a so-called scientifi
cally constructed currency system, one that will
contract and expand with the tides of business;
in other words, an elastic currency, an evolu
tion of our monetary affairs, is the plea of the
bankers who support the Aldrich plan.
The cant that is indulged in along this line
Is sophistical. This evolutionary school in bank
ing would make believe that this movement was
of, for and by the people, when, indeed, the great
body of the people have not read, nor do they
understand what is meant by the Aldrich plan
for currency reform. I repeat the cant Indulged
in by the special interests that we have outlived
the present monetary conditions, that every
monetary age Is one of progression, Is a flag
rant error. Rome progressed from Caligula to
Nero, but how did the Rome of Nero compare
.in grandeur, excellence, .political, and Individual
well-being, with the -reignt.of -Caligula? - Three
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