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The Commoner.
6
.VOLUME 12, NUMBER (
"Zf is to the Democrats in Congress That , W'e
Mus Look for any Early Financial. Legislation "
This is the Statement of Henry W. Yates, President of the Nebraska National Bank of
Omaha, in a Vigorous Attack Upon the Aldrich Currency Bill
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Boforo the Nebraska Bankers convention,
held at Omaha, August 27th, Henry W. Yates,
president of the Nebraska National Bank, Oma
ha, delivered the following interesting address:
Gentlemen of the Nebraska Bankers associa
tion: The opportunity has not heretofore been
given me of expressing to you in an address my
objections to the banking and currency plan now
pending in congress, known as the Aldrich bill.
Inasmuch, however, as I have published these
views in pamphlet form, to which some consider
able circulation has been given, I will not under
take to repeat them on this occasion, except to
the extent of emphasizing those particular points
which in my opinion utterly condemn the meas
ure as it is now presented and render its adop
tion improbable.
In the position I have taken upon this subject,
which is so much at variance with that of
numerous prominent bankers, I think you can
not but see that I have been impelled by no per
sonal motives whatever; I have not even had a
pet plan of my own which would be set aside
by the adoption of this plan. In fact, the only
criticism to which I have been exposed is that of
pulling down without offering some substitute
to meet the admitted defects in our banking
system. I have been actuated solely by a sense
of public duty connected with questions with
'which I have had a lifetime familiarity and
from sympathy for our independent banking
system with vhich I have been engaged for a
period lacking now only one year of being a
half century.
$ TWO DIVERGING LINES
' 'As a student of these subjects I could not fail
to have noticed that from the foundation of our
republic there have existed, both in finance and
in general politics, two widely diverging theories.
One has leaned strongly toward a powerful cen
tral authority, the other has advocated the
largest individual liberty along all business
lines consistent with the public welfare. For
a brief period in our history the centralized
theory of banking was given its oportunity, but
1 Its errors and weaknesses were soon developed.
I The acts and operations of the United States
i bank did not commend it to the public opinion
j of that day. It was drawn into politics as all
. nuch creations must inevitably be, and after
' one of the most exciting political campaigns this
' country has ever known, in which it was a vital
.Issue, it was utterly repudiated and has had no
! advocates since until in recent years, our so-
called money reformers have endeavored to
resuscitate it under various "nom de plume."
1
INDEPENDENT SYSTEM
On the other hand the independent system of
hanking has never been so strikingly demon
strated and advanced as during the past fifty
, years a period during which, notwithstanding
the civil war and two destructive panics, our
country has grown in power and importance
among tho nations of the world, financially and
otherwise, to a degree never dreamed of by
our earjy statesmen who founded our govern
ment Believing that this independent system of
banking has borne no small part in this magni
ficent national upbuilding that it has accom
plished all and more than any other system
could have done that the two systems can not
xlst together it is natural that I should op
pose with all my power a proposition which
would eventually destroy this independent sys
tem and erect in its place the autocratic conti
nental system of Europe.
If this part of the question could be fairly
'discussed and not be cloaked as it is by mis
statements and indirection which conceal and
confuse it, the claims in favor of the new sys
tem could easily be refuted. But it is not met
in this manner. On the contrary, it is claimed
jthat'the new system -will in-no manner 'interfere
with the old, but at the same time it will bo
noticed that the orators favoring the new sys
tem do not cease to declare on every occasion
that we have the "worst "banking system in the
world."
We will concede that this system has some
defects; that its career and growth have been
irregular and unsystematic. But what It is has
been gained from actual experience and almost
perfect adaptation to the conditions under which
it has existed. The living organism is now in
evidence, and whatever is done in the way of
reform should be in the direction of improving
and strengthening this system, not in destroy
ing it.
Far stronger arguments than any which have
been advanced should be demanded before the
first step is taken to effect the revolution which
would be involved by the disappearance of our
independent banks.
THE CURRENCY
The change proposed in our currency sys
tem should also be resisted.
Ever since the decline and fall of the old state
bank currency this country has had for its cur
rency only gold and silver with such paper money
as the government itself has put out or has
authorized for its own benefit and advantage.
So far as our national bank, currency Is con
cerned, it may all be retired without any loss
to the banks if their bonds are provided for.
The profit derived from the issue of the notes is
bo insignficant as scarcely to deserve considera
tion. But if any currency is to he issued for tho
benefit of the government, it is far better that it
Bhould be done through banks in this manner
with the responsibility upon them of current
redemption, rather than that it should be issued
in the form of notes direct from the treasury.
It will be conceded, however that the volume
of national bank notes ought to be limited to
some definite sum.
The Aldrich plan would do away absolutely
with the national bank xnotes, through whose
means the government has always obtained a
low market for its bonds and at the same time
has derived no inconsiderable revenue from tho
tax imposed upon them. It would substitute
for them the untaxed and unsecured "promises
to pay" of the corporation It proposes to create
with no resulting advantage whatever to the
government.
PUBLIC CREDIT LOWERED
To effect the disposition of the United States
bonds held by the national banks, it is proposed
to refund the 2 per cent bon'ds into bonds carry
ing 3 per cent. This, places tho government
for all future loans it may need in the market of
the world like any other borrower, and thus
at the outset depreciates and discredits its finan
cial standing.
Many bankers' conventions, this association
among the number, have voted their formal ap
proval of the Aldrich plan and so- far as public
utte'rances have gone, it would seem that tho
banking fraternity Is a unit in Its favor.
In the speeches of its promoters tho plan is
made very alluring to bankers. You are told
when your demands for money exhaust your
loanable supply, all that you will, have to do
will be to exchange your bank, paper for the
n&tes of the reserve bank, anduperpetual mo
tion is at once secured. if
But you may examine the measure closely
for yourselves or call in the assistance of some
of these promoters, and nowhere can It bo
shown that the ordinary paper you take in the
course of business can be used., either at the
hank itself or at any of its branches. The only
suggestion I have heard ventured is that if
you do not have the prescribed 1 paper your
' selvesryotir 'city-correspondent will have 'itand
the privilege is given you of "doing business at
the old stand."
The reserves of the entire country concen
trated in one single institution will amount to
a vast sum, and when this fund is doubled, as
it may be under this proposed law by the issuo
of bank notes, and this added to the money on
hand, the figures produced are so immense that
they will stagger the ordinary mind to compre
hend them.
It is quite natural that the ordinary banker
should conclude that in some way, a part of this
vast hoard will reach him, and perhaps it would.
THE PUBLIC OPPOSED
But granting that bankers may see some
thing in the scheme, which will work to their
advantage, and therefore favor its adoption, it
does not follow that the public will look at it in
the same way. The concentration of this vast
fund with the power it would carry with it in
a single corporation, operated it may be by
a very few individuals, would bode no good for
the public welfare. This public may be willing
to accept the leadership of bankers in some
questions pertaining to their business, but when
it comes to the great public questions of a cen
tral bank, authorized to hold all the bank re
serves of the country and to issue unlimited un
secured and untaxed notes to circulate as money
under government prestige and authority, it will
be found that an intelligent people will form
conclusions of its own, and that the consensus
of this opinion will be against the scheme.
This I think is already clearly indicated in
the financial planks of the various party plat
forms. The president was induced to give his support
to the Aldrich plan and urged its adoption vig
orously in a special message. It would naturally
be supposed that the party which nominated him
would declare distinctly in its favor. The plank
adopted by no means does this. It may be so
intended, but if so it is a case of finding words
in which to conceal meaning. All the other
platforms distinctly denounce it. I think it can
be safely asserted that no currency or banking
scheme which provides for a central bank and
the issue of unsecured and untaxed bank notes
has any possible chance of becoming a law.
DISCUSSION OF SERVICE
But the discussion may prove of some service.
It has been mainly one-sided; tho pleadings
have been really all from the promoters of the
scheme, who-by means of .their strong financial
hacking have been able to make a thorough and
able presentation of their claims.
As can be clearly seen these arguments have
not succeeded in convincing the public; they
have, however, attracted attention, which is of
itself a great advantage. The time is ripe for
some decisive action, and if the banks will join
in asking for some law giving them the power
to combine their reserves for mutual use, and
the power to expand their credit in emergencies
to a reasonable and safe extent, there can be
no reason to doubt but what men of all parties
will join in affording them the desired relief.
PANICS
i It is generally agreed that the main weak
ness in our banking system is its inability to
.withstand panics.
" In the publications of the National Citizens'
i league this is the club used to make tho plan
v go. The Aldrich bill is claimed to be a com
plete and permanent cure for panics. But due
candor is not used in the impression sought to
be made upon theViblic, a 'to the kind ofpanic
'Jwhich Will' be cured,
r A bank panic Is'-one thing j an economic .panic
is entirely another The letter marks Upturn
ing poiritJi'n business activities when a readjust
ment of prices must he made to indicate values,
' 'arid--this is continued tor "the ruination point
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