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The Commoner
VOL. 13, NO. 30
14
B.
nry alone, thus conferring upon a single political
appolntoo of the president tho tromondous re
sponsibility, as well as tho great power, of dis
pensing $500,000,000 of currency and, within
his solo discretion, determining tho validity and
sufficiency of $050,000,000 of commercial paper
and othor securities.
Among othor things, tho Vreoland-Aldrich
bill, section 2, dealing with tho application of
banks for curroncy, provides that:
Tho comptroller of tho currency shall immedi
ately tranomlt such application to the secretary of
tho treasury with such recommendation as no
thinks proper, and If, In tho Judgment of tho sec
retary of tho treasury, business conditions In tho
locality demand additional circulation, and If ho
la satisfied that a Hon In favor of tho United States
on tho securities so deposited ana on mo ubbuw
of tho banks composing tho association will bo
amply sufllclont for tho protection of tho United
Statos, ho shall direct an issue of additional circu
lating notes to tho association on behalf of such
bank, etc.
I bog theso critics to'noto tho language of
tho statute:
If in tho judgment of tho sccrotary of tho treas
ury buslnoss conditions domand additional circu
lation! And again:
If tho secretary of tho treasury bo satisfied
that tho securities deposited are amply suffi
cient for tho protection of the United States.
Could anybody conceive of power more arbitrary
or of centralization more complete? There is
nothing comparable to it in this bill, for here
wo commit tho power to a board of seven, hav
ing a trained and trusted representative at every
point of origin, applying every precaution and
going through every detail known to prudent
banking processes.
When this extraordinary power was conferred
by this houso'fivo yearB ago on a single official
of tho government and objection was mado by
Mr. James, now a senator from Kentucky, tho
loading republican member of the banking and
currency committee, Mr. Burton, now a senator
from Ohio, exclaimed with much feeling and
effect:
I say that for ono I favor lodging authority with
tho secretary of tho treasury and allowing him,
under tho great responsibilities of his position, to
dotormino tho amount of Issues rather than to leave
tho decisions to tho banks.
With how much moro reason, Mr. Chairman,
may wo who stand for this currency bill insist
now that this power shall be lodged with a
government board, composed of high and ex
perienced men, four of them with long tenure
of office and all of them, let us hope, keenly ap
preciating their great responsibilities and
courageously determined o do their duty as
representatives of the American people. There
is no politics in this matter; there can bo none.
It 1b my earnest conviction, based upon long and
serious reflection, that no man can conceiyo, as
none has yet pointed out, how any part of this
system can be perverted to political uses. In
my judgment if the United States has ever had
a president Ingenious enough to do UiIb evil
thing, it has never had one desperate enough,
and never will have one shameless enough, to
thus betray tho confidence of the nation. I
happened to be present when an eminent banker
suggested such a possibility to the present occu
pant of the executive chair, and heard this
banker vainly challenged to show how it might
bo done. I shall not soon forget tho emphasis
with which tho president of the United States
declared that no man would over bo found who
would bo willing to imperil his reputation or
tarnish his fame by so flagrant a prostitution of
his high office! It brought to mind tho splendid
declaration mado on this floor by Congressman
Burton, of Ohio, five years ago in discussing
this very topic, when ho compacted the whole
thing in a single sentence, exclaiming:
Thcro aro oxecutlvo acts which aro theorotically
possible but which tho Incumbents, with their
weighty responsibilities, would never daro perform,
becauso they would know that If their courso was
marked by favoritism or Injustice thoy would bo
discredited while living and dishonored when dead.
Tho X ray of publicity Is turned full upon tho
operations of this federal reservo board. Thero
can be nothing sinister about its transactions.
Meeting with it at least four times a year, and
perhaps oftener, will he a bankers' advisory
council representing every regional roserve dis
trict in the system. This council will have'ac
cess to the records of tho board and is autho
rized to give advice and offer suggestions con
cerning its general policy. How could we have
exercised greater caution in safeguarding the
public interest?
BANKING REFORM AND THE FARMER
For a brief period and in certain quarters this
bill was assailed by those who profossed to be-
liovo that it was written in the interest of the
creditor class. I suspect, Mr. Chairman, that
thero aro somo folks who aro incapable of accu
rately discriminating the real "creditor class
when it comes to tho banking business. As a
matter of fact, in tho great volume of business
transactions tho "creditor class" is tho people
who loan money to banks. In this senso tho
banks themselves aro distinctly debtors to their
depositors notwithstanding tho lattor are many
times borrowers of money and credit. But, for
populistic purposes, tho "debtor class" has boon
craftily turned to mean everybody who borrows
or desires to borrow money; and tho attempt
is mado to have it appear that under this, bill
greater difficulty will bo experienced by "the
plain people" in negotiatng loans than under
tho existing system.
A persistent and pernicious effort has been
mado to creato the impression that this bill, in
somo unexplained way, discriminates against
tho American farmer. To cure these imaginary
discriminations thero have been suggested
financial nostrums that would cause the judi
cious to grievo and which, if accepted, would
Involve tho whole country in ruin. Presented
in tho interest of the farmer and in the name
of democracy, they would impoverish the former
and eternally discredit tho latter. Some of these
suggestions have been prompted by an exuber
ant but utterly misdirected zeal; others by a
pitiful ignorance of tho subject, and others still
have their inspiration in the perennial and
ubiquitous demagogy of a certain class of poli
ticians. It would have been sheer foolishness,
Mr. Chairman, for tho proponents of this bill to
have undertaken any discrimination against the
American farmer, to whose favor a vast ma
jority of members here owe their political exis
tence and whoso interests they were commis
sioned to represent. And, sir, it would have
been cowardly in the banking and currency
committee of the house had it sought to please
the agricultural interests by partial legislation,
hurtful to the banking and commercial interests
of the United States. We have done neither of
these things. We have sought to do exact jus
tice to all classes; and any public man who
would have us do otherwise affronts tho intel
ligence and disparages the patriotism of the
American farmer no less than he outrages the
sense of justice of tho American merchant and
banker. It is gratifying to report to the house
that while in somo directions there have been
manifestations of selfishness and in others amus
ing rhetorical exhibitions in behalf of the people,
tho committee has had a clear perception of its
duty and has yielded neither to greed nor to
declamation. It has steered a straight course,
right between Scylla and Charybdis.
The requirements of the American farmer
for bank credit are no different from the needs
of other members of the community. The farmer
requires loanable capital, to enable him to ex
tend his agricultural operations as far as there
Is profit In them, and to take advantage of mar
ket conditions which call for the application of
more wealth than he actually possesses. How
ever, while thus essentially on the same basis
as others in respect to loanable funds and his
noed of credit, the farmer is peculiar In the
rospect that he ordinarily requires a longer term
of credit than do some othor members of the
community, and in most countries requires cur
roncy in tho transaction of his business rather
than book credit with tho bank.
FARM LOANS
The present bill is intended to render capital
available to banks through the rediscount opera
tion, and at this point I desire briefly to call
attention to those phases of the bill which bear
upon the farmer and his welfare and in regard
to which it is probable that the agriculturist
will bo directly helped.
In section 14 of tho bill we have provided for
the rodiscounting of paper possessing a maturity
of not more than 90 days in one case and in
another case paper possessing a maturity of not
moro than 120 days. In tho same section we
have provided for the making of acceptances by
national banks and the rediscounting of those
acceptances by federal reserve banks.
Thero has been a creat dnn.1 nf mfnnnnro.
hension in many quarters with reference to the
meaning of tho 90-day provision in this para
graph. Tho claim has constantly been made
that this 90-day provision would be of no ser
vice whatever to the farmer, because the farmer
never bothers with so short a loan as 90 days.
This, of course, is an entire misapprehension of
the .whole situation. Tho terms of the bill do
npt provide that tho paper shall not be dis
counted if it runs moro than 90 oays but
merely that . it shall not bo discounted
until it is within 90 days of muturlty in
other words, the bill enables the hanker who
holds the farmer's paper to shorten tho life of
tho farmer's paper by 90 days and to that ex
tent get now funds with which to aid the farmer
Now, just what does this mean? Suppose that
the loans of a farming community made by na
tional banks will average 90 days, with a re
newal for 90 days, or six months in all. it ia
evident that a bank which had loaned, let us say
$25,000, for four months would bo ablo to pre
sent this paper at the end of tho first 30 days
of the life of the loan and to get a rediscount
for tho remaining 90 days. That is to say, it
would bo ablo to draw back the amount of the
farmer's credit at the end of tho first 30 days
and to relend that sum to other people. When
tho time camo for renewal the bank would, ol
course, have to be in position to pay its loan or
rediscount to tho federal reserve bank if it ex
tended the farmer's accommodation for another
90 days out of new funds that have come in
meanwhile; but it could again rediscount at tho
end of another 30-day period. In other words,
if the community were doing its banking upon
a four months' period of credit the bank would
be ablo to shorten this in practice to a 30-day
period of credit. It is entirely conceivable that
by this process it should practically treble the
amount of banking capital which it could, If
necessary, place at the disposal of tho com
munity. Now, let us suppose that the country hank,
as is no doubt frequently the case, does not
have a steady run of loans such as would justify
tho use of the method just described. Let us
suppose instead of that that tho demand for
loans is likely to be "bunched" in the late spring
and then to slacken so that the funds of tho
banks are tied up on, let us say, six months'
paper. Under the 120-day provision of this bill
such banks would be ablo to take six months
paper as soon as it was two months old to a
federal reservo bank and rediscount it. In other
words, funds that would ordinarily havo been
tied up for four months longer will now bo
actually available to meet such additional de
mands as may come to the bank in tho course
of the summer and early autumn. Here, again,
it is evident that the loan period being practi
cally cut down by two-thirds the loaning power
of the bank is trebled, assuming that it is ablo
to obtain from the federal reserve bank the
rediscounts for which it has the basis in tho
shape of paper' growing out of agricultural
transactions.
HANDLING FARM CROPS
I have been constantly hearing that the pro
posed bill afforded no basis for accommodating
the farmer who had raised his crops and who
desired to get means that would enable him to
carry them along pending improvement oi
prices. Nothing could be more unjust or fur
ther from the facts of the case than this. As a
matter of fact, tho bill makes ample provision
for the handling of the great export crops of the
country, such as cotton, wheat, corn, and the
like. Not only does it provide for loans of tne
kind already referred to, but in the paragraP"
relating to acceptances it makes ample provision
for enabling the owner or raiser of crops to re
tain the title to them while they are being dis
posed of abroad. Let us see how this won s.
If a cotton grower in the south, for exainl"e;
needs funds he may arrange with a banK.u,v
his home to grant him a specified credit ot, say
$50,000. In this event he would draw a di
of exchange or draft on the bank in quest iou
for, say, six months and would attach to it u
documents showing shipment. The bank wouw
accept this paper and he would then be m pow
tion to sell the bill practically anywhere. "
credit would be based on an actual ownersnip u
cotton protecting the actual amount ot tne u
and investors practically everywhero wourn
entirely at liberty to purchase this paper i ee
because it had -been guaranteed by tne "'" v
which accepted it. Everywhere in the count j
where there were idle funds there would ob
demand for theso bills. Not only federal reser
banks, but other banks would constitute a u
ket for such bills. When rediscounted in
they would constitute a virtual "f11 e
credit to these banks, enabling them to inu
their loaning power tremendously f11! vhich
to give to their customers accommodation
the latter could not otherwise have expecttu.
LOWER INTEREST TO THE FARMER
The unquestionable effect of this n.enwrious
would be to draw funds now idle
(Continued on Page 20.)
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