! Ki &mr
The Commoner
Vol.
21, NO. 7
Williams' Terrific Indictment of Reserve
Board
Id
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In Address on "What Congress Should Do" Tells What Should Be Done to Correct Abuses of Power and
Make the Administration of the Federal Reserve Law a Real Benefit to All Sections of the Country
(Address of John Skelton Williams, formerly
First Assistant Secretary of the Treasury,
Comptroller of the Currency, and Ex-offlcio. mem
ber of the Federal Reserve. Board, and Director
of. Finance and Purchases' of the United
States ttailroad Administration, before the con
vention of the Peoples Reconstruction League at
Washington, D. C, April 15th, 1921.) ' ,-
Mr. Chairman and Members of the Peoples Re
construction Loague:
It is no mere form of words when I tell you
that I thank you for inviting me here to speak.
I am glad of the opportunity, because eight
... years of experience and observation beh'nd the
scones iii the financial department of our govern
ment have taught me much "and formed for me
thoughts and opinions which, if time allowed
fortunately for you it does not I could pour
out here before you through many hours. I
venture to hope that some of these thoughts,
results of what may be callejd expe-t train'ng,
may be useful, at least so far as to suggest fur
ther thought among my fellow-citizens.
I am asked to speak on "What Congress
SViP0;" There ls a Federal law which RE
QUIRES the Comptroller of the Currency to in
clude in his annual reports to the congress such
recommendations as he may think desirable for
the improvement of our banking and currency
system, or to increase the. safety of the depos
itors and holders of national bank notes and
other creditors of our national banks; and in
obedience to that law I have had the honor
or. submitting, in my annual reports as Conip
troller, for the past seven years', many such rec
ommendations, some of which have been en
acted into law and. others are still waiting.
I I shall begin my address by adding in ad
vance one declaration of what I think congress
should NOT do. As I am. out of offlce ,and. desire
to stay out, you will acquit me of selfish motive
when I express my strong belief that congress
should not abolish the office of. the Comptroller
of the Currency, as it is asked to do. Having
held that post from February, 1914, to March,
1921, I am peculiarly well qualified to judge
of its importance in our banking system, on the
integrity and ability of, which our stability
and- general 'prosperity so greatly depend. But
more of that presently.
Secretary of Agriculture Should Bo cx-Oflkio
Member of Federal Reserve Board.
Qwnm n "le1th.m that in my opinion congress
bHUULiD do is to make the Secretary bf Agricul
ture, ex-offlcio, a member of the Federal Re
serve Board, and I would give him authority to
deputize an Assistant Secretary of Agriculture
to represent him at meetings of the board which
fmaiy ? Jnm t0 attend- This I believe
to be desirable, even though it involve a reduc
tion in the number of, appointed members. The
Honorable E. T. Meredith, of Iowa, was one
of the ablest and most useful Directors of the
Federal Reserve Bank of Chicago until he re
signed to enter President Wilson's Cabinet as
Secretary of Agriculture. If he had been a
Eer- ex-offlcio, of the Federal Reserve
Bodrd, during the past critical year, while he
was Secretary of Agriculture, his services on the
board would have been invaluable. The Secre
tary of Agriculture is, or should be, a man who
knows closely arid thoroughly the needs and
condition of the farmers, the driginal nro
ducers, the real main-springs of our activities
and sources of our strength. We are at a mo
me?f ?.f paction reaction in this case, in the
H?ht direqtion. "Back to the farm" has mean
ing far .wider than the return of individual
from the cities to the furrows and SeWs it
means that the strongest and most earnest in
tellect of the country is being directed to the
farm, and the farmer, and their requirements
and has been aroused to the truth that unless
there is fair opportunity and reward for the in
vestment, intelligence and labor of the man and
woman on the farm, the halting of our progress
and tlie collapse of our power are inevitable
The argicultural . interests -quiet, cenpmiiv
steady, inarticulate, scattered and unorganized
and sometimes wasting strength, and lnninS
nause by misdirected outbreak and protest vain
ly vehement has not had the power, or the
' cons'deration to which its importance entitles
it. That unhappy fact is being realized now
as never before in three-fourths of a century.
We see the curious and apparently contradic
tory condition that now when the city and town
populat'on, the first time in our history, out
numbers the country population, the welfare of
the farmer is studied more zealously and its pro
, motion sought more diligently than 'when
the farmers outnumbered the urban resi
dents five to one. The cities have been taught by
strokes of adversity that they can not fatten and
thrive while there is starvation and poverty on
the farms. Therefore the presence of a direct
representative of the farming people in" the supreme-council
of the nation's financial manage
ment would be in exact accord with the tre'id
of present-day political philosophy and eco
nomic doctrine.
Men Entitled to Main Credit for Federal Re
serve Act, Which Is Described as "the Great
est Product of Financial and Political Genius
the World Has Known."
ff a real farmer or a man In real sympathy
with farmers, and having practical knowledge
. of the'r situation, had been on the Federal Re-
serve Board, perhaps his influence and repre
sentations might have saved that body from
some of the errors into which, in my opinion,
it has been led, or has strayed. As you know,
the Reserve Board forms and directs the policies
and management of the Federal Reserve Sys
tem. That system. I believe, to be the great-
t8LPir?uct,of financial and Political genius the
world has known, and the men who had the
largest part in its creation and development
MAednnPSeSl(Jent Woodrow Wilson. WilliJm G
McAdoo.-Secrtary of the. Treasury, Carter Glass
later secretary of the Treasury, and at the "me
of the passage of the Federal Reserve Act
tppanfmfin ithe Banking and 9rency Commit!
or PnVie.H?USeof Representatives, and Sena-
?ikK, 0wen' then Chairman of the
- srantesnSenna?eCUrrenCy Comn,ittee f the United
Without Federal Reserve Act the Var Would"
Have Been Lost.
tT?601"7, conception and purpose of tho
Federal Reserve System are as near perfection
as the human mind can produce. ' j am earned
ly, sincere in declaring that it was oe o? th
direction m,. fl ,,nte"l5ent supervision and .
ing the Federal : Reserve maPhEfV8 in leav"
munities and farmers .an? G farminS corn
others in all parted fh f nnU?ne? mm aml
in mv oninin iJmlCUDtry have suffered
tive busine s man must be o ,Cnserva
ference by conirrpU ! of intrusive inter-
commercia7! TEncia aSrsTeMtT6'' !n
me some wrongs have hwS ! seems to
necessary hardship MnfifoS,! ine, and Some un
tion of the machLery s,ch Z laCk 0f regula
roquire and enforce and v coness could
certain. ' nd by some changes make '
How Money Bates in New York Are am i,
Made and Maintained M tiflcally
tctoy System is
the country's supily of monv ?n d,8r,hion of
mate needs of the peoSS LS nf the legiti"
mirably."' Somet mef 1? 2as tZ ?,flU?d
prevented and troubles SSL een impeded or
querice. For instance wW GSSUed in ae
rates for momtunW high
poses have been madl an .Ji SI othep P"r
VorH, tne' natura SSli S2 K'U
from sections where it was needed for moAmw
and constructive worrit to where it could a
extraordinary profits from the necessities 2
speculators and promoters. The farmer m
chant, or manufacturer in' the west and'sniifi!"
and also elsewhere found money scarce at i
6 per cent, 7 per cent and 8 per cent rateVh!
could afford to pay,, because New York was at
fering from 10 per cent -to 30 per cent Thi
tends to defeat the- wise and beneficent n
'pose of the system. lur"
I used my official ppwers to investigate thi
subject as thoroughly as possible and made soma
astounding discoveries. The daily rates for call
money, nieanng money loaned on stock and
bond collateral, to be called at will, are fixed
daily by from five to eight members of the New
York Stock Evchauge, men also aotivelv con
cerned in the purchase and sale of stock,' meet
mg informally at the exchange or consultine
over telephones. They are responsible to nc
body, under no direction. Their casual, hastv
decision not only affect the prices of money and
stocks there frequently meaning disaster or
gain to hundreds of individuals and interests
but tend strongly to determine the movement
and prices of money and incidentally, to a
.. greater or less extent, of wheat and other com
moditiesfor more than a hundred million peo
ple: -.
. Perhaps it, may be difficult to prevent this
hxmg.of the daily money. rate, and adoption of
it, .by all the banks in the financial capital of
-the country. The state of New, York makes the
ky thermit, for. intent .on demand collateral
Joans for $5,000. or- mor.e.. I respectfully sug
gest to .the,con,gresa..tlia.t these burdensome
and sometimes destructive, rvates could be large
vL' !t nS; ?ntirelv Prevented by( an amendment
to the Federal Reserve Act which should pro
vide that no Federal Reserve Bank shall loan
money to a, membeV ba.nk which charges its
customers as interest on. any of its loans a rate
in excess of what congress ' m,ay regard as a
reasonable maximum rate. Many of the most
successful banks in the country both large
"SLiSima, adhere closely to the interest rates
nxed by law, and prosper while doing so. It has
been suggested that the passage of such an
amendment would result in the withdrawal
worn. the Federal Reserve System of many state
oanjes and trust companies, which would refuse
tf ?epu ,?uch restrictions, but my answer is
' ?el,ev the system would be stronger
;S?S.ir ???,r f WITH0XJT those banks which
nnS?il hey an not exist or prosper without ex-
-nfnnJf, usTurious and unconscionable? rates for
?y I also; belv.e that even without such
5 ?hi wCt,,V6, ,v,Rllanf' intelligent administration
;,,? esorve System machinery could
Shit r "lsuch couditiojis, and methods,
mShlSitBgvrneSiy lmpa,r s usefs and dI
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"Bureaumania" and the "ciifiiimlnr.Wu.n rfflr
fmpnt i?,e n thJs subiect I .shall be forced to
Jva k Mntly, I do not know that it is neces
SrPnmV0nfollow tne recent example of an
SntStSn vPtrollS of the Currency to regale and
SI SKJi yU lth colloqial conversations quite
sS'hiniia?id plcturesiue as those he employed
for n JLi I y, ,so successfully. But it is proper
living? tal lIng t0' and fr. men who dig the'r
when" necessary? ground toca a spade a spade
eral lal6 congress shouldvso amend the Fed
proof ntVe A as t0 make it not only foo!
d sea ii.iCipof'ppoof' hxt immune from the
"buSnnmi11?11..1 J201" ft WOrd l tleSCribe aS
hewhTLV .That ie the mania so Prevalent
gOvernm8hingt.0n' aml at everv other seat f
to SS20 ,f0p trustinS the official machinery
rSnHnJ aut0.matlca,ly insisting on inflexible
the Siineil,8ln,g ,t0 cognise r agine that
mi1rHpnnwancliJnangIng of conditions may re
codentH P Slle from established rules and pre
," s not a new trouble. Dickens'
Londn0!? thG "Circumlocution office" in
S- a DhotoffrTJltte? 8evonty yeara aS0, reads Me
ItonSffl lPh f 0n3of our departments. Every
?n GvorVgOVGrnmont haa been and is hampered
thns of h imerg1ency by "bureaumania." Vic;
thS cManitl08? lnLt,atIve. hman sympathy an
orpeiS y!f h.unian interestmn any even
or peuow. Their thought isompressed in fixed
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