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Mr. ACKER.-Then at the request of the Chair I will continue.

In the department stores in Philadelphia they have a large volume of currency which they do not need for present demands and which they deposit in the banks.

In the discussions which took place two years ago the commercial interests of the country were almost universal in recognizing the fact that the most convenient form of currency, the currency that responded most automatically to the demands of trade, was a guaranteed credit currency. Of course, there was a feeling at that time that a credit currency might be unsound, but it was demonstrated at that time that that fear was not justified, for the reason that exactly the same reserve of gold and the same class of assets as are required against deposits would be required against the issues of these guaranteed credit notes. More than that, a fund representing 5 per cent. of the notes in existence would be deposited in Washington as a guaranty against failure of any bank; and inasmuch as the failures of all banks up to this time have been, I am told, less than 1-13 of 1 per cent. of the total deposits, it may be seen that a 5 per cent. guaranty and a 2 per cent. tax upon circulation would be ample to protect those circulating notes in case of failure of any bank. That was one feature brought out in the several bills before Congress, and brought out, too, perhaps somewhat modified, by the American Bankers' Association, and those principles of a properly safeguarded currency became quite current at that time. But within the last year or two there has been no organized effort to disseminate those views, but, on the contrary, most of the literature which has recently been published upon the subject has been devoted to the advantages of central banks.

In view of Mr. WARBURG's splendid work and his enthusiastic advocacy of a central bank, I am rather sorry to know that the information which has been disseminated within the last year has been rather in the one directiontowards the centralization of our financial affairs, instead of carrying out the more automatic principles that were so heartily indorsed two years ago. As a member of the Na

tional Currency Association, organized about two years ago, I recollect that all the members were heartily in favor of a credit currency, as expounded at that time, but we took the position that until the National Monetary Commission should have completed its investigations and arrived at its conclusions, it would be unwise for us to send out any arguments in regard to our position. We felt that we should study the question and derive the benefit of all later information until the National Monetary Commission could furnish us its conclusions, and then, when that Commission should have made its final report and when those ideas would be embodied in a specific bill, then the National Currency Association should reassemble and seriously consider the recommendations of the Monetary Commission.

Therefore, gentlemen, I am asking you to bear in mind two vital features in conection with this discussion to-day :First, that Senator Aldrich, according to his specific published statement, does not expect this organization or any other organization immediately to pass upon his recommendations, but he expects this and other organizations to carefully study the very complex plan which he has submitted, so that the conclusions will not be superficial, but will be based upon an absolutely sound and dispassionate investigation.

The second point I will ask you to bear in mind is this: That the trend of thought two years ago was absolutely in the direction of a sound guaranteed credit currency as being the ideal method for automatically expanding and contracting in volume with the natural demands of trade.

But whatever plan is suggested, whether it bear the name of central bank or any other, I will ask that this test of automatic expansion and contraction be applied, because unless that is satisfactorily secured we shall have a faulty system, not an ideal system.

I thank you, gentlemen, for your attention. [Applause.]

The PRESIDING OFFICER.-Something that was said by Mr. ACKER recalls to my mind that I was a member of the Indianapolis Currency Commission, which first put forth in

a definite form the theory of a credit currency. But before we did that we carefully considered the question of a central bank.

Remember, however, that in the year 1897, when we met at Indianapolis, the temper of the public mind was very materially different from the temper of the public mind today. We said then to ourselves that, while the argument was a very strong one-nay, more than a strong argument -for a central bank, yet, in the then temper of the public mind it would not be possible to put that scheme forth with any hope of its adoption to any extent whatever. But the country has moved since then. The country has become much more homogeneous, much more closely knit together than it was in the year 1897. There has been an enormous advance in centralization and in everything, so that that which was not possible at that time may well be possible to-day.


We have learned since 1897 that one practical result of the adoption of a system of credit currency is that it necessarily depends upon the proposition that every bank shall join in guaranteeing every other bank. While we believed that our plan was so absolutely safe that the guaranty would not impose any practical liability, yet we very speedily convinced ourselves that the sentiment of the banking interests of the country was unalterably opposed to the idea that the banks would mutually guarantee each other, and it became perfectly certain to us that it would not be practical to put that system into operation.

I am very glad now to see that Dr. ANDREW is here, and it will give us all very great pleasure to hear him. It is not necessary that I should say anything in presenting him to you. [Applause.]


Mr. Chairman and gentlemen of the National Board of Trade: Those who are interested in establishing a more stable and adequately equipped financial system in this country have especial reason to-day to congratulate themselves upon the

progress of thought along those lines. One has only to compare the plans for banking reform proposed a decade or more ago with that which was proposed by the Chairman of the Monetary Commission yesterday to realize what a striking enlargement of view has been achieved by those who are studying means of improving our banking system. The best financial thought of the nineties, as embodied, for instance, in the so-called "Baltimore Plan" of the American Bankers' Association in 1894, or in the report of the Indianapolis Commission of 1898, contented itself with suggestions of "a more elastic note issue," and the debates of even as recent a period as the winter of 1907 and 1908, both in Congress and in the press, indicated that a similarly limited outlook still prevailed. During the last three years, however, under the auspices of the National Monetary Commission, the needs and practices of American banking have been subjected to a fresh and far more searching analysis than had ever been made before, and they have been scrutinized as never before in the light of the experience of other countries. The results of this analysis and comparison are evident in many directions. Very rarely to-day will one find any authority upon banking asserting that the banking arrangements of the country can be satisfactorily revised by merely amending the note issue regulations. One finds, on the contrary, almost a unanimity of demand for other and more far reaching reforms. This demand was voiced in practically every speech at the recent Monetary Conference of the Academy of Political Science in New York, but above all, it finds impressive expression in the ambitious and masterful proposals of the Chairman of the Monetary Commission.


What are, in brief, the general deficiencies in our banking system which almost everybody has come to agree require correction? They can be grouped under at least six rubrics, as I conceive them :

First. The lack of any mechanism of sufficient range and power and known to be sufficiently disinterested to secure

co-operation, unity of policy and uninterrupted exchange among the banks in different parts of the country.

Second. The unavailability of banking reserves which results from the rigidity of the reserve laws and from the actual parcellization of reserves among 25,000 banks.

Third. The lack of any well organized market for commercial paper and the consequent necessity felt by our banks, in order to keep their funds liquid, to lend large amounts on call upon stock exchange collateral.

Fourth. The absence of any flexibility in our note issue and the uncommercial character of the assets required by law to secure the notes.

Fifth. The intermittent interference of Government finance with business, resulting from the segregation of Government funds in the independent treasury.

Sixth. The lack of uniformity in banking privileges and regulations, due to the existence of several classes of banks subject to the varying laws of forty-six States

It is unnecessary before an assemblage like this to discuss at length the significance of these deficiencies. You are all well aware from your own experience of their existence and their import. Scarcely more than three years ago you saw the banks in different parts of the country engaged in a life-and-death struggle to obtain each other's cash; you witnessed a general suspension of payments among the banks and a consequent cessation of exchange between different cities; you experienced the rigidity and immobility of Our reserve under these circumstances; you felt the lack of any available market where commercial notes and bills could be discounted and converted into usable funds in time of emergency; you witnessed the effect of forcing the banks to keep auxiliary reserves in the stock market; your attention has been called time and time again to the unresponsiveness of our note issue to seasonal changes in currency demand and even to emergency requirements in moments of greatest stress.

These are obvious facts which I only enumerate in order that we may better understand the scope and intention of Senator Aldrich's suggested plan. Having them clearly in

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