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be avoided. I do not think the National Government can compete with all the forty-six or forty-seven States in making its banking charters attractive. Desirable as the unification of all the banks of the United States would be, in my judgment it is an impossibility.

There are many reasons for the existence of various forms of State banks which will continue of moving force. I do not believe it is possible for us to draw a bill which will unify the banks. I think we should take our system as we find it. I think we should give all the banks, under proper restrictions as to examinations, as to size, the right to come into the system, whatever limitations we choose to put upon them as to reports and reserves.

Directors elected by banks with geographical limitations-this follows the same idea that Senator Aldrich proposes, namely, that every part of the United States shall be represented geographically in the conduct of this central institution.

Stock limited to five per cent. of capital and surplus; voting power limited to five per cent.

Secretary and treasurer and comptroller and other officers, by virtue of their offices, should be members of the Board, with such powers as may be given to them.

Dividends limited to four or five per cent. at the most. Of course this is a vital part in the construction of such an institution from my standpoint. I am not in favor of setting up an institution for making money, but setting up an institution which will achieve its success by subserving the business interests of the people of the United States.. [Applause.]

No interest paid on deposits. It may purchase commercial paper under limitations as to time, and securities backed by the taxing power.

Note issue following something along the plan of the Bank of Germany. In one respect I disagree for the moment with the plan presented by Senator Aldrich in his bill, namely, the tax which he puts upon the currency. Take an institution like this, not built as a money-making machine, where all of its surplus earnings above the most moderate

earnings should go into the National Treasury for some public purpose, and it seems to me that the notes issued by such an institution, unless the United States needs the money, should be put out absolutely untaxed and free-at least until we reach such a point that we might consider, as the Bank of Germany does, that a further issue would be along emergency lines. Until that point at least should be reached, I at present see no reason why any tax should be placed upon the notes issued by such a bank. It is simply a tax upon the business of the country.

It should hold a part of the reserves of the banks. Of course, gentlemen, it is understood that in any scheme for the reform of our monetary system, as little as possible should we interfere with the present business of the banks. Except where it is absolutely necessary we should not interfere with the business as it is done to-day. What we are proposing to provide is not a competitor of the banks, but rather a keystone to our banking arch, to set up an institution which shall be for the benefit of all the banks, as well as all the people. [Applause.]

It has been proposed by some that the deposits of such an institution should be limited to the reserves of the three central reserve cities, that those reserves when placed in the central bank should count as reserves. Then, having perhaps from that source deposits of $500,000,000 or $600,000,000-and they could easily be made in gold as the years go by-in that way such a bank would have ample basis in gold for its note expansion.

Those are matters of detail, as I say, which need to be taken up and considered and passed upon by the best economists and financiers of the country before being put into law.

My friend from Philadelphia (Mr. ACKER) this morning, in the little I heard of his interesting discourse, said that any system proposed must be tested at least in one respect by the facility of its note redemption. I stated that, as it seemed to me, under the issuance of asset currency by a multitude of banks as conditions exist in this country, it would break down under the weight of its bank note re

demption. It should be automatic.

It should respond to the needs of business. It should be natural. The redemption of a central organization, such as I have outlined, it seems to me, would fulfill conditions in that respect.

Let us suppose, for example, that the crop moving season of the country approaches. Suppose it is the last of August or the Ist of September. Suppose that $200,000,000 of $300,000,000 in cash were needed to go out and move the grain of the West and the cotton of the South, and that the money is sent to all those distant points. It is sent in the notes of our central institution. Time goes on and the crops are moved. Those $200,000,000 or $300,000,000 of notes have performed their service, and it is time for them to start for home and go out of existence. Why, Mr. Chairman, they will follow exactly the process that goes on to-day, the natural, the business process. What do they do to-day? The banks in New Orleans that draw money from New York or Chicago pay it out to their correspondents and their customers, and when the season is over the bank notes go back into the banks of New Orleans. What do they do with them? What do they send North to pay their debts or to place on deposit? Do they send gold? No. Do they send legal money? No. Under the Gresham Law they send what they think is the poorest money that they have in the bank. Why, if one of you gentlemen is going to pay out a quarter from your pocket and you have one quarter that is old and worn and another one that is new and bright, you will pay out the worn quarter every time. And so those banks in New Orleans send up the notes because they are not legal money, they don't count as reserves. Or, perhaps, they go to Chicago. And when they get through using the surplus ultimately they go to New York.

And so they flow on until finally they reach New York or the central reserve cities. What do they do with them? They send them to the Treasury of the United States. Why do they send them there? They send them there to get legal money in place of the bank notes-for no other reason unless they are torn or worn out. That is the only reason for sending

them. What does the Treasury of the United States do with them? Sends them out to the banks again, when perhaps they are not needed-redundant, piling up in the markets.

Mr. Chairman, I think we all agree that a redundancy of money is at least as dangerous as a deficiency. A redundancy of money piles up in the great banks of New York, they pay interest upon it, they are obliged to use it, and where can they use it except on the Stock Exchange? New York is really the only call market in the United States. That is, a call market about nine years out of ten, and the tenth year they call in vain. [Laughter and applause.]

And so that money piles up there and money, is cheap. A great bull movement comes along, perhaps requiring hundreds of millions of dollars, and by and by the 1st of September comes around and we have a semi-panic in trying to get that money back from the stock market and into the channels of business. The stock market can always beat the business men of the United States, because they can afford to pay more for their money.

Now, in this central institution we are proposing, your bank notes will follow the natural channels above described. Upon their return journey these notes will go to the central institution instead of to the United States Treasury. And then what? Instead of being sent out again when they are not needed by the business of the country, they go out of existence. There we have the flexibility, the natural flexibility of such a system. [Applause.]


Mr. Chairman, I am taking too much of your time. want to refer for a moment to one or two of the standard objections which are made to this system. You know that almost every man that has not given this much attention thinks, when we propose the centralization I have described, that we are proposing to set up again the second bank of the United States which Andrew Jackson strangled. Nothing could be further from the truth. The truth is that the modern theory of a central institution is exactly the opposite of the central bank which existed in Andrew Jackson's time. The bank of Andrew Jackson's time was a great private monopoly. No charter could be given to any other bank

during its existence. It was solely a money-making machine. There was no limitation upon the earnings which it could make. It was the enemy and competitor of every other bank in the United States from the moment it was born. It established branches in all of the principal cities of the United States to compete for business. It had the prestige of the Government as a stockholder behind it-the exact opposite of the modern idea of a central bank. And yet, Mr. Chairman, with all of these radical defects which I have described—and unless they could have been cured Andrew Jackson did well to strangle it-despite all these defects, it is the only twenty years in our history that we did not have a financial panic. Some of you may not know that four years after its charter was refused, in 1840, the people of the United States elected a President upon a platform which called for the re-establishment of another United States Bank. Monopoly!

The people of the United States were against monopolies then and they are against monopolies now. And certainly, so far as I know, no man who advocates this or any other system desires to set up a monopoly. But, gentlemen, you cannot have monopoly on 5 per cent. Why do monopolies grow? Why do the trusts that the people dislike wax and grow fat? Because they want more business. Why do they want more business? So they can make more money. When the people talk of trusts and monopoly they often refer to the Standard Oil Company. I am not going to relieve the Supreme Court of its duty of deciding whether it is a monopoly or not, but I will say this: If by law to-morrow we could cut down the dividends paid by the Standard Oil Company to 6 per cent. or even 10 per cent., and provide that the balance of its earnings should go into the United States Treasury, you would not need to worry any more about the monopoly of the Standard Oil Company; it would disappear over night.

Hence I will say to my good friends here, they need not worry about setting up a monopoly where all the balance of the earnings above a certain amount must go into the Treasury of the United States for some public purpose.

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