Front matter (continued 11)

You will remember that when Aldrich made his first announcement about his plan, he said that we must have a Central Bank and that immediately President Taft declared at Boston, "Senator Aldrich desires to round out his career with a financial system for the United States, and says that we should have a Central Bank." I never will forget what an eminent citizen of this state said when he read that statement. It was this: "Well, God help the American people if Nelson W. Aldrich ever rounds out his career with a financial system for the United States."

You will all of you remember, I am sure, what a cold reception the idea of a "Central Bank" at the hands of Aldrich received. Does anyone of common intelligence believe that Aldrich ever changed his scheme below its throat? It is true he put a mask on its head; but that is all. He hunted around for an all-concealing name to hide the thing under—"The National Reserve Association." I assert that his proposal would mean the greatest and most centralized Central Bank in the world.

Note these figures and draw your own conclusion:

Nat. Reserve Assn. Bank of France Bank of England Bank of Germany

Capital

$400,000,000 $36,500,000 $72,000,000 $45,000,000

Deposit

1,500,000,000 100,000,000 250,000,000 200,000,000

Note Issue

2,400,000,000 1,000,000,000 (See Note.) 400,000,000

Possible Note Issue

4,500,000,000 Possible large issue with tax.

Note.—The Bank of England is not in any sense a bank of issue, because the amount of notes it issues is limited to the amount of gold coin in the issue department. The notes are gold certificates. There is an exception to the law, to the extent of the arbitrary amount of notes issued against the Government debt and securities, held in the issue department, amounting to $90,000,000.

Now, gentlemen, here you have a proposal to organize in this country an institution with a capital greater than the combined capital of the Central Banks of England, France and Germany, because the capital of all of our banks now exceeds $2,000,000,000, and the subscription to the National Reserve Association must be 20 per cent of this amount, to entitle them to participate. Certainly the idea must have been that they all would participate in so beneficent an institution. "It was to be a bank of banks for all the banks."

It was the declared purpose of the author of the scheme that the banks should surrender all their real money, now carried as reserves, to this central institution in exchange for its notes; or that the banks would deposit more than $1,500,000,000 with the National Reserve Association. This would be a deposit nearly three times as great as all the deposits of the Central Banks of England, France and Germany combined.

The bill provides, Section 51, that the National Reserve Association can issue $900,000,000 of its notes, and as many more as are covered "by an equal amount of lawful money" (United States notes, silver, or silver certificates, and gold in some form), without paying any tax. But if the banks turned over their present reserves, amounting to $1,500,000,000, as contemplated by the author of the National Reserve Association, it could issue $2,400,000,000 before beginning to pay any tax on circulation. By paying a tax of 1½ per cent per annum, it could put out $300,000,000 more notes, not covered by lawful money, or $2,700,000,000; then, by paying a tax of 5 per cent, it could go any limit until its lawful money reserve was reduced to 33 per cent. This makes a possible issue of $4,500,000,000, or a possible note issue today two or three times as great as all the note issues at any time outstanding of the Central Banks of England, France and Germany combined. Every dollar of this vast amount is only the credit of the so-called National Reserve Association, and yet is a lawful reserve for over twenty-five thousand banks to hold.

Mr. Merchant: By the way, Mr. Banker, I would like to ask you what you think of a tax upon bank notes to be paid by the Central Bank of Issue as it is practiced in Germany where they got this idea.

Mr. Banker: Economically speaking, a tax paid under such circumstances is of no more use than your appendix.

Mr. Merchant: My appendix! I have had my appendix removed.

Mr. Banker: Well, that makes no difference. I still insist that a tax paid upon bank notes under such circumstances is of no more use, economically speaking, than your appendix, whether it has been removed or not.

Mr. Lawyer: Section 23 provides, "The National Reserve Association shall be the principal fiscal agent of the United States. The Government of the United States shall, upon the organization of the National Reserve Association, deposit its general funds with said association and its branches, and thereafter all receipts of the Government, exclusive of trust funds, shall be deposited with said association and its branches, and all disbursements by the Government shall be made through said association and its branches."

The Central Bank of any country may be defined to be the bank at which the other banks carry their reserves, and at which the Government carries its balance.

But will some advocate say "it is only the bank of all the other banks"? This is the very quintessence of a Central Bank.

Upon this evidence will any candid man say that the so-called National Reserve Association is not a Central Bank? It was to have fifteen branches. The Bank of England has none. The Bank of Germany has nineteen main branches. The Bank of France has one hundred and twenty-seven main branches.

"Section 34.—The National Reserve Association shall have power both at home and abroad to deal in certain things."

Section 36.—"The National Reserve Association shall have power to open and maintain banking accounts in foreign countries, and to establish agencies in foreign countries for certain purposes."

Have the Central Banks of England, France or Germany any power to maintain accounts and establish agencies in foreign countries? With "A baby stare," and under cover of "Sunday-school pretences," we are told that this all-comprehending scheme is just a simple coöperative enterprise for the exclusive benefit of the individual American banks. Indeed, that it is the only truly altruistic banking institution that was ever conceived.

Now, as the chief argument for the adoption of this scheme, its main promoters and sponsors have persistently declared that the country was now being dominated and controlled by certain great banking interests, and, therefore, that the people should liberate themselves from these sinister and dangerous banking powers by running into the warm and enticing embrace of the National Reserve Association. Upon investigation, we find this anomaly, this surprising, this astounding fact: that the promoters and advocates of this gigantic machine are these self-same sinister banking influences who have the country by the throat today.

Hon. Leslie M. Shaw has pertinently inquired, "Is it not strange that Nelson W. Aldrich and his affiliations are tired of their great power and vast opportunities, and are now trying to divest themselves of them," through the innocent-looking National Reserve Association? It will be well remembered by all of you, that at the time that the Aldrich scheme made its first bow to the dear people, the public discovered that the National City Bank owned bank stock to the amount of $10,000,000 in other National Banks located throughout the United States. Possibly the same interests owned several times that amount. I was informed about that time that they controlled at least one hundred banks in the leading cities of the United States. Now, let us assume that to be true, and let us meditate upon what such an organization could accomplish if they wanted to elect every officer in every local association, and every officer in charge of every branch, and the board of directors of the National Reserve Association, and so name the "Governor" and the rest of the executive committee of nine which is to control this great Central Bank.

To appreciate the power of such an organization, you must keep in mind the fact that practically every bank in the United States would be carrying a balance with some one of these banks immediately under their control. There is your machine. It is a perfect duplicate of the political machine in this state. The state "Boss," whom you know stands in precisely the same position as the National City Bank would stand.

As you are fully aware, I am the "Boss" of this county; and I am in identically the same position that one of these hundred banks would be that are controlled by the National City Bank. When I get my orders, I immediately communicate with every so-called local leader in every township. This political machine works three hundred and sixty-five days and three hundred and sixty-five nights in the year. In the sense of an organization, we are working all the time, and it is the organization work that does the business. All the rest of the people are unorganized. So it would be with the banks. The men who belong to the organization or machine "like it and fear it"; because as things have stood, no one could get anywhere without being a part of the machine. This fact forces acquiescence. It has been, as you know, a perfect feudalism from top to bottom. We have had a machine government in this state as perfect as the Manchu Government in China.

Can you imagine anything easier than for the National City Bank with this complete banking organization all over the United States to name every man practically that went into this organization from top to bottom? This would not be done by holding a majority of the stock in all the twenty-five thousand banks; they don't care about that; because it is a matter of no consequence to them, and if they attempted to do anything so crude, it would spoil their whole game. They attain their ends in more subtle but no less certain and powerful ways. They get influences to work. They put forces into operation. Their interests are not limited to the banking business. They have affiliations with great transportation companies and manufacturing interests, and therefore control large bank deposits everywhere that the banks want and are always working to get. Then there are favors to be granted; commissions to be paid; "melons to be cut." Opportunities are suggested. In one respect at least they are like the Lord, they "work in a mysterious way their wonders to perform."

They had established their ramifications throughout the United States by making the National City Bank a holding company of bank stocks, and the culmination of their power was to be realized through the devious methods of organizing the National Reserve Association. The same money and the same power that filled the columns of the newspapers of the country with the unqualified praise of the Aldrich scheme for two years—the same power that rushed resolutions of one uniform stereotyped kind through twenty or thirty state bank associations, and steam rollered the same unconsidered declarations through two annual conventions of the American Bankers' Association, would have made this so-called altruistic, benevolent, coöperative association the most powerful machine ever organized; because, it would have absolutely dominated all the bank credit in the United States, or 45 per cent of the banking power of the world. You must remember that these interests are by far the greatest speculators in the United States. Yes, the greatest in the world.

Mr. Banker: But don't you remember that the bill provided in Section 26 that the paper rediscounted by it must "be issued or drawn for agricultural, industrial, or commercial purposes," and not "for the purpose of carrying stocks, bonds, or other investment securities"?

Mr. Lawyer: Yes, but that is all folderol. It is the purest kind of poppycock. If a bank wanted to take on a speculative deal, it could sell its commercial paper, could it not, and use the money for speculation just the same? That is on precisely the same level with its declaration that the institution was not a Central Bank. It is such subterfuges that disgust every candid man.

Listen to Mr. Aldrich in his report upon the bill upon the selection of the "Governor" of the National Reserve Association by the President of the United States. He says, "Further restraint upon the administration of the association upon narrow or selfish lines, is imposed by the provision that four of the highest officials of the Government are made ex officio members of the controlling board, and by the requirement that the governor shall be selected by the President of the United States. The fear has been expressed that the selection of the governor by the President, and the provisions making the Secretary of the Treasury, the Secretary of Agriculture, the Secretary of Commerce and Labor, and the Comptroller of the currency, ex officio members of the board of directors of the reserve association, might lead to an attempt to control the organization for political purposes."

Please note the sham, fraud and false pretense covered by this comment. The bill provides that the "Governor" of the association, as they call him, shall be selected by the President of the United States from a list of at least three names, furnished by the directors. Will any honest man say that the President of the United States would have had any more to do with the selection of the "Governor" of the so-called National Reserve Association than the King of Siam? Again note this cheap, false pretense, "Fear has been expressed that the selection of the governor by the President," and the four ex officio members of the board of directors, "might lead to an attempt to control the organization for political purposes." These four ex officio members have just four votes upon a board of forty-six which proceeds immediately to eliminate all of the ex officio members forever, by selecting an executive committee consisting of nine members to manage its affairs, from which all of them are excluded except the Comptroller of the currency. Can any intelligent man doubt the purpose of all these sham declarations and false pretenses? If so, let him spend a day or two trying to find out how the members of the boards of the local associations are to be chosen; try to unravel the process by which the members of the boards of the branches are to be evolved; and, having grown tired and dizzy with his task, let him undertake to prove how the board of directors of the National Reserve Association are to be manufactured through the machinations born of ulterior purposes.

I have studied puzzles before, but for complications, wheels within wheels, evident designs upon evident designs, occult purposes under occult purposes, and a combination of powerful forces, born of sinister influences, this project will forever stand alone as an illustration of what the human mind can do to conceal its real object.

There is not one man in a hundred, indeed I do not believe that there is one man in a thousand, taking the business men, farmers, working men, and bankers all together, who can solve the riddle, and tell how it is done. Such a mystery could not have just happened. It must necessarily have been the product of a purpose.

Simplicity, publicity and direct methods are the guaranties of common honesty. Intricacy, secrecy and indirect methods are invariably used to hide uncommon dishonesty. I do not mean petty larceny, taking a few pennies, or a loaf of bread; but the absorption of hundreds of millions, without returning anything to the world in exchange for them.

Should the United States have been so unfortunate as to have been bound hand and foot for fifty years, the life of the proposed charter, by the trammels and intricacies of the National Reserve Association under control of an executive committee, consisting of only nine men who had been the evolutionary product of a preconceived purpose and well-defined plan, can anyone doubt what the result would have been? Can anyone doubt that all of their banks and all of their business interests would have gotten all the money they wanted all the time?

The advanced information from week to week and, at times, possibly, a month ahead, of what the discount rate would be—a very natural way for some member of that executive committee to show his or their proper appreciation of his or their promotion to their positions—would have been worth more every year, during the fifty-year grant, than all the wealth that the American people could produce during any twelve months; for this advanced information about the discount rate would have made profits a mathematical certainty upon the billions and billions of stocks and bonds that are quoted upon the Stock Exchange, the fertile field of the man who knows that he has a sure thing.

Mr. Manufacturer: Mr. Lawyer, that smells pretty bad.

Mr. Lawyer: Yes, I admit it; but does it smell any worse than oil has been smelling for more than twenty years? Than certain United States senators have been made to smell? Than robbing rebates smell? Is it not the natural sequel to this train of abuses to which the country has been treated?

This whole situation was so graphically depicted, precisely as it has developed, two years before Mr. Aldrich gave birth to this conception, that I want to read it to you:

"A central bank could easily be so organized as to sap the commercial blood of this country at every turn and direct the silent and unseen currents of advantage into the channels of favored institutions, and all these favored institutions might turn out, upon investigation, to be, in the end, one institution.

"And if, unfortunately, the subterranean connection could not be detected, and even if detected, could not be broken, what a power for evil and injustice such an organization would prove in the life of this Nation.

"This is not only regarded as possible, but as probable; indeed, it is charged that it is the preconceived, cunning design of the advocates of a central bank to accomplish this purpose.

"Under these circumstances, with what suspicion and jealousy will every act of the central bank be watched! Localities will become envious of localities. Cities will bitterly attack their neighboring cities. Nine-tenths, if, indeed, not ninety-nine out of every hundred, of the banks will imagine spears in needlecases, and, right or wrong, fling their accusations upon the wings of the wind; and we will be living in a commercial world of unrest and constant controversy surpassing in suspicion, envy, jealousy and bitterness anything this Republic has ever witnessed. The consequences no man can prophesy; no imagination can paint."

These words were spoken by Hon. Charles N. Fowler, March 29, 1908, just two years before Mr. Aldrich made his report to Congress upon his National Reserve Association.

Mr. Laboringman: You know I said that I had heard that the Aldrich Bill was dead; for one, I hope so. If the people ever get a lick at it they will finish it for certain.

Mr. Farmer: You are right, and you bet that if they ever get a chance to discuss this banking bill question, they will come mighty near settling upon the right proposition in the end.

Mr. Banker: I agree with you, and furthermore I am thoroughly convinced that we shall never reach a satisfactory conclusion until we have had just the same kind of a hand-to-hand fight over this question that we had over the gold standard.

Mr. Manufacturer: It looks so to me. That gold-standard fight taught me that you could trust the American people to make a wise decision, if you would only have a country store, schoolhouse, cornfield debate, in which every man in the country got into the game—preacher, lawyer, teacher, farmer, merchant, manufacturer, laboringman, townfolks and country folks, all alike.

Mr. Merchant: Nothing more true has been said since we have been talking about this question than that remark about the importance of a public discussion of this whole matter. I know any number of men who when this Aldrich scheme came out were ready to swallow it, but who now realize what a fatal blunder it would have been. The reason was, that they knew absolutely nothing about the question and they were living in such a state of terror on account of the panic, that they were ready to take anything that would shield them from experiences such as they had just passed through. The Aldrich scheme was the only thing in sight, because hundreds of thousands of dollars had been spent in promoting it. They are just beginning to study and think about the subject. Our hope of wise action by Congress rests upon a red-hot debate among the people, exactly as you said.

Mr. Banker: Well, it will be easy enough to show them what the real reforms demanded are.

The reforms we demand are these:

First: Holding companies in the banking business must be completely wiped out.

Second: Every National Bank should be authorized to do

(1) A commercial banking business.

(2) A Savings bank business.

(3) A Trust company business.

(4) A note issue business, precisely as the Canadian banks do.

Third: All the various accounts—commercial, savings, trust and note issues—should be segregated.

Fourth: Every bank in the United States should be compelled to carry the same amount of bank reserves.

Fifth: All bank reserves should consist of gold or gold certificates, as soon as the United States notes can be converted into gold certificates.

Sixth: Every bank in the United States should be brought under national control, because banking is essentially Interstate Commerce.

Seventh: Every natural financial centre in the United States should become the clearing centre for all the checks, drafts and bank notes that are payable in the territory that is economically and naturally tributary to that Financial centre; such territory should constitute a commercial zone.

Eighth: There should be organized at each of these financial centres a Clearing House at which all the checks, drafts and bank notes payable within the commercial zone shall be at par.

Ninth: The banks of each commercial zone should elect a board of control to examine, supervise and control all the banks within such commercial zone, precisely as the Clearing Home bank examiners are examining and supervising all banks clearing through them today.

Tenth: The banks of each commercial zone should also elect a court of appeals, or a banker's council, composed of an equal number of business men and bankers, to settle all banking and business questions that would properly come before them.

Eleventh: The Board of Control in each commercial zone should be presided over by a deputy United States Comptroller, for the purpose of securing immediate and efficient action.

Twelfth: The banks of the United States should all contribute a percentage of their deposits to a Central Reserve, which should be composed of gold, and gold alone. The percentage of deposit should be 7 per cent at the outset, and be gradually increased to 10 per cent, which would amount, at the present time, to a central gold reserve of upwards of $1,250,000,000. This reserve would correspond to the reserve held today by the Clearing Houses for their banks.

Thirteenth: This central gold reserve should be held in trust by a body of men composed of one man from each commercial zone, for the benefit of all the commercial zones.

Fourteenth: Each Board of Control should have access to this central gold reserve, and should have power to sell gold to any bank within its zone and under its supervision, in case it desired it for the purpose of moving crops or for any other legitimate reason. The practical result would be, that the gold would be held, to a large extent, at the financial centres, and under the command of the Board of Control, precisely as the Clearing House committees today hold the reserves of the banks constituting their respective Clearing Houses.

Fifteenth: The use, distribution and control of the central gold reserve should be under the management of the representatives of all the commercial zones, who should be composed equally of business men and bankers.

Sixteenth: For the purpose of establishing responsibility and securing efficiency, the representatives of the zones should act through corporate powers granted by the National Government.

Seventeenth: The purpose of a national centralization of gold to so large an extent is two-fold:

(1) It brings all the banking power of the United States to the defense of the commercial interests in every part of the United States instantaneously.

(2) It will give to the representatives of the zones the power to control and direct the movement of gold to and from the United States, by fixing and enforcing a price for the use of gold, or a discount rate for gold transactions throughout the United States.

These reforms are based upon three distinct propositions:

First: They incorporate the principles of a central gold reserve, as illustrated by the Bank of England, where all the transactions are in gold, and gold alone, without the use or intervention of bank credit in the form of bank credit notes, which could be used for reserves by the banks throughout Great Britain.

Second: They incorporate the principle of bank credit currency, as illustrated by the bank note system of Canada, which involves daily redemption in gold coin through the clearing houses.

Third: They extend to every economic or natural commercial zone the established and approved practices of the American Clearing Houses, that is:

(1) Bank supervision and control over all members.

(2) A reserve created by all the members of the Clearing House and held by the Clearing House Committee for the benefit of all the members.

(3) Such a free check system over every commercial zone, precisely as New England has had since 1899, and as has just been established over a large territory around New York by the New York Clearing House.

The result of these reforms would be:

(1) To make each individual bank absolutely independent, because it has an unlimited resource in the coöperative gold reserve.

(2) To make every commercial zone as free and independent of every other commercial zone, as England is of France, or France is of Germany.

(3) To completely decentralize all bank credit in the United States, while it centralizes the gold to a degree that would enable us by raising the discount rate to close the door of our markets against the demands for gold from abroad.

(4) To insure all depositors in National banks against loss.

(5) To liquefy and therefore develop a general market for commercial paper.

(6) To save the business interests of this country more than $200,000,000 every year, to say nothing of the incalculable losses growing out of our ever-recurring panics. #/

Mr. Lawyer: Mr. Banker, you have stated with great clearness and precision just what our investigation has demonstrated should be done to give us a sound and economical financial and banking system.

After a careful consideration of the question, I am prepared to say that the Aldrich scheme would not accomplish or effect a single one of these reforms.

On the other hand, I am convinced that, while it would give us temporary relief, immediately there would follow undue expansion. In quick succession there would come wild inflation, a vast amount of gold would be expelled from the country and we would find ourselves in the end in far greater and more serious difficulties than those from which we are now suffering.

Mr. Banker: Your conclusion is in perfect keeping with my own. It seems to me very remarkable how many people were temporarily misled by its claims, but have since turned from it and are now opposed to it.

Mr. Lawyer: I do not think that is either remarkable or strange, when you recall the mental condition of the whole country, due to the panic; the vast amount of money poured into its propaganda; the claims made for it and the fact that it incorporated some things that the public realized ought to be done.

For example, it proposed to divide the country into districts, an idea that Congressman Fowler had advocated ever since 1897 or for more than fifteen years, and had incorporated in his bill of 1908.

The Aldrich scheme provided for a Central Reserve, but composed almost entirely of United States bonds, United States notes and silver in some form, a fact that did not attract the attention of the public at the outset.

It proposed to make an unlimited market for the rediscount of paper, a most pleasing thought to contemplate until it was discovered that this was to be done by "replenishing" the reserves of our 25,000 banks "indefinitely," as Aldrich said, with bank debts in the form of bank notes issued by the so-called "Reserve Association." It incorporated the plan proposed by Congressman Fowler in his bill of 1908 for converting the "Two per cent United States bonds" into "Three per cent United States bonds," a fact that impressed the National banks favorably.

The so-called Association was given an attractive name—"National Reserve Association," also borrowed from the first draft of Congressman Fowler's Bill of 1908, with only a slight change. He called his central reserve, "United States Reserve Association." Finally, owing to the clever presentation of the scheme, the country took to it at the start, because they wanted something done and they hoped that the scheme was what Mr. Aldrich declared it to be, when he said, "The plan we propose is, essentially, an American system, scientific in its methods and democratic in its control."

Every intelligent man now knows that the system he proposed was the German system from top to bottom, which broke down completely under the first real test, which came in 1911.

Every man who calls himself an economist must admit, instead of its being scientific in character, it was constructed in absolute defiance of all economic law, and now the public is convinced that instead of being democratic in control, it was intended to be a gigantic "Central Bank" with fifteen branches over which a "Governor," a name wholly foreign to American banking institutions, and his seven associates were to rule, the "Governor" appointing his assistant managers over the fifteen branches as if it were a Manchu dynasty and not a democracy at all.

Thus one by one the economic blunders have been pointed out; one by one the sinister motives have been exposed; one by one the false pretenses have been unmasked, until there is left only a recollection of the impression made by the expenditure of hundreds of thousands of dollars in this futile attempt to enslave all American bank credit and the lesson of extreme caution and a most urgent need on the part of every citizen in every walk of life, of study, diligent study, if he desires to perform a truly patriotic duty and be of some real service to his country in this hour of peril, inspired only by unselfish motives and a sincere devotion to the welfare of the whole people.

Mr. Merchant: Mr. Lawyer has certainly succeeded in pointing out very clearly the things that must be excluded from our bill.

Mr. Manufacturer: And Mr. Banker has certainly succeeded in pointing out very clearly the things that must be included in our bill.

Mr. Laboringman: Well, then, if we are all sure that we are right, let us go ahead.

Mr. Farmer: We will; and as our forefathers fought for the birth of this nation we will fight for its life.

Uncle Sam: Boys, I shall live only through your intelligence, your courage, your justice, your honor, your patriotism, your service, your sacrifice; and I shall be immortal only if all those who come after you shall possess these same virtues.

Farewell.

APPENDIX A

UNITED STATES CIRCULATION STATEMENT—January 2, 1913.

General Stock of Money in the United States. Held in Treasury, as Assets of the Government. Money in Circulation.

January 2, 1913. January 2, 1913. January 2, 1913.

Gold coin (including bullion in Treasury) $1,878,577,122 $170,983,732 $623,159,221

Gold Certificates[2] — 128,747,197 955,686,972

Standard Silver Dollars 565,481,020 165,022 74,528,998

Silver Certificates[2] — 12,814,458 477,972,542

Subsidiary Silver 174,538,163 17,814,855 156,723,308

Treasury Notes of 1890 2,797,000 10,115 2,786,885

United States Notes 346,681,01 6,995,837 339,685,179

National Bank Notes 750,972,246 30,787,771 720,184,475

—————— —————— ——————

Total $3,719,046,567 $368,318,987 $3,350,727,580

Population of continental United States January 2, 1913, estimated at 96,496,000; circulation per capita, $34.72.

FOOTNOTES:

APPENDIX B

CLASSIFICATION OF CASH IN BANKS—June 14, 1912.

Classification. National Banks. All Other Banks. All Reporting Banks.

Gold Coin $149,294,417 88,210,552 237,504,970

Gold Certificates 437,081,380 204,494,410 641,575,790

Silver Dollars 12,637,221 10,230,733 22,867,954

Silver Certificates 138,569,628 55,248,220 193,817,848

Subsidiary and Minor Coins 22,555,692 15,026,738 37,582,430

Legal-tender Notes 188,440,207 63,576,675 252,016,882

National Bank Notes { 47,564,277} 58,037,130 105,601,407

Cash not Classified {of other banks} 82,302,986 82,302,986

—————————— ————— ————— —————

Total $996,142,823 $577,127,445 $1,573,270,268

Amount of money held by United States Treasury, $368,318,987.

Amount of money held by all banks, $1,573,270,268.

Amount of money held by the people, $1,777,457,312.

Total amount of money in the United States, $3,719,046,567.

APPENDIX C

Assuming that the plan should be adopted within the year 1913, and taking round but approximate figures, the amount of reserves required to put the plan into operation would be as follows:

Individual deposits, commercial $11,000,000,000

Due to banks 1,000,000,000

Band credit currency, notes 1,250,000,000

———————

Total demand liabilities $13,250,000,000

Central reserves against this amount at 10% $1,325,000,000

Cash reserves on this amount at an average of 8% 1,060,000,000

Cash reserves against savings held amounting to $3,000,000,000 at 5% 150,000,000

———————

Total reserves required under our plan $2,535,000,000

Amount of circulation in the United States that may be used as reserves:

Gold coin in the United States $1,900,000,000

Standard silver dollars 565,000,000

Subsidiary coin 175,000,000

Treasury notes, 1890 2,797,000

United States notes 346,681,000

———————

$2,989,478,000

Less gold held in the U.S. Treasury as a Reserve Fund 150,000,000

———————

Total possible reserves $2,839,478,000

Amount of reserves required by our plan $2,535,000,000

———————

Leaving a net amount of lawful reserves for circulation among the people of $304,478,000

Amount of subsidiary coin $175,000,000

Amount of silver dollars out 75,000,000

Amount of $1 and $2 bills out 225,000,000

——————

$475,000,000

This amount is probably about equally divided between the banks and the people.

Amount of circulation now outside of the U.S. Treasury and the banks and, therefore, in the hands of the people $1,780,000,000

If we deduct the amount of lawful reserves left for circulation among the people $304,478,000

———————

We have the total amount of bank note circulation $1,475,522,000

Amount of circulation provided for 1,250,000,000

———————

Additional amount of bank credit currency to be provided $225,522,000

But this increased amount of bank notes, amounting to $225,522,000, will not take any additional reserves because the deposits which will be converted into these notes are now covered by reserves. It is plain that, thereafter, book credits and note credits will be currently interchangeable.

Thus every demand for currency will be met automatically and perfectly, every day, everywhere, throughout the United States, day in and day out; month in and month out; year in and year out.

INDEX

Appendix A, United States circulation, 501 Appendix B, amount of money held by banks, 502 Appendix C, reserves required under proposed plan, 503 Acceptance, what is an, 87 desirability of, 90 liability of, same as deposit, 93, 390 reserves against, should be same as against deposits, 96 Acceptance should be allowed only on goods in transit, 96 would develop a general market for commercial paper, 91 Acceptances, 428 Agriculture produced its money, 9 Aldrich, Nelson W, 60, 369 Aldrich, Wilbur, 30 American Reserve Bank, formation of, 389 duties of board of, 415 fund of, 433 how reserve is created, 422 government balance carried with, 434, 435 shall maintain parity of silver and gold, 439 Aldrich Plan and Plot, exposed, 459, 484 cost of currency of, 476 branches and foreign agencies, 487 economic objections to, 462 expansion and inflation of, 469 inconvenience and uselessness of, 475 loss of gold by, 469 800 associations possible, 478 was central bank, 484 possible capital and issue, 485 why public favored at first, 494, 499 would not effect reforms demanded, 498 reasons for its rejection, 500 Aristotle, 29 Bagehot, 202, 226 Bank, what is a, 225 credits of equivalent to gold, 234 failures of, 198 deposit, system of, 228 holding companies in, 237 at Hamburg, 226 number of, in United States, 235, 236 number and resources of, 374 independence of individual, 474 penalty for not carrying reserves, 431 repression in development of, 238 Bank, description of, by MacLeod, 226 by Bagehot, 226 United States, 71 at Venice, 226 Banks, no change in National, 239 increase in business of, 239 various kinds and business of, 375 Banker, is what, 224 Banking is Interstate Commerce, 216 is kind of insurance, 230 bank deposits and bank notes identical in, 231 necessary reforms in, 245 resources of, in 1860, 370 amount of, in 1890, 372 amount of, in 1912, 372 amount of, in world in 1890, 373 Bancroft, George, 165, 166 Bank credit currency, definition of, 67 first lien on assets, 69 additional amount permitted, 424 cost of transmission, how paid, 425 facility of supplying currency, 360 identical with check, 376 increase of, 400 how described and issued, 421 less profitable than deposits, 376 not understood, 378 tax on, how used, 427 strength of, 473 Bankers' Council, formation of, 412 Bank notes, bond-secured, 36 are a first lien, 69 are Government credit, in circulation, 58 bear no relation to business, 58 cost of, as currency, 50 not money, 36 origin of, 57 objections to, as currency, 59 penalty for carrying, as reserves, 428 promise of, to pay money, 36 Bayard, James A., 179 Bill, draft of, 407 Board of Control, compensation of, 413 Boston, country clearing at, 300, 310 Bullion report, 441 California, first use of gold, 14 Canada, bank system of, 79 chart showing movement of currency in, 80 Canada, circulation in 1912, 81 free from panics, 444 Cannon, James G., 291 Capital, what is, 108, 109 active, passive and fixed, 109, 110 active, essential to commerce, 110 conversion of commercial, into fixed, 131, 132 real estate mortgages tie up, 134 Central bank, tax on notes of, 486 Chase, Salmon P., 57, 176 Check, what is a, 86 City bank, National, bank stock holdings of, 488 Boss system established by, 493 Chicago Clearing House examinations, 316, 318 Clearing House, 289 approved practices of, 379, 383 clearings prior to establishment of, 295, 296 country Clearing, established in England, 299 centralizing reserves of, 308 definition of, 290, 291 established in London, 291 first clearing in New York, 298 free zones, 309 functions adopted, 339 for each commercial zone, 419 Clearing House Certificates, issues of, 329, 330 Coins, amount of subsidiary, 43 description of subsidiary, 38 parity of value of, 37 total amount of silver, 43 token, 37 value of, 37 Colonial credit money, 144 depreciation of issues of, 156 effect of issues of, 155 issues by Continental Congress, 157 issue of, in Connecticut, 149 in Massachusetts, 146 in New Hampshire, 151 in New Jersey, 151 in North Carolina, 153 in New York, 153 in Pennsylvania, 152 in Rhode Island, 151 in South Carolina, 153 in Virginia, 152 price of issues fixed, 158 succession of events following issue of, 173 Colwell, Stephen, 290 Congress, will legislate only after discussion, 369 Connecticut, bank commissioners report 1841, 357 Conklin, Roscoe, 180 Coöperative societies, conditions in Germany, 281 conditions in Belgium, 283 extent of business, 279 in United States, not a subject of banking legislation, 285 profits of, 279 main offices described, 281 started in Rochdale, 279 success assured in United States, 286 wholesale houses of, 280 Conant, Charles A. (Scotch currency), 68 Credit, definition of, 114, 124, 125 ample reserves essential to sound, 123 comparative value of, 124 contraction of, by an instrument of, 125 dangers of, 115 expansion as a result of, 121 Germany's abuse of, 124 importance of, 113 our banks should be ready to prove their, 124 per cent, of business done by, 112 production by use of, 119 proper functions of different forms of, 141, 142 use of, in Lancashire, 126 various forms of, 117 Webster on, 111 Crédit Foncier, amortization of mortgages, 266 capital of, 263 can take deposits, 265 formed when, 261 how governed, 262 Currency, definition of, 46, 441 cost of bank credit, 49 definition of bank credit, 67 deposits identical with bank credit, 64, 65 economy of bank credit, 51, 66 consists of, 47 proper system of, 48 right kind of, 55 what it is not, 47 redemption of, 67 Deposits, guarantee of, 393 no difference between currency and, 66 interchangeability of currency into, 64, 65 Depositors, insurance of, 395, 435, 437 cost of insurance of, 395 Depositors, insurance fund, how created, 435 losses of, how paid, 436 Deutsche Bank, 465 Diagrams, zone, subdivisions, 387 Canadian currency chart, 80 Clearing House, 295, 297 course of check, 311-313 Egypt, absorption of gold by, 20 Electricity, importance of, 113 Ellsworth, Oliver, 168 England, Bank of, 206 dissimilarity of, with banks of France and Germany, 443 failure of bank act, 441 resources, when established, 407 not bank of issue, 485 Exchange, what is, 84 Bill of, 87 broad definition of, 96 difference between draft and bill of, 87 is equal to gold in all transactions, 98 Origin, ancient, 94 Farmers, number of, 249 Fessenden, William Pitt, 181 Forgan, James B., 318, 319 Fowler, Charles N., 336, 340, 460 Fowler, W.J., Deputy Comptroller, 395 France, Bank of, founded by Napoleon, 71 land used as basis of money in, 137 Government credit of France used as basis of money, 138 resources of bank, when established, 407 note issue of, 484 Gallatin, Albert, 292 Garfield, James A., 58 Germany, resources of bank, when established, 407 financial situation of bank, weak, 467 failure of bank act, 443 Gold, adopted as standard by United States, 18 by England, 18 amount of, 19 amount in United States in 1860 and 1912, 370 certificate, 28 changing value of, 31 monetary use of, 22 outlook for supply of, 24 production of, 23 United States share of, 22 universal standard of value, 19 Gold, total amount used as reserves, 32 what influences the movement of, 440 Gold reserves, how created, 222 Government, demand liability of, 42 Government issues preceding greenbacks, 174 Hamilton, Alexander, 161, 171 Herrick, Myron T., 249 Hallock, James C., 293, 300 India, absorption of gold by, 20 Indiana, Bank of the State of, 346 State Bank of, 73, 345 statement of bank of, 361 Interest, rate in United States, 249 France, 254 Germany, 249 Iowa, State Bank of, 73, 348 statement of Bank of, 361 Japan, Tried Bond-secured Currency, 59 Jefferson, Thomas, 170 Jevons, Stanley, 203, 291 Kentucky, Bank of, 73, 347 Land Credit Bank, Directors of, 450 dividends of, 454 losses, how borne, 455 put into operation, how, 456 outline of provisions, 268, 269, 270 Landschaften, business of modern, 261 modern, 260 origin of, 252 old, 255 spread of, 258 Law, John, 137 Lee, Richard Henry, 162 Legal tender, what is, 41 Liverpool, Lord, coins of the realm, 39 Loan Certificates, clearing house, 328 amount of, issued, 336 are bank credit currency, 336 denominations of, 329-333 lessons of, 333 London, clearing started in, 291, 302 Los Angeles, Clearing House, 316 Louisiana, bank act of, 343 statement of banks of, 361 Lubbock, Sir John, 299 MacVeagh, Franklin, 240, 405 Madison, James, 164, 165 Maine, Report of Bank Commissioner 1857, 357 and 1865, 358 Marshall, John, 58, 164 Mason, George, 163 Massachusetts, Report of Bank Commissioner, 358 Missouri, Bank of the State of, 73, 351 statement of Bank of, 361 Money, amount held by banks in United States, Appendix B amount of, in United States, Appendix A coin and commodity must be of equal value, 44 credit must not be called money, 33 description of, 29 functions of, 30 gold is our, 26 how made, 26 what are the pieces of, 27 "wild cat," "red dog," etc., 348 Morrill, Justin S., 17 Mortgages, amount of, 249 rate of interest on, 249 Mutual Credit Societies, number of, 274 in Massachusetts, 275 resources for short loans, 277 Ohio, Bank of the state of, 73 bank act of, 344 statement of bank of, 361 Paper, accommodation, 128, 131 commercial, 120 difference between commercial and accommodation, 129 Paine, Thomas, 162 Panic of 1907, 471 Pinckney, Charles, 163 Population, shifting of, 32 Price, what is, 104 Prices, causes of higher, 31 Printing, importance of, 112 Promissory note, what is a, 86 note and draft identical, 87 Property, what is, 104 difference between property and wealth, 104 Postal Savings Banks, 384 Raiffeisen, Friedrich Wilhelm, 272 Real estate, unfit as basis for currency, 136 Redemption, in coin essential, 50 Reforms demanded, 494, 495, 496, 497 Reserves, amount of, 200 amount held by national and other banks, Appendix B, 381 amount of central, 222, 381 additional, where obtained, 409 Bagehot, 202 bank notes as, 204 circumstances should control amount of, 200 character of, 201 average, in United States, 208 elasticity of, 208, 219 from what points considered, 199 how increased, 220, 221 Jevons on, 202 legal tender quality unnecessary to, 188 national banks, 207 promises to pay as, 204 present, inefficient, 218 penalty for not maintaining, 423, 431, 432 present method of, useless, 218 are measure of value, therefore must be coin, 205 state or city debts as, 204 silver, not used in Bank of England, 206 should be national, 211 superimposed, 218 State bank, 207 taxation to compel equal, 212 unfair to permit unequal, 209 United States notes not actual, 206 what constitutes proper, 203 Ricardo, 441 Root, L. Carroll, 334 Ruggles, Charles A., 301, 310 Scotland, description of, currency by Conant, 68 currency by White, 68 effect of bank credit in, 67 Schulze, Francis Frederick, 272 Shaw, Leslie M., 487 Shaw, William A., 17 Sherman, John, 183 Sherman, Roger, 150, 166 Silver certificate, a warehouse receipt, 40 Silver dollars, amount of, Appendix A, 36, 43 a government debt, 40 a subsidiary coin, 39 a demand for gold, 38 not money, 38, 40 weight of, 36 Spaulding, E.G., 183 Stevens, Thaddeus, 183 Steam, importance of, 113 Standard of value, 9 changes in ratio of gold and silver as, 17 gold, the natural selection of, as the, 24 qualities of gold as, 17 Sub-Treasury, deposits in, 243 Suffolk Bank system, 73, 353, 354, 355, 361 achievements of, 334, 335 Bank was first clearing house in United States, 337, 338 commissioner's reports on, 357, 358 description of, 75 destroyed by 10 per cent tax, 74 Sumner, Charles, 179 Talbot, Joseph T., 205, 231 Uap, money of, 15 United States, bank clearings of, 373 financial center of world, 404 foreign trade of, 373 important interests of, 409 production of 1912, 373 size of, compared with Europe, 409 total business transactions of, 373 United States Government, nature of, 410 taxing power, only resource, 189, 191 time obligations only should be incurred, 192, 410 unfit to meet demand debts, 189 United States notes or greenbacks, additional cost of war due to, 185 agreement to pay gold, 34 amount of, Appendix A and 35 bonds issued for, 52 constitutionality of, 185-187 cost of, as currency, 50, 56 cost of, since 1879, 53 depreciation of, 184 drive gold out, 206 how converted into gold certificates, 427, 438 issues of, 183 lowest value of, 35 not money, 35 price of, a quotation of government credit, 41 resumption of payment of, 53 suspended payment of, 34 unfit for currency, 55 Walsh, John R., failure of, 314 War, Civil, first loan for, 177 Washington, George, 162, 165 Wealth, what is, 104 difference between property and, 107 Webster, Daniel, 111, 170 White, Horace, 30, 155 Wilson, John W., clearing house examiner, Los Angeles, 316 Zone, credit bureau of, 323 organization of, 338, 411 organization, repetition of National Government, 483 places of, discount limited to, 479 publicity of organization, 476 should not stand alone, 480 state lines do not conform to economic, 419