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142
REI.E.ASED FOR PUBLICATION
AFTERNOON DJ\''ERS, WEDNESD,\Y FEBRUARY llth, 1920
..
A
N .A D D R E S S
_by
HENRY .A. MOEHLENP.AH,
Member, Federal Reserve Board.
Delivered at the Convention
of the
Dallas Group
of the
TEXAS ST.ATE BANKERS .ASSOCIATION
February lltb, 1920
The story of Texas grips me.
1.43
X-1822
-1-
Its traditions
~~d
the achievements of
its men stir the pride and excite the imaginathJn of every American who,
contemplates them.
The
gJ.o:~y
the history of the ret:i.on.
of the tone Star St:lte has been written into
The spirit of Texas 1 with its vigorous optimism,
is congenial, and its atmosphere of wholesu.-r.e frankness is one in which the
average American should be able to breathe freely and deeply.
at home among you.
You speak a
l~1guage
I understand.
FranKly I feel
Therefore, may I
express the hope that I will be able to speak the language you will understand.
I desire to sit with you as a banker a..'"l.d citizen, to confer with you in a
frank, ordinary way concerning the problems confronting our Republic..
May I
·ask you to forget for the Ume the supervisory relations:iip I occupy, that we
may take counsel tugether to the e:ad that we may serve better ov.r comrD-unities,
our eountry and the world. ..
Texas is a Stat.e of bj_g things.
You boast of c terri tory greater than the
States of Massachusetts, New York, PennsyJ.vania., V:i.rginia, North Cc.rolina, md.
Georgia - the area of which totals
256,919 square miles - and of a territory
which is two hundred a.(l.d twelve times greater th<m that of the smallest State
of the Union- Rhode Island.
In
You have a po:;,nlation estimated at five millions,
1919 you produced crops of cotton worth
$1~75,000,0CO• of co:::n '~24o,000,000;
of wheat ~63,000,000; of oats ~6o,ouo,ooo and of hay ~2),000,000.
You possess
horses, mules> cattle, and sheep of a value of ::1',572 1 000,000, and who can estimate
the value of your oil, your sulphur and coal end. othe:- sources of wealth 1
In the value of your crops; for the first time you now head the nation, for
in
1919 you had a "billion dollar crop" ..
You are also the secoLd State in the
Uh~on
in the value of your livestock.
These things are of outstanding material imrortm•ce, but when I come to
Texas I am reminded of other things of no less impot-tance.
Your illustrious
Sam Houston and Colonel Bowie, and Davey Crockett, that hero of every American
.... 2-
1_44
X-1822
lad, speak of a spirit that is more than the spirit of Texas, that is the
spirit of America, the spirit that is in my heart today and in the heart of
every true American who is permitted to live in these momentous times.
A statement recently issued by the Comptroller of the Currency indicates
that the three leading States whose National Banks have shown the greatest
'
actu~l increase, proportionately, in resources in the last twenty years are
Oklahoma, $357,722,000. or 6537 per cent; California, $l,Ou0,214,uuO, or
and Texas, $869,611,000, or 1013 per cent.
in the banking resources of your State.
1665%;
This will indicate the increase
Truly indeed, 11 Westward the course of
empire takes its way. 11
Your war record is only another evidence of the greatness of your State ..
Psked to subscribe a q_uota of $362, 695t550 towards the various issues uf liberty
bonds, you did far better than that, you• subscriptions in all amounting to
~405,772,000, or $4o,OOO,OCO more than your quota.
in the military service, 155,000
~f
And of the 3,441,000 men
those who answered to the call of their
country were from Texas&
fis we felicitate ourselves on the greatness of our achievements of the
past, let us not fail to recognize that they
co~stitute
a challenge to us for
the future.,.
.As citizens we are proud and happy indeed to know that while our sons
were baring their breasts to the enemy,
. we, their elders, in the common,
ordinary pursuits of life, made some contribution.to their support.
indeed we would be today if we had not done our best.
Chagrined
Proud we are of the fact
that, under the leadership of just such patriots as sit here today, we who
stayed at
ho~e
raised twenty-two billions of dollars to equip and maintain our
military forcest and ten billions of a.ollars to lend to the allisd
seemed like an impossible task.
nc..:iur~s.
In fact you will remember that the leading
financiers of our country thought ,a sum in excess of one-half billion
on the first
This
loan would be more than our natian could absorb.
c~
dollars
The resp7nse to
-3-
145
X-1822
the call of the Secretary of the Treasury was over four billions uf dollars ..
This proof of the s:piri t that possessed. our pe_o?ple is only an index of what
our country may do in the
d.~?.ys
before us.
Iet us remember that at the be-
ginning of this war we o·.ved tho nations of Europe a trade balance of 4oo
millions of dollars, and besides
~hat
they held
a~
controlled our bonds and
securities in the sum of over four billions of dollars, representing a signal
portion of the railroad, comrr.ercial an<l industrial capital of uur country.
Just as our sons assisted in forcing back the enemy vmo believed that
"might makes rig,ht" ,-so we did our part, citizens and bankers, a splendid part
of which
we
may alvvafs be :proud, a magnificent achievement in finance equalled
by no other nation in c:.ll hictory.
I would bring i.o you a messe.ge, a spirit of o:ptimisrr., of endeavor, like
U...J.to that carried by our so.-:1.s to the distracted nations uf Europe in their hour
·of
peril~
Is it possible, m;;' fellow banKers tllat, after such sacrifice and such
an example, we can go back to the old days of iso).a.ti on, ·of selfishness, to the
old narrow program as butiiness rrenJ
Shall we not in the economic strife and
strain JUSt ahead. go to our sectors, as our boys went to thE.irs, in the first
.
_line, and there like true .•'\mericans "Carry on?!'
Some of us may have felt at the
beginning of this \var that from a military point uf view we were not e;a.ual to
the Job confronting us, but we .knew where our duty lay,
is
pec~liarly
.Americ2n vve ·took the shortest way to the JOb.
o:r;-ganized to accelerate prOduction.
with the spirit which
Every industry was
The energies of t.he nation were coordinated.
Labor unselfishly cooperated ,,IIi th capital.
in every home..
an:;.
Economy ani thrift were enforced
The Americ&n people organized for team work, ani overnight a
·plan of campaign was under way..
We had a '·Vill to win.
we a.re a democratic people 1 that this is a
gove~ent
T"nis proves to rr.e that
of the people completely
·capable of self government under the greatest strain•
.A writer says of P~rsh:i.ng that nothing typifies his character so vividly
-4...
1.46
X-1822
as the driving force he put into his campaign from beginning to end..
He had~
definite plan, and he stuck to it through thick and thin, letting nothing get
in the way.
General Pershing only reflects the traditions of our·Pmerican spirit- the
spirit of George Washington at Vall~y Forge,, General Jackson at New Orleans, ani
General Scott, upon your own soil and in Mexico. - the spirit of Grant and tee,·
of Stonewall Jackson and Phil Sheridan.
That is the spirit of America and that
is what I would like to interpret to you today in terms uf present day problems.·
This is a mighty State With a long history of great things done.
can only make big men.
Ana
These
right here, with all the vigor of my soul, gentlemen,
I wish to say we have a big job ahead of us - a world job.
No great task can be
perfo~ed unless we have the impulse and dynamic force of the heart behirld it.
When men like Hoover bring to us the news that two million.; five ·hundrE'!d thnusand
·children are being f.ed daily iri Europ~; that fifteen to twenty rtlillion families are
receiving unemployment allowances, and as we read the news the travelers bring
.
·
.
beasts
,
that the ftr.menians are eating grass beside the roadways like d~b
, and
when we re-read the stories of the devaste.tad cities in Europe and have a pic tv.re
of the demolished factories and the deserted farms 1
it drives us to our knees and
we are humbled in our pride, and we cry aloud.
The first need over there is food.
yes, credit.
~~ere
The next, raw material, and the third •
else can our brothers get it7
Let me remind you, my country-
men, "that the kirid of men to whom we shall extend credit is the peasantry of
France and Belgium, the kind of men who ha'f"e made those countries great and who
stood with the spirit expressed in the words "THEY SHALL NOl' "PASS", who kept
back the hordes of Germany and stood between us and
de~potism~
pay their debts for we know of what stuff they are n:a.de.
our own country, SJ>rang from their loins.
These people will
T:ne citizenship c.:<' ttlis:
Dare we forget them in their
Can we returning from these heroi111. tasks which we performed as
e:X.':?:t~rnit.y?
&J. \iu:.r:\0.~:...:: i .,>.
n::.::. . '.. u. :,
go back to the ordinary pur.suits of life, the"same kind of men we once were, to
-5-
X-1822
live again the same narrow, uneventful, uninspired livesi
i.47
I will not believe
it~
We can understand
All·human relationship in these days is being spiritualized.
why our boys were made soldiers over night better now than we could before the
war.
I love to think of you...1g j'\merica, the whi te·-faced doughboy inexperienced
in war, with no military training, but with all the traditions of .American life.
I
the initiative which came to him from the baseball diamond and the football field I love to think of him with that democracy imbibed in the public schools, with
that Justice and honesty and right of the ..~rasrican. home, and I am sure these
elo~uent
things Jmerican found most
expression when they were confronted with
false ideals of the giant autocracy.
So we must be loyal to this heritage they have given to us and take our
place in the economic strife before us.
Shall we be any less loyal?
My country-
men, it is our privilege in tbe "Providence of God to take ou.r place forever with
the nations of the Ea1·th.
T.b.e Great Teacher snid
for my sake shall find it."
unto but to minister.".
the heart are the issues
It was said of Him
11
11
He
He th<:t shall lose hl:-s life
~J·ame
not to be ministered
The great expounder of wisdom, Solomon, also said "Out of
of
lifc,.if
.· I would bring you not a n'3w message but an old. one, along this line; tha.t
we can never do our full measure of service a.s business rr;en, as bankers, or a.s
Americans only as we try to do it by the heart impulse.
axiomatic.
This principle is
If you are here today a.s bankers, thinking in terms of service to
your communities as before the war, get out of the vva.y for your other
You are too small for the JOb •. A new day is here.
brother~
This is my appeal to you a.s
big men, to do the big thing with a. big spirit.
There are many economists and lead.ets and statesmen who are devising plans
for solving the many problems arising out of this unpreriedenteci \vorld upheaval ..
While we wait we do well to recall the tried virtues of our fathers.
Time is needed to heal the wounds, economically
remedies can be applied..
speaking~
Let us be steady in our thinking..
$orne artificial
Let us be generous
j_48
X-lt22
..
and helpful to those in authoti ty.
Let us be free from pol:l.tical bias and. snap
J udgrr.en t.
Let us set a good example as leaders in the new day 1s program. We
certain
are
of a few things~ This nation must produce more if those petple
over there are not to starve, and if feeble and new governments are to be made
stable.
As we get deeper into the winter, adeg_uate description cannot depict corl-o'.
ditions that exist in Europe.
Orte writer gives one phase which tells the story!
':For months past the reports of the health cond.itiuns in the Central ~mpirea have
been of such character that the imagination is dulled, and one almost seems guilty
of sentimentality in quoting them.
}::U t
their general veracity is not disputed.
In the last years of the war, In Austria alone at least 35,000 people died of
tuberculosis.
In Vienna alone 12,000.
Today we have to reckon with a number of
at least 350,000 to 4oO,OGO people who re·quire treatrr:ent for tuberculosis. .~,s
bloodless
the result of malnutrition a · - ·
generation is growing up with undeveloped
muscles, undeveloped joints, and undeveloped brains.
Tuberculosis is nearly
always fatal now among· adults.
11
Nothing can be d!lme against it owing to lack of foocistuffs.
child here
1,
the physician in charge of one of the hospitals said:
an incredible amount of bread, and yet did not get any strunger.
'You see this
1i
t consumed
I found out
that it hid all the bread it received underneath its straw mattress.
The fear
of hu•6er was so deeply rooted in the child that it collected stores instead of
eating the food, a misguided animal instinct made the dread of hunger worse than
the actual pani?js. ' "
Mr. Herbert C. Hoover in a recent statement said:
"One of the first acts of the Gennans was to denude the peOple of ?elgium
to a very large extent, and the north of France almost wholly, of their cattle ..
In consequence, it has been necessary to maintain a stream of condensed milk and
other food especially for children for the whole of the last four years.
Ths
European races are absolutely dependent for the rearing of their young on ths::.r
i49
-7cattle.
There is no cruelty to the
dairy stock.
popula~ion
greater than to rob tnem of
Nor can the herd. be r.:stored ovemi[;ht.
the
It taKes four years to
rebuild the herd by bre0ding up from a few foundation animals."
"The big problem is the child. problem.
Just as l3lgium was in danger of
losing her next gener3.tion by nv.:n'oe::-less cas;;;s of tal...erculosis brought on by
malnutrition, so are these natJ.ons e;oing through a pt;riod where
~ht:J
child forces
are being steadily and incr.::asingly diminished and wiped out."
"Things, how3ver, arc as be;.d. as they are painted, or more truly, things aren 1t
painted as bad as they are*
Starvati.on in war is to be e.:{pected, but starvation
in peace means one thing only. thu breeding of ruJ.archy."
1Jmbassador Morg0:nthau seys,
11
l7othing on earth
,~:"cop
t a
can prevent the death by fr00z::.ng and starvation of from
people in Europe and tho near e<e::>t this winter, 11
flames of Lolshevisrr. arise ir..E1.:;.rope?
lead 'tll.e way to succor Ru.rope.
mira~ le
f.~.v0
from heaven
to tGn million
Do you ,vonder, gentleri.en, the
This is our first task, f,r::erica·
alone must
How?
It is an outstana.ing privilege for me to me .:;t with you bEmkers bec&use you
have to do with the gJ."eatest pro·iucing class of our country - the :farmer.
are producing the essentials most in dmnand by
·ot~1ez-
cour.tl'i8s.
~hoy
It has been my
privilege to serve as a country bar.ker for twenty--five year·s, a com::n.4nity ;.;imilar
to that which most of you serve here.
producers of livestock.
These were che f<:.rmers, Clairyrr.en and the
You heve in addition, because of your soil and climate,
the great cotton industry.
You will becume more than ever tne co\:.Ilsellors, the
leaders, in the large new program Jt.,st ahead.
Te..;·~as
occupied a uni.1ue position at
one time of being the greatest livestock district of the world.
You are without
doubt the largest natural livestock breeding district of our nation.
You he.ve had
the setbacks of seasons, disease, and rr.arket conditi ..ms similar to all other
sections, but at no time in the history of the world
great for the staple products which you :produce here.
out of the
Digitized forthat
FRASER
r~ave
the dernrmds been so
It is gratifying to know
distress and. strain of your serious drought of three and four years
:150
-6--
,.
X-1822
ago you have en:erged to nearly as strong a position as formerly,
As Mr .. Paul M. Warb1.1.rg, a former member of the Federal ReserV'e :Board, in a
recent speech said: "We are living in mera where the production uf money. and
·
ti· on
ere d J.· t h as J.ncreased
and the protilJ.C
--~
· of goods has deqreased.
e~erge we must produ~e
In order to
less credit and money and produce more goods."
We do well to take inventory at this time on the qt:estion of fir~ t im;'''' ta.,ca:
namely, the beef supply.
pounds.
.
The total exports for the year 1914 were
Four years later, in 1916, during the
war
33 }000,000
·they were increased to
700,000,000 pounds, and then in 1919, approximately 260;00l 1 0GO pounds, or nearly
nine times that of the last normal pre-war year.
This increase in five years
means that our beef supplies have been cut to the bone~
Irtfotmation
from
the
dairy districts would indicate marked encroach!tent upon dairy herds for beef
slc.ughter.
At the close of your
dry season, in the spring of 1919, it was indicated that
your breeding stock has been reduced to less than 50% of notwal.
At the close of
1919 the sarr.e condition prevailed in the Mountain States of Wyoming, Idaho, Mantana and Colott.ado, and for the san:e reas.on their he:rds were reclaced t and thin
cows, heifers and unfinished beef came to. the markets in '..lr..usual vohnne.
During the first eleven months of the year 1919, the total receipts of cattle
at the six principal markets, Chicago, Kansas City 1 Omaha, St~Louis, St. Jobephj
and Sioux City, were 9,962,ouo heed, as against 10,751,000 cattle during the
corresponding period of 1918, showing a decrease of 7139,000 cattle~
1_5:1
X-1~22
.A.s you well know, the big ranges in Texas have been cut up so that the
livestock proposition has become more intensive and means that every farmer
must heve a few head.
.
This is we 11, for the waste feed on every fenced
\
farm is of immense value.
When a country is short of female breeding
cattle as the United States is today, the vital necessities of growth
require at least seven years to replenish the ranks of breeding females and
prodtlce a normal crop of beef steers ready for slaughter,.
For the first time in the history of our country a good milch cow is
now worth more than a horse.
In :).690, we had 26 cows per hundred population; in 1900 - 23; in 191022; and in
1919 -
22.
If you will bear in mind the increase in population
during this thirty year period and that this
population has been centered
in the cities, you will readily grasp the importance of an enlarged program
if we do our part as a producer of milk products as well as meat in this
time of world need~
1.52
X-1822
-9-
Serious consideration should be given as to legislative action prohibiting
for a period of years the slaughter of nll female calves fit for breeding purposes.
Vl'e protect our wild gar..:;e
b~1t
we should. give more thought to the :pro-
tection and perpetuation of our domestic livestock, particularly of the beef
strains.
The record at the live stock markets during. the past four years shows the
volume of veal calves being slaughtered, which is appalling.
The following table
shows the slaughter of cnlves for 1916, 1917, 1918 and 1919 ..
1916
1917
1913
1919
( Es tirr.<: ted)
5,773,900 Heads
7,030,700 Heads 7,767,175 Hems
8.919,000 Heruls
Last yee.r you hnd nn unusual precipi t&.tiun which hns had its influence on
your pastures end your conditions are again normnl.
The herds from the Northwest
and West h:we been ret11rn.ed in a marked way to 'Jvur Stnt.e.
During the three years pl;'ecf3eding l9l9 whe:"l you had a drou-th over the Texas
country the number of sbeep duclined greatly.
It wo.s estimc-.ted that there was
a decrease of about 300,000 het::ds up to J:muary 1919.
S:i.nce
thr~t
time the ro.ins
hr.ve come ·and you hnve had about 300,000 heads of lamb come into Texas from the
drouth stricken areas of Me>ntona, Wyoming, Utah and parts of New Mexico cmd it is
said that all of Western Texas to date has been largely restocked in its lambs
to the pre-drouth number.
Your sheep now total
ne~rly
3 million
hend.
Vlhen the compact or U;egue of Nations. or Treaty has been completed and the
credit program reconstructed nnJ. when the
nation~;;
of E·urope come to buy in this
country to replenish their b.ards 1 for ·this is the only country they cc..n come to,
you will reudily understoncl who.t this menns.
Our exports const;mtly increasing
j_53
X-l~
-10-
will make hecvy draft upon the production, which is therefore related directly
to the home supply and the price levels*
Another important phase of this question is related to the labor problem.
labor was never so well paid and was never in Sl.\Ch demand as now.
This must
cont5.nu8 f o:r ma':ly yea.rs in this country because of t1e g:·e3.t need for building
operations of all kinds, construction of highways, the rehabilitation of the
railroads, the increase of the plants necessary for increased production and
manufacturing of all kinds and it can be safely said without contradiction in
view of past history that when labor is well employed, meat consumption increases
in proportion.
The ratio:·of slaughter has exceeded that uf production during the last five
years.
The excessive marketing during the war period is no indication of over-
productiort, but rather of depletion.
A
cattle increase during the past four
years at the seven principal markets of 6,000,000 heads or over
means rapid
destruction~
S3 per cent1
It is predicted that the coming census will demonstrate
that the annual cattle estimates will show a grossly exaggerated condition in
the number of cattle in this covntry and particularly the breeding stock.
It
is claimed by the best informed statisticians of our country that the
nations supply of ~emale cattle is way below normal; that it will take
two_whole. g~nerations of livestocK. before H will be poR~c;1bJe +.o sum)ly
tb~
country with a normal supply of beef for the block.
This is the time to take stock and make our plans for the future.
This is
a message of prirr.e importance to the bankers ani leaders of livestock interests
of Texas.
May I suggest therefore
two outstanding needs to which every banker must
relate himself during the next few years:
First, .Adequate financing of the fanner for purchase "f tractors and all
machinery, seeds and labor necessary for increased acreage to take up the slack
X-1622
- 11-
154
of available lab or.
Second, 'ro provide ample funds wherever character a."ld ability are in
evidence to carry over for the necessary period all female stock for breeding
purposes.
''
.And right here let n.e state, gentlemen, the Federal Reserve System
was established for the purpose of stabilizing agric'L'.ltural as well as the
industrial and comrr.ercial act~.vities of our country.
No paper will come to
the Federal Reserve System that will be more acceptable and more eligible for
rediscount than thet of your farmers and livestock producers ..
The orderly marketing of cotton, both in domestic ani foreign commerce,
is highly es·sential to the nat.iont and especlally to you of the South..
Your
whole civilization is based uyon the profi tabJeness of cotton production.
Here-
tofore, the marketing of cotton has been anything but orderl;,•, in :.:·act it has
been positively disorder·J.y.
This ho.s been due to two thi.ngs - the lack of
adequate credit facili t5.es enci. of sufficient wa1·ebousir.g
facilities~
The first
difficulty, that of inac'.eq.Pate credit fa.ciliUes, has been almost, if not
entirely, overcome by tbe passage of the Federai. Heserve .Act, under whose :provisions every r..ember bank is authorized to "accept draft::; or bills of exchange
drawn upon it
* * * * *
whi.cl1 are secured at the ti.n.e of c:.ccep tance by a ware-
house receipt or other such doctAr.uent conveying or securing ·t;i tle cove ring
readily marketable staples .. 11
Here is authority for the open disco1.mt market an(i for the use of ban.LIDrs
acceptances.
Hitherto the fl.nancing of cotton was largely localized.
t
Its
burden rested upon the southetn ·banks, with only small assistance from ou.tside
sources.
Credits on cotton were extended by the ordinary promis;sory note, which
had no entree into the open market.
The Federal Reserve .Act throws wide open
the door to the money markets of tne world, an.d the only req_uireruent for entrance therein is that the seeker after credit shall cQme pro:perly clothed.
Under the .Act and the regulations of the Federal Reserve Iloard this dress
consists of a warehouse receipt, cove ring cotton or other staple rod nonperishaele
-12-
1_55
X-li522
agricultural prod\.:cts, issued under such safaguards as to guarantee a.t all
times the absolute integrity of its statement of fact •
.Adet1uate warehousing fac).li tiefi for cotton would, therefore; seem to be
the most pressing necessi t1 in the sane and economic distribntion ot' your great
crop~
The warehouse receipt to be of the highest credit value should be ur.:iform
in its character, Just as are bills of lading and other instrumentalities upon
.
I
which credit is extended..
Cotton, when saf.eg,larded against weather, fire ani
theft' is practically indestructible t and should furnish the basis of the very
best collateral upon which to borrow money.
Credit only desires to be assured
that this c~~odity is thus protected. This assurance can be made absolute only
s tandardhed
through
a system of
y.rarehousing issuing a uniform receipt ...
If, as everyone agrees is the ('ase 1 the lack of credit is the chief reason
for the present WlSOund and unecor1omic system of marketing cottcn, and if the
uniform wareh•.Juse receipt 1 as everyone agrees, is the k9y which unlocks credit,·
then it must follow that the providing of ao.eqv.ate, s tar.~.dard WE,;rehouses is by all
od.d.s the uppermost thing to be done by cotton proO.u')er e.nd bLlS"iiless man to bring
about the solution of the difficulties under wl:.id! you of t1.<.e r,o•Jth have 'oeen
' <
handicapped for so.many years.
A proposition of setting UlJ a 1wcf:'erential ,·ate
on paper secured by warehouse receipts issued under prop8r r. t.ate or federal
regulation and inspection should have the fullest
The farmer needs your help.
consideration~
Give it to him along these line sA
I have only
briefly hinted at this question of increasing productivity. ·May I suggest the
need for a larger ca-npa.ign of eC!.t1cation to stop the people in their debauch, tb.eir
spree, their extravagant
people since the war.
was universal.
li~ring
a1d spending?
A great reaction bas come over our
Economy and even sa.cr.if:i.ce when the boys were at the front
Every unit of our country was organized under the county
of defense to encourage thrift, prod\.\ction and saving:
armistice a reaction set in.
corning more serious~
c~~ncils
ilfter the s\gning of tlle
Signs are appearing that the :people are now "be'-
In some industrial centers they are beginning to reeJ.iae
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156
X-1&22
that in this hour of need for greater prod.uc tion is their opportunity to save
from their earnings for the. rsJ.ny day.
\Ve should encourage our customers and
our people by example and precept that we mean what we say.
We should take
the message to them emphatically that no bank can encourage SIJeculation whether
upon the stock markets, l.n the handling of commodities, or in land.
The time
has come when we must shift all of our relierves to tbe point of attack.
are the Ol.ltstanding officers of the line.
Yo1.1
The war, finartd.ally, has JUSt begliln •
This lesso~ must be cartied with emphasis and must be put into practice behind
.
i
the counteh of every bank.
Every loan should be analyzed and critiched to
the end. that every dollar should count for production and not a cent for
speculation.
To w,_ thholct produ.cts from the market for pure speculation is
unwise and hurtful.
.A reg'llar, ot·derly market;.ng is part of your problem~
We hear much these days about the necessity of
deflat~on
of
credit~
Some
economists lay it to the expansion of currency, others to preva.il:i.ng price
levels, others to condition of foreign exchange, and so on~
Whatever maybe the
cause for abnormal conditions in our credit structure \le are confident of two
essential necessities for approach to solution.
First, we must increase our
production and from our prodv.ction save more and spend less.
We all feel s'UI'e
that these are the ·: found.atiun stones in these days of recvnstr:uction.
So
instead of talking of the inflation or expansion of currency or of credit, or
its deflation or contraction, let us,
thinking and doing.
a~
I have indicated, be steady in our
tet us conservatively regulate our credits and apply our-
selves to this new great task with a1.1 our energy and.
pow~r,
but with that
power under absolute and complete control.
The Edge Act, now a law 1.1pon the statute 'books, will furnish the
machiner~r
with private capital and control, but with Government SlJ!lervisl.on, which will
pro.vide in large measure means for financing the operC2.tivns governing the exports
and im,ports of our country so that credit may be extended and rationed in ord.erl;}
fashion..
It is another great piece of constructive legislation
inJ~
to
1_57
X-1522
provide credit ~pon long time. and offering a good investment for the savings
~
of our people.
The Federal Reserve System is now the reservoir of strength to the financial,
industrial, corrrnercial and· agric'll.ltural interests of o'll.r country.
As bankers we
are beginning to understand that this law was put upon th~ statute books, not
for bankers only, that they might profit more, or for any one class, but for the
interest of all our people; if you please the financial traffic regulator.
There
is not a man in this room today but who will admit that the Federal Reserve System
saved • not only our country, but the world from financial chaos and distressWe could not have won the war without American men ·ani money.
participated in its benefits.
made more secure and valuable.
Every citizen has
Every stockholder in a bank has had his holdings
Does it mean anything to you, my !'ellow bankers,
as a truEtee for your depositors to be a participant in a System the capita~ of
which is $67,5v9 1 000 and the su~lus of which is $120,120,000, and the resources
$6-,171,747,000 and in control of over two billion dollars of gold ..
Let us take for example the case of a strong state bank in one of our
T~ President stated that his bank entered the System during the
largest States.
war as a patriotic duty but
~
it haJ. never borrowed or re-discounted the direc-
tors were discussing, now that the war is over, the advisability of withdrawing
from the System.
T'n.is bank had paid in $9,COO on capital subscription and carried an average
reserve of $162,000- or a total of $171,000.00- which under the tenns of the
Federal Reserve il.c t was paid in gold.
The withdrawal of this bank would take
that much gold from the system.
As the gold held oy the Federal Reserve Banks forms a forty J_:;er cent basis
for loaning power the withdrawal of this bank's
~171,000.
of gold would redn.ce
the loaning capacity of the Federal Reserve Bank by,$42?,500~
Therefore any
withdrawal of capital or reserve reduces the ability of the Federal
toFRASER
protect the
Digitized for
credit situation of the country by two
an~
R~~e~e
bank
one-half ttroos the
158
-15-~
amo·..mt of such withdrawaL
Every State member bank has the privilege of with--
drawing from the syst.em and as a:-pp'!:"c,xiwately y/jo of the capital and reserve
deposits of the Federal
Rcse~'"'~Te
13aaks of the
co11rAt1~;y
belongs to Sta.te n:ember
banks you can see wh~t the effe~ t to onr crecU t st:tucturc would be if the
privilege were taken
aiva~1tage
The aggregate resou:.:·c8s of
half billions.
t~l.e
of, especially luring these days of reconstruc Uon
3tate merr.ber banks approximates nine and one-
The eHgible LOn.,·member banks have resources of about
b
billions,
The effectiveness of the Fedn:ral Reserve System would be increased from twenty
to ,twenty five per cen~ if these eligible non-merLber banks entei·ed the System •
.And when you stop to consider that the Federal Beserve Systom 1s task is to
maintain confidence and insLL'e corrtJlercj_al solver:.cy don't you think membership
worth while?
It is highly impor-ta"".t that the eli gfb J.e no:n-roembe r State banks in Texas,
to the number of 3L~1, witll a capital of twei1t;y-·one a1d a haJJ miLLions and a
surplus of nine miHions and res014rces of p;5 m:U.lions 1 e.dd their strength to
the great structvre.
Is i t fair for y01.1 as bar-.lre rs to sta2.d on tha side li:.1es and participate
in the benefits of this gr-eat financial Sys :.om
EX.rl
not mc.ke auy contrib'.-ltion?
Is it safe for you to ass1.·:rr.e that in the day of stress or strain
•
~;hat
your
correspondent in the city will be able to care for you regardless of his own
needs 7 Have you the rj.ght to put this burden upon hire.?
It is my sincer·e
JUdgment that your elder brother, your real reserve, vvill be ym.1.r f1lll protect5.on,
keeping youi in full control of your L1dependent re latJ 011s as a banker in - the
independent bank:i.ng System of onr country.
You owe it to your community.
You
owe it to this larger prog:rar,1 as a banker and as a pr·od.,.acer to rr.ake s\:re of yo1.:'.f'
ability to ser-ve.
-·
~
Why shoultt
yol.~
be dependent?
We hear a good deal these a.ays
about the possibility of Branch I.anks being estab lishe~ in this country.
hostile to my sense as an independent banker
~~d
This is
citizen, and yet I am convinced
a need for ~his can only come when the local bc;tnker cannot or will not serve
his community and it becomes necessary for outside capital to come in.
·159
You
do well my friends to consider this independent relationship and you should make ·
safe your position as a financial leader of your community.
May I assure you l am not making this statement with a view to solici.tmg
1ut as I stated at the beginning, to be of service and to make those
membership.
suggestions that I would like to have made to me if ! were in your place~
/
May I "Qriefly reeapit\ollatG what I consider ·the outstanding benefits of
membership in the Federal Reserve System:
l.
It is an insurance policy, assuring to you complete confidence in. your
ability to serve your communities and to care for you.r depositors under every
stress and
2.
strain~
It is a guarantee to your community that any program for development
or production can be safely and continuously carried out.
3.
It is a guarantee to you as a conservative banker in the district of
your business that you can take these deposits with the assurance of security
and continuous service.
4.
It insures the independent relationship of your bank as to its dependence
upon any other bank..
5.
It is not a fie ti tious reserve but a real reserve.
For the first t).roe
in the history of our country we are able to assemble the wealth of our·peopl.e
into the credit structure.,
6.
You are able to transfer funds without cost.
checks at par ,·~e-ither going or comingr
You are able to collect
You are able to' ship currency either way>
insured and all charges paid, without any expense to your bank •
.
'
7.
You have the benefit of the adVice of business experts of the country
not only on financial matters but upon the conduct of your business in particv.lar.
You have 'the privileges of rediscounting eligible paper.
This is pa;ticularly
important at this time because of the need of increased. production of the art)c)c>.F".
160.
. X-lS22
-17you produce in this section.
6.
The System has in the short period of its exi~tence brought about better
banking methods.
You have heard criticism as to the necessity for making reports,
etc., but let me re:rr..ind you Gentler;,en that it was well for your country that
i
under the National lanking law s" careful e:xamination of banks
that when the stress of war
adhered to;
111J.S
upcn us we had little to clean up or remove but
w.:l.S
we could go imrr.edietely at our job.
]ankers now ar0 becoming real bsnkers and
I
trusteQ. guardirtns of the peoples money.
9·
It has given to every bank, a mc;mb9r of the system. the prestige because
of the things I have enumerc.ted. and it is reflected in the confidence of the
depositor, which is above :111 absolutely necessary,
Have you undertaken to socure the viewpoint of your depositor, very seldom
expressed, as to how he feels?
reflect
If there is any doubt in your mind~as to this
upon the four yea4's or more since the World War began.
lnstee.d of
apprehension or fri€';ht our :people for the fir<Jt time in the history of our
country understood that the Goverr®ent was behind tL0 tanks; that somehow, someway:
their interests were fully protected#
:ta:"lk failures ·.ver:. t:he lowest in the
his tory of· the country during t.h:is period.
LDn4 depos!.ts inc.reasecl, bank stock
paid large dividends, lare;er than ever before, ani in ::>pi te of all we were able
to finance the Government in £:11 .its operations as I have iadicated before in
the sum of approximately thirty--five billion dollars.
liihen I say "we" I do not
mean bankers but I mecn the :people, our depositors; unQ.er your leadet'<>hip.
l'ut this could not have been done
Federal Reserve System in operation.
A.S
you will fr3ely admit without the
May I emphasize this again because it is
my thought to get into your minds f::i.rst things so that the petty, smaller thing
will take its right Flace, and that you
w~ll
have proper respect because of the
accomplishments of the System during this great period.
•'
'
I am conscious of the fact that there are critics everywhere.
there are some here today
~no
No doubt
fail to appreciate the fact that tha Federal
X-1322
-16-
Reserve System stands· as the great insurance policy, past, present and futurej
vVho still cling to their idea and chi!"p and whistle because of their pet.ty losses
on exchange and their losses upon reserves a year after the war is over, and
with the memory of past panics fresh in their minds, ani with their deposits
doubled and their profits greatly increased, having the complete confider£e of
the people.
In spite of all this wonderful record there are still sorr~ men left
who would take us back to the dark alley of narrow thinking .and small doing.
·Do you realize, my friends, "What it means to be a citizen of a country, and
the only country on the face of the earth with a stabilbed money standard ..
How would you like to live in a country where the mark, in terms of gold, is today
only equal to one twenty-second of what it was before the war, or where the franc
in
exchange for gold is eq,ual to less than half its t'onrer value, and the lire
one-third of its former value?
fl.nd what shall we ~ay of the previous standard
of the world, the pound sterling? Ch, I Jmow thert:l are rwn here who will begin
to talk about the purchasing pow.;r of th.;; dollar, but let me remind you that J.n
spite of the present price 10vels our dollar still heads the list..
undisputed creditor
D.;t
tion of the world,
He are ·t,he
Not a natiunal ban.K :failure of any
cunsequence during all these years of stress.
wt
me refresh your mind as to how you people in Texas have participated
in the Federal Reserve System.
Rediscounts
1917
$52,052,6oO
1916
$5;)7 J 677 '766
1919
$1,224,94<--, 345
Is that any contribution to the State of Texas?
\!~bat
Are you as a banker a debtox·?
will be the record for 19201
.
In the old days when the stock gamblers vvould plan
set the wheels of speculation
gain~.
th•~ir
I
little parties and
when the garn\:l got beyond their control. you
will remember, they were playing with the funds the producing people had en .J.:>posit.
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:162
X-li:.22
and wllen we desir-ed thes-e- .t•J.nd.o f o;: their use, enci for legitimate purposes
to increase production and. care for our ctillmunities, v:e were told that vr.e
could not have tb.em and we v;ere CJi1~lled to resort to one device and. :.o.:1.otl\er
to care fer our need.
One centralized power controlled. How different t.cday,
A lemocrati'ied System responding to needs of every sectiun of our country.
1..8 t us get it into ~ur minds if we have forgot t,.m it, that the Fede re.1
Reserve System is a great G3vernment institution, and is, as I have stated, tor
the benefit of all th8 p~C!Jle.
There fl.re sorr.e 'bankers who labor u.."lder the :Ui?•.J.-
1·\,).cination that the deposit::; in their institution are their property.
Ti~
do well occasionally to r0rr.ind ourselves that the funds belong to the people,
and that the Sys tern i~ fun?-tioning ~ot primarily for the banker bvt for the
people •
That is what we have the Government for, end after all you and I arc
the Goverr.rnent.
Has the safety 5nd security that the Fec.eral Reserve System
has brought to yov a! a bank::r meant anything to yov.r customer?
tried to get his viewp•Jint 7
Have you ref lecteJ on how he felt during the wa.r?
This System has been the great insurance policy for all of us
members or non-members.
Have yov cnr
wh~thcr WI?
were
Your whole district ia now on the par bMis) .rud. by
the way, is this not in ms.ny w'ij.yc
~
goQd thing?
Would you n..,t suffer rnany
ir~
conveniencjs and possible iess if you were to go back to the old days :;f taJ"iy
service.
In a short tin:e now, the whole country will be upon a par basis.
use an old illustration, which to my mind is <.lui te clear, l!f tho
prodv,c~r
To
in the
old davs, who hauled his produce 'ey wagon, forced to go dOV>ll strears1 ten miles
to find. a bridge to deliver his goocls, of course putting thP. cost of trans-p'lrt.r
tion as to time, labor and all upon the Q:Ustomer _
The
Stah.-or.~r
Government carue
along more recently and put a bridge across this river right at thP- door of
producer and the cunsumer and have told them to use it to expedite trade,
save tima, labor and moneyr
the u:;:,c of the old bridge?
tl~e
~~
Do you want to be one of thosP men who i·M;ist upon
Think i t over, and again 1e t me remind. 'J""U, always
-20-
X-1622
163
remember that these deposits belong to the people ani that the Federal Reserve
System is functioning in their interest primarily.
·May I have the ear of the State bankers present who are not members of
the System, to urge upon you the prime importcnce of st:·engthening the System
for the job ahead as I have outlined briefly.
n1e day has come when if you
expect to use the System directly or indirectly you must make your :f'ai.r con· tribution to its reserves in every way.
In this brief, plain way I have
undertaken to talk to you in a languame you would understand, without technique
or any effort to give advice.
I would like to do to and for you as I would like to be done by if I WGre
in your place.
The time has come for us to relate ourselves as citizens> not
only to the financial system but to the country and to the world in terms of
sacrifice and service-for you to put first things first.
You may discover that
this principle when once worked out will be not unlike the tides of the ocean.
They come in with unfailing regularity and when they go out they take with them
not only the greab war vessels and merchantmen, but the 1i ttle dory and canoe are
lifted alike upon the bosom of the tide.
A well known philosopher put the
idea something like this: "Just as in religious hysteria a single text becomes
a whole creed, to the exclusion of every other text, and instead of being
itself subJect to rational tests is made the sole test of the rationality of
everything else."
small doing.
That is the mistake of small thinking, which results in
lVJay I urge you again to use your privilege as leaders in the new
day of opportunity..
How proud we are of our country and our civilization.
unmindful of this:
let you be not
That our country in the days to come will be JUst as great
and strong according to our own contribution.
have paid the price.
~ut
It has cost u·3 much, the fathers
We will not tolerate on our shores the anarchist or the
bolshevist, but we propose, methodically, steadily, conscientiously to go at our
job of reconstruction, having full respect for the blood arrl treasure that has
:l64
-21~
'been spent to make our cou.Yltry what it is, a11d. hand down to our children the
heritage unsullied a:.1d pro>Te
~o
a.Jl the world that this is a Democracy where
:people know how to perform the task of self govemment,.
'
.
@FedFRASER