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932
X-1742
RELEASED FOR PUBLICATION
AFTERNOON PAPERS DECEMBER 1 0 t h .
AN
1919.
ADDRESS
by
HENRY A.
MOEHLENPAH,
Member, Federal Reserve Board..
Delivered a t t h e Convention
of the
Oklahoma S t a t e Bankers
Association,
Oklahoma City, Oklahoma.
December 10, l ^ i g .
-I-'
X-1743
* Gentlemen of the S t a t e Bankers* Association- I t i s unnecessary f o r me to s t a t e ay jgreat p l e a s u r e in meeting
with you a t t h i s Convention,
I regret, exceedingly t h a t Governor Harding,
could, n o t be here a s you d e s i r e d .
May 1 ask you t o l e t me come i n w i t h
you as a State Banker, f o r as you know, f o r twenty-five y e a r s t h i s has
been my b u s i n e s s , s e r v i n g a country a g r i c u l t u r a l community and I- f e e l
more a t home.
I come n o t f o r the purpose of making a speech b u t t o s i t with you,
i f I may, in Conference and to have a chat with you r e g a r d i n g some things
of mutual s i g n i f i c a n c e and importance a t t h i s time.
Indeed I r e g a r d i t
as u n f o r t u n a t e t o come here perhaps in a way r e p r e s e n t i n g the Board upon
which I have the g r e a t honor to s i t , and you may think t h a t I speak- from
the l a r g e r supervisory r e l a t i o n s r a t h e r than with you as a banker. . May I
assure you I do not - a d e s i r e t o be of service t o my f e l l o w - b a n k e r s , alone •
prompts nie. My serving i n t h i s c a p a c i t y however, a s s u b s t i t u t e today, i s
not your f a u l t .
I t i s a . s i g n a l honor t o meet with t h i s d i s t i n g u i s h e d gathering of r e p r e s e n t a t i v e b u s i n e s s men and bankers of Oklahoma, t h i s g r e a t new Empire
6f OUr c o u n t r y .
The e x t e n t of your immense t e r r i t o r y and of your resources
with only t h i r t e e n m i l l i o n of your f o r t y ' • t h r e e m i l l i o n s of atireg of land
under c u l t i v a t i o n , can h a r d l y be measured.
Some, twenty odd years ago i t
was• my g r e a t p r i v i l e g e t o spend some time h e r e .
small; your country new.
Your c i t i e s then were
Transportation f a c i l i t i e s of l i t t l e consequence.
Today the evidence of your p r o s p e r i t y , of your e n t e r p r i s e and v i s i o n , overwhelms me.
The r e s t of t h i s country has l e a r n e d to r e s p e c t and honor Oklahoma
n o t only f o r your progcessiveness and your e n t e r p r i s e , b u t because of your
•Americanism so pronounced and so wonderful iji t h e s t r e s s f u l days j u s t passed.
A s t a t e t h a t can produce i n one year (1919) n e a r l y t h r e e hundred m i l l i o n s
9
3
*
of d o l l a r s i n food crops
250 m i l l i o n s i n o i l and can produce and maintain
$120,7^9>000 °f l i v e stock and have so p o t e n t i a l a p a r t in producing those
things so necessary f o r the p r e s e r v a t i o n of l i f e and f o r the commerce of our '
n a t i o n , i s incomparable.
I a p p r e c i a t e too t h a t you n o t only r e p r e s e n t t h i s great
and s i g n i f i c a n t volume of resources but t h a t you men a r e the p i o n e e r s , the key
men, the l e a d e r s i n your banks, in your State c h a r t e r e d i n s t i t u t i o n s , r e p r e s e n t i n g
eleven m i l l i o n d o l l a r s of c a p i t a l a;id n e a r l y four and a h a l f m i l l i o n s of surplus
and the d e p o s i t s of your c l i e n t s approximating 1$0 m i l l i o n s of d o l l a r s .
figures are s i g n i f i c a n t .
These
And I would be indeed r e c r e a n t a s a c i t i z e n to come
to you w i t h any mea&age of pessimism, because these a r e days when we should
value the r e s o u r c e s of our own l i v e s and the c o n t r i b u t i o n that the world and
events have made t o u c .
They axe a challenge n o t o look backward but only
forward to the o p p o r t u n i t i e s and p r i v i l e g e s and b l e s s logs t h a t c o n f r o n t u s and
t o enc-OUrage ourselves only because of the achievements of the p a s t A w r i t e r r e c e n t l y says, "Pershing with the whole s t r e n g t h of h i s p e r s o n a l i t y ,
s e t himself the task of i n j e c t i n g t h i s "will to win" irate h i s army. Nothing
vividly
t y p i f i e s Pershing 1 s c h a r a c t e r s<y
as does the d r i v i n g f o r c e t h a t he put
i n t o h i s campaign*
He had a plan of campaign, a d e f i n i t e plan, asd he stuck
to i t through thick and t h i n , l e t t i n g nothing come i n the way.
" His o f f i c e r s were made to f e e l t h i s d r i v i n g f o r c e .
"General Pershing has
ordered t h i s and i t ' s got to be dona" - that was the s p i r i t t h a t dominated the
army.
n
J u s t two i n s t a n c e s :
1
An o f f i c e r sent t h i s message to headquarters.
I must s u r r e n d e r . "
"Unless I have reinforcements
Immediately the order went back from Pershing: "Turn your
cemmand over and r e p o r t a t
tokadgtiarters."
An e f f i a s r could ask f o r needed r e i n -
forcements, but he could not t a l k surrender.
• " ItersMng asked another o f f i c e r :
"They are
t i r e d out.
"What c o n d i t i o n a r e your troops in?"
They a r e not i n condition to continue i n a c t i o n . "
4
-3»
The answer was snapped:
X-1742
9 3 5
" I t ' s not your men t h a t are t i r e d out, i t i s you.
Show your men that you've got the stamina to hold on and your men w i l l hold on
with you. n
Quoting from an e d i t o r i a l in a Metropolitan Journal*
"We a r e besieged by an army of calamity howlers.
nightmare»
The Bolsheviki i s the
The nerves of these people go a l l to pieces when they discover some
r a d i c a l l i t e r a t u r e or a r a d i c a l speech* and they can almost name the day when
Revolutionists w i l l overthrow our Government."
"We must s i l e n c e those who would make us believe t h a t we a r e to have a panic,
and to a s s e r t not only our courage but our f a i t h in our American i d e a l s .
If those
who had come before u s hadn 1 £ had f a i t h and courage t h e r e would not have been any
United States of America,
I t i s demanded of the Americans of today t h a t they
have the same f a i t h and courage, i f t h i s country i s to overcome any f u t u r e d i f f i c u l t i e s and be b e t t e r and greater f o r the experience. n
"We must have patience.
We a l l have our ideas as to what should be done,
but they cannot be r e a l i z e d at once.
The United States and i t s i n s t i t u t i o n s have
come through a century and a half of change.
and f u r t h e r development.
I t i s going on to
other changes
I t i s f o r us to concentrate on that f a c t with courage,
with f a i t h , and p a t i e n c e , n
Why should our message not be one of optimism?
Who upon t h i s planet have
greater reason to be o p t i m i s t i c than the c i t i z e n s of our Republic? Two years ago
or more we were c a l l e d in the Providence of God, I believe*, to the great mission
of redeeming and saving the world from the despot and the autocrat to a l a r g e r
and more pronounced l i b e r t y than yet any of u s of the human family have reached
or believed.
I t i s not p o s s i b l e t h a t men could make the s a c r i f i c e s i n v a i n t h a t our sens
'
have made i n going with c l e a r h e a r t s and clean hands to help the opp^^ssed peoples
on the other side of the world.
To us who have had some humble p a r t
-4-
xri?42
936
as
with them i n the s a c r i f i c i a l thing, to go back to do our work i n l i f s
b e f o r e would, be to dishonor o u r s e l v e s .
I t i s our p r i v i l e g e as business
men t o occupy completely the sector t h a t belongs to u s .
Great t r i a l s and
o b s t a c l e s and problems may confront u s but what care we; t h i s i s what has
made the hone and sinew of our people.
country g r e a t .
This i t i s t h a t &as made our
As we c o n f r o n t the new s i t u a t i o n economically i n t h i s world
and as we launch our bark upon an uncharted sea, economically speaking, l e t
us remind ourselves t h a t our boys, new and u n t r a i n e d i n war, f o r days and
n i g h t s l i n g e r e d i n the trenches before the enemy, u n a f r a i d , and yet could
not go out t o engage the enemy i n combat be cause the time was not y e t .
But
when the word was given, trench or bombs or barbed wire or overwhelming odds
did not r e t a r d or stagger.
With one voice {.hey cried "Let us go".
t h i s s p i r i t , unconqierable, that made the issue complete and quick.
I t was
When
America w i t h i t s men a r r i v e d a new s p i r i t was p r o j e c t e d i n t o the plans of
battle.
I t i s t h i s s p i r i t t h a t I would l i k e to r e f l e c t , i f I could, as we
think of our problems as bankers.
Sfe have a r i g h t to b e l i e v e t h a t the things
we have accomplished as a Nation and a s men we cannot only duplicate in the
f u t u r e but can improve and e n l a r g e .
Who would have thought t h a t two years ago or so t h a t t h i s n a t i o n could
have r a i s e d in money i n so short a time a sum of thirty™two b i l l i o n s of
dollars* Twenty-two b i l l i o n s to equip our boys and armies i n the f i e l d s , and
ten b i l l i o n s to loan to the A l l i e d Nations.
Do you remember t h a t when i t
•
was proposed to make the f i r s t war loan the great f i n a n c i e r s of our country
from N-w York said "The sum asked f o r under no circumstances should be l a r g e r
than a half b i l l i o n of d o l l a r s ; t h a t i t would be impossible to get morti?"
The Secretary of the Treasury, struck the h e a r t of
the sons of l i b e r t y ,
they not only gatze a h a l f b i l l i o n but over n i g h t added t h r e e and more f u l l
b i l l i o n s . You men i n t h i s room airi. p a t r i o t s l i k e you a l l over the country,
have been the l e a d e r s i n accomplishing t h i s .
-5r
X-17U2
9 3 7
May I remind, you t h a t "before we were c a l l e d i n t o t h i s great c o n f l i c t
and when war was declared on the other side of the world, we owed the nations
of Europe in trade balances about U00 m i l l i o n s of d o l l a r s .
Besides t h i s ,
Europe owned and h e l d in t h e i r strong boxed about f o u r and a half b i l l i o n
d o l l a r s worth of the s e c u r i t i e s r e p r e s e n t i n g the r a i l r o a d and commercial and
i n d u s t r i a l c a p i t a l of our country.
The problem of paying nctt only t h i s debt,
but of buying back our s e c u r i t i e s which were being dumped upon the exchanges
was most a p p a l l i n g .
But to be b r i e f , Gentlemen, we not only paid t h i s debt
but bought these s e c u r i t i e s back i n the main.
I am sure from t h i s brief r e c a p i t u l a t i o n t h a t I have given you a f a i r
reason why we should be o p t i m i s t i c as we approach the problems of the future*
The pioneer never was a p e s s i m i s t .
The producer who sees the reward of h i s
labor i s always an optimist and I appreciate today t h a t I am f a c i n g not only
pioneers but producers.
Men, you are honored t o have to do with the greatest
producing c l a s s of America, namely, the farmer.
We hear much these days about " i n f l a t i o n " and "over expansion" and
" d e f l a t i o n " of c r e d i t . Would not " c r e d i t regulation" be the b e t t e r term?
I t i s p e r f e c t l y obvious t h a t with twenty-five b i l l i o n s of c r e d i t opera- •
t i e n s , represented by the Government bonds issued during the war, t h a t f o r
a long time things w i l l be abnormal and i t may be f a i r t o s t a t e t h a t the
credit situation is inflated.
This can only be changed by an absorption of
t h i s debt by the savings of the people.
This means economy and t h r i f t and
saving on a no mean s c a l e .
I t i s j u s t as equally obvious t h a t America never had such o p p o r t u n i t i e s
f o r production and when I say
1
c r e d i t should be regulated 1 I mean t h a t a v a i l -
able funds of the banks i n the Federal Reserve System and a l l banks generally
should be wholly d i r e c t e d into the channels of production f o r the increase
of a l l commodities, the need f o r which i s w o r l d w i d e and without precedentBankers w i l l have to become a n a l i s t s , to d i s c r i m i n a t e c a r e f u l l y on
938
-5t~
X<L?U2
loans w i l l be a d a i l y t a s k ; they w i l l have t o stand a s guardians and t r u s t e e s
a s never b e f o r e in t h e i r b u s i n e s s to see that, no funds go f o r speculation
whether i t i s upon the stock markets, i n commodities or i n land or anything
else.
The f u l l power of a l l c r e d i t should he conserved and be behind p r o -
duction.
With patience and care America w i l l surmount a l l her d i f f i c u l t i e s *
Time i s e s s e n t i a l *
You know our c i t y f r i e n d s do not f u l l y understand our r e l a t i o n s to the
economic welfare of t h i s country.
r e s e n t i n g true wealth.
Too often they r e g a r d the d o l l a r a s r e p -
This i s not so.
There i s no wealth c r e a t e d except
by the l a b o r e r who produces an a r t i c l e to s e l l or the farmer who from the
s o i l or the e a r t h produces sorts thing f o r use t o maintain and s u s t a i n l i f e .
And I consider i t a s i g n a l p r i v i l e g e and honor to spsak to men who have to
do with the a g r i c u l t u r a l i n t e r e s t s of our c e r a t r y .
u s f u l l y a p p r e c i a t e the sigaifieitoce of t h i s -
I am sure t h a t none of
The country banker has without
question the l a r g e s t opportunity of a l l other b u s i n e s s men a t t h i s time in
our country.
You a r e to deal d i r e c t l y with the men who t h i s year i n t h i s
n a t i o n of ours have produced ten b i l l i o n s of d o l l a r s worth of food crops
alone and who added an increase of l i v e stock approximating 700 m i l l i o n s
of d o l l a r s .
I d e s i r e a l s o t o take you back b r i e f l y i n t o the f i n a n c i a l h i s t o r y f f
cur own country as compared w i t h your p o s i t i o n today.
thi s
I am reminded to do
,6-.
•
x-ifte
9 3 9
i as I have r e c a l l e d f o r yoxif c o n s i d e r a t i o n the achievements of these years
and to s t a t e t o you. without any f e a r of exaggeration or c o n t r a d i c t i o n t h a t
none of these things could have be in p o s s i b l e i f i t had n o t been f o r the
Federal Reserve System.
As I have s t a t e d to you, my banking experience has
been confined almost e n t i r e l y f o r a q u a r t e r of a century to a S t a t e chartered
institution.
My l i f e has been r e l a t e d almost e n t i r e l y t o the a c t i v i t i e s and
b u s i n e s s of t h e farmer and with you I have had the experience t h a t every banker
has had, n o t of going through a war b u t of going through f i n a n c i a l war and
panics.
With chagrin and shame as a t r u s t e e of the p a o p l e ' s money repeatedly
we have had to apologize and r e f u s e to give them t h e i r money when Called f o r *
And I wish here t o s t a t e t h a t I am a f i r m b e l i e v e r i n the p o s i t i o n of the
State Banker i n our economic l i f e ,
I b e l i e v e you have j u s t as d i s t i n c t a
r e l a t i o n of importance to the people a s the National Bank h a s .
Each have
t h e i r place and we should preserve the independent r e l a t i o n s we occupy as
earnest
bankers, but i f we wish to preserve t h i s independence I ask f o r your
and c a r e f u l c o n s i d e r a t i o n of what t h i s r e l a t i o n has to do with the Federal
Reserve System a t t h i s time.
Are you a
p a r t i c i p a t o r i n and f o r the System,
or are you s a t i s f i e d w i t h being a b e n e f i c i a r y ?
I s i t of any concern to you
as a banker t h a t you play i n t o the game and be p a r t and parcel of t h i s f i n a n c i a l organism or t h a t you s u p e r f i c i a l l y s t a n d on the side l i n e , too o f t e n
criticise
to
and y e t partake of the b l e s s i n g and b e n e f i t s and make no r e a l
contribution.
I do n o t come here today i n any s p i r i t of c r i t i c i s m , and as A
commenced, I d e s i r e to t a l k only as a S t a t e banker wi th my f e l l o w s t a t e
bankers, b e l i e v i n g t h a t we have a message f o r your thoughtful c o n s i d e r a t i o n .
The remedy f o r our e x i s t i n g f i n a n c i a l condition and the r e o c c u r r i n g panics
i n the f i n a n c i a l h i s t o r y of our country was p l a i n to a l l our Statesmen, but
because of c e n t r a l i z e d i n f l u e n c e s , s e l f i s h i n the extreme, i t was q u i t e imp o s s i b l e f o r l e g i s l a t o r s t o p r o j e c t a programme to remedy t h i s s i t u a t i o n .
took a s o - c a l l e d
1*
U n i v e r s i t y P r o f e s s o r , now the o u t s t a n d i n g f i g u r e in a l l the
,7-
9 4 0
X-17U2
world - P r e s i d e n t Wilson - t o not only conceive the p l a n i # i t s f u l l n e s s
and t o add the n e c e s s a r y v i s i o n but a l s o the n e c e s s a r y f o r c e t o demand of
congress the enactment of the law e s t a b l i s h i n g the Federal Reserve System.
We shudder t o t h i n k what our p o s i t i o n would have been i f t h i s system
had not been ready when war broke upon the world* Without doubt f i n a n c i a l
chaos would have r e i g n e d .
In the o l d days when the stock gamblers would p l a n t h e i r l i t t l e p a r t i e s
and set the wheels of s p e c u l a t i o n going, when the game got beyond t h e i r
c o n t r o l , you w i l l remember, they were p l a y i n g with the f u n d s the producing
people had on d e p o s i t , and when we d e s i r e d these f u n d s f o r t h e i r u s e , and f o r
l e g i t i m a t e purposes to i n c r e a s e production and care f o r our communities, we
were t o l d t h a t we could not have them and we were compelled to r e s o r t to one
device and another to care f o r our need.
The Oklahoma Bank had i t s r e s e r v e s
deposited a t Kansas C i t y , and Kansas C i t y i n Chicago and the Chicago Bank i n
New York.
Thus were our r e s e r v e s pyramided.
day of s t r e s s .
Never K,obelized f o r use f o r the
I am not going t o waste any time today t a l k i n g to any man here
who has not the v i s i o n to see the importance of t h i s g r e a t m a t t e r .
The f i r s t
n e c e s s i t y i f we p r e s e r v e our indepenaenfcvrelationship a s bankers to our own
i n s t i t u t i o n s , and "our own communities, i s the mobolization of our r e s e r v e s
for use.
When we commit them to another i n t e r e s t ,
s e l f i s h or p e r s o n a l ,
they mast of course be use a f o r p r o f i t , and when same are so used they may
not always be l i q u i d enough to become a v a i l a b l e ,
I do n o t b e l i e v e i t i s necessary longer to t r y t o prove to any banker
what i t means to mobolize r e s e r v e s .
This has been a proven f a c t and i n s t e a d
of pyramiding as we used to i n the old days we f i n d now a f o u n d a t i o n i n the
mobolized r e s e r v e s of the Federal Reserve System, upon which we can b u i l d
a s t r o n g s u p e r s t r u c t u r e of c r e d i t . If the a s s i s t a n c e of these r e s e r v e s i n
has
the Federal §eserve System
not y e t appealed t o
X-1742
you as being the f o u n d a t i o n of your own "business as banker, I s h a l l
not waste time to argue f u r t h e r *
not ap p rec i a t e d *
I t i s obvious and s e l f - e v i d e n t if
The l a r g e r c o n t r i b u t i o n you make t o those r e s e r v e s ,
the s t r o n g e r your bank w i l l be and the g r e a t e r your a b i l i t y t o serve
your community.
If you a r e s t i l l on t h e s i d e l i n e s as I have i n d i c a t e d
you are s t i l l b u i l d i n g apon the c o n t r i b u t i o n and s e r v i c e of otners*
Do you t h i n k i t v;ould be p o s s i b l e f o r Oklahoma t o have done
h e r noble and splendid p a r t i n c o n t r i b u t i n g $l63,918,400 xor the war
i s s u e s of Government bonds, which i s e approximately ]>0 m i l l i o n s above
h e r a l l o t m e n t , i f i t had n o t been f o r t h i s f o u n d a t i o n l a i d ?
I n 1917, $25,693,596.worth of p a p e r was r e d i s c o u n t e d f o r
banks i n Oklahoma by t h e F e d e r a l Reserve Banks :.t Kansas C i t y and
Dallas,
Then i n 1912, as the advantage of t h e System haa become more
widely known and as more banks had become members, a t o t a l , of
$148,3^51896 was r e d i s c o u n t e d f o r Oklahoma,
For the f i r s t nine montns
$242 , 9 4 ] , 668
of I9I9 the t o t a l of paper rediscounted was .
'
other
words, t h a t much money was loaned t o your s t a t e from
out side
"- sources;
t h a t much money was given to Oklahoma1 s use because i t has banks
prudent enough to j o i n the F e d e r a l Reserve. System.
Vh-t v / i l l i t be f o r
1920 i f you do your aasy i n production?
May I suggest h e r e , Gentlemen, t h e need of t h e c l o s e s t
a n a l y s i s of a l l loans
- t h a t c r e d i t f o r s p e c u l a t i v e "purposes, e i t h e r
on stock exchange, i n commodities or in l a n d , be denied*
s i t u a t i o n c o n f r o n t s us*
A stern
Twenty-five b i l l i o n s of Government debt has
been c r e a t e d which must bo absorbed by t h e s a v i n g s of the p e o p l e .
Any
a d d i t i o n a l c r e d i t c r e a t e d o t h e r than n e c e s s a r y f o r i n c r e a s e d p r o d u c t i o n
Xwl?42
i s but adding a hazard.
bankers.
This i s your f i r s t duty i s American
Let u s not i n f l a t e , but dofl?.te i n o r d e r l y f a s h i o n .
V.'e
should a l l be p r e a c h e r s vmd d o e r s i n t h r i f t and economy.
I need not take more of your t i n e t o review t h e s e f u n d a mental p r o p o s i t i o n s .
We have -tt the p r e s e n t time in t h i s country in
the c o n t r o l of t h e Feder.,1 Reserve System, over two b i l l i o n s of jolcu
As near a s can be estimated, t h e r e i s o u t s i d e some 600 m i l l i o n s of
gold i n the p o c k e t s of the people or i n the c o n t r o l of s t a t e bonks.
I appeal t o you, gentlemen of f i n a n c e , a s the ciistodians of the
i n t e r e s t s of your communities, t h a t i t i s s e l f - e v i d e n t .xnd h i g h l y
inportzmt t h a t t h i s cold be deposited i n the common r e s e r v o i r f o r use
i n the day of o p p o r t u n i t y or s t r e s s th.it may be before u s .
TBiile we are concerned f o r the day of s t r e s s , we must
provide abundant resources t o take - d v i n t a ^ j of our p r e s e n t job as a
world power, t o produce the n e c e s s i t i e s of l i f e iznnediately -nd in
volume as we never have b e f o r e , i f the world i s to be saved from u t t e r
s t a r v a t i o n and f i n a n c i a l d i s t r e s s .
I know t h a t there a r e alarmists i n the country.
The croaker
c r i t i c , e f f i c i e n c y e x p e r t s , and so c .lied economists are a l l e y s i n
evidence.
They were here when the Federal Reserve System was e s t a b -
l i s h e d , you w i l l rsmembsr.
TJhen the prqpositionswas conceived of
b r i n g i n g i n t o t h e c r e d i t f a b r i c s of our country the l i q u i d a s s e t s , the
wealth if you p l e a s e , as r e p r e s e n t e d by the n o t e s of the f.:.raer,
merchant -nd manufacturer, to be available f o r currency, and when
i t was propose^, and as i t i s now a f a c t , t o p u t with t h i s wealth
-nd c r e d i t of our people n a d d i t i o n a l kC$> of gold t o u n d e r l y t h e
F e d e r a l Reserve note i s s u e , many of these e x p e r t s met and s a i d t h a t
X-1JU2
-10-
currency would "become too i n f l a t e d :.nd t h a t we would not have enough
gold to hold the s t r u c t u r e up.
Let ma remind you .i./_.in of the volume
of gold now i n thy country, and
of
our currency medium and of i t s value
as compared with any money standard i n the world.
But I would f u r t h e r
remind you, i f I may, i n a more f o r c i b l e way, t h a t f o r the f i r s t time
i n the h i s t o r y of our country the rc.,1 wealth as represented by the
l a b o r e r and t h e products of our xvhole people and p r o p e r t y are mobilized.
Yes, we h^-ve the gold.
We are a c r e d i t o r n a t i o n .
We have now a
foundation to b u i l d the s u p e r s t r u c t u r e of c r e d i t , s a f e , deep and sound.
We have democratized our banking system - 12 g r e a t banks with branches serving a l l our people, commercially and geographically, and not any
one group, c i t y or d i s t r i c t .
The Federal Reserve System i s the
g r e a t e s t s i n g l e piece of c o n s t r u c t i v e l e g i s l a t i o n ever p l a c e d upon
the s t a t u t e s of our country.
The denunds to be made upon us i f we do our p a r t are to be so
great that anything we can do to increase p r o d u c t i o n as the l e a d e r s -md
r e p r e s e n t a t i v e s of the farmers should be done with p r e c i s i o n and in
volume.
The F e d e r a l Reserve Act was passed to s t a b i l i z e the i n d u s t r i a l ,
commercial and a g r i c u l t u r a l i n t e r e s t s of our country.
The resources
of the System were never c a l c u l a t e d by the founders or by the Government
to be used f o r s p e c u l a t i o n .
I t has '.'.ltvays been the f u l l purpose to
have the law so administered by the Board at Washington to give
p r e f e r e n t i a l r a t e s b f o r a l l paper based upon commodities and to provide
f o r the s a f e , o r d i n a r y movement of same to the markets.
If we .can
-as country bankers, p l a y our p a r t as l e a d e r s to see t o i t t h a t our
customers, our c l i e n t s , w i l l avoid :.ll s p e c u l a t i o n i n commodities and
«
:fi:
»
x-1742
944.
t h a t t h e r e i s an o r d e r l y market a t a l l t i m e s , there never need he
a f e a r but what you can go on end increase without f e a r the expansion of
a l l e f f o r t to increase production.
There may be someone here who would
l i k e to muddy the water and warn us about the danger of i n f l a t i o n .
No
prudent man i n the banking b u s i n e s s would f a i l t o study and appreciate
t h i s danger.
The events of the post f o u r y e a r s , however, w i l l not warraat
any man i n s u S S e s s f u l l y s t a t i n g or proving t h a t we are s u f f e r i n g frcub
o v e r - i n f l a t i o n of currency a t the p r e s e n t time, - but over-inf l a t ion of
c r e d i t i s a p o s s i b l e danger.
May I r e f e r b r i e f l y to the l e t t e r cf
Governor Harding to Senator Mclean, dated August 8, 1919, ae f o l l o w s :
"There has undoubtedly taken place during the l a s t
two years a c e r t a i n amount of c r e d i t expansion which#
under the circumstances connected with our war f i n a n c i n g ,
was i n e v i t a b l e , but t h i s w i l l be c o r r e c t e d as the
s e c u r i t i e s issued by the United S t a t e s Government f o r war
purposes are g r a d u a l l y absorbed by i n v e s t o r s . This c r e d i t
expansion i s equal to the d i f f e r e n c e between the t o t a l of
the wap: expenditures of the Government on thb one hand,
and on the o t h e r , the t o t a l amounts r a i s e d by the Government
through t a x a t i o n and by the sale of i t s o b l i g a t i o n s so f a r
as paid f o r out of savings. No r e l i a b l e estimate can be
made of t h i s d i f f e r e n c e , which must be gradually absorbed
through f u t u r e savings f o r the reason t h a t banks are lending
and w i l l always lend f r e e l y on Government bonds as c o l l a t e r a l . "
I urge
and to get i s import,
upon every banker here t o read that l e t t e r c a r e f u l l y
I again wish to s t a t e t h a t I am an expansionist
or any other old thing t h a t you may wish to c a l l i t , Mien I say to you
t h a t we can f i n a n c e the farmer without l i m i t to increase h i s operations
to produce t h a t which the people may eat or wee* without any danger of overproduction.
No man or economist l i v e s i n t h i s world who can guage or
prophesy what the outcome w i l l be economically i n tas c o u n t r i e s of Europe,
so weak and broken down by the war, but one t h i n g we may be sure o f , t h i s
s l a c k w i l l never be taken up by our standing s t i l l or by p i l i n g u p " r e s e r v e s ,
.Again l e t me s t a t e , r e a l wealth i s only produced.
Our problem i s simple
-la~
X-17U2
and. we should legyn our lesson as r a p i d l y as p o s s i b l e .
spend l e s s , economize and save.
Produce more
I do not come here to s e l l anything
or to s o l i c i t anything. I may perhaps be making a f e e b l e e f f o r t to
a d v e r t i s e something worth while.
X-1742
You remember the s t o r y which i s the foundation of R u s s e l l Conwell ! s
simply
g r e a t l e c t u r e e n t i t l e d n Acres of Diamonds** which he gives BO
and.
p l a i n to h i s audiences by i l l u s t r a t i n g how so many people look f o r t h e i r
f o r t u n e , t h e i r E l Dorado, someJ$fa§re e l s e than where Grod has p u t them to
work and achieve*
He t e l l s how a f a r m e r , I think i t was i n A f r i c a , who
had heard of a g r e a t diamond mine somewhere and with a l l the allurement
and p a s s i o n t h a t came t o him with the overwhelining d e s i r e to possess an
immense f o r t u n e he sold h i s l i t t l e farm and personal p r o p e r t y and went on
a long search f o r the diamond mine.
The purchaser of h i s farm one day,
while at the w e l l watering h i s stock*
discovered a g l i s t e n i n g i n the sand
and upon i n v e s t i g a t i o n found a diamond,
(r» fixtiher i n v e s t i g a t i o n he found
more and to msk e a long s t o r y short the purchaser of the farm was the owner
of the g r e a t e s t diamond mine i n the world*
I l l u s t r a t i n g a g r e a t lesson
t h a t we a l l ought to l e a r n to value w e l l our own p o s s e s s i o n s , our p r e s e n t
o p p o r t u n i t i e s and our place in l i f e .
I t would be well worth while to
think of t h i s as c i t i z e n s of the Republic, but I would l i k e t o c a l l your
a t t e n t i o n t o the other s t o r y as a b a s i s f o r h i s other l e c t u r e e n t i t l e d
n
Five Million D o l l a r s f o r the Face of the Moon?
He commences t h i s
l e c t u r e by t e l l i n g the simple s t o r y of a man lying s i c k unto death i n
one of our E a s t e r n c i t i e s , &iven up by p h y s i c i a n s , surgeons and s p e c i a l i s t s *
He resigned himself to d i e .
An old lady in the neighborhood hearing of
h i s c o n d i t i o n asked f o r a v i s i t *
She prayed she might have the p r i v i l e g e
of serving some t e a brewed from herbs she had gathered i n the woods»
The r e s u l t was, t o make another s t o r y s h o r t , the p a t i e n t began to improve,
soon was convalescent and began t o r e a l i z e he had a lease on l i f e .
x-i742
-14He began t o s t u d y and t h i n k of what he should do w i t h h i s l i f e so d e a r l y
bought.
Being a t r u e p h i l o s o p h e r , he decided to Secure the r e c i p e f o r
the herb t e a which cured him.
He began t o s e l l i t t o h i s f r i e n d s , i t s
fame grew, soon he had salesmen and wagons on the r o a d .
He began to build
large b u i l d i n g s t o manufacture and the world was b l e s s e d by the use of
t h i s new medicine.
His advertisements appeared on the barns and the
f e n c e s , on the s i d e s of t h e roads and on p l a c e s of prominence.
Even the
Rocks of G i b r a l t a r were p l a s t e r e d w i t h advertisements of h i s medicine so
t h a t the passengers on p a s s i n g ships could r e a d ; on the mountains of the
Andes he dared t o go.
One n i g h t h i s f r i e n d s found him s t a r - g a z i n g , look-
ing up i n t o the moon i n a l l i t s b r i l l i a n c y .
what he was doing.
One bold s p i r i t asked him
He sighed and said " I f I could secure the f a c e of the
moon I would give f i v e m i l l i o n d o l l a r s " .
He was asked "What f o r ? " *
He
said he would place f i v e words upon the f a c e of the moon so t h a t a l l the
world might gaze, read and p r o f i t thereby.
He was asked what the f i v e
words would be t h a t he would choose from the languages of the e a r t h t o
place "here.
What do you suppose were t h e words he would p l a c e t h e r e ?
The g r e a t l e c t u r e r , C o n w e 1 1 , a f t e r taking h i s audience to t h i s p o i n t would
leave them and draw lessons from l i f e as t o what man was r e a l l y placea
upon the e a r t h f o r .
Service.
The f i v e words he would place upon the
Advertise
moon were t h e s e : " F i n d Good, Then
I t " . A simple b u t wonderful
thing which I have o f t e n thought we should p r a c t i c e .
There i s i n the
h e a r t of man enough good which i f encouraged, c o r r a l l e d , coached and
coaxed would be s u f f i c i e n t to d r i v e out a l l the e v i l or darkness,
I am
here t o a d v e r t i s e , i f I may, a good t h i n g .
I b e l i e v e , Gentlemen, t h a t from t h i s war we have a l l become b e t t e r
men, b e t t e r c i t i z e n s , b u t I would l i k e t o apply t h i s l a s t thought t o you
9 4 7
" 948
as S t a t e "bankers, asking f o r your good c o n s i d e r a t i o n of the b e n e f i t s
t h a t may come t o you "by becoming members of the Federal Reserve System#
To those of you who as bankers a p p r e c i a t e the new r e s p o n s i b i l i t y
upon you as community b u i l d e r s and as t r u s t e e s of the p e o p l e ' s money,
I ask f o r your very c a r e f u l c onsider& ion t o the importance t o you of
p l a c i n g your banks i n t o the Federal Reserve System, and having t h a t close
complete r e l a t i o n s h i p which assures absolute s a f e t y f o r the f u t u r e ,
whatever problems may be*. You w i l l be a p a r t of a Federal i n s t i t u t i o n ,
which i s n a t i o n - w i d e , cohesive, a complete f i n a n c i a l o r g a n i z a t i o n having .
f u l l r e s p e c t f o r every i n t e r e s t of our people„
i n organization c o n t r o l l e d
by the s t r o n g e s t Government on the f a c e of the earth#
A system which
today c o n s i s t s of 7821 n a t i o n a l banks and 11-03 s t a t e i n s t i t u t i o n s , with
a t o t a l c a p i t a l of $1,527*171,000 and a surplus of $1,312,205*000
and with t o t a l r e s o u r c e s of $30,280,234,000 i n d i c a t e a f i n a n c i a l machine.
of s t r e n g t h and one of cooperative power without compare,
in institution
which has i n i t s c o n t r o l over two b i l l i o n d o l l a r s worth of gold, the
g r e a t e s t amount of gold ever assembled i n the h i s t o r y of the world i n
the c o n t r o l of any one Government.
Does i t mem anything to you to be a r e a l p a r t of such m
i n s t i t u t i o n ; to be recognized by i t and as p a r t of i t ?
Save you taken time to secure the viewpoint of your d e p o s i t o r s
when they once grasp t h i s tremendous f a c t and ; s they draw checks upon
your i n s t i t u t i o n upon which i s p r i n t e d the f a c t t h a t your bank i s a msmber
of the F e d e r a l Reserve System and t h a t the check of that customer passes
c u r r e n t anywhere i n the United S t a t e s ?
You may, i f you p l e a s e , magnify some of the smaller l o s s e s or
charges t h a t you would have in j o i n i n g t h e system, but l e t me appeal t o
yo* as I have
t r i e d to thus f a r , to get the l a r g e r viewpoint of your
949
-l6-
X-1J42
• l e a d e r s h i p as a banker and a s a leader in your community.
things f i r s t .
That you put f i r s t
Ycu may discover t h a t t h i s p r i n c i p l e when once worked out w i l l
be not u n l i k e the t i d e s of the ocean.
They come i n with u n f a i l i n g r e g u l a r i t y
and when they go out they take with them not Only the great war v e s s e l s , mer-*
chantmeh, but the l i t t l e aery and canoe are l i f t e d a l i k e upon the bosom of the
tide.
A well known philosopher ptiit ihe idea, something l i k e t h i s : "Just as i n
r e l i g i o u s h y s t e r i a a s i n g l e t e x t becomei a Whole creed, to the exclusion ef
every other t e x t , and i n s t e a d of being i t s e l f s u b j e c t to r a t i o n a l t e s t s i s made
the sole t e s t of the r a t i o n a l i t y of e v e r y t h i n g e l s e * "
I am c o n f i d e n t , Gentlemen, t h a t i f we would give more a t t e n t i o n to these
f i r s t t h i n g s , l i k e a l l our t r o u b l e s , the small ones would a l l recede and be
forgotten.
Besides the enlargement of your b u s i n e s s and the opportunity of service,
to say nothing about enhanced p r o f i t s as a member of the Federal Reserve System,
you would have the p r i v i l e g e of the rediscount a t the Federal Be serve Bank, to
care f o r a l l your needs with your customers engaged i n commerce and industry,
and with your farmer customers on paper taken f o r not to exceed s i x months,
r e p r e s e n t i n g the a c t u a l a c t i v i t y of a farmer in the operation of h i s business*
The need f o r e n l a r g i n g h i s operation i s so g r e a t and so immediate t h a t
there w i l l be no paper coming to the Federal Reseree System during the next
f i v e years that w i l l be regarded a s s a f e r , a s so fundamentally proper, a s t h i s
paper.
This may mean to you, Mr. Banker, t h a t you w i l l have to change some of
your methods in t a k i n g t h i s paper.
I t may be to your advantage to secure h i s
statement to h i s worth, b r i e f l y , i n a s k i n g
. X-17*42
-17-
for credit.
I t may become necessary f o r him to attend to h i s paper
more promptly a t maturity*
I t may become necessary f o r you t o change
your operations i n taking t h i s paper f o r s i x months instead of f o r a
year or more or upon demani.
your advantage,
But if so, t h i s w i l l be d i s t i n c t l y to
I have o f t e n wondered why i t was that State bankers
w i l l s i t back without any seeming concern, allow t h e i r competitor
, ,
align
perhaps i n the National baa king System t o
himself with t h i s
great jbafcerit i n s t i t u t i o n of power and s t r e n g t h and p o s i t i o n and go
a f t e r the business and get i t , when he could have the some advantage
t h a t every n a t i o n a l baa ker has and under the law a l l the e x i s t i n g
advantages t h a t he may enjoy as a State c h a r t e r e d i n s t i t u t i o n *
To be able t*a discount your customers 1 paper by sending the same
as you do your cash items to the Federal Reserve Bank i n proper form
t o receive c r e d i t immediately.
And also where the r a t e s of discount
are c e r t a i n l y always advantageous.
I am not making a p l e a here f o r the sake of g e t t i n g b u s i n e s s
but only of showing up the a c t u a l advantages t h a t would be d e r i v e d .
Do you understand t h a t what you would deposit with the Federal Reserve
Bank of your D i s t r i c t would be an actual reserve upon which you could
b u i l d c r e d i t necessary f o r your operations and which would never
be denied you.
As I s t a t e d p r e v i o u s l y , I believe i n the independent r e l a t i o n ship t h a t we have and p r i z e as bankers.
We can not t@lera.te a
branch bank system as i t i s h o s t i l e to the American i d e a .
X-1%42
-is-'
This i s one wqy t o f o r t i f y your p o s i t i o n ; to use the F e d e r a l
Reserve
• as a r e s e r v e and t o understand t h a t your loans can
be taken t o t h i s e l d e r b r o t h e r i n the next room and t h a t you can
r e a l i z e same i n cash b y taking back with you good Federal Reserve
notes*
I appeal t o you, gentlemen, to give t h i s question of the
p r i v i l e g e of r e d i s c o u n t i n g i n the Federal Reserve System
more
than
s e r i o u s and c a r e f u l c o n s i d e r a t i o n
I f e e l you have given i t
thus f a r .
The p r o f i t t h a t you would moke s u r e l y would take up any
s l a c k t h a t you would lose because of the non-payment of i n t e r e s t
upon your b a l a n c e .
Again my X remind you t h a t your r e s e r v e i s not
only a r e s e r v e f o r the day of s t r e s s , b u t f o r increased opportunity.
I s h a l l not attempt to argue with you*
If experience has not
taught you t h i s i t w i l l be a waste of time f o r me to c o n t i n u e .
Again may I inform you t h a t you can ask f o r currency of the
or
r e s e r v e bank
the branch bank and same w i l l be shipped to you
without c o s t , f u l l y insured and express charges p a i d .
worth anything to you?
Is t h a t
951
X-17U2
-19-
'
IE also wish to remind, you that you can t r a n s f e r funds by
telegraph, without expense, to any p a r t of the country.
I t has been urged that you may be deprived of the exchange which
you have been accustomsd to on checks sent you f o r c o l l e c t i o n .
This
h a s been of course a knotty problem, but may I remind you of the
wording of the Act> which i s e x p l i c i t and i n f a c t mandatory and
hnder the r e c e n t r u l i n g of the Attorney General of the United States
the Federal Reserve Bank can do nothing e l s e but to see t h a t the checks
coming to i t are collected a t par
exchange.
.nd they - r e not permitted to pay
Your recourse, if any, i s to the Congress of the United
S t a t e s , and not in c r i t i c i s m of the Board or Banks.
May I r e f e r you again to Section 13 and ask f o r your serious
consideration and also Section l 6 .
The Federal Reserve Batiks are r e q u i r e d under Sections 13
and 16 of the Federal Reserve Act to receive from meober banks at par
deposits of current funds in l a w f u l money, national bank n o t e s , Federal
reserve notes, or checks and d r a f t s , payable upon p r e s e n t a t i o n , and
a l s o , f o r c o l l e c t i o n , maturing notes ~nd b i l l s .
There i s a proviso
to t h i s s e c t i o n which allows member and non-member banks to make
reasonable charges "to be determined and r e g u l a t e d by the Federal
Reserve Board, but i n no case to exceed 10 c e n t s per $100 or f r a c t i o n
t h e r e o f , based on the t o t a l of checks and d r a f t s presantfeddat any
one time, f o r c o l l e c t i o n or payment of checks and d r a f t s and remission
t h e r e f o r by exchange or otherwise; but no such charges s h a l l be
made against the Federal Reserve L&fBafe". The Attorney General of the
United States has construed t h i s as meaning t h a t a Federal Reserve
Bank cannot l e g a l l y pay any f e e to any member or non-member bank f o r
,
-20-
»
the c o l l e c t i o n and remittance of a check.
. 953
x-1742
I t follows t h e r e f o r e that
i f the Federal Reserve banks are to give the service r e q u i r e d of
them under the p r o v i s i o n s of Section 1J they must .i© cases where
banks r e f u s e to remit f o r t h e i r checks at p a r t use some o t h e r means
of c o l l e c t i o n no matter how expensive.
The a c t i o n of the v a r i o u s Federal Reserve banks i n
extending t h e i r p a r l i s t s has met with the approval of the Federal
Reserve Board, which holds the view t h a t u n l e s s the law should be
amended by Congress the Federal Reserve banks must use every e f f o r t
to c o l l e c t a l l bank Shocks r e c e i v e d from member banks, at p a r .
V
About 80 per cent of the banks of t h i s country, members
amd zaonznembers, arc now upon a p a r b a s i s .
I t w i l l not be long before
i t w i l l be 100 p e r cent
.nd t h e n I p r e d i c t t h a t we w i l l be asking
ourselves the question
"IThy d i d n ' t we do t h i s b e f o r e ;
why d i d we
stand i n our own l i g h t :.nd step on our own f e e t on so elementary a
proposition?"
F i n a l l y , l e t u s h..vc a f u l l understanding of the wonderful
o p p o r t u n i t i e s t h a t are b e f o r e us as business men not only to develop
our communities, increase the production upon those farms, to make
l i v i n g c o n d i t i o n s happier and our people more contented, but to enlarge
our v i s i o n as business men,for I am sure t h a t i n a few y e a r s hence we
w i l l f i n d our d e p o s i t s %nd our i n f l u e n c e doubled and quadrupled
b e c - u s J of t h i s l a r g e r a p p l i c a t i o n and r e l a t i o n s h i p .
You are a l l f a m i l i a r with the r u l e s of the Federal Reserve
System.
t
They - r e p r e c i s e , s h o r t and complete and to remind you that'
while there i s c r i t i c i s m h e r e , a n d t l u r e , as t h e r e
.Iways w i l l b e ,
954
# *
-21-
X-I7U2'
t h a t you have not seen the n a t i o n a l banks scrambling t o get out of
the system.
t
They f u l l y a p p r e c i a t e i t s b e n e f i t s and are r e a p i n g them
d a i l y while I f e a r many of our State bankers a r e sleeping a t the
switch.
I t has cost our country a great t r e a s u r e of blood and money
to have won t h i s world war.' You hbve a r i g h t to expect the s p i r i t u a l
b l e s s i n g s t h a t w i l l cone from t h i s s a c r i f i c i a l e f f o r t and we have
J u s t as much r i g h t to teap any economic rewards that may come.
let
us have an a p p r e c i a t i o n i n our conduct as stewards of the p e o p l e ' s
money f o r t h i s heritage*
A s h o r t time ago I went with my c h i l d r e n to the g r e a t •
Congressional l i b r a r y at Washington, the most b e a u t i f u l b u i l d i n g i n
c h i s e l e d on
a l l the world. Some great h e a r t and mind has caused to be
marble short mottoes to be t r e a s u r e d and never to be erased.
One,
my child wrote down, to my g r e a t p r i d e , which I would l i k e to pass
.
.«
•
on to you as a thought worth your note.
This i s i t :
"We t a s t e the
spices of Arabia; yet never f e e l the scorch of the sun t h a t brought
them f o r t h , "
Indeed i t has cost much to make t h i s Republic.
r
The man
of the Revolutionary and of the C i v i l Wars and of the g r e a t World
War have f e l t t h e heat of the sun, they have p a i d the pric.e.
To you
-nd your c h i l d r e n w i l l be the b l e s s i n g of ever t a s t i n g the f r u i t ,
us be worthy of t h i s h e r i t a g e .
let
@FedFRASER