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f
S ? E E € K E S
H O N . ?. C B 2 H .T L. O W _ .*
1916-1324
SIXTY-FOURTH CONGRESS, FIRST SESSION.
Corrupt Practices.
SPEECH
OF
H O N . R O B E R T L. O W E N ,
OF
O KLAH OM A,
I n t h e S e n a t e of t h e U nited S ta te s ,
Thursday, August 2Jf, 1916.
Mr. OWEN. Mr. President, I ask unanimous consent that,
after the Senate shall have voted on the pending revenue bill,
it proceed to the consideration of House bill 15842, and to the
disposition of that measure.
Mr. SIMMONS. What is the measure?
Mr. OWEN. It is the corrupt-practices act.
Mr. SMOOT. Nobody in the Senate can tell when the revenue
bill is going to pass; that has not been decided. It seems to
me that it is unwise for the Senator now to ask unanimous con
sent to take up the bill to which he has referred after the revenue
bill shall have passed. IV e do not know when a resolution will
be agreed to providing for final adjournment. We are right
in the last days of the session of Congress, and for that reason
Mr. President, I shall object.
Mr. OWEN. Mr. President, on the first day of this session
the chairman of the Democratic conference, Senator K ern, intro
duced a bill providing for the control of corrupt practices in this
country. The bill is similar to one which was reported during
the last Congress, but was not acted on by the Senate. The
House passed a similar measure at this session and sent it to the
Senate. It has been reported back to the Senate and is now on
the calendar. The bill is not a long b ill; it is not an involved bill.
It ought to be capable of disposition in one or two days. The
House of Representatives acted in a few hours in considering
and acting on the measure.
After the revenue bill shall have been acted on by the Senate
that bill must go to conference, and it certainly will take sev
eral days to reconcile the differences between the two Houses,
and in that time this bill can be considered, amended if neces
sary, and disposed of.
There is no reason why Senators should not in the meantime
read this bill; should not study this bill; should not be com
pletely prepared to express themselves upon it, unless it is the
desire of Senators to prevent action just before the pending
election. The American people, I believe, will not approve of'
the old system of the use of money on a gigantic scale to influ
ence and control the elections of this country. As one of their
Representatives, keenly sensible of my duty toward them, under
my oath as a public servant, I shall resolutely insist upon action
now. I earnestly hope I may have the sympathy and coopera
tion of all Senators, whether Democratic or Republican, in get
ting immediate constructive action and that 1 may not be impeded
by the old Senate game of a substantial filibuster under the pre
tense of debate, but that the debate shall be simple and straight
forward, and amendments suggested sincere and of constructive
and not of obstructive purpose.
This bill is easily understood. The first section simply defines
what “ political committees ” are, what the word “ candidates ”
and the word “ elections ” shall be construed to mean, what the
words “ political purposes,” the words “ disbursement,” “ per
son,” and “ Representative ” shall be construed to mean, in
order that the text of the bill shall not be susceptible of mis
construction.
Section 2 of the bill provides for the organization of political
committees of citizens who desire to take part in influencing
elections, and provides a method by which such committees can
be organized.
Section 3 requires each of the committees to have a chairman
and a treasurer.
Section 4 provides that every political committee must keep
a bank account and keep a complete record of receipts and dis
bursements.
Section 5 requires receipts to be preserved.
58546— 16368
Section 6 provides for an account to the treasurer and a
record o f contributions.
Section 7 requires statements by the treasurer to be filed
with the Clerk of the House of Representatives.
Section 8 requires the details of the contributions, where
they are above $100 and where they are below $100, and the
aggregate of contributions and disbursements in like fashion.
Section 9 requires statements by others than political com
mittees of expenditures where they exceed $50, and compels a
private person who contributes more than $50 to make a report
as if he were a committee, and provides further that no indi
vidual citizen shall contribute to any election a sum exceeding
$5,000.
Section 10 puts a limitation on expenditures of $400,000 on
national committees in the election of presidential and vice
presidential electors, and makes the chairman and treasurer
of each national political committee responsible for preventing
the aggregate of such disbursements exceeding this amount.
It provides further that the chairman and treasurer of the
congressional campaign committees shall be charged with the
responsibility of accounting to the treasurers of their respective
national committees for disbursements made by them. It limits
the aggregate of disbursements for a presidential candidate to
$50,000, for a vice presidential candidate to $25,000, and pro
vides that no political committee or any member or officer
thereof and no personal campaign committee shall make any
disbursements for the nomination of such candidates except
under the direction and with the consent of such candidates.
It makes the amount which a Senator may expend for a nomi
nation or for an election $5,000. but provides for certain ex
emptions in the way of postage, circulars, etc., on condition that
(hose expenditures shall be reported, together with other ex
penditures. It provides that the aggregate of disbursements
by a Member of Congress for his nomination or election shall
not exceed the sum of $2,500. It provides that candidates shall,
within certain times, make these reports to the Secretary of
the Senate, if a candidate for the Senate, or to the Clerk of the
House of Representatives, if a candidate for the House. It
provides that no candidate for Representative or Senator shall
make a promise of patronage in order to secure his election or
nomination. It requires the statements to contain a statement
that no promise has been made. It requires the statements to
be made under oath. It provides that the bill shall not be con
strued to annul or vitiate the laws of any State not directly in
conflict with the bill, and provides that no disbursement may
be lawfully made except for the following purposes—and this
is a very important part of the bill, which ought to meet the
approval of every Senator on both sides of this Chamber:
First. For the traveling expenses and expenses of subsistence
of the candidate arid of the members of political committees
and their bona fide officers and assistants.
Second. The payment of fees or charges for placing the name
of the candidate upon the primary ballot.
Third. The hire of clerks and stenographers and the cost of
clerical and stenographic work and of addressing, preparing,
and mailing campaign literature.
Fourth. Telegraph and telephone calls, postage, freight, and
express charges.
Fifth. Printing and stationery.
Sixth. Procuring and formulating lists of voters.
Seventh. Headquarters or office rent. ,
Eighth. Newspaper and other advertising.
Ninth. Renting of halls or providing places for public meet
ings, and all expenses of advertising and other expenses usually
incident to holding such meetings.
Mr. President, these affirmative declarations are intended to
exclude the use of money in buying voters, in bribing men under
the pretense of using their services for legitimate purposes
when in point of fact the man is really hired to vote, and a
multitude of crafty means o f evasion.
The bill provides further that any person who, otherwise
than in compliance with the provisions of the bill, shall hire or
employ, or offer to hire or employ, or shall reward or give to
any person anything of value for his services, or for loss of
time, or for reimbursement of his expenses in consideration
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2
CONGRESSIONAL RECORD.
of such person directly or indirectly working, electioneering,
or making public addresses for or against any candidates or
candidate, or who rewards or offers to reward any person for
his vote or influence, or the promise of his vote or influence,
for or against any candidate for the office of President, Vice
President, or Senator of the United States, or Member of the
House of Representatives, shall be deemed guilty of a felony—
not a misdemeanor, Mr. President, because the basest crime of
all crimes is to befoul the ballot box of this country and to
steal the governing powers of the people of the United States
by fraudulent practices in thie ballot box— and upon conviction
thereof shall be punished by imprisonment in the penitentiary
for a term of not less than 1 year nor more than 10 years.
Section 11 of the bill provides that the statements required by
the bill shall include the name and post-office address of the op
ponents of the candidate making a report, with instructions that
the Clerk of the House of Representatives or the Secretary of
the Senate, as the case may be, shall require such opponents,
even if not successful, to make a proper report of their expendi
tures under penalties for failure to do so.
Section 12 requires that the Clerk of the House and the Sec
retary of the Senate shall, on or before the 15th day of Janu
ary next after any general or special election for Representa
tive in Congress or Senator of the United States, report to the
House and Senate, respectively, the names of these candidates
and their reports, and that these reports shall be printed as a
public document, in order that the people of this country may see
to what extent and how far money is being used in the control
of the election of the President of the United States and of Mem
bers of this body and of the House of Representatives.
Section 13 provides that jurisdiction over all violations of the
act is conferred upon the United States district court.
Section 14 provides that personal expenses for stationery,
traveling expenses, circulars, advertising, postage, and telegraph
and telephone service shall not be subject to the provisions of
the bill, except that an account shall be kept of all moneys ex
pended for circulars and postage and advertising authorized by
the section, which shall be reported in the statements required
by the bill as an addendum thereto, but not subject to the limi
tations in amount fixed by section 10 of the bill.
This provision is a matter of grave doubt as to the exception;
but, nevertheless, it will permit the people of the United States
to pass their judgment on whether or not the abuse will justify
striking out this exception. We have proceeded very slowly in
this matter. This question has been up for years.
We have taken one poor, little, weak, inadequate step from
time after time, and we now have on the statute books a law
that is fundamentally and essentially as contemptible as any
law that was ever written upon the statute books of any intel
ligent people. I say so because the present so-called corruptpractices act deals only with committees handling two or more
States and exercises no control whatever over committees in
side of a State and no control whatever over individuals inside
of a State, and as far as the present law is concerned, an indi
vidual, as a private person, could go into the different States
and spend a million dollars or ten million dollars corruptly with
out the laws of the United States holding him to an account for
the stealing o f the presidential office or the stealing of the
senatorships upon this floor.
The idea of the Senate of the United States refusing now to
act upon this matter, right in the face of a pending election and
of this acknowledged state of the law, I do not believe will meet
with the approval o f the people of the United States, and I do
not think it ought to meet with the approval of the people of the
United States, whose sworn representatives we are.
It shall be no fault of mine if the Senate does not act at this
session on this bill on the calendar. The newspapers have an
nounced— and announced without any justification, in my opin
ion— that there was an implied agreement between the Senators
on this side of the aisle and Senators on the other side of the
aisle that they were not going to permit this matter to be heard.
Mr. President, they are going to permit it to be heard. It is go
ing to be heard. No such pretended agreement exists. I do not
know who is responsible for the false report, but it assuredly is
not a friend of the bill.
There was an impression that the parliamentary status o f this
bill was such that even if the Senate acted it could not be dis
posed of by the House. That is not true.
The House bill has passed and we have reported it, and the
matter can be disposed of in conference within 24 hours. No
parliamentary difficulty is in the way except a possible Repub
lican filibuster, if they dare face the country with it.
Mr. PENROSE. Mr. President, will the Senator permit an
inquiry ?
Mr. OWEN. I yield to the Senator from Pennsylvania.
58546— 16368
Mr. PENROSE. Is the Senator’s anxiety to pass this bill
chiefly to remedy conditions in Oklahoma? I ask because I
have heard that the greatest laxity prevails there, to put it
mildly, in the methods of conducting elections and the expendi
ture of money.
Mr. OWEN. I will say to the Senator that I should be glad
to have it apply to Oklahoma; but I will also say to the Senator
that there is no State in the Union that will require it more
than the State of Pennsylvania.
Mr. PENROSE. Of course, there is a difference of opinion
on that.
Mr. OWEN. Hardly.
Mr. PENROSE. But I think investigation will disclose the
fact that the most corrupt elections in the country are in the
State of Oklahoma.
Mr. OWEN. If that were true as to Oklahoma—which it is
not _ a s it assuredly is as to Pennsylvania, Mr. President, then
this act will put an end to it. I will say to the Senator that
there is some basis for his« inaccurate observations, because
when I was a candidate I was informed, and I verily believe,
that the Lumber Trust sent $40,000 into my State to defeat my
nomination, being offended because of the demand which I made
and voiced on this floor that Mr. Lorimer should not retain his
seat in the Senate, because the Lumber Trust had bribed the
Illinois legislators to elect Mr. Lorimer, at a cost estimated at
between $100,000 and $200,000.
Mr. VARDAMAN. Mr. President-----The PRESIDING OFFICER. Does the Senator from Okla
homa yield to the Senator from Mississippi?
Mr. OWEN. I yield to the Senator.
Mr. VARDAMAN. If the Senator will pardon an interrup
tion, I should like to emphasize the fact that this bill is not
intended for any particular State but for all the States.
Mr. OWEN. Absolutely.
Mr. VARDAMAN. And if there are irregularities in Okla
homa or Mississippi or Pennsylvania, they ought to be corrected
in so far as legislation can correct them. I agree with the
Senator that the bill ought to be considered at this time.
Mr. OWEN. I have no doubt that there is more or less irreg
ularity in all of the States. I do not claim any extraordinary
virtue for Oklahoma. Those people are only human beings,
subject to the same temptations as people elsewhere, but public
sentiment there is absolutely overwhelmingly in favor of hon
esty in our elections. I represent the people of my State truly
when I demand this statute.
Mr. SAULSBURY. Mr. President-----The PRESIDING OFFICER. Does the Senator from Okla
homa-yield to the Senator from Delaware?
Mr. OWEN. I do.
Mr. SAULSBURY. I simply want to say that it seems sur
prising to one coming from this part of the country that in a
large State like Oklahoma $40,000 seems to shock the public
conscience so greatly. There is one case which I know could
be disclosed bv the records of the Senate in which over $50,000
was contributed for the purpose of influencing an election in
my State on the Saturday before the election which was held
on the following Tuesday. I thoroughly agree with what the
Senator from Oklahoma says about the necessity of passing
this bill.
Mr. O’GORMAN. Mr. President, to avoid any ambiguity as
to the application of the last statement, I should be glad to
know from the Senator from Delaware whether the $50,000
to which he refers was used for the election of the candidate
of the Republican Party.
Mr. SAULSBURY. Most assuredly it was, as many Sena
tors now sitting in this body know.
Mr. PENROSE. Mr. President, there was a million dollars
spent to elect President Wilson—over a million.
Mr. O'GORMAN. Is it not a fact that two and a half mil
lion dollars were used in 1890 to elect Mr. McKinley?
Mr. PENROSE. That might have been.
Mr. O’GORMAN. The rate has been going down since that
time.
Mr. OWEN. If what the Senator [Mr. P enrose] says is
true-^and I do not know whether it is true or not— I want to
put a stop to the practice. I do know that no such sum was
officially reported as spent in the election of Mr. Wilson, but
it was currently reported in 1896 that Mark Hanna raised
$16,000,000 to elect McKinley and the “ Big Boys ” successfully
threatened a panic beside and voted every poor employee the cor
porations could coerce to elect McKinley; and I do not want
these great parties rivaling each other in raising gigantic funds
in a contest of money for the purpose of dishonestly and cor
ruptly influencing votes.
*
CONGRESSIONAL RECORD
Mr. GALLINGER. Mr. President-----The PRESIDING OFFICER. Does the Senator from Okla
homa yield to the Senator from New Hampshire?
Mr. OWEN. I yield.
Mr. GALLINGER. Has the Senator noticed that the treasurer
of the Republican National Committee is asking $10 contribu
tions to enable him to get a fund for the coming campaign?
Mr. OWEN. I wish it might be confined to $10 contributions.
I would be much more content if both parties were confined to
small contributions.
The suggestion of the Senator that innocently assumes the
Republican, will rely on small contributions will not be taken
seriously by the people, much less by Republican leaders who
know better. They will raise millions in big contributions if
not prevented, and every well informed man believet it.
Mr. O’GORMAN. The Democratic committee in 1912 solicited
$1 contributions, which was quite reasonable.
Mr. GALLINGER. I have not seen their -ertificate yet. I
have seen the advertisement of the Republican treasurer.
Mr. OWEN. Mr. President, I have in my hand now a
memorandum showing conditions in Ohio, and, according to the
report filed with the secretary of state under the Ohio law,
Mr. Herrick who was the successful candidate for the Republi
can nomination at the recent primaries held in that State spent
the following amounts:
By Herrick personally, $22,175.
By the Herrick Voters’ League, $29,000.
By the Stark County Herrick Voters’ League, $413—a total
of $49,588.
And the reports from nearly a hundred other counties have
not apparently come in yet. I do not know how much it will
be, but I say this is an abuse that ought to stop.
I do not think the Republican Senators on that side of the
line should filibuster against this bill. I do not think they
should refuse their consent that a vote may be taken upon it.
I do not see how they reconcile themselves in refusing to per
mit a vote on this bill.
Mr. PENROSE. Mr. President-----Mr. OWEN. I yield to the Senator from Pennsylvania.
Mr PENROSE. Does the Senator expect the Republicans
in this Chamber or any individual. Senator to take this bill
exactly as he has framed it, without consideration?
Mr. OWEN. Not at all.
Mr. PENROSE. It will take some time to form a good cor
rupt-practices act.
Mr. OWEN. The threat of taking some time is an old, old
story and an old, old joke. It means a filibuster threatened
under words the people would not understand in reading the
R ecord, but which every Senator knows means filibuster un
der pretense of debate.
.
Mr. PENROSE. It will be applicable to this bill also.
Mr. OWEN. But a filibuster will be well understood by the
people when it presents itself, even if under the false color of
debate.
Mr. PENROSE. No one is filibustering.
Mr. OWEN. And it will not be done without being exposed.
I can tell the Senator.
Mr. STONE. Mr. President-----The PRESIDING OFFICER. Does the Senator from Okla
homa yield to the Senator from Missouri?
Mr. OWEN. I yield.
Mr. STONE. My friend from Oklahoma said he could not
understand why our friends on the Republican side o f the
Chamber could object to the passage of this bill. He certainly
did not mean in that statement to have any doubt as to the
reason. The reason is that they expect to try to buy this
election.
Mr. GALLINGER. If the Senator will permit me, I have
heard it stated from several sources that the Democratic Party
is proposing to buy it-----Mr. STONE. We are ready to vote to-morrow to pass this
bill.
Mr. GALLINGER. That they have already raised a very
large sum for that purpose which they have distributed in part.
Mr. OWEN. The Democrats are ready to act now, and I
challenge the Senators on the other side to action.
.Mr. PENROSE. If the Senator will permit me, the supposi
tion throughout the country is that an enormous corruption
fund has been collected by the Democratic Party, and now
they want to lock the door.
Mr. OWEN. I have heard that statement made with regard
to the Republican Party. I do not know whether it is true or
not, but I believe the Senator himself would certainly know
if it were true that the Republicans had gathered and dis
tributed a gigantic fund for such purpose.
58546— 16368
3
Mr. PENROSE. N o ; I have been down here attending to my
official duties. I do not know what is going on.
Mr. OWEN. This bill will disclose the fact if such funds
have been collected and will prevent the corrupt use of such
funds in either party if they have been collected.
Mr. VARDAMAN. I wish to suggest that the statements
which have been made by Senators on either side of the aisle
have proven beyond any sort of question the necessity for this
legislation. After the admissions made and the suspicions ex
pressed I do not see how any Senator can afford to antagonize
the passage of this bill at this session. To do so would be almost
criminal inconsistency.
Mr. OWEN. Absolutely.
Mr. VARDAMAN. If that money has been collected, the
enactment of this law will disclose the fact, and it may be the
means by which a few distinguished gentlemen can be sent to
the penitentiary for using it, a thing that might contribute mate
rially toward the purification of the political atmosphere in this
country about election time.
Mr. OWEN. They will not use it if this act is passed.
Mr. POMERENE. Mr. President-----The PRESIDING OFFICER. Does the Senator from Okla
homa yield to the Senator from Ohio?
Mr. OWEN. I yield to the Senator.
Mr. POMERENE. I wish to suggest that even if such a fund
has been collected, this legislation can be so framed that it can
not be used.
Mr. OWEN. It would not be used in any event until just
before the election; but if this bill is passed it can not be used
in any improper way without great jeopardy tb the political
thieves guilty of corruption. I do not believe that the people of
the United States are going to stand any more buying of elec
tions in this country.
Mr. President, the parliamentary way is clear. This bill is on
the calendar. The House of Representatives has acted. A con
ference can dispose of the matter within a day after the Senate
shall consider it and, if it requires amendment, after it shall
be properly amended. But to say that it will take a good deal
of time, with the sinister suggestion that it will be debated to
death, will not go in this Chamber any more without prompt
exposure. If filibustering is really privately and secretly pro
posed by the Republicans against this bill, they are going to be
compelled to publicly filibuster against it.
I notify the Senate that in due time I shall move the Senate
to act upon it and it will be then for the Republicans to conduct
an open filibuster if they see fit. They can not do it under cover.
I know at least six good Republicans who will vote to take this
bill up.
_
, _
I say to the Senaton that as far as I am concerned I am
willing to stay here as long as is necessary to demonstrate
either the passage of this bill or to determine to the satisfaction
of the people of the United States the sinister opposition that
will prevent it from being voted upon.
Mr. GALLINGER. Mr President-----Mr OWEN. I yield to the Senator.
Mr' GALLINGER. The Senator has not been very constant
in attendance here and his colleague has disappeared from view.
Mr OWEN. The Senator from Oklahoma, now addressing
the Senate, has been here sufficiently to fully discharge every
di tv i n c u m b e n t on him, and at this session has been as continu
ously present as the Senate except for a visit to Oklahoma
of two days on an urgent business trip.
The Senator from Oklahoma has, through his committee, de
livered the rural-credits bill, taken active part in having the
child-labor bill he introduced passed, obtained a favorable report
on cloture in the Senate, and is now presenting the corruptp f fTL-lli.'Wf IILl, not to mention very many other acts he has per
sonally prepared and had passed.
The presence of the Senator from Oklahoma and his urgent
demand for a corrupt-practices act at all events will demon
strate that he is present now.
Now, Mr. President, I want to say to my colleagues that on
the 15th day of July this corrupt-practices act was made a part
of the legislative program of the Democrats for this session. I
carefully examined the records of the Democratic conference in
the hands of the secretary of that conference, Senator Pitt
m an.
I read with painstaking care every single resolution
passed from that time to this. There has been no change
either directly or indirectly of that action of the conference.
It is true that in an attempt to reconcile the Republicans to
vote upon the legislative program which we had, they insisted
upon naming certain particular hills and leaving off of the list
the corrupt practices act. It is also true that on this side a poll
was taken and a number were found who, because of the long
time the session was taking and because of the anxiety to get
CONGRESSIONAL RECORD
4
home and appear in their States, where they had campaigns
pending, yielded to the suggestion; but the matter was not
accepted then by the Republican side, and no obligation what
ever rests on those who tentatively and conditionally consented
to such proposed program, as the conditions utterly failed.
Mr. GALLINGER. Mr. President-----Mr. OWEN. I yield to the Senator from New Hampshire.
Mr. GALLINGER. I thank the Senator for yielding, because
I want to say to the Senator that he has made a misstatment.
Mr. OWEN. I shall be glad to correct any statement I have
made, if it be inaccurate.
Mr. GALLINGER. The majority submitted a list of meas
ures which they desired to have passed at this session, and the
corrupt-practices act was not on that list; so that the Senator
must not say that the minority is responsible for keeping it off
the list submitted by the majority.
Mr. OWEN. I am very glad to hear that disclaimer. I was
certainly under the impi-ession that the minority were responsi
ble for keeping it off, but since the minority disclaims the
paternity of this illegitimate child I know that no Democrat
will consent to be known as its father.
Mr. PENROSE. And, Mr. President, if the Senator will per
mit me one brief observation-----Mr. OWEN. Certainly.
Mr. PENROSE. So far as I am concerned personally, I will
go as far as the Senator from Oklahoma or any other Senator
to pass a corrupt-practices law. I would even go to the extent
of arbitrarily prohibiting the use of money in any election, com
pletely stopping i t ; and I am willing to stay here all the rest of
the summer axitl until the day before election, if the Senator
wants to stay here with me and a sufficient number of other
Senators will remain to make a quorum, to consider this bill,
the immigration bill, and everything else on the calendar; but,
in view of the fact that Senators want to go home and that we
have been here a long while, anyhow, it seems reasonable that
a bill like this, that requires the most careful thought, should
have full opportunity to be considered. I will help the Senator
get it up next winter, and help him pass some kind of a bill.
Mr. OWEN. The willingness of the Senator to stay here until
the day before the election, possibly until the day after the elec
tion, considering the corrupt-practices act is really pathetic.
Mr. PENROSE. I take it, from all I have heard, that the
Senator did not have this interest in election reforms during his
own candidacy for reelection to the Senate.
Mr. OWEN. Well, the Senator might hear more and know
less. I should not like to say what I have heard about some of
the States and some of the things that have gone on in some of
the States, very near the Senator from Pennsylvania, for fear
that it would not be parliamentax-y- WJmt I want to do is to
stop the suspicions that are going around, even if they are not
well founded, and to stop the corrupt practice that has dis
honored our country.
This bill provides that—
No corpoi’ation or officer thereof ©n behalf of such corporation or
from corporate property shall make any contributions whatever for
political purposes. No funds shall be transmitted from one State into
another for political purposes in excess of $1,000 for each congressional
district.
That will keep some of the money out of Oklahoma that might
otherwise go there, and it will keep money out of Wisconsin,
where, I am informed, on one occasion $250,000 was sent by the
chairman of the Republican national committee to defeat L a
F ollette for the Senate.
For that reason, among others, Senator L a F ollette and his
Republican friends, like Senators K e nyon , C lapp, N orris, and
others, are for an adequate corrupt-practices act, as is every
true Progressive, I suppose. Since the Republicans have pledged
their loyalty to Progressive principles (and Progressive votes),
let them show the integrity of their high and virtuous purposes
now by voting for this bill, by helping constructively (and not
destructively) to perfect this bill.
Mr. GALLINGER. Did the Senator observe how much money
had been contributed to elect him [Senator L a F ollette] on a
certain occasion?
Mr. OWEN. I do not know that I have, but it would take
some money to meet that kind of a fund against him. I want to
stop the war of these funds. I do not believe that these large
funds ought to be used either for or against a Senator. I think
he ought to be allowed to go to his constituency with a clean
case and contend for his cause on its merits, and not have it
unduly influenced by money one way or the other.
Mr. PENROSE. Mr. President-----Mr. OWEN. I yield to the Senator.
Mr. PENROSE. If the Senator has not read it, I will say
that former Senator Stephenson, in his memoirs, states that
58546— 16368
he spent about half a million dollars in Wisconsin in connec
tion with the then regular organization there.
Mr. OWEN. Well, I have seen that statement also very
vigorously, denied by the Senator from Wisconsin [Mr. L a F ol
lette ], and I believe Senator L a F ollette against his corrupt
enemies.
Section 15 of the bill provides:
That every candidate and political committee shall securely keep and
preserve, for a period of two years from the date of any primary or
election at which such candidate was voted for or in which such
political committee participated, all records, accounts, ledgers, cash
books, canceled checks, check stubs, and other written or documentary
evidence and the records of all receipts and expenditures made by him
or it or on his or its behalf, and these records shall be, and are hereby,
declared to be public records.
Not private records, but public records. They belong to the
public ^ they vitally concern the public. This is not a private
matter. A railroad president a few days ago had the unpar
alleled impudence to tell an officer of the United States—Mr.
Folk— that the contributions of the railroads for political pur
poses were private matters; and yet those roads come here and
claim to represent twelve thousand millions of dollars of prop
erty, and if they can use money ad libitum as a private matter
the liberties of common citizens working at from $2 to $20 a
day are gone to destruction.
Mr. GALLINGER. Mr. President, I will ask the Senator in
all seriousness if the law that is now on the statute books does
not prohibit corporations from contributing to political cam
paigns, and does it not cover substantially the same ground as
his bill in that respect?
Mr. OWEN. Mr. President, the narrow limitation of the
question of the Senator would carry an implication that is
thoroughly untrue. It is true that corporations as corporations
are forbidden from making such contributions; but this bill
goes much further. It prevents the funds belonging to cor
porations being used, directly or indirectly; it prevents the
hiring of employees for corrupt purposes. It goes much further,
and prevents private individuals from being guilty of corrupt
pi’actices. Under the present law, I will say to the Senator
from New Hampshire, the so-called publicity of the present
statute relates only to committees operating in two or more
States. It allows any committee to go on the inside o f a State
and allows any individual to go on the inside of a State and
resort to any corrupt practice he pleases, without the Federal
law laying a hand upon him. The law on the statute books is a
fra u d ; it is— I was about to use unparliamentary language—
it is an unspeakable fraud on the American people. I t seems
to promise them protection against corrupt practices, when, in
fact, it does not protect them in the slightest degree. The
so-called reports of campaign expenditures which are now sent
to the Secretary of the Senate and Clerk of the House of Repre
sentatives are ridiculous. They do not include all the money
expended on Federal elections, and the law does not require it.
I know this law is a dastardly fraud, and every Senator here
must know the same thing. How long, O Lord ; how lon g!
Mr. YARDAMAN. Mr. President-----The PRESIDING OFFICER. Does the Senator from Okla
homa yield to the Senator from Mississippi?
Mr. OWEN. I yield to the Senator.
Mr. VARDAMAN. With the permission of the Senator, T
will suggest that this bill is intended to strengthen the present
law, to carry out the purpose of the American people in the
enactment of that law. It does not impair the efficiency of the
pi’esent law at a ll; but it is rather to strengthen it, to help to
carry out, to execute, and make more effective the law already
upon the statute books prohibiting corporations from contribut
ing to campaign funds. If Senators desire purity in politics;
if they really are in favor of preventing the corrupt use of
money in elections, knowing, as they do, the utter inefficiency of
the present law, it seems to me that they should embrace with
enthusiasm the opportunity to perfect the bill proposed by the
Senator from Oklahoma [Mr. O w e n ] and pass it at once.
Mr. OWEN. I am praying you now, Senators, to make
effective what the people of the United States thought they
were getting when they got that old law. The old law they got
was nothing but a cloak, behind which thieves could perpetrate
the most dangerous, the most vicious of all crimes—stealing the
governing powers of the people of the United States; stealing
the presidential office; stealing the Senate; stealing the House
of Representatives; stealing the power of taxation; and stealing
the power to deny the right of life, liberty, and the pursuit of
happiness to the citizens of this country.
Mr. President, I feel very strongly about this matter. I
caused the corrupt-practices bill to be introduced on the first day
of this session. It was duly reported. The House acted on a
bill introduced in that body, and now the improved bill intro
duced in the Senate comes before the Senate in lieu of the House
CONGRESSIONAL RECORD
5
bill, or as a substitute for the House bill. The parliamentary credits, or anything of value that belongs to or is under the
status is clear. There is nothing now to prevent action on the control of any other person.
part of the Senate except a fundamental unwillingness on the
That is another loophole that is stopped up by this bill, because
part of some of our distinguished, opponents on the other side of in dealing with thieves you must have a bill that is closely knit
the aisle, who, under the color of debate, may, if they please, together. This bill has been carefully gone over by the Depart
carry on a filibuster until the election.
ment of Justice and by the friends of justice, and we believe that
Mr. SHEPPARD. Mr. President-----it will hold water.
It provides also that legal expenses in election contests shall
Mr. OWEN. I yield to the Senator.
Mr. SHEPPARD. Was objection made when -the Senator not be limited or affected by the bill.
It provides for punishment by imprisonment of those who
asked unanimous consent?
Mr. OWEN. Every time when I have asked unanimous con violate i t ; and section 20 gives an immunity bath to persons who
sent to vote on this bill at a fixed time Republican objection has are testifying on behalf of the Government.
If a man is used as an instrumentality for buying up votes,
been made. Last Saturday I asked unanimous consent, and to
he can be summoned and compelled to testify under this bill,
day I asked unanimous consent.
being given an immunity bath under the bill. He can not throw
Mr. SHEPPARD. Was objection made to-day?
himself behind the shield of the constitutional provision that
Mr. OWEN. It was made to-day.
no citizen shall be required to testify where his testimony will
Mr. SHEPPARD. Who made the objection?
incriminate himself, by means of which skillful lawyers now pre
Mr. OWEN. It was made by the leader of the Republican vent corrupt and corrupting witnesses from giving testimony,
side, the Senator from Utah [Mr. S moot], who is the chosen because this bill proposes to give an immunity bath. The man
leader of that side and who vigilantly acts for the Republicans does not put himself in jeopardy, and he can be compelled under
on all occasions.
this bill to tell the truth, and it is the truth that the American
One of the most important sections of this bill is section 16, people want. It is honesty in elections. It is that the jury
which provides that no person not a candidate, and no organiza passing upon the great issues of statecraft between the two
tion, association, partnership, or committee not a political can great parties shall not be, by sinister means, misled, suborned,
didate under the terms of the bill shall contribute, pay, or ex bribed, or coerced, and that -no member of our great electorate
pend, directly or indirectly, any money or thing of value for the shall be subjected to such temptation because of poverty or a
purpose of influencing the elections except as a contribution to because of dependence for employment upon those who have the
a candidate or to a political committee authorized by law to act. power of life and death over him and his wife and his child,
I do not care to dig up the past. I understand perfectly well because he must have employment in order to eat bread.
that the American people move slowly, move gradually as ex
Mr. President, I do not wish to detain the Senate on this
perience justifies, and they improve their system of government matter, but I give notice that immediately after the vote on
step by step, as knowledge justifies. All that I want to do the revenue bill I shall move that the Senate proceed to the con
is put a stop to the buying of elections in this country by private sideration of the corrupt-practices act. If my distinguished
citizens who are multimillionaires, and who can spend millions friends on the opposite side of the aisle want to conduct a fili
of dollars without feeling it and then recoup themselves through buster—or as they more politely and craftily put it, if they
the taxing power of the people by practices generally known “ want to take sufficient time to consider carefully and discuss
as those of the “ invisible government.”
this important measure ”— we will give them an opportunity.
Mr. STONE. And expect to get it back.
We will ascertain whether it is for the purpose of perfecting
Mr. OWEN. They would have defeated me in my State if the bill or whether it is for the purpose of killing time. It will
money could have done it, and but for the honesty of the people not take 24 hours to develop that fact, and only a few days to
of Oklahoma I would not now be here or making this appeal.
satisfy the American people perfectly well what the purpose
The bill further provides that no person shall contribute or of certain Republican leaders is in their hostility and opposition
pay to any candidate or political committee any money, funds, to the passage of a corrupt-practices act.
58546— 163G8
W A S H IN G T O N : GO VERN M EN T P R IN T IN G O F F IC E : 1916
ARMED MERCHANT SHIPS
SPEECH
OF
HON. ROBERT L. OWEN
OF O K LA H O M A
IN THE
SENATE OF THE UNITED STATES
M A R C H 4 (legislative day of
M A R C H 2), 1917
WASHINGTON
GOVER NM ENT PR INTING O FFICE
87001— 17147
1917
H O N . R O B E R T L. O W E N .
The Senate had under consideration the bill (H . R. 21052) authoriz
ing the President of the United States to supply merchant ships, the
property of citizens of the United States and bearing American registry,
with defensive arms, and for other purposes.
Mr. OWEN. Mr. President, it is my purpose to support the
request of the President of the United States. I do so in the be
lief that the great body of the people of the magnificent State of
Oklahoma who sent me here desire that I should do so. I do
so because I believe a public exigency of the highest importance
requires it. I do so trusting in the representation made by the
President of the United States in his message to Congress a few
days ago. I place the utmost reliance on the words of the Pres
ident in asking for the means with which to protect our mer
chant ships. He sa id :
It is devoutly to be Imped that it will not be necessary to put armed
force anywhere into action. The American people do not desire it, and
our desire is not different from theirs.
I am sure that they will un
derstand the spirit in which I am now acting, the purpose I hold near
est my heart and would wish to exhibit in everything I do,
I am
anxious that the people of the nations at war also should understand
and not mistrust us. I hope—
Says the President—
that I need give no further proofs and"assurances than I have already
given throughout nearly three years of anxious patience that I am the
friend of peace and mean to preserve it for America so long as I am
able. I am not now proposing or contemplating war or any steps that
need lead to it. I merely request that you will accord me by your own
vote and definite bestowal the means and the authority to safeguard
in practice the right of a great people who are at peace and who are
desirous of exercisi ig none but the rights of peace to follow the pur
suits of peace in quietness and good w ill— rights recognized time out
of mind by all the civilized nations of the world.
No course of my
choosing or of theirs will lead to war. W ar can come only by the w ill
ful acts and aggressions of others.
Mr. President, before this unhappy war arose it was the
international law—and I think that neutrals are still compelled
under the rules of that international law to regard it now as the
international law— that merchant vessels, with or without con
traband, had and now have a free right to pass without being
subject to destruction without notice through the high seas;
that even those ships which carried contraband had and now
have a right before being summarily sunk to be visited, to be
examined, and an opportunity afforded to the crew of such
vessels for safe conduct to port before being sunk.
I am not unaware of the exigencies with which the Imperial
German Government is faced. The Imperial German Govern
ment can not command the high seas because of an ineffective
naval force. The Imperial German Government, feeling keenly
the blockade established by the superior naval force of the
British Empire, has declared it a necessity of war to disregard
the established international code and to carry on a submarine
warfare that shall be ruthless, and to sink ships without notice
0
87001— 17147
3
in a certain zone, armed or unarmed, contraband or not contra
band, with or without cargo.
THE
INTERNATIO NAL. LAW
OF
NEUTRALS.
It was hoped a year ago that the United States had arrived
at an adjustment with the Imperial German Government. In
my own judgment the reservation of the Imperial German Gov
ernment that it reserved the right to carry on the submarine
warfare without notice to ships, to sink them without notice,
was a reservation that was not permissible or recognizable by
our Government under the international law governing neutrals
as it has been recognized prior to the breaking out of this great
controversy in August, 1914. We can not change this law with
out violating our obligations as neutrals to other belligerents
and setting a precedent which may fatally affect our own future.
The President of the United States, in charge of the conduct of
the foreign affairs of the United States, found himself compelled
to deal with the Imperial German Government in numerous
cases in which American vessels were sunk in which American
citizens lost their lives, and lie was compelled, as the Chief
Executive of a great neutral power, to declare the duty of the
United States and tire rights of the United States under inter
national law as it existed. He solemnly declared this law and
is compelled by the laws of neutrality to maintain it. The
President of the United States was not responsible for the ships
owned by individual Americans going from one port to another
upon business voyages, which they in the course of commerce
had the right under international law to make. It was not
contrary to but in accordance with international law that ships
should carry munitions no matter if distasteful to any nation
affected by it. The unfortunate thing for the German Empire
was that because she could not command the seas this law gave
an advantage to Great Britain and her allies because they
could in greater degree command the seas.
The President was therefore compelled to take his course to
defend the rights of the Government of the United States
and of her citizens under international law. Having taken
this step in pursuance of international law, the quesjo n vutli which he is confronted, as our representative, is,
Snal 1^ lie withdraw from the assertion of the rights of
le United States as a great neutral or shall he stand
" I - ! th°se rights, not changing them in the midst of
lliis gigantic conflict, but observe them as he is obliged to
ou /n eu trn btv'lv-ci^n ^ .V Bd.st0 chause
he would violate
‘ }
hh Great Britain and her allies and give them
serious grievance under international law against us. The
?aw whether u J T
18 in thi* 1X,^tion under international
Pe01,'C W1U “ 0,<l
“ IS h” ndS
In my judgment it would be a great national calamity if the
people of the United States and if the C o n f e s s o f the United
States should refuse to hold up the h ands^f The Chiel L S
live of this Nation under these painful circumstances. The
Imperial German Government has notified the world that all
neutral ships of commerce, even if unarmed, free from contra>and, loaded \\ith passengers on lawful voyages, innocent of
wrongful intent to anyone, will be sunk on the high seas with
out notice, v itliout a chance for their passengers to escaoe
87001— 17147
4
with their lives. That Government seems determined to force
ns to acknowledge her right in the midst of this conflict t<>
change the law of nations and bring us in conflict with her an
tagonists. In that exigency the President of the United States
calls upion Congress and says:
I ask a sufficient credit to enable me to provide adequate means of
protection where they are lacking, including adequate insurance »
the present war risks.
Thp miestinn for Congress is. Shall that reasonable request
he granted or shall it not?
,
Mr. President, if prayers or sacrifice could adjust this gi
gantic conflict in Europe we would all be glad, I think, to make
our just contribution to secure peace on that torn and unhappy
continent; but this conflict will only terminate by the triumph
of the strongest arms. It is a conflict unrelenting, ruthless,
carrying on means of destroying human life, gigantic, novel,
and of extraordinary efficiency in the engines of destruction.
W E M U ST CO NSID ER T H E FUTURE.
It is well for us, in considering the eventualities that will
flow in the immediate future from the triumph of one or the
other of these titanic forces to consider what these great powers
in conflict stand for in relation to the United States if one or
the other be victorious. On the one side I believe are lunged,
in many forms, great democracies— Great Britain with her
colonies and dependencies, France and Italy and Belgium and
their colonies, Itussia and her democratic people. On the otliei
side are ranged many military autocracies, those of Germany,
o f Austria, of Bulgaria, of Turkey, ruling by so-called “ divine
right ” and by organized military power and not “ by the consent of the governed,” except by the involuntary consent \\hieh
dare not oppose superior, force. On the one side are the ideals i
of democracy, of the right of the people to rule themselves
justly and with liberty under the principle declared by Abra
ham Lincoln as expressed in his message to Congress, in which
he said. “ Let us have faith to believe that ‘ right makes
might.’ ”
,
t,
And on the other side is the military ideal that
m ig h t
M A K E S R IG H T .”
T H E DOCTRIN E
“ M IG H T
M AKES
R IG H T ” ?
Mr President, the doctrine that lies at the base of military
autocracy is a fixed ideal of power alone, a permanent ambition
to rule by force of the cannon’s mouth and machine gun, an
ambition long maintained and without the shadow of a doubt
as to its significance. I call your attention to the bronze
cannon on the north entrance of our War Department Building,
a great cannon whose name is “ Le Marechal le Due d Humieres,
cast by the Bourbons nearly two centuries ago, and on its face
in three different mottoes is this false doctrine that
uiignt
makes right.”
„
.
„T
At the mouth of the cannon you will find these w ords: la1
passe par tous
the passway through everything ’’—the can
non’s mouth the passway, it may be, through justice and mercy
and innocence and righteousness and industry and honor
“ Might makes right.”
t
, „ VT
On the base of that cannon you will find the words, Aec
pluribus impar ”— “ not unequal to many.” The cannon com
mands the people, and is “ not unequal to many.” It can slay
87001— 1 114 »
5
and dominate and tax millions without the consent of the gov
erned. On the body of that Bourbon cannon you will find the
phrase, “ Ultima ratio regum ”— “ the final argument of kings.”
When the people argue that right is right, they hear the final
argument of kings— the cannon’s roar— and learn that m i g h t
MAKES BIGHT.
Do you think that this is merely a romatic suggestion cast
in bronze in honor of le Due d’Humieres? Not at all. The
doctrine of armed power over the people with or without thenconsent is at the base of the German Empire to-day.
This was the doctrine of Frederick the Great and of his
father, the Great Elector, and this is the doctrine of William,
the present Emperor.
I.OCAI. DEMOCRACY RULED BY AUTOCRACY.
It is true that after the Fra neo-Prussian War Bismarck made
many concessions to the democratic sentiment of the German
people in the management of their local affairs and developed
si very high degree of democratic efficiency through various
forms of municipal ownership, so that in a city like Munich
the people not only controlled, through their own municipal
powers, such as city water works, city gas works, electric light,
heat, and power plants, city hospitals, city schools, city tram
ways, but city bakeries, city packing houses, and city breweries.
The industrial conditions of Germany have been wonderfully
stimulated by democratic cooperation among the people, stimu
lated by the Imperial Government, and the Imperial Govern
ment; has provided many forms of democratic cooperation, such
as State insurance against old age, industrial accidents, and
diseases, vocational education, rural-credits associations, co
operative marketing and buying, the cartel system. State-owned
railroads, telegraphs, telephones, and parcel post. etc.
The Imperial Government has thus greatly benefited the de
velopment ol the German people and is entitled justly to very
gieat credit for this service rendered to the people by using the
powers of the people in the interest of the people
This has led to a warm attachment of the people to their
uivoi1'', G? ' ei: n’ " en!; und j ustl.v
it has led to a magnificent
V°.f the germ an people which is the admiration of
«ui or the lovers of men, but, nevertheless alon(r with thi^
theeidomiimmeal / ,e" loc'™tic‘ organization there has remained
the dominance ot the German Empire bv Prussia and the
d/rm'USShl, ! , y /,lle Hm,se
Hohenzollern, dainfing
ink b,\ (hunt tight—the right to rule the neonle with or
navy° and Die F m n lr o V ^ hght t0 cominand the army and the
highly* or°--miyp<l miilt UlS )ecome surrounded by a tremendous
1orgamzed nulltary power of which he is made either
willingly or unwillingly, the spokesman
’
t
It was this group, I believe, who forced the sword into w n
Jr SJ*
THE
SECRET
* ° siEU *■*
T REATY OF
VERONA— W O RL D -W ID E
DEMOCRACY
—
T H REA TE N ED
\ call your attention again to the secret treatv of Yerom
which 1 I,ml printed h, the
I S
on April ^
1916 for the purpose of attracting the attention of this country
to the policy which lies at the basis of these great contending
powers
Urn treaty, the secret treaty of Verona, was framed
by Metternich, ot Austria, m 1822, after Napoleon had seized
87001— 17147
6
the organized powers of democracy and turned them into an
engine of monarchy which out-Heroded Herod and was over
thrown.
Listen to the philosophy and historical admonition of the
secret treaty of Verona:
The undersigned, specially authorized to make some additions to the
treaty of the Holy Alliance, after having exchanged their respective
credentials, have agreed as follows :
A rticle 1. The high contracting powers being convinced that the sys
tem of representative government is equally as incompatible with the
monarchial principles as the maxim of the sovereignty of the people
with the divine riaht, engage mutually, in the most solemn manner, tp
use all their efforts to put an end to the system of representative gov
ernments, in whatever country it may exist in Europe, and to prevent its
being introduced in those countries where it is not yet known.
A rt. 2. As it can not be doubted that the liberty of the press is the
most powerful means used by the pretended supporters of the rights of
nations to the detriment of those of princes, the high contracting parties
promise reciprocally to adopt all proper measures to suppress it, not
only in their own States but also in the rest of Europe.
The King of Prussia and the Emperor of Austria were the
real autocratic monarchs behind this deadly compact to destroy
the democracies of the world and establish “ world power ” for
themselves and their allies as the military autocrats of mankind.
Mr. LEWIS. Mr. President, will the Senator permit me to
ask him a question?
The PRESIDING OFFICER. Does the Senator from Okla
homa yield to the Senator from Illinois?
Mr. OWEN. I yield to the Senator.
Mr. LEWIS. Would the Senator forgive me for merely call
ing his attention, in support of his very classic and historic
address, to the fact that the very treaty to which he alludes
had for its purpose the preventing of Spain and Portugal, which
had broken out then into the form of a republic, from emulating
the form of this, the United States of America, in both its
democracy and republicanism of form, to prevent the spreading
of our doctrines to Europe?
Mr. OWEN. Mr. President, this treaty continues, in the
fourth article, as follows:
A rt. 4. The situation of Spain and Portugal unite unhappily all the
circumstances to which this treaty has particular reference. The high
contracting parties, in confiding to France the care of putting an end
to them, engage to assist her in the manner which may the least compromit them with t-heir own people and the people of France by means
of a subsidy on the rart of the tw?o empires of 20,000,000 of francs every
year from the date of the signature of this treaty to the end of the war.
Spain had established a limited monarchy based on recogni
tion to some degree of the rights of the people. These nations
sent armies, under Louis X VIII, into Spain for the purpose of
reducing this limited monarchy to an absolute monarchy, icith
the same prince on the'' throne. The contest was absolute
military autocracy against any form of democracy. They sent
an army into Italy also— an Austrian army—to reduce a like
limited monarchy to an absolute monarchy, the same issue of
absolute military autocracy against the principle of democracy,
and then they proposed after succeeding in Spain and Italy to
send their armies to the Western Hemisphere for the purpose of
reducing all revolting colonies of Spain and Portugal, overthrow
ing western democracy and establishing absolute military autoc
racy and then it was that Great Britain, the greatest of all
democracies, through Canning, the prime minister, notified the
Government of the United States of this dangerous purpose, and
87001— 17147
notified the Holy Alliance, so-called, that Great Britain would
regard with disfavor any attempt by the Holy Alliance to reduce
the revolting colonies of Spain and Portugal in the Western
Hemisphere. The matter was considered by Thomas Jefferson,
and he regarded it as the most important occurrence that had
transpired since the establishment of the United States of
America. It led to the doctrine, the so-called Monroe doctrine,
in which President Monroe sent a message to Congress in which
it was stated that the United States would regard it as an un
friendly act for any European power to attempt to establish its
system of government on the Western Hemisphere, and that
prevented the Holy Alliance from subjecting the Western Hemi
sphere to the powers of absolute monarchy which would have
destroyed the democracies of the Western Hemisphere at their
birth.
VOX B ER N H A RD I.
Mr.-President, in October, 1911, there was published a work
of profound significance by Gen. Friederich von Bernhardi. trans
lated by Allan H. Powles, entitled “ Germany and the next war.”
I think it is generally understood and conceded that Gen. von
Bernhardi represents the view of the military powers of Ger
many, that he may be fairly called a spokesman for that group,
and for that philosophy, if we may call it philosophy. Let me
read just a few words from Gen. von Bernhardi. He said that
“A rude shock was needed to awaken the German people.” to
awaken the warlike instincts of the German people, and compel
them to show their military strength. He speaks of them as
“ a peace-loving, almost too peace-loving, nation.” He speaks of
the good-natured character of the German people, and with that
I agree, but he says that it is necessary to move them to war.
He says:
I must try to prove that war is not merelv a necessary element in
the life of nations but an indispensable factor of culture in which a
true civilized nation finds the highest expression of strength and
vitality. •
He says further:
Our people must learn to see that the maintenance of peace never
can or may be the goal of a policy. The policy of a great State has
positive aims.
It will endeavor to attain this by pacific measures
so l o n g as that is possible and profitable.
He says further:
The inevitableness, the idealism, and the blessing of war as ah
indispensable and stimulating law of development must be repeatedly
emphasized. The apostles of the peace idea must be confronted with
Goethe s manly words :
Dreams of a peaceful day?
Let him dream who may !
' W ar ’ is our "allying cry,
Onward to victory ! ”
Mr. President, lie says:
The Great Elector laid the foundations of Prussia's power by suc
cessful and deliberately incurred wars. Frederick the Great followed
the e x a m p l e of his glorious ancestors. He noticed how his State occu
pied an untenable middle position between the petty States and the
great powers, and showed his determination to give a definite char
acter (.decider cet Ptre) to his anomalous existence: it had become
essential to enlarge the territory of the State and carnger la figure de
la Prusse, if Prussia wished to be independent and to bear with
honor the great name o f k i n g d o m .
The King made allowance
for this political necessity and took the bold determination of chal
lenging Austria to fight. None of the wars which he fought had been
87001— 17147
8
forced upon h im ; none of them rlul h° postpone as long as possible.
H e had always determined to be the aygressor—
Frederick the Great had always determined to be the aggres
sor, and he still is the idealized leader of the military group
that now controls the German and the Austrian Empires, and we
were given a testimonial of this idealism by the United States
being presented by Wilhelm recently with a figure of Frederick
the Great, which stands in front of our War College.
H e had always determined to he the ay pressor, to anticipate bis
opponents, and to secure for himself favorable prospects of success.
Mr. President, this book glorifies war. It lips a chapter en
titled “ World power or downfall,” and the outline of the next
war is indicated, the forces that will take part in it, the part
that must be played by the German Empire.
There is a wide distinction between the German people and
their autocratic leadership that has led them to ruinous war.
Mr. President, I can hardly say whether I feel a keener sym
pathy for the unhappy people of Germany or the distressed
people of France and Great Britain. The German people are by
nature, outside the military autocrats, peace loving, good natured, lovable—the people of France and of Great Britain are by
nature even more peace loving and lovable and are moved by a
magnificent patriotism and spirit of joyful self-sacrifice and
enthusiasm—but when Wilhelm gives the order for mobilization
and for war the people of both countries are thrown into a
frenzy of war, and the insane passion of war finds expression
in unnumbered excesses and violence beyond all belief. When
the order of mobilization was given by the Emperor of Germany
it mattered not how peace loving or good natured or lovable the
people w ere; they had no choice whatever but to respond to the
battle cry. The German citizen had no choice but death except
to march to the trenches under the command of this military
autocracy, and, Mr. President, if this military autocracy wins
in this war, if this military autocracy by virtue of this war can
dominate the democracies of France and Italy and Great Brit
ain and Europe, it will become, indeed, the “ world power,”
idealized and prayed for by the military autocracy, and our
country, from a peaceful, industrial, happy democracy, where
liberty is idealized, may by military force be driven to become a
part of a great military machine, controlled by the same forces
which are in control now of the central Empires. Mr. Presi
dent, if war does come by virtue of our sustaining our neutral
rights, I shall be reconciled in the belief that at least the United
States has at last thrown her great powers on the side of de
mocracy. on the side of liberty and justice and mercy and
humanity, on the side of the doctrine that “ right makes
might ” and against the infinitely pernicious doctrine that
“ might makes right.”
87001— 17147
o
f
64th Congress \
2d Session
SENATE
f
D ocum ent
No. 737
Withdrawing Power from Federal Courts to
Declare Acts of Congress Void
AN ADDRESS
DELIVERED AT THE AUDITORIUM IN OKLAHOMA CITY,
OKLA., JANUARY 27, 1917
By
H on.
ROBERT L. OWEN
U n it e d St a t e s S e n a t o r
PRESENTED BY MR. SHEPPARD
F e b r u a r y 27, 1917.— Ordered to be printed
WASHINGTON
GOVERNMENT PRINTING OFPICE
1917
SENATE RESOLUTION NO. 383.
[REPORTED BY MR. CHILTON.]
I n t h e S e n a t e o f t h e U n it e d S t a t e s ,
March 2, 1917.
Resolved, That the manuscript submitted by the Senator from
Texas (Mr. Sheppard), on February twenty-seventh, nineteen hun
dred and seventeen, entitled “ Withdrawing from the Federal Courts
the Power to Declare Acts of Congress V oid,” an address by Senator
Robert L . Owen, be printed as a Senate document.
A ttest:
J a m e s M. B a k e r ,
Secretary.
2
WITHDRAWING POWER FROM FEDERAL COURTS TO DECLARE
ACTS OF CONGRESS VOID.
By Senator R obert L. O w e n .
Oklahoma City, Okla., January 27, 1917.
L a d ie s a n d G e n t l e m e n , F e l l o w C it iz e n s o f O k l a h o m a :
I come to speak to you on a m atter which I regard as of very great
gravity. I t is the question of withdrawing from the Federal courts
a power which they have long been permitted by Congress to exercise,
to declare acts of Congress void as unconstitutional.
th is country has reached a point where public opinion has slowly
come to the conclusion that the refuge of monopoly is to be found in
the I ederal courts. This country has perceived m any acts intended
to protect human life, intended to safeguard the mass of men, nullified
by the Federal judiciary.
Every monopolist and his attorney, actual, hopeful, or expectant
[laughter], will swear by the Federal courts and the Constitution as
by the Arc of the Covenant and rush to its defense like the Sons of
L evy, especially when the Constitution is not being assailed but being
properly interpreted.
I have demanded that Congress should exercise its plain, conceded,
constitutional right and withdraw from the Federal courts the power
to declare acts of Congress unconstitutional or void on grounds of
public policy. [Applause.] I have made this demand because
Congress can not otherwise protect the common people against
predatory monopoly. . [Applause.]
Congress can not otherwise furnish the American people the means
y will°k
adjust the great questions arising between capital and
labor, great questions affecting the business, political, moral, and
physical
life of the Nation.
*
have, theiefore, desired, as one of the public servants of Oklahoma, to be permitted to advise the people of this State to instruct
their Kepresentatives in Congress and in the Oklahoma Legislature
to support m y demand for the control of the Federal judiciary, if the
people of Oklahoma wish to abate the high cost of living and to enjo y fully their inalienable and indefeasible rights of self-government.
One of the most skillful special pleaders in Oklahoma, a gentle
man very attractive socially, of considerable learning, and of great
oratorical power, has seen fit to throw himself at the head of the
Sons of L evy in defending the A rk of the Covenant, which being inter
preted means to defend the alleged right of nine learned lawyers, ap
pointed for life, bv previous administrations, and out of sym pathy with
the succeeding administration or with national public opinion but sit
ting on the I ederal bench to nullify and abort the legislative power
3
4
WITHDRAWING POWER TO DECLARE ACTS OF CONGRESS VOID.
HBH
of a hundred million people. In a burst of beautiful eloquence, be
quotes the H o ly Scriptures as the clarion call, and in the words of
the Prophet Joshua, proclaims: “ A s for me and m y bouse, we will
serve the L ord.”
[Laughter and applause.]
In answer to this ringing challenge, I answer: “ I am willing to
serve the people, the common people, the commonest kind of people,
and let them judge who the Lord is the Sons of L evy serve.”
In order that you m ay clearly understand what it is I have pro
posed, and why, I present to you the following resolution:
Whereas the Constitution of the United States gives no authority to any judicial
officer to declare unconstitutional an act which has been declared constitutional
by a majority of the Members of the United States Senate and of the House of Rep
resentatives and by the President of the United States, who, on their several oaths,
have declared the opinion in the passage of such act that it is constitutional; and
Whereas in the Constitutional Convention, in which the Constitution of the United
States was framed, the motion was three times made to give to the Supreme Court,
in some mild form, the right to express an opinion upon the constitutionality of
acts of Congress, and was three times overwhelmingly rejected; and
Whereas such assumption of power by the Federal courts interferes with the reason
able excercise of the sovereignty of the people of the United States and diverts it
from the hands of the representatives of the people in Congress assembled to a tri
bunal appointed for life and subject to no review and to no control by the peoplo
of the United States, and is therefore against a wise public policy; and
Whereas the declaration by any Federal court that the acts of Congress are uncon
stitutional constitutes an usurpation of power: Therefore be it
Resolved by the Senate and House o f Representatives o f the United States oj America
in Congress assembled, That from and after the passage of this act Federal judges
are forbidden to declare any act of Congress unconstitutional.
No appeal shall be permitted in any case in which the constitutionality of an act
of Congress is challenged, the passage by Congress of any act being deemed conclu
sive presumption of the constitutionality of such act.
.
Any Federal judge who declares any act passed by the Congress of the united
States to be unconstitutional is hereby declared to be guilty of violating the consti
tutional requirement of “ good behavior ” upon which liis tenure of office rests and
shall be held by such decision ipso facto to have vacated his office.
S ec . 2. That the President of the United States is hereby authorized to nominate
a successor to fill the position vacated by such judicial officer.
(After resolution there was much applause.)
This resolution I intend to amend so that if any statutory Federal
court thinks an act repugnant to the Constitution he shall certify
the act to Congress and suspend final action on the case until further
instructed by Congress on the point the court may raise and leave the
appeal from State Courts as it now stands. In this way a safeguard
wifi be provided against a possible inadvertence in any act of Congress.
The meaning of this resolution is that when inferior Federal judges,
such as district, circuit, and other statutory judges, interpret an act
which Congress has passed, they shall deem the passage of the act
as establishing a conclusive presumption of the constitutionality of
such act under penalty of vacating their office.
The resolution means that the Supreme Court will have no oppor
tunity to pass on the constitutionality of an act of Congress under
its appellate jurisdiction, which is the onlv jurisdiction in which such
questions can arise, except from State Courts and under which is
no probable danger to the public interest. Congress has the consti
tutional power to withhold from the appellate power of the Su
preme Court the right to pass on the constitutionality of the acts
of Congress. [Applause.]
WITHDRAW ING POWER TO DECLARE ACTS OF CONGRESS) VOID.
5
The McCardle case, 1868: The Supreme Court decided in that case
by unanimous opinion that Congress had that power. The Congress
has that power, and the time has come for Congress to exercise that
power.
The Supreme Court itself has m any times sustained this interpre
tation, as in W iscart v. Dauchey, 3 Dali., 321 (1 7 96); Duroussean v.
U . S., 6 Cranch., 307 (1810); U . S. v. Gordon, 7 Cranch., 287 (1813);
Daniels v. C., R . I. & P. R . R ., 3 W a ll., 250 (1865); In re McCardle,
7 W a ll., 510 (1868); N at. E x . Bk. v. Peters, 144 U . S., 570 (1891);
Col. C. C. M. Co. v. Turck, 150 U . S ., 138 (1893).
CONGRESS AND THE SUPREME COURT NOT COEQUAL.
The law schools have been teaching thousands of boys to be law
yers, have been teaching them that the Constitution established three
coordinate, coequal branches of the Government. This is a funda
mental error, because there were established three coordinate but
not coequal branches of Government. The sovereign law-making
power of the people, as far as they delegated such powers, were
vested expressly in Congress, using these words:
To make all laws which shall be necessary and proper for carrying into execution
the foregoing powers and all other powers vested by this Constitution in the Gov
ernment of the United States or in any department or officer thereof.
Congress, b y statute, established a Supreme Court, the executive
departments, and fixed their powers in accordance with the Consti
tution and in accordance with the power vested in Congress as the
law-making power.
Congress fixed the number of judges on the Supreme Court. It
can add to that number now or it can diminish the number b y an
act of Congress.
Congress fixed the compensation of the Supreme Court.
Congress, through the Senate branch, confirms a justice of the
Supreme Court before he can take his seat.
Congress can impeach the Supreme Court and remove that court
from office. [Applause.]
Congress, under the Constitution, was expressly charged with fixing
the appellate jurisdiction of the Supreme Court— and that’s all the
jurisdiction they have worth mentioning.
The Supreme Court has only original jurisdiction in all cases affect
ing ambassadors, other public ministers, and consuls, and those in
which a State shall be^ a party. Only about one such case arises in
10 years. All other jurisdiction is appellate. One case in about
n,000 is under original jurisdiction, about 4,999 cases under appellate
jurisdiction.
Congress has the duty imposed upon it under the Constitution to
fix that appellate jurisdiction and make such exceptions and such regu
lations as Congress sees fit.
THE POWERS OF CONGRESS.
I am talking now of the power of Congress under the Constitution
without changing the Constitution, without modifying its meaning
without putting a strained interpretation upon it. I am talking now
6
W ITHDRAW ING POWER TO DECLARE ACTS OF CONGRESS VOID.
of the power. I shall talk presently of the duty of exercising that
power and give you the reasons why I think the time has come to
exercise it.
.
The Constitution, Article I, section 1, declares the following powers
vested in Congress. I wish you would listen to these powers of Con
gress :
All legislative powers herein granted shall be vested in the Congress of the L nited
States, which shall consist of a Senate and House of Representatives.
It gave the House of Representatives and the Senate the power
to impeach any officer of the United States, including judges. It
gave the Senate the power to sit as a high court of impeachment over
judges. I t gave the Senate the right to advise with the President of
the&United States and confirm the appointment of all officers of the
United States, including judges.
It gave each House the authority to determine its own member
ship and its own proceedings.
,
It exempted the Members of the Senate and the House from arrest
by judges except for treason, felony, breach of the peace.
It provided that they should not be questioned in any place
about any speech or debate in either House, not even b y judges.
It gave Congress the power to lay and collect taxes, duties, im
posts, and excises; to pay the debts and pay for the common defense
and general welfare of the United States.
To borrow m oney. It has borrowed billions of dollars.
To regulate commerce. It has regulated hundreds of billions of
commerce.
.
.
To establish a uniform rule of naturalization and uniform laws on
the subject of bankruptcies.
.
To coin m oney, to regulate the value thereof and of foreign com,
and fix the standard of weights and measures.
To punish counterfeiters.
To establish post offices and post roads.
To grant patents and copyrights. I t has granted over a million
patents.
To constitute tribunals inferior to the Supreme Court.
To define and punish piracies and felonies committed on the high
seas and offenses against the law of nations.
To declare war, grant letters of mark and reprisal, and to make
rules concerning captures on land and water.
To raise and support armies.
To provide and maintain a navy.
To make rules for the government and regulation of the land
and naval forces.
.
. ,
To provide for calling forth the militia to execute the laws of the
Union, suppress insurrection, and repel invasions.
To provide for organizing and disciplining the militia, and for
governing such part of them as m ay be employed in the sei v ice of
the United States.
To exercise authority over all places purchased b v Congress, carry
ing into execution the foregoing powers and all other powers vested
b y the Constitution in the Government of the United States or m
any department or officer thereof, including the judicial department.
The Constitution expressly provides that Congress shall not do
certain things, for instance:
WITHDRAW ING POWER TO DECLARE ACTS OF CONGRESS VOID.
7
It forbade interference with the slave trade up to 1808.
It forbade the suspension of the writ of habeas corpus except
where the public safety required it.
I t forbade a bill of attainder or ex post facto law.
I t forbade a capitation or other direct tax on the States unless in
proportion to the census.
I t forbade an export duty.
I t forbade a preference to be given to the port of one State over
another.
It forbade expenditure of money except b y lawful appropriations.
I t forbade titles of nobility.
And the people refused to ratify that Constitution until the Bill
of Rights in the 10 amendments were agreed to be added to that
Constitution and made a part of it. In that Bill of Rights were
reserved the various rights of the people, which Congress was charged
with the duty of defending, as follows:
The first, free religion. The gentlemen who wrote that Constitu
tion forgot to put that in. [Applause.]
Free speech.
A free press. The gentlemen who wrote that Constitution forgot
to put that in. Thomas Jefferson demanded that they go in.
Free right of assembly.
Free right of petition for redress of grievances. The gentlemen
who wrote that Constitution forgot to put those things in.
The right of the State to have troops.
The right of the people to keep and bear arms.
The right of the people to be free from the quartering of soldiers
upon them.
Freedom from unlawful searches and seizures.
Ireedom from arrest for crime except on indictment.
The right of life, liberty, and property, not to be interfered with
except b y due process of law.
. ^ ie right against takipg private property for public use, without
just compensation.
Ih e right for speedy public trial by an impartial jury. The gen
tlemen who wrote the Constitution forgot to put all those things in.
And when they came home and saw Thomas Jefferson they heard
rom him, and others like him, and they heard from the people of the
countiy, too.
1 hey could not have liad the Constitution ratified
except for that Bill of Rights, put in this Constitution.
ih e right to be informed of the nature of the accusation against a
citizen.
65
Ih e right to be confronted with witnesses against a citizen
The right of compulsory process for obtaining witnesses.
Ih e right to have counsel in the defense of the rights of a citizen.
The right to a trial by jury.
The right against excessive bail, excessive fines, or cruel or unusual
punishment.
The gentlemen who wrote this Constitution forgot to put those
things in, but this Bill of Rights safeguarded the people, ahd it was
on the demand of the people and of men like Thomas
Thoma Jefferson
who believed in the people and stood for them,
jL1- ’ TV- 11 *
Rights went into this Constitution.
[Applause.]
8
W ITHDRAW ING POWER TO DECLARE ACTS OF CONGRESS VOID.
THE PEOPLE ALONE CAN CONTROL CONGRESS.
I refer to that because it is a part of this argument.
M y friend, Judge Charles B . Stuart, quotes with great zeal Alex
ander Ham ilton, Gerry, and others, who didn’ t believe in democracy,
who regarded a all political evils as due to the turbulence of the
democracy.”
,
.
Alexander Ham ilton believed in a President appointed for life,
with the right to appoint governors of States for life, consisting of
those who were representing the aristocracy of the country, in order
that the people might be held in subjection and governed accord
ing to law. [Laughter and applause.]
THE PEOPLE CONTROL CONGRESS.
These instructions which I have read to you were laid upon the
Congress b y the people, and the people retained in their own hands
all powers not expressly granted to Congress. Congress was charged
with the lawmaking power of the people, subject to the people
themselves alone.
And the people took every pains in this Constitution to require
the entire House of Representatives and one-third of the Senate,
every two years, to come back before the people and give an account
of their stewardship, and receive the approval of the people before
they continued the duty of making laws for the people. In that
way the people kept in their own hands the sovereignty which was
declared vested in them by the Bill of Rights in every one of the 48
States in this Union. Read these constitutions.
On the 31st of July, 1911, I put in the Congressional Record an
extract from the constitution of each of the 48 States on this very point,
because at that time, five years or mare ago now, when the Standard Oil
decision was rendered I made a demand for the control of the Federal
judiciary, and I put in the record then the power which the people of this
country had retained over the State judiciary. The people kept control
of Congress, and when Congress passes a law in pursuance of the
Constitution, the Congress itself declares that law to be the Supreme
law of the land and does not say that the law m ay be declared void
by the judges. [Much applause.]
Unhappily, Congress not having in express terms forbidden this
unwise practice Congress m ay be fairly held to have acquiesced in it.
The Constitution requires every Senator and every Representative
in Congress to take a solemn oath to support faithfully and truly the
Constitution of the United States.
W hen, on their oaths, the members of the House of Representatives
of the United States, and the United States Senate, with the approval
of the Vice President of the United States, who presides over the
Senate of the United States, and with the approval of the President
of the United States, passes an A ct, a conclusive presumption arises
that the act is constitutional, and this presumption can only be
overthrow?! b y the disapproval of the people of the United States,
wrho will return a new Congress and correct any unconstitutional or
impolitic acts of an expiring Congress. [Applause.]
W ITHDRAW ING POWER TO DECLARE ACTS OF CONGRESS VOID.
9
THE SUPREMACY OF THE LEGISLATIVE POWERS OF OTHER NATIONS.
N o civilized nation permits the judges on the bench to declare un
constitutional or void the acts of the Parliament. Great Britain, in
1700, February 6, declared that judges should hold their office “ while
they behaved themselves well,” subject alone to removal by resolu
tion of Parliament. That is what I proposed in 1911 for the United
States. I thought the time had then come for that rule in the United
States.
France does not permit the laws of Parliament to be set aside bv the
judges.
'
Italy, in its written constitutional law, provides that the judges
shall not set aside an act of the Parliament.
It is the written law of Austria.
It is the written law of Germany.
It is the written law of Belgium.
It is the written law of Denmark.
I t is the written law of Australia.
I t is the written law of New Zealand.
I speak of these things because the civilized world which has con
sidered government by the people, having all agreed upon this doc
trine, there m ust be sound reason for it.
I t is not an accident.
I t is written out of the blood and tears of centuries. [Applause.]
It is true that in 1788 several lawyers of distinction (and privilege)
contended that the contemplated Supreme Court of the United
States should have the right to declare acts of Congress unconstitu
tional. Judge Stuart quotes several of them.
H e quotes Daniel
W ebster; he quotes Oliver Ellsworth; he quotes John Marshall and
Alexander Ham ilton. A ll I care to say now is that the selfish
opinions of such lawyers of aristocracy w'ere no more convincing
then than they are now. [Applause and laughter.]
Oliver Ellsworth, and Daniel W ebster, and Alexander Hamilton
and John Marshall did make that argument to the great property
holders of their States with a view to getting their support for the
Constitution, because the Constitution needed friends at that time,
but John Marshall, who spoke equally well on either side of the case,
defended the Constitution against the charge of Patrick Henrv that
it would establish a judicial despotism by the following remarks. I
Wrailn
t0 Asten to J°hn Marshall because he is the patron saint
of all the gentlemen who differ with me about this question. Here
is what John said. I will not call him by a more familiar name
[Laughter.]
Congress is empowered to make exceptions to the appellate jurisdiction as to law
and fact of the Supreme Court. These exceptions certainly go as far as the legislature
may think proper for the interest and liberty of the people (Elliott’s Debates, vol.
o, p. 560.)
The plain truth is, the people of the American Colonies who lived
under the English practice recognized as a fixed principle of govern
ment that the judiciary is subject to the legislative power of the
peopie
The English law that I referred to a moment ago was to
that effect, and that law was the law of the Colonies, which thev
perfectly well understood. It is true that Rhode Island did about
this time pass an act which its supreme court declared unconstitu-
warn
10
WITHDRAWING POWER TO DECLARE ACTS OF CONGRESS VOID.
tional. I t is also true that the legislature put the court out of office
for that reason.
.
It is also true that two or three other States had a similar expe
rience, and the court was rebuked b y the people for its conduct in
this matter.
The Legislature of New Hampshire removed its supreme court
four times on the ground of policy.
. .
On July 31, 1911, in Congress, and before the Bar Association of
Oklahoma on the 23d day of December, 1911 (vol. 5), I explained
the extraordinary pains the people of the United States have taken
to prevent the usurpation of their power by the judges.
Now, listen to this. Here is what the people at home thinkhere is what the .common people think; you will find the details in
Volum e 5:
THE PEOPLE CONTROL THE
STATE JUDICIARY.
Forty-eight States have two ways of removing judges b y impeach
ment, and either by a short tenure of office or by resolution of the
legislature. Thirty-two States have three ways of removing judges.
Thirty-two States m ay remove judges by resolution of the State
legislature.
Seven States have four ways of removing judges, viz,
impeachment, legislative recall, short tenure of office, and popular
recall
They started the popular recall in Oregon, first, because of the
oross aggression of the railroad interests and other private interests
of the State, which had corrupted practically their whole govern
ment in the interest of property against the people. The recall
was applied to all officials; no exception was made as to judges. The
judges of that State now would compare favorably with those of any
other State. And they did the same thing in California recently
for the same reason, Hiram Johnson making his campaign for gov
ernor and winning overwhelmingly, when the chief issue was the
recall of judges and on the slogan that “ the Southern Pacific has got
to go out of the governing business in California.”
D o not make
any mistake about this matter.
Forty-five States recall judges b y a short tenure of office and all the
States, the 48 States, have the right of impeachment. No one
ever hears any complaint of our State judiciary for the very reason
the judiciary is in sym pathy with the people and serve them acceptOklahoma, as we all know, has reason to be especially proud of
her supreme court. Its members are nominated and elected b y the
people and the justices of the supreme court are in sym pathy with
the people.
THE PEOPLE WISH THE FEDERAL JUDICIARY RESTRAINED.
The people are overwhelmingly opposed to the usurpation of
legislative power b y the Federal judiciary appointed for life.
Nobody knew better than John Marshall himself that the Supreme
Court had no right to declare an act of Congress void under the Con
stitution, for in the case of W are v. Hilton, John Marshall stated
WITHDRAW ING POWER TO DECLARE ACTS OF CONGRESS VOID.
11
now listen to the patron saint of the opposition— this is John,
John Marshall whom I am quoting:—
The legislative authority of any country can only be restrained by its own municipal
constitution; this is a principle that springs from the very nature of society, and the
judicial authority can have no right to question the validity of a law unless such
jurisdiction is expressly given by the Constitution.
The word “ m unicipal” is used in the broadest sense.
This is John Marshall. And nobody pretends that there is any
express provision in the Constitution of the United States conferring
any such authority.
The highest authority on English and American law has been Sir
, William Blackstone. H e is the one that all law clerks, law schools,
and law students swear b y. Listen to Sir W illiam. He says:
When the main object of a statute is unreasonable the judges are not at liberty to
reject it, for that were to set the judicial power above that of the legislature, which
would be subversive of all government. (Blackstone’s Commentaries, p. 85, sec. 3.)
I have to talk in the language of the lawyers, otherwise I would
not perhaps be understood b y them.
A V o i c e . Judge Stuart forgot to say that.
Senator O w e n . Perhaps he had not recently read Blackstone.
Thomas Jefferson had a view full of apprehension after John
Marshall came on the bench.
The Congress did not rebuke Marshall for the Marbury v. Madison
case, and Thomas Jefferson didn’ t see the way clearly how to protect
the country against that aggression, and this is what he said:
It has been my opinion that the germ of dissolution of our Federal Government is
in the constitution of the Federal judiciary, an irrepressible body working like gravity
by day and by night, gaining a little to-day and a little to-morrow and advancing
with a noseless step like a thief, over the field of jurisdiction, until all shall be usurped,
(federal Law Journal, vol. 66, p. 293.)
I beg you f ° observe that I quote the page whenever I make a refer
ence. Judge Stuart neglected to do that.
Evidently Jefferson did not observe the power of Congress to limit
the appellate jurisdiction of the court. If he had, he would not have
. ra. &t Ml. The country is in no danger on earth; the Con
stitution is all right, doesn’t have to be changed; it only has to be
exemplified and decently interpreted and made to accomplish the
ends tor which it was intended.
Andrew Jackson is another authority I want to call your attention
0 y ou remomber what he said of John Marshall in a famous
case? H e said this:
John Marshall has rendered his decision.
Now let us see him enforce it.
That is what Jackson said, but I want to quote you the language
of Jackson in the case of the Bank of United States. Jackson said
this:
It is maintained by the advocates of the bank that ite unconstitutionality, in all
its features, ought to be considered as settled by precedent and bv the decision of the
Supreme Court. To this conclusion I can not assent. * * * If the opinion of the
Supreme Court covered the whole ground of this act, it ought not to control the coor
dinate authorities of’ this Government. The Congress, the Executive, and the court
must each for itself be guided by its own opinions of the Constitution. Each public
officer who takes an oath to support the Constitution swears that he will sunnnrt it
“ he understands it and not as it is understood by others. It is as much the dutv nf
the House of Representatives, of the Senate, and of the President to decide upon the
12
WITHDRAW ING POWER TO DECLARE ACTS OF CONGRESS VOID.
constitutionality of any bills or resolutions which may be presented to them for pas
sage or approval, as it is of the Supreme Court, when it may be brought before them
for judicial decision. The opinion of the judges has no more authority over Congress
than the opinion of Congress has over the judges; and on that point the President is
independent of both. The authority of the Supreme Court must not, therefore, be
permitted to control the Congress or the Executive when acting in their legislative
capacities, but to have only such influence as the force of their reasoning deserve.
(Senate Journal, July, 1832, p. 451.)
President Jackson overlooked the fact that Congress has the power
to impeach the President and the Supreme Court and that Congress
therefore exercised the sovereign law-making power of the people,
but he states correctly that “ the Supreme Court must not be per
mitted to control the Congress.”
M y friend, Judge Am es, I fear did not clearly understand Presi
dent Jackson’s view in his remarks on “ Jackson’s d ay' when he
quoted him as authority against m y position.
President Jackson overlooked the power of Congress to control
the appellate jurisdiction of the Supreme Court, which would make it
impossible for the Supreme Court to put itself in mischievous conflict
with the sovereign lawmaking power of the Nation.
Abraham Lincoln (I want you to see that I have some friends along
the line here; I am not entirely alone) resisted the Dred Scott de
cision and said that he would not oppose the decision as far as it
related to the slave individually, and then he said these memorable
words:
But we, nevertheless, do oppose that decision as a political rule which shall be bind
ing on the voter to vote for nobody who thinks it wrong; which shall be binding on the
Members of Congress or the President to favor no measure that does not actually concur
with the principles of that decision. * * * We propose so resisting it as to have it
reversed, if we can, and a new judicial rule established upon this subject. (Works of
Jefferson, vol. 12, p. 163.)
W ell, he had some trouble in reversing it. It took the bloodiest
war in our history to reverse it, and four years of fratricidal strife, and
billions of treasure; with grief, sorrow, heartburning and bitter hatred
that lasted for generations.
It is hard to reverse the decisions of the Supreme Court b y that
kind of a method, but it was reversed. They declared in the Dred
Scott decision slavery a constitutional right. W ell, the people didn’ t
think so, and the people changed that decision.
The Supreme
Court held the Missouri compromise on slavery unconstitutional
and void in the Dred Scott decision and held in effect that Congress
had no power as a forum to settle the question of slavery as long as a
single slaveholder objected.
This decision inflamed tbe North and
led to the withdrawal of the Southern States and to war.
THE CONSTITUTIONAL CONVENTION, 1788.
In the Constitutional Convention which framed this United States
Constitution, Edm und Randolph, on June 4, 1787, proposed the
following resolution:
jResolved, That the Executive and a convenient number of the national judiciary
ought to compose a council of revision, with authority to examine every act of the
National Legislature before it shall operate * * * and that the dissent of said
council shall amount to a rejection unless the act of the National Legislature be again
passed. (Elliott’s Debates, vol. 1, pp. 159, 164 , 214.)
WITHDRAW ING POWER TO DECLARE ACTS OF CONGRESS VOID,
13
They didn’ t propose to finally veto an act of Congress and never
let it go into effect. They only; proposed to have a temporary veto,
and if Congress insisted on passing it then let it be the law, but even
that moderate proposition was three times defeated and never
received the vote of over 3 States out of the 13.
A like proposition was also rejected August 5, 1787.
(Elliott’s
Debates, vol. 1, p. 243.)
Only 11 members of the Constitutional Convention out of 65
favored giving the judiciary any control. These were Blair, Gerry,
Hamilton, King, Mason, Morris, W illiamson, W ilson, Baldwin,
Brearly, and Livingston.
Hamilton, Morris, Gerry, and several others of this group were
known to be strongly opposed to democracy.
George Washington, Charlie Pinkney, James Madison, and m any
others, 22 in number, are known to have expressly opposed any
judicial veto. There were 65 members and only 11 on record as
favoring any form of judicial interference with the legislative powers.
(This is fully set up in Davis on Judicial Veto, p. 49.)
The Constitution, however, speaks for itself; it puts the sovereign
power in Congress, the power to control the appellate jurisdiction,
and thus to prevent the exercise of the judicial veto, if it is attempted.
The judicial veto has been attempted.
I t has been exercised.
I t has been proven highly mischievous.
I t has become unendurable. [Applause.]
MARBURY V. MADISON CASE.
John Marshall was a federalist, an aristocrat, a reactionary, a man
of considerable ability, with a consuming desire for power, great
tenacity of purpose, and a great hatred for Thomas Jefferson and his
doctrmes.
John Adam s, the federalist, took advantage of the election of
Jefferson, the democratic republican, to put John Marshall, the feder
alist, on the bench as Chief Justice for life, as one of his last acts
before he turned over the Government to Thomas Jefferson. Keep
at m mind, because it m eant trouble, and here comes the first
trouble
In Marbury v. Madison, John Marshall violated the first
principles of government of the English-speaking people in assuming
the right to declare void the will of the National Legislature.
Congress (under A rt. I l l , sec. 1), in distributing the judicial powers
of the United States, when it established the Supreme Court b y the
ludiciary act of 1789, gave the Supreme Court, wisely and justly, and
lawfully in addition to its “ original” jurisdiction, the right to issue a
writ of mandamus as a part of the judicial powers of the United
States. Wby> a little citizen having a case against a great Cabinet
officer could haidly expect to get his relief from a small subordinate
officer of the judiciary department. W hen he makes a demand on
the Secretary of State for his right he ought to have the backing 0f
the very highest judicial authority— one that can speak to the Secre
tary of State on terms of some comparative equality.
John Marshall struck down that right on the pretense that Congress
had no right to add to the “ original” jurisdiction of the Supreme
14
WITHDRAW ING POWER TO DECLARE ACTS OF CONGRESS VOID.
Court. Congress did not add anything to the “ original” jurisdiction
of the Supreme Court. The Constitution placed the judicial powers
of the United States in the Supreme Court and in such inferior courts
as Congress should establish, and Congress, in pursuance of that
authority, gave the right of issuing the writ of mandamus to the
Supreme Court, as it had a plain constitutional right to do.
A little fellow named Marbury, in the District of Columbia, had
been appointed notary public b y the retiring administration; his
commission had been made out; it had been signed by the President,
b y the Secretary of State, had the seal on it, and was lying on the
table of the Secretary of State for delivery. The incoming Secretary
of State refused to deliver it, and Marbury went to John Marshall,
Chief Justice of the Supreme Court of the United States, and asked
to have a writ of mandamus issued on the Secretary of State to de
liver that commission. John Marshall said “ no” ; that Congress
has no right to authorize the Supreme Court to issue writs of man
dam us; that was unconstitutional on the part of Congress. And
when he refused that jurisdiction of a writ of mandamus he seized
the power to declare an act of Congress void, and, therefore, at
tempted to make himself the judicial ruler of the United States, by
exercising a judicial veto over Congress.
The Congress of the United States ought then and there to have
impeached John Marshall. [Loud and continued applause.] H e
was guilty of a violation of the true meaning of the Constitution; he
himself in that act violated the spirit and purpose and meaning of the
Constitution, and he assumed the sovereign power over the legislative
agents of the people of the United States. H e held office for life,
and there was no way for the people to get at him except b y im
peachment, a hard and a difficult remedy. A great m any men who
would think he was wrong in his opinions, who would thmk that he
had done very wrong, would hesitate long before they would use that
drastic power, which exercised over a Supreme Court Judge blasts
his name for all history. The remedy is too drastic for the offense,
because, after all, the Congress can prevent the recurrence of that
kind of thing sim ply b y removing the appellate jurisdiction.
Jefferson denounced Marshall as a thief of jurisdiction, and Mar
shall never repeated that offense.
i t was 53 years before it was repeated, in 1856, and then, in the
Dred Scott case, it caused the enormous catastrophe of the Civil W a r.
FLETCHER VS. PECK CASE.
The next mischievous step taken b y John Marshall of national
importance was in Fletcher v. Peck, where an act of the Georgia
Legislature correcting a previous fraud was declared “ unconstitu
tional.”
In this case the legislature of Georgia had been deliberately
corrupted with m oney b y four land companies and induced to pass
an act conveying, without adequate compensation, an enormous grant
of land, some 40,000,000 acres, belonging to the people of Georgia.
The people of Georgia were enraged over it. They came together,
turned out the legislature; they elected a new legislature; the new
legislature immediately repealed the act. It came up before John
MarshalLs court, and after solemnly considering it he decided that a
State didn’t have the right to pass an act “ impairing the obligation
WITHDRAW ING POWER TO DECLARE ACTS OF CONGRESS VOID.
15
of a contract.” The most mischievous consequences followed. It
was only necessary thereafter to corrupt a legislature and get the
grant made— that settled it.
Since that time m any courts have announced a wiser
That fraud vitiates a contract; that it is no contract
obtained corruptly.
DARTMOUTH COLLEGE CASE.
A far more dangerous opinion followed this Fletcher v. Peck case.
It was the Dartmouth case— a case that didn’t seem to be of any
importance at all. The legislature of New Hampshire passed an act
increasing the number of trustees of Dartmouth College. The old
trustees were Federalists; the new trustees anti-Federalists. Mar
shall and Washington were Federalists; they opposed the act of the
legislature. Duval and Todd supported the legislature. Marshall
succeeded in preventing a decision at that term, and by a political
campaign the other three judges, Johnson, Livingstone, and Storey,
were persuaded to agree with Marshall.
(Life of W ebster, by Lodo-e
p. 1 -8 8 .)
Listen to these words. Mr. Lodge says:
The whole business was managed like a quiet, decorous, political campaign.
Chancellor K en t says the decision in that case did more than any
other single act proceeding from the authority of the United States
to throw an impregnable barrier around all rights and franchises
derived from the grant of government.
(K en t’s Commentaries,
p. 419.)
’
Court is ^ j arS ^a^er ^ r- Chief Justice Cole, of the Iowa Supreme
16
WITHDRAW ING POWER TO DECLARE ACTS OF CONGRESS VOID.
This gross error was corrected b y reversing it. Gen. Grant did
that b y appointing two new judges m favor of the legal-tender act
whose votes corrected the error of the Supreme Court b y reversing
the court. I t was an undignified remedy but better than none. Con
gress has this right now, but the American people do not and will not
approve any such practice. The judges on the Federal bench ought
to represent the matured judgment and will of the American people.
INCOME-TAX CASE.
W hen the Supreme Court declared the income tax void and trans
ferred the taxes from the wealth of the country, which is protected
b y the expenditure of such taxes, it disregarded the will of the
people of the United States and of Congress, vetoed the action of the
House of Representatives, of the United States Senate, and of the
President, reversed the decisions of the Supreme Court of the United
States for a hundred years, and it took the people 16 years to correct
it b y a constitutional amendment, at a cost to the consuming masses
of over $1,600,000,000.
SHERMAN ANTITRUST ACT.
W hen the Supreme Court declared the Sherman antitrust law only
intended to prohibit unreasonable restraint of trade, they rendered
the act nugatory and void. The effect of this decision was to
enthrone m onopoly and to raise the cost of living.
EIGHT-HOUR LAW.
If the Supreme Court should now nullify the eight-hour law and
the railways of the country should arm several hundred thousand
strike breakers with guns and pistols to face several hundred thousand
conductors, engineers, firemen, and brakemen, and their sympathizers,
no man can foresee the harmful consequences of such judicial veto of
the act of Congress.
THE REMEDY FOR THE JUDICIAL VETO.
The remedy which I have proposed is very simple.
The Constitution gives Congress all the power necessary.
A ll that Congress has to do is to pass the resolution I have pro
posed. The Constitution gives Congress entire control of the appellate
jurisdiction of the Supreme Court in the following words:
In all cases affecting ambassadors, other public ministers and consuls, and those in
which a State shall be a party, the Supreme Court shall have original jurisdiction.
In all other cases before mentioned the Supreme Court shall have appellate juris
diction both as to law and fact, with such exception and under such regulation as the
Congres? shall make.
The power of Congress in this matter was passed on in the case
of W illiam H . McCardle, an editor in southern Mississippi, arrested
by M aj. Gen. Ord who was putting into effect the reconstruction
■ Act in 1868. McCardle sued out a writ of habeas corpus from the
circuit court to the Supreme Court of the United States. The
WITHDRAW ING POWER TO DECLARE ACTS OF CONGRESS VOID.
17
Supreme Court refused to exercise appellate jurisdiction and dis
missed the case on the ground that Congress had withdrawn appel
late jurisdiction in such habeas corpus cases, and that Congress
had the constitutional power to do so. I t was a unanimous opinion.
The court said:
We are not at liberty to inquire into the motives of the legislature. We can only
examine into its power under the Constitution, and the power to make exceptions
to the appellate jurisdiction of this court is given by express words.
What, then, is the effect of the repealing act upon the case before us? We can not
doubt as to this. Without jurisdiction the court can not proceed at all in any cause.
Jurisdiction is power to declare the law, and when it ceases to exist the only function
remaining to the court is that of announcing the fact and dismissing the cause. And
this is not less clear upon authority than upon principle.
It is obvious, therefore, that we have no occasion to discuss the past
history of the Supreme Court on the point of whether they have
usurped jurisdiction in declaring congressional statutes void. W e
need not go into the past. W e might say that since Congress has
permitted the right without protest to pass upon acts of Congress,
that it was not unreasonable that the Justices should think themselves
justified in exercising the power of saying an act of Congress was
unconstitutional. I am willing to acquiesce in that for the purpose
of the argument but not historically. M y proposition deals with
the future, not the past.
I have demonstrated without the possibility of a doubt that this
power is in Congress, and conceded to be in Congress b y a unanimous
opinion of the Supreme Court of the United States.
A nd I call your attention to the remarkable fact that m y friend,
Judge Stuart, in answering me, never made reference to that fact.
A V oice . Maybe he forgot it.
Mr. O w e n . Yes; maybe he forgot it.
Now, the ju stif cation for the withdrawal of these cases from the
Supreme Court I am going to state very briefly:
1 hese decisions which have been rendered have been against vour
interest.
I want you to know that in m y mind is no purpose to lower the
dignity of that great court. I respect and honor that great court;
I respect the learned and able gentlemen who comprise that court
individually and personally; I believe in their integrity of m ind’
I believe in their learning; I believe in their high personal honor; but
I tell you also that I believe when you have a jurv of Irishmen you
will get a home-rule decision. [Laughter and applause.]
FALLIBILITY OF MAN AND OF JUDGES.
A ll men are fallible. L ven judges are fallible. On the Supreme
Court, every season cases are decided by the hundreds, as the term
goes by, m which constantly there is a minority of judges on one side
and a majority of the judges on the other, and every time the major
ity decides a case against the minority there is a judicial ascertain
ment by the Supreme Court of the United States as to the fallibility
of each one of the members on the minority— did you get that ?-—
and there isn’ t a week that some of those judges are^not in the
minority, so that we have every day through the term the judicial
ascertainment by the m ajority of the Supreme Court of the United
S. Doc. 737, 64-2------ 2
18
WITHDRAW ING POWER TO DECLARE ACTS OF CONGRESS VOID.
States of the fallibility of every one of its own members. W h y,
there is nothing surprising about that— everybody knew that, of
course. Just happened not to think of it? They are human beings
after all.
i
,
.
.
...
Just look at this Income T ax case, and look at the dogma of the
Supreme Court on the question of deciding an act unconstitutional
only when the unconstitutionality is overwhelmingly established, and
only when there is no doubt about the unconstitutionality of the act.
The professional dogma of the court is to give all benefits of the doubt
in favor of the constitutionality. The trouble about the dogma is
they never pay any vital attention to it. It is only a theoretical
dogma; it is not real; I will show you why. Here is the Income la x
case. For a hundred years the Supreme Court had sustained the
right of Congress to pass an income-tax law. Here was the' incometax law, passed by the House of Representatives, they said it was
constitutional; passed b y the Senate, they said it was constitu
tional; approved by the President of the United States, he said it was
constitutional. Here are the decisions of the Supreme Court of the
United States for a hundred years, and they said it was constitu
tional, and here were five judges on the bench, on the first vote, they
said it was constitutional, and then Judge Blank reversed himself
over night and joined the other four, which made them five, and then
they decided in spite of this dogma that there was no doubt whatever
about its unconstitutionality. Now, that is quite a remarkable thing.
Here is Judge Blank in that case who, when he first voted it was con
stitutional, judicially ascertained the fallibility of the other four
minority members of the court; and then when he changed his mmd
and joined the four minority members and made them five, he
judicially ascertained the fallibility of the four he had just left, and
since he was on both sides he must have been fallible. And there
was a demonstration of the fallibility of every judge on the court by the
action of Judge Blank. [Applause.]
MORTAL MAN INFLUENCED BY PREVIOUS ASSOCIATIONS AND OPINIONS.
Now, you all remember that famous case of Tilden-IIayes. Hero
were five of the justices of the Supreme Court; five of the most con
spicuous and able Senators of the United States; here were five of
the ablest Members of the House of Representatives, seven Democrats,
eight Republicans. There were four great contested election ques
tions with m any controverted questions, and every one of the 15
decided every case according to his own previous political predilec
tion, and the country was astonished to nnd that 8 was a majority
of 15. B u t they did discover it. [Laughter.]
Now, the point I want to make with you is that human beings of
the first magnitude are influenced by their training, by their environ
ment, b y their social atmosphere, and, sometimes, b y the men they
eat dinner with. [Much applause and laughter.]
Now, if you put the sovereign power of declaring void the acts of
your legislative representatives in the United States Supreme Court
not responsible to you, you m ay thank yourselves for the conse
quences.
WITHDRAW ING POWER TO DECLARE ACTS OF CONGRESS VOID.
19
STANDARD OIL AND AMERICAN TOBACCO CASES.
Look at this great case known as the Standard Oil case. Here
was a case where the people of this country after years of struggling
finally had their Representatives in Congress, in the Senate and in
the House, both agree upon the Sherman antitrust law (1890),
making it a criminal offense to commit an act in restraint of trade,
vital if the principle of competition is to survive; vital if the monopo
lies are not to be permitted to kill off every competitor and have a
masterful control over the market and over the price which shall
be paid for that which you produce and for that which you are
compelled to buy. That law, it took you years to get on the statute
book. It finally, by the slow, dragging, wearisome process of the
court, came before the Supreme Court in the trans-Missouri and
joint-traffic cases, and there, in three different decisions, that court
declared that Congress meant what it said and that it was the law,
that any act in restraint of trade was criminal.
Ihen the trusts came to Congress and tried to get a remedy. I
want you to listen to the report of the Committee on the Judiciary on
tms very remarkable case. The proposed relief bill was introduced
by Senator Warner, of Missouri, January 26, 1908. Now listen to
this; I want you to listen. Here is the report of the Senate com
mittee refusing to write the word “ reasonable” into this act. Con
gress had said it is not reasonable for you to deny liberty to another
man, no matter how sm all; it is not reasonable for you to meet and
act in restraint of trade, restraining some other man from his rights.
Listen to this Senate com m ittee:
^ ? mfiakes ? .cnminal offense t0 violate the law, and provides a punwhSw o S r d
f ne and imprisonment. To inject into the act the question of
an. % reement or combination is reasonable or unreasonable would render the
J
t
t
e
r
T
v
' “ definite and uncertain, and hence to that extent
the" actnU*at*Fy*an a
Z 0UM Practically amount to a repeal of that part of
• . ud while the same technical objections do not annlv in pivil
P eaT ^
HUle °f reasonableness or unreasonableness would
eaa to me greatest variableness and uncertainty m the enforcement of the law Tbo
b“ made
t a e *wiuM
y ,uuierent rules ol reasonableness
as cases, courts, and iuries
* * To
amend the antitrust act, as suggested by this bill, would be to entirely emasculate if
and for all practical purposes render it nugatory as a remedial statute.
’
President 1 aft, in a special message to Congress January 7
T a L T X e n ? wouTd
S°
1910
the k w ' and said that ^
fmi int0,t.h(r hakds of the court a power impossible to exercise on any consistent min
ciple which will insure the uniformity of decision essential to good government Tt
is to thrust upon the court a burden that they have no precedents to enS le tlmm to
carry and to give them a power approaching the arbitrary, the abuse of wWcl n iVlU
involve our whole judicial system in disaster.
3
OI wmcn rm8nt
The Supreme Court in the Standard OU cases and American
tobacco case (1911), thereupon proceeded to emasculate it and
render it nugatory b y writing an opinion which in effect held that a
reason abk reetram t of trade was not unlawful after Congress had reI am going to read to you just one opinion from Judge Harlan on
this case, and then I am going to quit that. Listen to tfie o p im on o
fflB S tas “
"—
and Joint Traffic cases adjudged t S th eT t'o f ^ ^ ^ d i d ^ o t ^ o T r ^ ^ T o f
V
W B m
20
WITHDRAWING POWER TO DECLARE ACTS OP CONGRESS VOID.
interstate trade to any extent or in any form, and three times it expressly rejected the
theory, which had been persistently advanced, that the act should be construed as if
it had in it the word “ unreasonable” or “ undue,” but now the court in accordance
with what it denominates “ the rule of reason,” in effect inserts in the act the word
“ undue,” which means the same as “ unreasonable,” and thereby makes Congress
say what it did not say—what, as I think, it plainly did not intend to say, and what,
since the passage of the act, it has explicitly refused to say. It has steadily refused to
amend the act so as to tolerate a restraint of interstate commerce, even where such
restraint could be said to be “ reasonable” or “ due.” In short, the court, by judicial
legislation, in effect, amends an act of Congress relating to a subject over which that
department of the Government has exclusive cognizance. I beg to say that, in my
judgment, the majority in the former cases were guided by the “ rule of reason,” for,
it may be assumed, they knew quite as well as others what, the rule of reason required
when the court seeks to ascertain the will of Congress as expressed in a statute. It is
obvious, from the opinions in the former cases, that the majority did not grope about
in darkness, but in discharging the solemn duty put on them they stood out in the
full glare of the “ light of reason” and felt and said time and again that the court could
not, consistently with the Constitution, and would not, usurp the functions of Congress
by indulging in judicial legislation. They said in express words in the former cases,
in response to the earnest contentions of counsel, that to insert by construction the
word “ unreasonable” or “ undue” in the act of Congress would be judicial legisla
tion. Let me say, also, that as we all agree that the combination in question was
illegal under any construction of the antitrust act, there was not the slightest neces
sity to enter upon an extended argument to show that the act of Congress was to be
read as if it contained the word “ unreasonable” or “ undue.” All that is said in the
court’s opinion in support of that view is, I say with respect, obiter dicta, pure and
simple.
In respect to the decision on the income tax, Mr. Justice W hite, in
dissenting, said:
I consider that the result of the opinion of the court just announced is to overthrow
a long and consistent line of decisions, and to deny to the legislative department of
the Government the possession of a power conceded to it by the universal concensus
for 100 years, and which has been recognized by repeated adjudications of this court.
(157 U. S., 429.)
Mr. Justice Jackson of the Supreme Court, in his dissenting opinion
on the income tax decision, said:
Considered in all its bearings, this decision is, in my judgment, the most disastrous
blow ever struck at the constitutional power of Congress. (158 U. S., 705.)
Mr. Justice Brown, in his dissenting opinion, said:
I can not escape the conviction that the decision of the court in this great case is
fraught with immeasureable danger to the future of the country and that it approaches
the proportions of a national calamity. * * * I hope it may not prove the first
step toward the despotism of wealth. (158 U. S., 695.)
Mr. Justice Harlan said:
It so interprets constitutional provisions * * * as to give privileges and immu
nities never contemplated by the founders of the Government. * * * The
serious aspect of the present decision is that by a new interpretation of the Constitution
it so ties the hands of the legislative branch of the Government that without an amend
ment of that instrument or unless this court, at some future time, should return to the
old theory of the Constitution, Congress can not subject to taxation, however great
the needs or pressing the necessities of the Government, either the invested personal
property of the country, bonds, stocks, and investments of all kinds, etc. * * *
I can not assent to an interpretation of the Constitution that impairs and cripples the
just powers of the National Government in the essential matter of taxation and at the
same time discriminates against the greater part of the people of our country. (158
U. S., 695.)
Mr. Justice Harlan also said on another occasion:
When the American people come to the conclusion that the judiciary of this land
is usurping to itself thefunctions of the legislative department of the Government, and by
judicial construction is declaring what is the public policy of the Lnited States, we
will find trouble. Ninety millions of people—all sorts of people with all sorts of
1
W ITHDRAW ING POWER TO DECLARE ACTS OF CONGRESS VOID.
21
beliefs—are not going to submit to the usurpation by the judiciary of the functions
of other departments of the Government and the power on its part to declare what is
the public policy of the United States. (221 U. S. 1,106.)
Mr. Theodore Roosevelt, before the Colorado Legislature, pointed
out the grave danger in recent court decisions in defeating humane
laws, and stated:
If such decisions as these two indicated the court’s permanent attitude there
would be really grave cause for alarm, for such decisions, if consistently followed up,
would upset the whole system of popular government.
A nd he referred to such decisions as “ flagrant and direct contra
dictions to the spirit and needs of the tim e s ."
Senator Robert M. LaFollette, in his introduction to Gilbert E .
R oe’s work, “ Our judicial oligarchy," said:
Precedent and procedure have combined to make one law for the rich and another
for the poor. The regard of the courts for fossilized precedent, their absorption in
technicalities, their detachment from the vital, living facts of the present day, their
constant thinking on the side of the rich and powerful and privileged classes have
brought our courts into conflict with the democratic spirit and purposes of this genera
tion. Moreover, by usurping the power to declare laws unconstitutional, and by
presuming to read their own views into statutes without regard to the plain intention
of the legislators, they have become in reality the supreme law-making and lawgiving institution of our Government. They nave taken to themselves a power it
was never intended they should exercise; a power greater than that entrusted to the
courts of any other enlightened nation. And because this tremendous power has
been so generally exercised on the side of the wealthy and powerful few, the courts
have become, at last, the strongest bulwark of special privilege. They have come
to constitute what may indeed be termed a “ judicial oligarchy.”
Thomas Jefferson, in his letter to Mr. Jarvis, in 1820, rebuked him
for assuming that judges should have power over the legislature,
the judges being themselves beyond control except by the impossible
remedy of impeachment, and said :
You seem to consider * * * the judges as the ultimate arbiters of all constitu
tional questions; a very dangerous doctrine, indeed, and one that would place us
under the despotism of an oligarchy.
A number of books have recently been written upon this matter,
as “ Our judicial oligarchy," by Gilbert E . R oe; “ The judicial v e to ,"
by Davis; “ The m ajority rule and the judiciary,” by W illiam N .
Ransom, with an introduction by Theodore Roosevelt; “ The Spirit
of the American Constitution," by Prof. J. Allen Sm ith; all which
emphasize the need to correct the practise I have referred to.
I could quote you m any such opinions, but I must not take too much
of your time. I want to conclude what I have to say. I want to call
your attention to this: lh a t just as soon as the decision was rendered
in the Standard Oil case, declaring that “ reasonable" restraint of
trade was the meaning of Congress, and that Congress didn’ t make
criminal any act in reasonable restraint of trade, the Standard Oil Co.
stock went right up. The people were advised in the country that the
Standard Oil Co. was being dissolved. The papers announced that
the Standard Oil Co. of New Jersey had received a terrible blow by
this decision. The effect of that decision was the immediate rise in
the market price of the Standard Oil stock. I sent a telegram the
other day to John M oody, the great statistician and head of&M oody’s
Investors’ Service, and M oody sent me back a telegram that this
stock of the New Jersey Standard Oil Company and its subsidiaries
capitalized at one hundred million, and at the time of this decision
m 1911 worth$600 a share, or $600,000,000, was now worth on the
22
WITHDRAW ING POWER TO DECLARE ACTS OF CONGRESS VOID.
market (within a period of six years) $2,400 a share, or a gross
market value of $2,400,000,000. Do you get that ?
D on’ t make any mistake about what that means. I t will explain
something about the 40-cent oil at Healdton and at Cushing. Now,
m y fellow citizens, I only refer to that one company (there are very
m any others of like purport), and I want to say to you that I believe
it is a wise policy for the people of the United States to deal with
corporations, no matter how large they are, with the same exact jus
tice that they deal with the smallest citizen; but, at the same time, it
is essential that we should protect the small citizen against the unfair
exactions of predatory power. I have no prejudices against great
organizations, but am proud of their accomplishments in America.
All I want to see is that they do not use their great power tyrannically.
The gain on this stock in six years is $1,800,000,000. It is not
all due to this decision; it is due to other factors, in part. But in m y
opinion a large part of this increase is due to that decision of the
Supreme Court m nullifying and emasculating the antitrust law
passed b y Congress.
JUDGE STUARTiS REPLY.
W e all saw in the paper a short time ago where a man in Chicago,
by getting a m onopoly on eggs in cold storage cleaned up a million
dollars. H e was only doing on a small scale what the big boys are
doing on a large scale; that is all.
Do you object to paying 60 cents a dozen to speculators for eggs?
T hat is a very small thing. Judge Stuart seems to think you ought
not to object to paying 60 cents a dozen for eggs. Judge Stuart
regards it as a joke. H is answer to me before the legislature, when
I pointed out this invasion of the legislative powers o f the people by
this decision of the Supreme Court and the result of their decision in
the Standard Oil case— his answer to me was that, “ something had
been said about the Standard Oil Co. case” ; he didn’t say what—
and that the high price of eggs was attributed to the decision in the
Standard Oil case.
If the people of this State wish to regard the high cost of living as
a piece of humor they will know where to go and get their advice.
Now I observe in this argument of Judge Stuart to what I said
he answers not a word about the power o f Congress— no answer to
th at; no adequate answer to the importance of letting the people
know what the law is; no answer to the need of having in Congress
a responsible forum for the settlement of internal disputes.
After we got the Sherman antitrust law it was on the statute
book 21 years before the Supreme Court emasculated it. W hen a
law is passed now you do not know whether it is the law or not.
W e have passed this eight-hour law, and the gentlemen who control
the railway property o f the country promptly announced that they
would pay no attention to it at all until it was decided constitutional
by the Supreme Court of the United States.
W ell, I intend to introduce another act of the same kind and attach
to it a condition that the question of its constitutionality shall not
go to the Supreme Court. [Loud and continued applause.]
W hen men become so large that they feel they can openly defy
the lawmaking power of the people of this country, I tell you the
time has come to withdraw from the Supreme Court this refuge
upon which such gentlemen rely.
WITHDRAWING POWER TO DECLARE ACTS OF CONGRESS VOID.
23
M y friend, Judge Stuart, tries to prejudice the jury. H e talks
with pathos about that great and honored southern statesman,
.Robert E . Leo, whom we adore, and the confiscation of his home
stead. It is a red herring drawn across the trail.
The fact is the confiscation acts were declared constitutional by the
Supreme Court. And the fact is that it was not Robert E . Lee, it
was George Washington Custis Lee, the president of m y old college
whom I knew well, who brought an action (and the Supreme Court
upheld him in his right) to recover a fair money value for the property
taken for a burial ground for the soldiers and sailors of the United
States.
1 merely mention that because the judge so emphasized the great
accuracy that he should observe, and I think it worth while to call
your attention to the facts, as they seem to be.
In the case of the Oklahoma State capital, Congress passed the
enabling act fixing the capital at Guthrie for a certain length of time,
due to the activity of certain distinguished citizens who lived up there,
I suppose. The State of Oklahoma accepted that act with that
clause m it, and, then, not feeling bound by it, they exercised their
IU
tcV°h a referendum vote, and voted to bring the capital
to Oklahoma City. They were within their rights, and the Supreme
ourt, when the matter went up to them, very properly said so, and
f / - ° not doubt m the least that Congress would have said the same
•
i u
1”Tef ],lad had an opportunity to pass on it after the vote
in Oklahoma if the citizens here desired that that should be done
So much for that “ appeal to the ju ry.”
[Applause.l
It, shows the poverty of Judge Stuart’s argument when he is driven
to use arguments of that kind.
I lien the next question the Judge raised was that the only thing
which protects our daughters from being obliged to sit down, side
a sn° gr0 m f he theater and at the
table was the
ao ion of the Supreme Court of the United States. [Laughter.]
W ell, I don t know about that, I think not, I know better.
manhood
^ Ssouth,
o u th °"Tlfie
b e dsovereignty
^
" hil? P
o{ the ”South
was the1
mannooci o
otfth
tlie
ofr0|?le
the people
rAnnhiu^
Make no mistake about that. M y people were Sieve
PP
]
I he civil-rights case was one single example, where political oreiu
dice went too far, but those cases didn’ t arise in the
thevarose
m Kansas, California, and New York if I
n^V rn l
i J
S
border States of Missouri and Tennessee. A nd I think the Supreme
Court was quite right m declaring it unconstitutional and the
Supreme Court in doing so respected the will of the white race of the
ISorth and W est, as well as of the South. That is about the only thingI now recall they have done in the wav of d e c l a r i n o - : ,
lg
conslitutiunnl that I really fully approve of. The Supreme Court has
had a splendid and honorable career. I am proud of that great court
but when you go back through these cases, notably the W d Scott
case, the legal-tender cases, the incom e-tax cases the Standard nil
case the American Tobacco case, in all of S
e ^ e s where t h w
decided against Congress, there followed the most harmful cons,”
quences to the people of this country. The whole tr,,„l,n . ; 1 U ”
can’ t get at the Supreme Court if it"m ak es a mistake but if yr ° "
Thompson, Member of Congress from this district m £
a mistake
or if Robert L .O w en , your Senator, makes a mistake y o u T a n get
at them quickly, and that is the vast difference, that is ”the exeefd
South;
24
WITHDRAW ING POWER TO DECLARE ACTS OF CONGRESS VOID.
ingly important difference, if you wish to maintain democratic
popular government.
. . ,
Taking this power from the Supreme Court will not dimmish its
docket or its dignity. They have a docket now of 700 cases, and
they can not read the full record of those cases in a single term; they
have more now to do than they ought to be required to do.
They
ought, themselves, to ask Congress to limit the character of cases
that come before them, both for their own sake and for the sake of
litigants. I have talked to some of the judges about this need and
they would welcome some relief, I am sure.
I do not believe the honorable justices on this court want to retain
this responsibility which they now believe rests on them by law and
certainly it will be better for the -country to w ithhold it.
I t will improve the dignity and high standing of the Supreme
Court; it wilt improve the standing of the Supreme Court with the
people of the United States; the people will have more confidence m
that great court if the court is not put in the painful position of bemg
put in conflict with Congress to the injury of the dignity of the court.
Now, m y fellow citizens, the question merely comes down to this:
W h y do the people of this country, in sending its lawmaking agents
to Washington, make them responsible to the people at home ( E vi
dently so the people can correct the errors of Congress if the Congress
errs. The crucial question is, D o you wrant Congress able to give
relief to the country and be responsible to you, or do you w^ant Con
gress to pass laws and have them declared void by a power over w hich
you can exercise no control ?
V oices . N o, no.
A V oice . Take a vote.
A V oice . Y e s ; take a vote.
A V oice . L et’s have a vote.
Senator O w e n . N ow , wait a minute.
.
If wre are going to vote, let s
Those wLo are in favor of the proposition
have a fair vote on it.
please arise.
St e n o g r a p h e r ’ s n o t e .— Out of an audience calculated by those who are supposed
to know at 1,250, practically the entire assembly rose to their feet.
Those opposed will now please rise.
St e n o g r a p h e r ’ s
n o t e .— Ten,
by count, rose.
Ladies and gentlemen, these questions are before the American
people. They ought to be discussed in good nature, in a friendly
spirit, and we ought not to enter into the discussion of the question in
an unkind w^ay, much less to speak unkindly of our great and honored
Supreme Court.
.
. . . A.
, .,
I believe the time has come when the legislative powers ol the
people ought to be exercised free from interruption so that the people
can understand wTiat the legislature means and then let the legr*iature be responsible to the people of this country. L et us know what
the law means the moment it is passed. Let the Department of
Justice be able to tell our business men immediately (when they ask)
what the law is, and not be left to say: The department can not say
until some test case is settled a fewT years hence by the Supreme
Court.
I thank you for your courteous attention. [Applause.]
o
JU S T IF IC A T IO N OF THE W A R W ITH THE IM P E R IA L
GOVERNMENT
OF
GERM ANY
BY
THE
UNITED
STATES.
SP E E CH
OF
HON.
ROBERT
OF
L. O WE N ,
OK L A H OMA,
I n t h e S e n a t e of t iie U n ited S ta te s ,
Monday, April 16, 1911.
JU S T IF IC A T IO N OF T H E W A R W I T H
T H E IM P E R IA L G OVERN M EN T OF
G E R M A N Y B Y T H E U N ITE D ST A TE S.
Mr. OWEN. Mr. President, a few days since I received a let
ter from a well-known lawyer in Oklahoma advising me that
many of the people in his neighborhood were opposed to war
with Germany, and saw no reason for it, and asking me, gravely,
what justification 1 could offer for it. It is clear from my
correspondence that seme of our citizens do not fully under
stand some of the most important facts which justified the
United States in accepting the repeated challenge to war by the
Imperial German Government. Some of our people seem
moved by ti e obvious truth that war is deplorable and to believe
we ought not to engage in this war.
Mr. President, certainly war is deplorable, but abject cowardly
submission to tyranny, to persistent wrong, to brute force, is
more deplorable— it is despicable. America is incapable of such
submission.
Submission to the brute force of Germany by France, by
Russia, or by England in the last two years would probably
have ended the democracies of the w orld; would have put the
United States in the most deadly peril; and for us to submit
to her brute force now would put both our present and our
future in jeopardy.
I rejoice that the President of the United States has pointed
out the danger to the world and to the civilization of the world
of the triumph of the Imperial Government of Germany in this
European conflict. I rejoice that on entering this conflict the
mighty powers of this great Republic will be used alone in de
fending and preserving liberty; not in a spirit of malice or
hatred of the German people, but against the house of Hohenzollern; to assist in taking from the hands of William II the
power to further brutalize the great German people who have
infinitely deserved a better fate.
I have always admired the German people. I have admired
their sturdy common sense, their industry, their virtues
and their home-loving qualities. I have admired their intellec
tual attainments, their internal democratic development their
92727— 17258
progress in the sciences, in the arts. I have loved their music
and enjoyed their poetry and their literature. Notwithstanding
their confessed good qualities, their natural peace-loving quali
ties, the actual governmental control of the German people has
since 1870 been under the directing hand of the Prussian mili
tary machine, that subordinates every other interest of state
craft— agriculture, factories, commerce, school, church, home—
to military power and to the aggrandizement of the house of
Hohenzollern and of the smaller allied German kings and
princes.
The Prussian King, ex officio Emperor, claims to rule by
“ divine right,” without the consent of the German people, and
he does rule them without their consent.
Any citizen who criticizes the Government, the Emperor, or
the King of Prussia is guilty of a crime, lese majeste, subject
to instant imprisonment. The citizen is a subject; he is not
free.
The press is not free, and the educational system, from kinder
garten, gymnasium, and high school to university, is controlled
by the dominant power of the Kaiser, and the people have been
taught systematically and thoroughly that obedience is the first
duty of a subject of the Kaiser and that the doctrine of the
military powers is right; and, unhappily, the doctrine of the
military powers of Germany is that might makes right; that
military necessity is not bound by treaty, by moral law, or by
any other law ; that terrorism or frightfulness is a lawful
weapon in the hands of the military machine; that when a sol
dier makes himself terrible by wholesale slaughter and destruc
tion, regardless of the laws of humanity, he shortens the war by
intimidating those who would oppose.
Thus it is that the German people have been led to their doom
by this ungodly, vicious military machine; thus it is that they
have alienated the sympathy of the whole world, and those
Americans who have loved the German people see no way to
protect the world or to protect the German people except by
overthrowing Prussian militarism, overthrowing the Hohenzollerns.
While the people of Germany are by nature democratic and
peace loving; nevertheless, their order, obedience, industry,
their very virtues, their efficiency, as subjects of the Kaiser,
have been made an instrumentality in the hands of the military
machine which threatens the peace of the whole world, which
threatens our peace, and has waged war on us in spite of every
effort on our part to prevent it.
Mr. President, while Bismarck made many concessions to the
development of local democracy in Germany and developed a
great democratic efficiency in Germany as a concession to the
constantly increasing intelligence of the German people; as a
concession to the constantly increasing demand for democracy
in Germany, nevertheless in framing the German Empire he
and the Hohenzollerns so framed it as to put that Empire under
the practical domination of the Kingdom of Prussia, whose
King claimed to govern mankind by the “ divine right ” and in
partnership with Almighty God Himself, a doctrine descended
from Frederick II, sometimes called “ the Great.” but who did
not believe in God at all in the affairs of men except i.n so far
as the affectation of that belief served his selfish ambitions.
92727— 17238
3
The control of the German Empire by Prussia and the control
of Prussia by the house of Hohenzollern left William the Sec
ond the master of the army and navy, of the war machine, with
the power to declare war. The consent of the subordinate Bundesratli, composed of appointees of the Kings and princes of
Germany was not necessary. He and his military captains have
been moved by the principle o f the Hohenzollern family, ambi
tion, first, last, and all the time; ambition, wrapped in the
cloak of pure patriotism, parading as Germany, as the fatherland ; but always beneath has been the determined purpose to
aggrandize the house of Hohenzollern and the army. Hence
arose the military slogan “ Deutschland Uber Alles,” which
being interpreted meant “ The house of Hohenzollern and the
military autocracy— Uber Alles.” Hence the greatly exploited
notion of “ Weltmacht,” which meant power over the world by
the Hohenzollerns and their military autocracy. Hence that
mysterious toast “ Her Tag.” which meant t h e day when the
house of Hohenzollern and the military autocracy would rule
all mankind, the day when autocratic military power would rule
mankind under the blasphemous claim of “ divine right,” and
should impose its will over the liberties of the civilized and
uncivilized nations of the world through brute force and terror
ism or “ schrecklichkeft.” The world is compelled to teach the
Kaiset and his subject soldiers the follv of trying to terrorize
the world.
In some things this Government may well profit by the glorious
example of the German Government. They have magnificently
developed vocational industrial education, have established in
numerable cooperative democratic societies, State insurance
against old age, accidents, and so forth, and have thoroughly
cared for the unemployed man and made him self-supporting,
and have wonderfully developed municipal ownership, and so
forth. Organized industrial democracy has been made the help
less tool of political military autocracy, and the Germans in
large measure seem not to see this.
In August, 1914, when the ambitious Hohenzollerns had art
fully contrived to prepare their war machine with an overwhelm
ing supply of cannon, powder, shells, machine guns, rifles trans
portation material, and all the accouterments of war • when thev
found France inadequately protected, Bussra without war sup
plies England with no army, Luxemburg and Belgium incapable
of defense, they threw suddenly this desolating war machine of
terrorism like an avalanche on the fair fields of Luxemburg
Belgium, and France, intending to seize Paris, fore* a treaty
with France, impose a giant indemnity, as It did it 1870 then
dominate Russia, and establish throughout the world
Der
Tag,” “ Weltmacht,” “ Deutschland iiber alles,” and establish the
house of Hohenzollern as the military autocratic rulers of man
kind in the sweeping destruction of the liberties of the world *
The Hohenzollerns under Frederick William of Brandenburg
and Prussia, under Frederick the Second and his successors have
always followed the doctrine that—•
Might makes right.
They have always despised the American doctrine of Abraham
Lincoln, who had “ the faith to believe that right would make
92727— 17258
A,
I
4
The Hoheuzollerns always believed in the doctrine of absolute
monarchy as against limited monarchy or democracy in any
form. Under them Prussia has been an armed camp, an army
for over a hundred and fifty years, glorifying war and military
power and for 50 years keeping Europe in a state of constant
suspense and apprehension of the blow which all Europe fea red
but believed would some time surely fall. The Holienzollerns
believed in the false monarchial doctrines of the Bourbons,
whose principles you will find cast in bronze on the cannon we
took from Spain in 1898, now mounted at the north end of the
War Department in Washington City.
On the mouth of one of these cannon, called de Mareschal Ee
Due de Humieres, you will find these words—
“ Le passe par tous ”—•
The passway through everything. That is, the cannon’s mouth
is the passway through broken treaties, through the boundaries
of undefended neighbors, through justice and righteousness,
through industry and honor— the pathway to the so-called
“ glory ” of kings and the ruin of peoples. On the base of that
cannon you will find the words—
■*Nec pluribus impar ”—
Not unequal to many. That is, the cannon is not unequal to
many people— to very many people. It can slay people; it can
dominate people; it can tax millions without the consent of the
people. This is the doctrine of autocracy against democracy.
On the body of that Bourbon cannon you will find the phrase
“ Ultima ratio regum ” —
The final argument of kings. When the people argue for
self-government, when the people argue that justice is justice,
that right is right, that their conscience is the whispering of the
spirit of God, then the people hear the final argument of kings,
the final argument of the Hohenzollerns and of military autoc
racy— the cannon's roar— who would teach the world the per
nicious doctrine that might makes right.
These are the real principles of military autocracy when moved
by the royal family pride; by cold selfish ambition, playing upon
the prejudices, the weaknesses, the ignorances of mankind. Yes;
playing upon the most sacred sentiments of mankind; playing
even upon the trust of mankind in the Divine Spirit. These
vicious military autocratic forces which are now assailing the
liberties of mankind under the grossly false pretence of protect
ing the German people against their supposed enemies are the
same in spirit that established the “ Holy Alliance ” signed by
“ Alexander the First,” Emperor of Russia, of the Romanoff
fam ily; by Francis the First, Emperor of Austria, of the Hapsburgs; by Frederick William the Third, King of Prussia, of the
Hohenzollerns, in 1815, in which they pledged themselves—
“ to take for their sole guide the precepts of that holy religion
(the Savior taught), namely, the precepts of justice, Christian
charity, peace ” ;
Pledged themselves—
“ by unalterable good will, the mutual affection with which
they ought to be animated; to consider themselves ali as mem
bers of one and the same Christian nation; the three allied
Princes looking on themselves as merely delegated by Providence
92727— 17258
o
to govern tliree branches of the one family, namely, Austria.
Prussia, and Russia, thus confessing that the Christian world,
of which they and their people form a part, lias in reality no
other sovereign than Him to whom alone power realty belongs,
because in Him alone are found all the treasures of love, science,
and infinite wisdom— that is to say, God, our Divine Saviour, the
Word of the Most Pligh, the Word of Life.”
The Holy Alliance had for its sinister, deceitful purpose the
misleading of the people of these great countries, through the
piety and good will of the people,-into the belief that their lead
ership was actually moved by these high holy sentiments.
The history of Europe demonstrated that they were moved by
nothing of the kind but alone by their own selfish ambitions,
and that they made this pretended treaty for the purpose merely
of establishing themselves in the confidence of their people and
of neighboring religious peoples, while in reality they were con
stantly engaged in enriching themselves and their court favorites
and their own families at the expense of the people, and never
hesitated to sacrifice the poor people, their subjects, their quasi
slaves, on the field of battle or in exile in order to further the
family interests of the Romanoffs, the Hapsburgs, and the Hohenzollerns. It was an autocratic military combination intended
to promote the selfish interests of these families by military
force and to enable them in concert to prevent the people of
Russia, Prussia, and Austria making any headway in self-gov
ernment, and to prevent the self-government of men making
progress in any other part of the world. This blasphemous
combination— I say blasphemous, because they pretended to
have a charter from the Throne of Grace and to govern by D i
vine right under the special sanction ofdhe Almighty, when they
well knew the corruption of their own courts and of their own
selfishness—amended this self-serving declaration of 1815 of
their own “ holiness ” by adding several articles to this treaty
of peculiar interest to all democracies.
In 1822 the “ Holy Alliance ” added certain articles known
as the Secret Treaty of Verona, as follows:
“ A rticle 1. The high contracting powers being convinced that
the system of representative government is equally as incom
patible with the monarchial principles as the maxim of the
sovereignty of the people with the divine right, engage mutually,
in the most solemn manner, to use all their efforts to put an end
to the system of representative governments, in whatever conntry it may exist in Europe, and to prevent its being introduced
in those countries where it is not yet known.
“ A rt 2. As it can not be doubted that the liberty of the press
is the most powerful means used by the pretended supporters of
the rights of nations to the detriment of those of princes, the
high contracting parties promise reciprocally to adopt all proper
measures to suppress it, not only in their own States, but also in
the rest of Europe.”
Here we find the Hohenzollerns and the Hapsburgs, who still
dominate Germany and Austria, making a solemn covenant with
the Romanoffs of Russia and with the Bourbons, through King
Louis X VIII, of France, whom they had placed upon the French
throne, and solemnly engaging in—
A deliberately prepared and deadly compact to destroy all the
democracies of tlie world;
92727— 17258
To stamp out the liberty o f the press in all Europe, even out
side their own dominions; and thus—
To keep all mankind in ignorance, in order that they and
their families,- who were constantly intermarrying with other
like families, might continue to dominate mankind by military
force.
This blasphemous “ Holy Alliance ” by this very treaty fur
nished 20,000,000 francs annually to Louis X VIII to wage war
on the limited monarchy of Spain, which the people of Spain
had by painful revolution established and to reestablish an
absolute monarchy in Spain under the same prince, in order to
discourage and break down any right whatever of the people of
Spain to govern themselves. They did not hesitate to cause the
murder of the people of Spain to carry out their “ Holy ” Chris
tian purposes.
This blasphemous “ Holy Alliance ” then sent an Austrian
army into Italy and accomplished the same identical purpose,
murdering the Italian people for the same “ Holy ” Christian
reasons. This wicked “ Holy Alliance ” then proposed sending
other armies and navies to North and South America for the
purpose, as they said, of “ reducing the revolting colonies of
Spain and Portugal on the Western Hemisphere ” and thus
strangling all representative governments at their birth
throughout North and South America. What they really meant
was that they intended to send an army into Brazil to destroy
a republic in Brazil, to send an army into the Argentine, into
Chile, into Colombia, into Peru, into Venezuela, into the Central
American States, and into Mexico, to suppress the freedom of
the people, to prevent their governing themselves, to put them
again under an absolute monarchy, so that the monarchial
principle should govern all mankind, and democracy never
should be permitted to establish its foot upon the entire earth.
That was their purpose.
Canning, of Great Britain, notified this detestable conspiracy,
knowm as the “ Holy Alliance,” that Great Britain would
oppose such an assault on the former colonies of Spain and
Portugal, for Great Britain, though a limited monarchy, was
arleady a great representative government, loving liberty and
justice.
President Monroe, advised of this conspiracy of the houses o f
Hohenzollern and of Hapsburg to invade the liberties of North
and South America, sent his message to Congress in December,
1823, in which he made the following statement of principles
known as the “ Monroe doctrine.”
He said :
“ It is impossible that the allied powers should extend their
political system to any portion of either continent without
endangering our peace and happiness; nor can anyone believe
that our southern brethren, if left to themselves, would adopt
it of their own accord. It is equally impossible, therefore, that
we should behold such interposition in any form with indif
ference.”
*
He said :
“ With the existing colonies or dependencies of any European
power we have not interfered and shall not interfere. But with
the Governments who have declared their independence anil
maintained it -Mid whose independence we have, on great con92727— 17258
7
sideration and on .just principles, acknowledged, we could not
view any interposition for the purpose of oppressing them or
controlling in any other manner their destiny by any European
power in any other light than as the manifestation of an un
friendly disposition toward the United States.”
This firm stand taken by Great Britain and the United States
prevented representative government and the democracies of
the Western Hemisphere from being destroyed by the unlimited
rapacity and cold-blooded ambition of the Hohenzollerns, the
Hapsburg, and their “ holy ” associates.
Mr. President, this same group attempted to set up a monar
ch a l government in Mexico, when the United States was em
barrassed and in the throes of the Civil War, by sending Mexico
an emperor—Maximilian, an Austrian gentleman of the Haps
burg family—who quickly had some unhappy dealings with the
democracies of the Western Hemisphere. Let him repose in
peace. The action of the United States overthrew Maximilian
and ended an overt act of the Hapsburgs against our national
peace.
Mr. President, those who have observed the development of
‘■h® £reat war machine in Germany as an instrumentality by
which the Hohenzollerns might dominate mankind will see quite
clearly the attitude of the military autocracy set forth in the
book, Germany and the Next War, by its' mouthpiece, Gen
von Bernhardi, October, 1911. Von Bernhardi is fairly a
spokesman of the military autocracy of Germany. He glorified
war. He insisted in that volume— and it was sent all over this
country, by hundreds of thousands— that the German people
n,mst ,)e awakened and compelled to show their military
strength. He praised to the skies the great elector. Frederick
vvniiam of Brandenburg, the first important member of rhe
House of Hohenzollern. Listen to Von Bernhardi praising this
wonderful Prussian general, ruling by divine right a population
o two and a quarter millions, with a hundred thousand armed
men trained to the last degree of efficiency and better supplied
with munitions of war than any other army in Europe. Listen
to Ins praise of the great elector:
“ Tlie great elector laid the foundations of Prussia’s power bv
successful and deliberately incurred wars. Frederick the Great
followed the example of his glorious ancestors. He noticed how
Ins State occupied an untenable middle position between the
petty States and the great powers, and showed his determina
tion to give a definite character ( decider cet etre) to his anom
alous existence; it had become essential to enlarge the territory
of the State and corriger la figure de la Prusse if Prussia
wished to be independent and to bear with honor the great name
of k in g d o m . The King made allowance for this political neees
sity and took the bold determination of challenging Austria to
fight. None of the wars which he fought had been*forced upon
him; none of them did he postpone as long as possible He hal
alvxiys determined to be the aggressor:’
Fredeiick II followed him, idealizing war, waging war on
defenseless people, as when he first took his place as King of
Prussia he violated the treaty with Maria Theresa of Austria
broke faith, treated the treaty as a scrap of paper threw 50 000
highly trained, seasoned, skilled soldiers upon Silesia, undefended
«
92727— 1 i 2o8
because relying upon his good faith, and he kept all Europe in
turmoil for years and years and years, and at that time " aged
seven years of continuous warfare.
.
It might be said that his opponents in France and in Austria
were no better than he, as far as keeping faith was concerned,
because the house of Bourbon and the house of Hapsburg occu
pied the French and the Austrian thrones, and were represented
bv those who were just as deceitful as was Frederick himself.
' Frederick the Great is now the ideal of the Prussian military
autocracy. Onlv a year or two ago the United States was pre
sented with a statue of Frederick the Great, and it is standing
down before our War College now. My own opinion is that the
statue of Frederick the Great ought to be gently and dim tly
removed from its spot and dropped in some quiet place in the
Potomac River where it will no longer serve to give dignitj and
honor to this cruel and unscrupulous prince.
The Imperial German Government presented us with its meal
in the statue of Frederick, the embodiment p f war and rapacity
and broken treaties.
...
, „
France presented us with the French ideal. Bartholdi s won
derful c o n c e p t i o n , standing guarding the entrance to our greatest
port—New York—where all the world may see ‘ Liberty en- lightening the world.”
God bless France and speed her prophecy.
Once too often the Hohenzollerns have been the aggressors of
the world’s peace, and now this world-wrecking spirit will be
terminated forever by the indignant power of the whole world
In that respect I am rejoiced to see Brazil following l ie Lnited
States - first o f all, little Cuba declaring war on Germany, and
following her father, the United States, who gave her peace and
cove her liberty against a prince of the Hapsburg family. Heie
comes B razil; the Argentine will follow; Paraguay. Uruguay.
Peru Bolivia, and tlie Central American States may he expected
to follow ; and I expect to see even Mexico show her sympathy
with the democracies of the world, and with this great struggle
t0 put down forever the irresponsible ambitions leading nrmeu
military forces that have no conception of human liberty, whose
one idea is obedience and to rule the world by military efficiency
and by te rrorism.
,. .
.
Mr. President, I rejoice to believe that this war which we shall
now wage with all the resources of 100,000,000 people; with all
the financial power of the richest Nation on the globe; with all
the vast equipment of material, of factories, of American 1 m en
tions on the Imperial Government of Germany, will reneei the
most gigantic service to the German people which it is; possible
for one people to render to another in delivering them from the
military tyranny and the political control of the Hohenzollerns
and their military clique, who have taxed and driven the Geunan
people beyond all human endurance; who have kept all t be na
tions of Europe trembling under the load of universal imr.taij
preparation for 50 years. It was Germany that preventer dis
armament a few years ago at The Hague. Even Nicholas li
proposed it, and Germany, of all the nations, prevented it.
This German military autocracy have finally driven the people
of Germany te overwhelming slaughter on the battle holds <>t
Europe, and have compelled the liberty-loving, God-tearing
democracies o f the whole world, in defense of liberty am.
92727— 1725S
9
righteousness, to turn their guns on the unhappy Germans led
to the shambles by the heartless ambitions of the Hapsburgs and
Hohenzollerns.
No man who has studied the history of recent Europe ques
tions for a moment the bloodguiltiness of the Hapsburgs, who
in avenging the wicked assassination of the Crown Prince of
Austria-Hungary imposed 10 demands on Serbia, to everyone
o f which Serbia submitted save the relinquishment of her sov
ereignty and the violation of her constitution. (See chap. 4,
Obstacles of Peace, by S. S. McClure.)
The gist of the Austrian demands, of which there were 10,
was as follow s:
“ 1. Serbia shall suppress all anti-Austrian publications.
“ 2. Dissolve the Narodna Odbrana and all similar societies,
confiscate their funds, and prevent . heir re-forming.
“ 3. Remove from public education in Serbia all teachers and
teaching that are anti-Austrian.
“ 4. Remove from military and civil service all officers and
officials guilty of anti-Austrian propaganda; Austria will name
the persons.
“ 5. Accept collaboration of Austrian representatives in the
suppression of anti-Austrian propaganda.
“ 0. Take judicial proceedings against accessories to the plot
against the archduke; Austrian delegates will take part in the
investigations.
“ 7. Arrest Maj. Voija Tankositch and the individual named
Milan Ciganovitch.
“ 8. Prevent and punish the illegal traffic in arms and ex
plosives.
“ 9- Send to Austria explanations of all unjustifiable utter
ances of high Serbian officials at home and abroad.
“ 10. Notify without delay that the above measures are exe
cuted. Reply before G p. m. on Saturday. July 25.”
The answers to the 10 points may be summarized thus:
“ 1. Yes; will suppress all anti-Austrian publications.
”
Y es; will suppress the Narodna Odbrana and similar so
cieties.
“ 3. Yes; will expel all anti-Austrian teachers and teaching as
soon as evidence is given.
” 4. Yes; will expel all anti-Austrian officers and officials, if
Austria will furnish names and acts of guilty persons.
"5 . Yes; will accept collaboration of Austrian representa
tives in these proceedings, as far as consonant with principles
of international law and criminal procedure and neighborly
relations.
“ 6. Yes; will take the judicial proceedings; will also keep
Austria informed; but can not admit the participation of Aus
trians in the judicial investigations, as this would be a violation
of the constitution.
“ 7. Y es; have arrested Tankositch; ordered arrest of Ciga
novitch.
<‘ 8. Yes; WSIl suppress and punish traffic in arms and ex
plosives.
“ 9. Yes; will deal with the said high officials, if Austria will
supply evidence.
“ 10. Yes will notify without delay.
“ If this answer not satisfactory, Serbia will abide by decision
o f The Hague Tribunal.”
92727— 17258
Everybody felt that the Hapsburg note did not seek or con
template honorable adjustment, but arbitrarily imposed impos
sible conditions and really meant war, as indeed it did. for in
48 hours Serbia was actually invaded.
The record shows that every possible effort was made by the
authorities of England, through Lord Grey, by the authorities
of France and of Russia, to reach an adjustment, and that it
was the refusal of the German Emperor to cooperate with Lord
Grey which led to the failure to avert the war on Serbia by
Austria, which was instantly followed by the German Emperor
issuing an order to mobilize and then declaring war on Russia
and on France and the sudden and violent invasion of Belgium,
Luxemburg, and France, and Russia; and the German and
Austrian Emperors and their armies were prepared. Luxem
burg was not prepared. Belgium was not prepared. France
was not prepared. Great Britain had no army. Russia had no
materials of war, had no factories, no adequate means of wag
ing war. The fact that all the invaded countries were unpre
pared, and that the German Army had reached the highest point
of its efficiency and preparedness, is the damning answer of all
history to the shameless contention of the German leaders that
they did not bring on this war, but that it was thrust on them.
Let us thank God Himself that they have the decency to pay
tribute to the love of justice and righteousness in the hearts of
mankind by pretending, at least, that they are not responsible
for this gigantic cataclysm in which all mankind is involved and
the blood of all nations is being shed.
Here is a case where the house of Hapsburg and its military
bureau, regardless of the Parliament of Austria-Hungary, re
gardless of public opinion of the people of Austria-Hungary,
took a step to precipitate war on Servia on a few hours’ notice,
knowing it threatened a general European war, which, indeed,
instantly followed.
Here is an example of where the house of Hohenzollern and
its military bureau refused to cooperate in reaching an adjust
ment of the threatened war of Austria against Servia, which
the leading powers of Europe earnestly endeavored to avoid in
the hope of avoiding a general European war.
“ AC T IO N S S P E A K LOUDER T H A N W O R D S.”
The German and Austrian Imperial Governments stand for
ever condemned by the judgment and conscience of mankind.
And then Germany, violating her plighted faith to Luxem
bourg for protection of neutrality, swept with violence the
treaties aside, treated them as “ scraps of paper,” and drove her
soldiers through Luxembourg in violation of the law of nations
and of good faith. The same thing is true of Belgium. The
German Government violated its faith to the nations of all the
world. I have always regretted that the United States did not
on that instant raise a strong protest against this violation of
international law, although under the treaties and under the
understandings of The Hague we were not called upon or ex
pected to do it.
It will be remembered that it was the ambition of the house
of Hohenzollern which led to the war between Prussia and
France in 1870. The Hohenzcllerns nominated a hereditary
Hohenzollern prince to be King of Spain.
92727— 17258
11
They wanted to be on both sides of France for “ friendly ”
purposes, so that they could embrace France conveniently when
the time was opportune. France naturally objected, and because
of the excitement which it created in France the foreign office
of France indicated to the King of Prussia, William I, that
they would like to have an assurance that the French peace
would not in the future be threatened in that way by the nomi
nation of a Hohenzollern prince to take the Spanish crown
They had a right to ask that. Bismarck, the head of the mili
tary machine, the adviser of William I, changed the dis
patch sent from the court of William I to Paris in such a
way as to leave the impression of an insult to France, and
m that way, by artfully playing upon the passions of the
french King and upon his pride he was led to take the initial
step It is exactly as though a trained duelist would step on
the foot of an innocent man and then, when the innocent man
resented it shoot him on the spot. That was the act of Bismaiek. The French at that time were utterly unprepared*
there was no order; there was perfect confusion. The Prus
sian military machine, in good working order, under Yon Moltke
up to the last ounce of working efficiency, pounced upon France
liesieged I aris, starved the people of Paris to utter exhaustion
and surrender, and imposed an indemnity of 5,000,000 000
francs on the French people, and then, through the prestige
gained by overwhelming unprepared France in that way and
through this gigantic fund, established the German Empire
v.tli the hereditary absolute King of Prussia as the " E l i
Emperor of the German Empire. That is what occurred
Ihe Hohenzollerns have been active in putting princes of
I n r Z Z .,lern f 1? 0* on the thrones of adjacent kingdoms? as
Gieece. and just as they proposed to do recently in estab
lishing a kingdom o f Poland.
J aVe real
bef npurpose.
ahning t0 get contro1 of the whole world
That is their
Just as in recent times the peace of Europe has been overo f X d e r f f i k 'th ^ C r e ^ F ™ * and the HaPsburgs, so in the days
II- i h l r t
G,l ?at Eur°Pe was kept in a turmoil bv Fred
erick the Great and Ins military bureau
“ AnoeMach?a1ef”F^ L C,kLS lgn, af ter writing his famous book
Anti Machiavel, in which he denounced the dishonest doctnnes of statecraft of Machiavelli, was to practice the craft of
Machiavelli and violate the treaty of Prussia with^^Austria bv
invading and secretly entering the unarmed Province of Silesia
with a large army. During the co n g e st „ f Si S
Fr«lerich
made a treaty witii France, which lie secretly iKtraved h ? 2
mg an authorised agreement to Austria! and wMch w a s a
cepted by Austria, in contravention with his oblicntinn* t,,
France Frederick then, having by this ruse ob ta in ^ Uie evacu
ation of Silesia by Austria, promptly denied having authorized
the agreement which Austria had accepted and by which he ob^
tamed the retirement of the Austrian troops
D
The house of Hohenzollern should not be’ regarded merclv
a dynasty; it is a dynasty interwoven with
gigantic mUitaS
machine under the domination of the King of PrussiV who g
a
Of t h f ^ r n ravfy Gern" ' " r a" J - t i v e gco°LPS r a’,oWS , 5
02727— 17258
12
Germany is governed substantially by the military powers,
who may illtreat the German subject with perfect impunity.
The German youth and the German citizen are taught from
their childhood to regard their obligations to the army and
the Kaiser as the first duty of good citizenship, and the ideals
of the army have been in this way grafted in a large measure
into public opinion of the German people, who have been led
to believe that loyalty to Germany and ,the German people and
loyalty to the Kaiser and his war machine are identical.
'When William, therefore, under the pressure of his war ma
chine, gave the order of mobilization, the citizens of Germany
had no alternative except death but to seize their rifles and go
to the trenches in an assault upon their neighbors.
There were 4,000,000 socialist voters who were thus forced
into the ranks against all their principles of international broth
erhood. They were driven through Belgium against their so
cialist brothers of Belgium, with unspeakable atrocities com
mitted by the German soldiers; they were driven against France
and Italy and Russia, against their socialist brethren, without
any regard to their long-taught principles of international
brotherhood. They could not help themselves. They had no
power of organization. They dared not, under penalty of death,
take the first step toward liberty. They were unhappily under
the irresistible domination of Prussian militarism; under a mdnarchial autocratic structure o f government which they had never
been strong enough to change into a democratic government of
the German people, by the German people, and for the German
people.
Under a democracy or under a limited monarchy, with a re
sponsible ministry and a parliament in control of government,
this enormous disaster to the German people, to the Austrian
people, to the people of all Europe, and to the people of America,
and to the people of the world would not have occurred.
The world ought not to permit the recurrence of this gigantic
disaster at any future time, and the only way in which to pre
vent its recurrence is that the world shall demand, as England
is demanding, as England has demanded, as France has de
manded, as Italy has demanded, as Russia and America are now
demanding, the end of the warlike and irresponsible government
of Prussian militarism, the overthrow of the Hohenzollerns, and
the establishment of a government truly responsible to the
German people.
Mr. President, these considerations are far more important
considerations justifying war against Prussian militarism by
the people of the United States and by all the Republics on the
face of the earth than even the murder of our citizens and the
submarining of our ships, because the house of Hohenzolleru
and the house of Hapsburg are sworn and deadly enemies to
the democracies of the world, and if they succeed in overthrow
ing the democratic people of France, England, Italy, and Rus
sia this military machine would immediately make war on us,
and with their millions and millions of trained and seasoned
soldiers they might devastate America before we could organize
our armies in adequate resistance.
I
do not underestimate or ignore the tragedy upon tragedy
which has attended the invasion of our international rights.
92727— 17258
13
On the Lusitania, without warning, we had 114 American
citizens murdered on the high seas in cold blood, in violation
of international law.
On the (Jutflight we had two Americans killed without
warning.
Mr. President, it is one thing for an American citizen to be
killed in a street fight in a foreign country, to be murdered in
a foreign country by some irresponsible citizen or subject of a
foreign country, and it is another thing when the responsible
head of that Government commits murder on a single son of this
Republic by or through executive, military, or naval orders.
On the Armenian we had 23 Americans killed ;
On the Iberian we had 3 Americans killed;
On the Anglo-Californian we had 2 Americans killed;
On the Hesperian we had 1 American killed;
On the Arabic we had 3 Americans killed ;
On the Persia we had 2 Americans destroyed;
On the Ancona we had 7 Americans killed;
On the Englishman we had G Americans killed ;
On the Sabota we had 1 American killed;
On the Marina we had 8 Americans destroyed ;
On the Russian* we had 17 American citizens destroyed;
On the Eaveston we had 1 American destroyed;
On the Vedamore we had 10 Americans killed;
On the Turino we had 1 American killed;
On the Athos, 1 American killed;
On the Lacona, 8 Americans were lost;
On the Sjostad, 1 American killed ;
On the Vigilancia, 5 Americans killed ;
On the Healdton, 7 American were lost;
On the Crispin, 19 Americans were lost; and 18 of our Ameri
can ships have been torpedoed, sunk, or burned by this subma
rine warfare, not to mention innumerable ships— over 700 ships—
belonging to other neutral nations, and numbers of citizens of
other neutral nations destroyed, because they had the courage to
maintain their international rights on the high seas.
Our citizens have been ordered to keep out of and not to dare
exercise their international rights on the high seas within an
arbitrary zone a thousand miles long and fifteen hundred
miles in the opposite direction surrounding Europe, where fourfifths of the commerce .of the world must pass. We have been
ordered that we shall not pass this line under penalty of death.
That is military autocracy in action. Over 700 ships of neu
tral unoffending nations have been destroyed in violation of
international law and neutral citizens innumerable murdered
without notice to intimidate Great Britain and the world to a
profitable peace for the Prussian military autocracy.
Under the international law the failure to maintain our neu
tral rights on the high seas under the threat of the Prussian
military machine would be a violation of our neutrality, indeed
with other nations, who have the right to buv goods from us
and have a right to ask the delivery of such goods in accord
ance with international law.
The United States has made every effort that it is possible
for a sell-respecting nation to make in the endeavor to avoid
this war, and we have been unable to do it except at the s->cri92727—17258
u
„
fice of our national rights, our national dignity, and our na
tional honor.
It will l)e remembered that in the Spanish 1\ ar the Imperial
German Government furnished Spain with munitions of war
and undertook to interfere with us in Manila Bay through her
armed men-of-war.
.
It will be remembered that Germany attempted to interfere
with Dewey in Manila Bay.
It will also be remembered that the battleships of Great
Britain interposed and stopped interference o f Germany with
the rights of this great Republic, although I think that Dewey
could have taken care of himself.
It will be remembered the German Government sent muni
tions of war to Mexico to be used against America.
It will be remembered the German Government undertook to
invade Venezuela in violation of the Monroe doctrine.
It will be remembered that the Imperial German Government
has distinguished itself by maintaining a fixed hostility to the
Monroe doctrine.
It will be remembered that we were compelled to send the
Austrian ambassador home, representing the Hapsburg war ma
chine, for his conspiracies against our peace in the United States,
when he, in conjunction with the agents of the Hohenzollern
machine, were promoting the blowing up of American factories,
filling our country with spies, promoting disloyalty in the United
States, and stirring up the hostility of citizens of German ex
traction against our peace, and stirring up the activities of
hundreds of thousands of German subjects, permitted by cour
tesy to reside in the United States, to interfere with our peace
at home.
It will be remembered that the German agents have been stir
ring up disorders in Mexico, in Central and South America, and
promoting war on our borders, and are now doing so at a very
great expense to the United States.
That pernicious activity of the agents of Prussianism will go
far to account for the things we have found difficult to under
stand ; why the South American Republics did not feel more
friendly to us in view of our sincere friendship for them; why
little or no reciprocity. It was because the Hohenzollern agents
persuaded those people that we had designs upon their peace and
upon their property.
Perhaps the crowning offense against the United States was
disclosed in the proposal of Zimmermann, representing the Prus
sian military machine, to make an alliance with Mexico at a
time, January 19, 1917, when we were still at peace with the
Imperial German Government, in which Zimmermann proposed to
Mexico that Germany and Mexico would make war together on
the United States and make peace together; that Germany
would give Mexico general financial support and that Mexico
should reconquer the lost territory of Texas, New Mexico, and
A r i z o n a ; and that Japan should be invi ed to join Germany and
Mexico in this war on the United States.
There was no alternative for the President of the l nited
States, charged as he was with the protection of the people of
the United States, informed as he was of all the things I have
mentioned, and very many other things equally sin'ster and cor92727— 17258
1
15
^
<vti\ro of the e\ il intent of the Imperial Gor inmi Government against the Tjiiited istates, except to sever relations with
the German Empire and to take up the gauge of battle flung
into our teeth.
I agree with the President of the United States that it is a
fearful thing to lead this great, peaceful people into war, and I
“ also appreciate that the right is more precious than’ peace
and we shall fight for the things whicty we have always carried
nearest our heart—for democracy, for the right of those who
submit to authority to have a voice in their own governments
for the rights and liberties of small nations, for a universal
dominion o f right by such a concert of every peoples as shall
bring peace and safety to all nations and make the world itself
at last free.”
No treaty and no agreement with the Prussian miiitarv gov
ernment or with the house of Hohen'zollern is worth, dr ever
will be worth, the paper it is written on except where those who
have the pledge have the military power to compel obedience to
t he promise. Their treaties are “ scraps of paper.” If they
Muceed in Ibis war, they will attack us at their convenience.
1 am pleased now that we join with those who are determined
b 1Sh ,hl)erty- 111 the worl(1- Together we shall establish
the peace and happiness of mankind.
The world can not allow the Prussian miiitarv machine to
succeed, otherwise their brutality would dominate the world.
+l,„ 1“JLer.t ,as aa addenda to my remarks the brutality shown by
t.®
orders <)f, tlle German military machine in deaf
in.-, with the peaceful, unoffending people of Belgium wIidsp
i.eutnUity they violated in willful d is r e ^ r d o f u S T p l g h S
faith to the people o f Belgium.
y ■
Mr. President, I fervently pray with all my heart that the
h!',!i ' i h ) ir y' OVin? German people, who in their local affairs
l ave developed such a high degree of representative self-governlimit, \\ill overthrow the house o f Hohenzollern, whose wicked
leadership has led them to this ruinous war and to the shambles
Whenever the German people establish a dem ocracy-a re resentatn-e “ Government of the people, by the people, and for the
pe°pie - t h e democracies of the world will no longer be unwilb
ing to trust the Government of the German people. Treaties with
republics are sacred; treaties with the Hohenzollerns and Hapsburgs are “ scraps of paper.” No assurances which the Hohenzollerns or the Hapsburgs can give to the democracies of the
world are worthy of any faith or credit whatever, when
against their fancied interest, as the history of the Hohen
zollerns prove from Frederick the Second, of Prussia, down to
the invasion of Luxemburg and Belgium.
Aii. 1 1 esident, the American people wish the happiness and
the welfare of the German people and of the a K
np eop le
as Americans wish the happiness of the British and the French
and the Russian people We wage our war not on the unlmppv
German people but on the military autocracy and on the-house
o f Hohenzollern and the war machine that knows no conscience
no justice no mercy, but can only be persuaded at the cannon’s
mouth. May the Lord of Hosts bless our arms and proteT th e
liberties of mankind.
1 cu
92727— 17258
H H H
10
Mr. President, I found in a western paper a few days ago art
editorial in the Muskogee Phoenix, Muskogee, Okla., written
by Tams Bixbv, Esq., former chairman of the Dawes Commis
sion. It breathes a high, pure note of Christian patriotism, which
I think deserves a place in our annals at this time. I wish to
read it. It is very short. It is entitled :
ONW ARD,
C H R IS T IA N
S O L D IE R S !
T h e U n ite d S ta te s o f A m e r ic a
g iv e n to th e
t h e P ilg r im
F a th e rs
t h r o u g h th e ir lo v e a n d d e v o tio n
t o th e O m n ip o te n t R u le r o
th e d e s tin ie s
of m en, h as
d e c la r e d w a r o n
th e a n n iv e r sa r y
ot
our
S a \ io r s
c ru c ifix io
and
p ro p er
th a t it
sh o u ld
be
as
it
is .
Loyal
A m e r i c a n s ' g o f o r t h ® to
w a r S o t o n ly a . th e» c h a m p i o n .^ ® f » b « g
a n d fr e e d o m a n d h u m a n ity b u t a s s o ld ie r s o f th e c r o s .
, . , .1
lm o n t h e c r o s s n e a r ly 2 , 0 0 0 y e a r s a g o f o r t h e s a lv a t i o n o f m a n k i n d
A m e r i c a n s w i l l d f e u p o n t h e f ie l d o f b a t t l e t o m a k e t h i s a b e t t e r w o r l d .
T h r o u g h A m e r i c a 's b lo o d t h e w o r ld i s t o b e p u r g e d o t a b a r b a r i c ,
h e a t h e n i s h d y n a s t y t h a t in i t s l u s t h a s f o r g o t t e n t h e t e a c h i n g s o f o u
S a v io r .
I t is ^ a n o b l e t h i n g t o d i e a n d t o s u f f e r t h a t m e n m a y b e b r o u g h t
VI
n e A m e d c a GOu n a f r a i d , g i r d e d w i t h t h e a r m o r o f r i g h t e o u s n e s s , s t r i d e s
f o r t h t o b k t t l e T h e r e i s n o h a t r e d in o u r h e a r t s ; w e b e a r n o m a i c e
to w a r d o u r e n e m ie s ; w e a sk n o c o n q u e st n o r m a te r ia l re w a r d .
A m e ric a .
t r i l p 4-n
t r a d it io n s t h a t g a v e h e r b ir th , is to w a g e a n o b le , C h n s t ia n
w ar
W e a r e willing t o d i e i f n e e d b e t o b r i n g t o a l l m e n o n c e m o r e
m e m e s s a g e o f p e a c e on e a r th , g o o d w ill.
A n d in t h i s s a c r e d h o u r
A m e rica o ffe r s fo r h e r e n e m ie s th e p r a y e r o f th e c r o s s .
la t h e r , fo r g n e
'T h
ness,
i
of
A m e r ic a , c h a m p io n
c iv iliz a tio n , a n d
h<\ \ m i ™ m e ^ c l a m o r a n d
f
m
of
th e
C h r is tia n ity ,
c r ie s o f b a t t le
w ith
a
com e
c le a r
h eart
of
r ig h te o u s
and
w illin g
th e s tr a in s o f th e h y m n
o f th e u n ite d a llie s o f m a n k in d :
“ O n w a r d . C h r is t ia n s o ld ie r .
92727— 17258
W A S H IN G T O N : G O VERN M EN T P R IN T IN G O FF IC E : 1917
jf1
i
Proposed International Convention to Establish Interna
tional Government to Coerce Militarism and Assure
Permanent Peace.
S P E E C H
OF
HON. R O B E R T
O F
O K
L. O W E N ,
L A II O M A ,
I n t h e S e n a t e of t h e U n ited S ta te s ,
Thursday, August 23, 1917.
Mr. OWEN. Mr. President, on August 20 I introduced a
joint resolution which I think may have a most far-reaching
effect upon this war if it should meet the approval of the
Congress.
This joint resolution proposes, as a war measure, an inter
national convention for the purpose of terminating international
anarchy, establishing international government in lieu thereof,
and coercing the Teutonic military conspiracy by the organized
commercial, financial, military, and naval powers of the world.
I desire to read the joint resolution to the Senate, because it
explains itself, requires but little explanation, and is the
shortest way in which to present the proposals which I wish
to offer.
“A
jo in t r e s o lu tio n (S . J . R e s . 9 4 ) p r o p o s in g a s a w a r m e a su r e a n in te r
n a tio n a l c o n v e n tio n
fo r
th e
p u rp o se o f te r m in a tin g
in te r n a tio n a l
a n a r c h y , e s t a b lis h in g i n t e r n a t io n a l g o v e r n m e n t in lie u t h e r o f, a n d
c o e r c in g th e T e u t o n ic m ilit a r y c o n s p ir a c y b y t h e o r g a n iz e d c o m m e r
c ia l, fin a n c ia l, m il it a r y , a n d n a v a l p o w e r s o f t h e w o r ld .
“ Resolved by the Senate and House of Representatives of the
United States of America in Congress assembled, That it is the
opinion of the representatives of the people of the United States
assembled in Congress that international government, supported
by international force, should be immediately organized to take
the place of the existing international anarchy; that competing
armaments should be replaced by a noncompetitive international
army and navy; that the Teutonic military conspiracy to domi
nate the world should be overthrown by the combined commer
cial, financial, military, and naval powers of the world.
“ That international government should be based upon the fol
lowing principles:
“ First. Every civilized nation and informed people should
have the unquestionable right of internal self-government, with
exclusive control within its own territory over immigration, emi
gration, imports, exports, and all '.iternal affairs, with the right
to make its own political and commercial affiliations.
“ Second. The oceans and high seas should be free and open
under international rules. All international waterways, straits,
9 0 3 :1 — 1 7 8 4 3
ti
2
.v
and canals should be open on equal terms to the citizens of all
nations. Equal terms should be arranged for fuel, repairs, and
dockage in all ports for the ships belonging to the citizens of all
nations.
“ Third. All interior nations having no seaports should have
the right of shipment of their goods in bond on equal terms and
conditions, without tax, through any intervening territory to the
seaports of any other nation with equal access to shipping
facilities.
.
“ Fourth. That there should be established by international
agreement an international organization of all civilized nations
with an international legislative council to draft rules of interna
tional law to be submitted to the several nations for approval.
That when such rules of international law are approved by the
parliaments, or lawmaking branch of the governments of threefourths of the member nations, representing three-fourths of the
total population of all the member nations, such international
rules should be binding on all member nations. Such rules should
be limited to the powers expressly delegated to such international
legislative council and strictly confined to international affairs.
“ Fifth. The international legislative council should elect and
define the duties of a representative international executive cabi
net to execute and enforce the rules established as international
law.
“ Sixth. The international legislative council should have rep
resentatives from each member nation exercising a voting power
according to relative population, relative wealth, and relative
governmental development, to be determined by international
agreement.
“ Seventh. The international legislative council should estab
lish and define the duties of an international supreme court,
with power to pass upon all questions of international contro
versy incapable of diplomatic adjustment but with no power to
pass on questions affecting the reserved rights of nations.
“ Eighth. The international legislative council should formu
late the method for raising an international army and navy and
for establishing an international blockade and other means for
enforcing the rights of member nations under international law,
such army and navy to be provided and sustained by the member
nations pro rata according to relative population and wealth.
“ Ninth. With the conclusion of the present war the nations
of the world should agree to reduce in progressive stages their
land and sea forces to a point preferably not to exceed internal
or local police purposes and the quota required for the interna
tional army and navy.
“ With progressive disarmament and international peace safe
guarded by world government dissatisfied nations now held cap
tive by dominant nations for strategical purposes could be safely
o-iven their liberty.
“ Tenth. That the international army and navy should not be
authorized to exercise military force further than to prevent or
suppress the invasion of the territorial integrity of any of ie
member nations and in the blockade and embargo to enforce
international law.
.
“ Eleventh. That it should be a violation of international law
and the highest international crime for any nation on any
alleged ground to invade the territorial limits of another nation.
The penalty of such invasion should be immediate Internationa.
9633— 17843
3
blockade of the invading nation, embargo on all mail, express,
and freight to or from such nation, and the suppression of such
invasion by the international army and navy.
“ Twelfth. That nations backward in education, industrial,
and economic development, and in the knowledge of the prin
ciples of government should have their rights safeguarded on the
principles of freedom, humanity, and justice by international
agreement with a view to future self-government.
“ Thirteenth. It is clearly realized that the program of pro
gressive disarmament or permanent world peace is impossible
of attainment until the military forces now ruling the Teutonic
people, first, either voluntarily acquiesce in progressive disarma
ment and international justice as the basis of world peace;
second, are forced to do so by the Teutonic people; or, third, are
coerced to do so by the combined powrers of the world.
“ Fourteenth. That in order to bring this war to an early
termination, the belligerent nations opposing the Teutonic
powers should immediately cohere on a plan of international
government pledging justice and peace to all member nations
and the coercion of the military autocracy of Prussia by the
commercial, financial, military, and naval forces of the world,
giving assurance, nevertheless, to the Governments of Germany
and Austria of their willingness to admit the Teutonic powers
as members of the proposed international union on equal terms
with other nations when they shall have met the conditions and
given satisfactory guaranties.
“ Fifteenth. In our opinion no reliance should be placed upon
the vague suggestions of peace of the Teutonic military autoc
racy, but that their obscure proposals should be regarded merely
as a military ruse. The peace resolution of the Reichstag, while
promising well for the attitude of the German people, when they
achieve self-government, can not at present be regarded as a
proposal binding on or capable of enforcement by the German
people, because they do not control their own Government, but
are mere subjects and puppets of a military autocracy which
has long conspired and still dreams of conquering the world by
military force and terrorism. The United States and the nations
opposing militarism should strenuously prosecute the war with
every available resource, and no separate peace should be made
by any of them until the menace of the military autocracy of
Germany is removed.
“ Sixteenth. It is our opinion that if a world-wide agreement
can be established on the above principles, and the men now
engaged in slaughter and destructive activities can be re
turned to productive industry, the world could quickly recover
the gigantic shock of the present war and would be able without
serious difficulty to soon repair the material injuries and losses
already suffered.
“ Seventeenth. The United States does not enter this war for
material advantage, for any selfish purpose, or to gratify either
malice or ambition. The United States will not approve "forcible
annexations or mere punitive indemnities, but it will approve
a free Poland, the restoration of territory wrongfully taken
from France and Italy, and restorative indemnity to Belgium
and Serbia, and the adjustment of other differences by inter
national conferences. It will favor extending international
credits for the restoration of all places made waste by war.
The United States enters this war in self-defense; to protect its
9633— 17843
4
\
\
*1
I rii
own citizens and tlie nations o f the world in their present and
future rights to life and liberty on land and sea. It does not
wish the world to remain an armed camp.
“ Eighteenth. No peace is desirable until the world can be
safeguarded against a repetition of the present war. Competi
tive armaments must be ended and replaced by international
cooperative armaments in order to assure permanent world
peace.
“ Nineteenth. That the President of the United States shall
immediately submit the above resolution to the belligerent na
tions now defending themselves against Prussian military autoc
racy and invite them and all neutral nations by wire to an
international convention for the purpose of considering the
above principles and taking affirmative action for the early sup
pression of the Teutonic military autocratic conspiracy by the
combined commercial, financial, military, and naval powers of
all nations.
“ Twentieth. The sum of $400,000 is hereby appropriated to
meet the cost of promoting such convention.”
Mr. President, in waging war on the Prussian military autoc
racy for the suppression of its conspiracy to rule the whole
world by military force and terrorisn^the people of the United
States have determined to use every resource at their command
until this object is accomplished.
The Pan-German leaders are in control of the governmental
powers and of the Army and Navy of Germany. They demand
world power. They demand annexations and indemnities. They
regard treaties as scraps of paper. They have terrorized the
seas, made war on us and on all nations, and conspired against
our future peace. They are using the German people as puppets
and pawns on the checkerboard of war.
In vain do the democratic elements of Germany—the sane
elements of Germany—urge international justice. The military,
autocracy denounces the voice of moderation, of justice, of inter
national reconciliation, except on their own terms and future
dominance. They pretend to be willing to make peace, but it is a
peace dictated by German victory that will leave the military
group stronger than ever. They pretend to favor peace, but it
is for the object of demoralizing the war-making activities of
free Russia and of other opposing nations, while the military
group gird up their loins for more strenuous efforts of a German
victory with arms.
The conspiracy of the Prussian military autocracy to rule the
world and destroy the democracies of the world is of long stand
ing, as the secret treaty o f Verona completely demonstrates.
They capture neighboring territory and put the inhabitants to
laboring for the military powers. They capture adjacent people
and put the inhabitants in the trenches with rifles to help the
military conspiracy in its lust for world-wide conquest.
Mr. President, heretofore I have submitted the language of
the secret treaty of Verona. I call the attention of Senators
again to this vital- doctrine of the Hohenzollerns, the Hapsburgs, the Romanoffs, the Bourbons. It is strange it ever found
the light of day. I beg you to listen to this language. It was
made in 1822 and resulted in our issuance of the Monroe doc
trine to tell them to keep off our democratic Western Hemi
sphere.
0633— 17843
1
5
SECRET
TREATY
OF
VERONA.
The undersigned, specially authorized to make some additions to the
treaty of the holy alliance, after having exchanged their respective
credentials, they agreed as fo llo w s:
A r t ic l e
1. The high contracting powers, being convinced that the
system of representative government is equally as incompatible with
the monarchical principles as the maxim»*“ of the sovereignty of the
people with the divine eight, engage mutually, in the most solemn
manner, to use all their efforts to put an end to representative govern
ments and to prevent its being introduced in those countries where it
is not yet known.
(See the C o n g r e s s i o n a l R e c o r d , Aug. 13, 1917, p. 6554.)
Article 2 of that treaty pledged the destruction o f the liberty
of the press, because it was an agency by which representative
governments, by which the liberty of men, made progress.
This treaty was framed in the interest of and signed by
Metternich, representing the Hapsburg dynasty of Austria;
by Bernstet, representing the Hohenzollerns of Prussia; by
Nesselrode, representing the Romanoffs of Russia.
The Hohenzollerns have steadily pursued the policy to which
it solemnly pledged its efforts in this treaty to destroy the
democracies of the world and to suppress the liberty of the
press.
They now have behind their policy 170,000,000 people— Bul
garia, Turkey, Austria—under the masterful control of the
Prussian autocracy.
The world has not aroused itself any too soon if it wishes the
democracies to survive.
It would be an act of madness for the world to temporize
with this spirit, with this set and fixed policy of the Hohen
zollerns of the Prussian autocracy.
German diplomacy throughout the world has been busy in
weakening other nations whose powers might be used against
the military autocracy.
I submit the record of the Hohenzollerns as compiled by the
Security League (Exhibit D ), which is convincing to any
student of history.
They have gone to South America, to Central America, and
to Mexico, and have made those people believe that the United
States, loving liberty as it does, willing to make sacrifices for
the good of mankind as it has been, free as it is from any desire
to annex the territory of other nations—they have made those
nations of the Western Hemisphere believe that the United
States was the Colossus of the north, waiting a convenient time
in which to absorb them and their property and overthrow their
liberty.
Mr. SHERMAN. Mr. President-----The PRESIDENT pro tempore. Does the Senator from
Oklahoma yield to the Senator from Illinois?
Mr. OWEN. I yield to the Senator from Illinois.
Mr. SHERMAN. I am in full sympathy with what the Sena
tor states. Would the Senator favor waging war to depose
the present reigning house of Germany?
Mr. OWEN. Absolutely. That is what I am waging war on
right now.
Mr. SHERMAN. And not leave it to the German people?
Mr. OWEN. And not leave it to the German people. I am
not willing that the German people should be led by the
Hohenzollern house under a military autocracy that threatens
every neighboring nation and has finally gotten in its grasp
9633— 17843
170,000,000 threatening the democracy o f the world. If the
Germans wish to use the Hohenzollerns as a social ornament, we
should perhaps raise no objection; but if they use them as the
head and front of a conspiracy to assault the democracies of
the world and threaten our future peace, we should not agree
to it; if the Hohenzollerns use the Germans, and, dominating
them, compel the poor Germans to make war on others, then even
the Germans should help to put this Jonah into the sea.
Mr. SHERMAN. May I inquire further if the Senator would
restore the independence of Bohemia as a part of the AustriaHungary Empire?
Mr. OWEN. Mr. President, the policies which are being laid
down in this joint resolution will lead to the liberties of all
the Teutonic people, including the people of Bohemia.
Mr. SHERMAN. That would follow with the restoration of
Poland ?
Mr. OWEN. It would follow with the restoration of liberty.
Mr. SHERMAN. I ask specifically about Poland.
Mr. OWEN. I will answer the Senator by saying that both
the German authorities and the Russian authorities agree upon
an independent Poland. They differ as to means.
Mr. SHERMAN. That was the point. I wish to go along
with the Senator on all these things. I think we are substan
tially agreed that the restoration of Poland will require some
disciplining of one of our present allies. In 1772 the original
partition of Poland by Russia, Austria, and Prussia took place.
Mr. OWEN. I will place in the R ecord, that was done by
the Romanoffs, by the Hapsburgs. by the Hohenzollerns. I
will place in the R ecord now the evidence that free Russia de
sires a free Poland.
Mr. SHERMAN. There is no difference between the Senator
and myself on that.
Mr. OWEN. No, there is no difference, I am sure, in poli
cies and purposes between the Senator and myself. The time
has come for the United States to use every energy to organize
the powers of the whole world in suppressing the Teutonic mili
tary autocracy and suppressing forever its conspiracy to rule
mankind by military force and terrorism.
Mr.. SHERMAN. Mr. President-----Mr. OWEN. I yield to the Senator.
Mr. SHERMAN. The President not long ago, within the last
two years, said that each independent sovereignty lias a right
to determine its own form of government. He was particularly
speaking of Mexico at that time. That does not apply to Ger
many, does it?
Mr. OWEN. I think it does most fully, most completely.
That is what I desire and hope to see.
Mr. President, in organizing the world to break down the
Teutonic military conspiracy against the world the world should,
nevertheless, give assurance to the Teutonic people that the world
does not wish to crush the Teutonic people or require of them
more than absolute justice demands in the way o f restoring ter
ritory wrongfully taken, property seized, appropriated, or de
stroyed by the Teutonic people under the leadership of the
Prussian military autocracy.
I have submitted Senate joint resolution No. 94, containing a
plan which I believe will lead to an earlier overthrow of the
Teutonic military conspiracy, which will lead to an earlier
9633— 17843
7
awakening of the Teutonic people to the clanger of such leader
ship, and to the necessity of their demanding the right of selfgovernment in order that sanity may be restored to their councils.
My proposal is an immediate international convention of all
belligerent and neutral nations to establish an international gov
ernment, with legislative, executive, and judicial powers and an
army and navy to enforce the rights of member nations and to
coerce Prussian militarism.
Mr. President, we have not any international law. The socalled Hague Conventions are scraps of paper; they are unani
mous-consent agreements. Behind those conventions the
Holienzollerns concealed their military preparations until they
could pounce upon their neighbors unawares. Those conven
tions are worse than useless, they have served an evil purpose.
But the fact that 32 nations there agreed upon the adoption of
compulsory arbitration, the fact that 32 nations there desired
to bring about a means of ending international war and
anarchy, the fact that those 32 nations represent seven-eighths
of the people of the world, gives every reason to us to believe
that they could now be cohered together in such a way as not
to interfere with individual nations, not to interfere within
the bounds of any nation, but use the combined efforts of all
to prevent any nation becoming an international outlaw and
threatening the liberties o f the world.
Mr. SHERMAN. Mr. President-----The PRESIDENT pro tempore. Does the Senator from Okla
homa yield to the Senator from Illinois?
Mr. OWEN. I yield to the Senator.
Mr. SHERMAN. What would the Senator do with the Ger
man philosophers like Nietzsche and historians like Treitchszke?
Mr. OWEN. I would leave them to the German people, who
will take care of them.
Mr. SHERMAN. They are the responsible foundation, Mr.
President, of the servility of the German people who have sub
mitted to the doctrines of militarism.
Mr. OWEN. I can not agree with the Senator from Illinois in
that respect.
Mr. SHERMAN. If the Senator will permit me, the philoso
phy of Neitzsche is the foundation for the work of all the Ger
man professors who have led to the subordination of the civil
to the military power.
Mr. OWEN. That is quite true ; but these professors and these
teachers are the hirelings of the Hohenzollerns, who for over a
hundred years have had eulogy after eulogy paid for in Ger
many.
The Hohenzollerns are responsible for these moral, historical,
psychological lunatics who have helped to make German opinion
insane.
Mr. President, some critic has said, in relation to this world
cooperation which I propose, “ This is Utopia.”
My answer is, first, Utopia is better than hell, and, second,
that this proposition is not Utopian, and, third, it is already
nearly an accomplished fact in the union of the great belligerents
now waging a common war on Prussianism. Seventeen nations
are now cohering on the battle line of Russia, of Italy, of Bel
gium, of France; 17 nations now are bound together in bonds
of sty'el and of brotherhood against military autocracy ruling
9633— 17843
8
the world. We have only to take the step to bring them together
around the council table, but it takes initiative to do it. Some
nation has got to take the first step of inviting cooperation.
I pray the Father of us all it may be our great Republic that
may perform this humane task and justify the prophecy of
France in giving us the Bartholdi Statue—
“ L iberty E n l ig h t e n in g t h e W orld.”
Y ou will remember, Senators, that in 1899 Nicholas, although
a Romanoff, in the compassion of his heart, proposed to the na
tions of the world gradual and universal disarmament. Who
was it that defeated it? It was William II and his Teutonic
group of military autocrats. Who was it, when The Hague Con
vention met in 1899; stood in the way of a similar proposal? It
was the same group. Who was it, in 3907, who prevented the
coherence of the world to prevent future wars? It was the
Teutonic group again, led by William II.
Mr. President, without any adequate organized effort on
the part of the United States, 17 out of 44 nations at The
Hague have already declared war on the Prussian autocracy,
to wit, Great Britaiu, the United States, France, Portugal,
Italy, Russia, Serbia, Montenegro, Itoumania, Greece, Japan,
China, and little Cuba, and Panama, and Siam, and Liberia, and
San Marino. These nations now at war with the Prussian
military autocracy represent over three-fourths of the people of
the whole world.
Brazil, Bolivia, Guatemala, Honduras, Nicaragua, and Haiti
have severed diplomatic relations and are on the point of war.
Argentina, Peru, Chile, and others are on the point of sever
ing diplomatic relations.
Seven-eighths of the people of the world are at heart opposed
to the ambitions of the Prussian military autocracy, and the
United States should strenuously take steps to induce every
neutral nation to combine with the entente allies in making war
on the Prussian military autocracy. There are compelling rea
sons to justify the neutral nations to cooperate. We should
give voice at the same time to the aspirations of mankind for the
establishment of a means by which to assure through all future
time the liberty, the peace, the happiness of all mankind. This
is what every nation wants. China, the reserved, the oldest of
organized nations, understands this, as shown by the presi
dential mandate declaring war on the Teutonic powers.
I beg Senators to listen to this language of the Far East. The
proclamation declares:
The chief aim of this declaration is to put an end to the calamities
of war and hasten the restoration of peace.
* *
* Until considera
tions involving the existence of the nation forced this momentous de
cision, it was not thought possible that its rights—
China’s rights—
under international law should have become impaired, the peace of the
world retarded, and the position of the family of nations undermined.
W e are forced to fight in reestablishing the family of nations and to
share in the happiness and benefits to be derived therefrom.
This mandate was signed by the premier of China aud all the
ministers.
Those ideas undoubtedly are American ideas, and if they were
not transplanted to China previously, certainly they were pre
sented by the representatives of the United States now at
9633— 17843
Pekin. What persuades China will be presuasive also as to
other nations.
Every nation which has already declared war upon the Prus
sian military autocracy has been moved by the spirit of selfdefense against an international outlaw, against international
anarchy, and in safeguarding its own future peace.
And the same considerations which have moved 17 nations
to declare war, representing three-fourths of the inhabitants of
the world, will suffice to cohere them in an international govern
ment against a future war by the Prussian military autocracy,
and persuade every other self-respecting nation of the world
to adhere to the same policy, except perhaps Denmark, Holland,
and Switzerland, who stand in deadly awe of the contiguous
Teutonic military forces, and they will adhere when the present
war is over.
Mr. President, I believe the principles which are laid down
in the proposed resolution as a basis of international govern
ment will be acceptable, in substance, to all the nations of the
world, and to the better elements of the Teutonic‘ people, hut
are not acceptable, of course, to the war-mad Prussian ’ Pan
German elements. The Pan German element demanding the
doctrine of “ Deutschland Uber Alles ” will have to be coerced
at home or conquered by foreign armies.
There is some reason to believe that the German people are
about to awake fr o m their d re a m s, a n d that eve n the m ilita r y
group may be coerced by German opinion; but certainly the
world will never permit to prevail the conception of Gen. Von
Liebert, a spokesman of the German war party, who is quoted
in a speech at Itathenow, Prussia (Washington Post, Aug. 20,
p. 3), as saying:
W e can not .sign a peace before we have Flanders coast, a colonial
empire, and maritime bases. Should we not realize this now, we must
prepare to work for it after the war in view of the next war.
Mr. President, the Prussian military autocracy is not going
to have the power or opportunity to lead the world into any
“ next war.” ^It is going to be disarmed by force, if necessary;
and if the German people insist upon backing this war-mad
Prussian conspiracy, the German people will unavoidably reap
more unhappy consequences than are already in sight.
Gen. \ on Diebei t does not express the body of German opin
ion. the majority of the Reichstag seem ready for peace and
to abandon the Pan-German military program of annexation
and indemnity on their neighbors as a condition of peace. The
willingness of the Reichstag to forgive Belgium and France
and excuse them from the payment of indemnities is a sample
of Teutonic magnanimity and lack of humor.
Hugo Haase on July 19 offered a resolution in the Reichstag
representing a minority view, however, which shows some evb
dence of sanity, as follow s:
The Reichstag strives for a peace without annexations of any kind
whatever, and without war indemnification, upon the basis of the rights
of the peoples to decide their own destinies. In particular, it expects
ou6 rV>SV ^aV 0n f ^Ggiuni and the repair of the wrong done to Belgium
The Reichstag demands the initiation of immediate peace negotiations'
upon the foundation of this program. It demands an international agree
ment about general disarmament, freedom of international tra l ? Sqnd
intercourse unrestricted international freedom of movement an inter
national agreement
or the protection of workmen from exploitation,
9G33—17843
10
recognition of the equal rights of a State without regard to nationality,
sex, race, language, and re'igion ; protection of national minorities, and
obligatory international arbitration for the settlement of all disputes.
The urgent preliminary condition for the achievement of peace and
the carrying out of this peace program is the immediate raising of the
state of siege. Moreover, it is necessary to effect the complete democra
tization of the constitution and administration of the Empire and its
several States, and this m ust end in the creation of a social republic.
Herr Scheidemann, leader of the Social Democrats, on Au
gust 7, at Monheim, demanded a government really representing
the will of the German people, and sa id :
But that is still not enough. When the Reichstag met we said, “ This
thing has got to go further. W e want dem ocratization; we want a
clear declaration on the question of our war aim s.”
The Reichstag with its peace program has invaded the foreign policy
of the Empire and brought about a complete defeat of the annexationists.
But now the fight is going on over the decisive influence of the people
in Empire and State. W e want a State government consistent with the
meaning of the suffrage message, and we want an Imperial Govern
ment consistent with the meaning of the Reichstag program. Our whole
foreign policy must be conducted consistently with this program. And
the German press must not be made the instrument of those who would
gladly abolish the Reichstag resolution altogether from the world.
Press and parliament belong to one another.
It is significant, Mr. President, tfiat the authorities of Ger
many are now permitting on the interior of Germany an “ offen
sive campaign for peace.” It is significant that the proposals
of Pope Benedict are immediately approved by Austria, and
that the German authorities are indicating their disposition to
acquiesce.
But it is also true, Mr. President, that German opinion will
be greatly stimulated in favor of peace on the terms of inter
national justice and on the terms which the entente allies will
accept if we cohere against the Prussian military autocracy,
every nation on earth, which we can do, and do speedily, be
cause they are anxious to establish world-wide liberty to end
the terrorism of the Prussian conspiracy.
The proposal o f the Reichstag and of the chancellor (Exhibit
A) solemnly declare that—
Germany took up arms In defense of its liberty and independence
and for the integrity of its territories. The Reichstag labors for peace
and a mutual understanding and lasting reconciliation among the
nations. Forced acquisitions of territory and political, economic, and
financial violations are incompatible with such a peace.
Mr. President, the whole world knows that this statement,
while offered as a theory by the Prussian military autocracy to
the German people, is utterly false. The Prussian military autoc
racy took up arms for the purpose of annexation, indemnity, profit,
and world domination, and their leaders still confess and declare
this to be their plan in spite of the Reichstag resolution to the
contrary.
The unfortunate German people were mobilized and sent to
the shambles not in defense of German liberty but in unjust
offensive war on the liberty of Serbia, France, and Russia; not
in defense of German independence but in offensive war on the
independence of innocent neighbors; not in defense of the integ
rity of the territory of Germany but in offensive war on the
integrity of the territory o f innocent Belgium, Serbia; then
France and Russia—the fixed Hohenzollern policy.
But it should not be forgotten, Mr. President, that the majority
of the Reichstag represents, in a way, and inadequately, the
0633— 17843
11
Social Democrats of Germany, who, with all the limitations on
suffrage, had 4.000,000 voters before the war, and the opinion
of the German socialist democracy is of importance in deter
mining the opinion of the German people, subjects and vassals
though they are. I submit the declared opinion of the German
Social Democrats. (Exhibit B.)
The German socialist democracy are, in fact, opposed to an
nexations of territory by force. They are opposed to war in
demnities. They are in favor of restoration of national incfependence of nations subjected in war, and while they take,
naturally, a German view in various particulars, they do favor
national disarmament and freedom of the seas, while the minor
ity socialists go to the extreme of democracy. ( Exhibit B .) The
latter favor a republican Balkan federation of free people, and
they seek an international understanding on the basis o f democ
racy. These opinions in Germany ought not to be entirely
ignored and these opinions will be immensely strengthened by
the activity of the allies on the firing line against the Prussian
military autocracy. They will be strengthened by the Germans
discovering that the whole world is combined against the Prus
sian military conspiracy, and that the whole world desires to
deal justly by the Teutonic people, as well as to compel the Teu
tonic powers and people to respect the rights of other people
with the same scrupulous decency.
The entente allies, while pressing the battle on the trench
fines, should encourage the democratic elements of the Teutonic
Empires by giving them assurance of the just purposes of the
entente allies, and meet the false dogma of the Pan-German
militarists that the entente allies, if victorious, will crush and
enslave the Teutonic people.
The opinion of the Russian people is shown by the declaration
of the Provisional Government and the councils o f workmen
and social delegates (Exhibit C) of April 9. 1917, of May 1. 1917,
of May 4, 1917, and of .Tune 13, 1917. The Russian Government
desires an independent Poland. The Russian Government does
not seek annexations or indemnities for free Russia. It strenu
ously demands, however, that the menace of the Prussian mili
tary autocracy shall be ended by military force, and Russia
would agree, I hope, to the proposals which I have submitted.
English opinion, I am satisfied, would approve some world arlangement ior the speedy coercion of the Prussian military
autocracy and would approve a world plan for the maintenance
of the future liberties, peace, and happiness of mankind. Mr
Asquith very properly pointed out that the military autocracy
possessing the political power of Germany not only did not
give its free and full assent to the Reichstag resolutions
limited as they were, but made equivocal comments that left
the autocracy open to demand a “ German peace” based on
German victory, which will not be considered by the entente
allies, and he asks the German chancellor plainly a question
whether the German Imperial Government is readv to grant
Belgium absolute independence and make full reparation for
the colossal damage done that devastated country, and he stated
with great force that—
The German Government does not speak for the Reichstag <so t w
Reichstag itself does not speak for, or at any rate does not give fuU
0633— 17843
12
expression to, the whole view and opinion of the mass of the German
people. I believe that to be at this moment one of the greatest obsta
cles to the attainment of peace. It is one which does not lie within
the power of the allies to remove. It lies within the power of the
German people.
It _ can not be too clearly, too emphatically, or
too often stated this is a matter not for any governments but
for the peoples or for the governments only in so far as they can
claim to be the authentic spokesmen and interpreters of the peoples
for whom they stand. Once that is generally realized throughout the
democracies of the world, I believe that we shall be within measureable distance of a lasting and an honorable peace. Meantime we
should not be helping the advent of peace if we were to give the im
pression that there is any halting in our determination or any doubt
of our ability to carry on, if need be, the burden which we took up
with a clear conscience for great 'mds and which we can only in honor
lay down when we feel sure that those ends am going to be achieved.
Mr. Bonnr Law, chancellor of the exchequer, said—
They tell us that Germany is quite ready for a reasonable peace.
W hy have the Germans never put down their peace aims in any shape
or form ?
Ours may have gone too f a r : but at all events, we had
the courage to state them before the world. Germany has never done
anything of the kind. And w hy? Because she does not mean what
those honorable gentlemean say she means, and because that would be
found out the moment any peace terms were put in black and white.
* *
* W e are not only fighting for the freedom of ourselves, though
that is the essence of our l i f e ; we are fighting for the rights of other
nations besides Germany to live their lives in their own way. *
* *
Now I come to what is the real aim so far as this country is con
cerned in this w ar. I have thought from the beginning, and I repeat
now, that the one thing which we are fighting for is peace, and
security, for peace in the time to come.
Mr. President, there is only one way in which to have peace
for time to come, and that is to end competitive armaments and
the ambitions of military dynasties. This can be done by inter
national government and the substitution of international
police in lieu of competing armaments and in no other way.
Mr. President, the fact that Pope Benedict proposes “ simulta
neous and reciprocal diminution of armaments” with the ap
proval o f Austria and apparently with the approval of the Ger
man Imperial Government, seems to promise that even the
Teutonic autocracy is coming to its senses.
We will help them to reach a condition of sanity by multiply
ing our war efforts and by coordinating every nation in the world
in this struggle against the world domination of the Teutonic
powers.
With the end o f competitive armaments, the Teutonic military
dynasties would have no important function; they would have
no real power. The Teutonic peoples would then control their
own governments.
There would be no demand then for vassal States, with their
subject rifles and economic resources. The German people
would then have no need for the iron mines of Alsace-Lorraine
for war-making purposes, but the iron ores of Alsace-Lorraine
would be equally available for the German factories, the French
factories, or any other factories in Europe. The whole “ doc
trine of balance of power ” would be ended in Europe because
the balance of power would not be then weighed in the scales
between one alliance and an opposing alliance, between Teu
tonic alliance and entente alliance. The balance of power would
be transferred to an international council of sovereign States in
the interest of every nation in the world. There would no longer
be any reason why there should not be organized republican
9633— 17843
13
States in the Balkans, where each people speaking a common
language could enjoy their own development and own selfgovernment In harmonious relations with others.
The struggle over the Italia Iridenta would end, and Austria,
who offered the Government of Italia Iridenta to Italy before
the war, would have no reason whatever for then refusing this
point under such favorable circumstances. The suspicions and
jealousies which have existed heretofore between the nations
would disappear before the establishment of progressive dis
armament and the establishment of international police.
Mr. President. Mr. Bonar Law very wisely said that there
was a great difference between the German people and the
German Government, and when he sa id :
W e shall not have peace In the time to come unless the German people
are convinced that war does not pay, that their greatness and develop
ment must be found in other directions and not in plunging the world
into war.
Mr. President, I think the German people will ultimately be
satisfied that war does not pay. I earnestly hope that they 'may
soon be satisfied on this point. I hope so for the sake of the
youth of Europe, as well as for the sake o f the youth of America,
and of the nations of the earth now at war with the Imperial Ger
man Government. This end will be more speedily attained when
the German people see that all the nations of the world are
organized to end the military autocracy that has led the German
people into this bloody conflict. The Germans will get no profit,
but severe losses in men and property, which daily grows more
fatal to her interests.
Mr. President, on May 27, 191G. President Wilson, after the
issuance of the ultimatum to the Imperial German Government,
said:
W e believe these fundamental th in g s:
First. That every people has a right to choose the sovereignty under
which they shall live, bike other nations, we have ourselves no doubt
once and again offended against that principle when for a little while
controlled by selfish passion, as our fraulcer historians have been
honorable enough to ad m it; but it has become more and more our rule
of life and action
Second. That the small States of the world have a right to e D jo y the
same respect for their sovereignty and for their territorial integrity
that great and powerful nations expect and insist upon ; and
Third. That the world has a right to be free from every disturbance
of its peace that has its origin in aggression and disregard'of the rights
o f peoples and nations.
*
So sincerely do we believe in these things that I am sure that 1 sneak
the mind and wish of the people of American when I sav that the United
States is willing to become a partner in any feasible association of
nations formed in order to realize these objects and make them secure
against violation.
There is nothing that the United States wants for itself that any
other nation has. WTe are willing, on the contrary, to limit ourse'ves
along with them to a prescribed course of duty and respect for the
rights of others which will check any selfish passion of our own as it
will check ary aggressive impulse of theirs.
On May 30, 1916, President Wilson stated at Arlington Na
tional Cemetery:
I have stated that I believe that the people of the United States are
ready to become partners in an alliance of the nations that would
guarantee public right above selfish aggression.
Some of the public
prints have reminded me, as I needed to be reminded, of what Gen.
Washington warned us against.
He warned us against entangling
alliances.
I shall never m yself consent to an entangling alliance, but would
gladly assent to a disentangling alliance, an alliance which would dis-
9633— 17843
entangle the people of the world from those combinations in which they
seek their own separate and private interests and unite the people of
the world to preserve the peace of the world upon a basis of common
right and justice.
There is liberty there, not limitation.
There is
freedom, not entanglement. There is achievement of the highest things
for which the United States has declared its principles.
Mr. President, the program I have outlined is thus shown to
be in substantial accord with the views of the President of the
United States. I want to call your attention to what he said
in his address to the Senate on January 19, 1917:
No peace can last or ought to last which does not recognize and
accept the principle that governments derive all their just powers
from the consent of the governed, and that no right anywhere exists to
hand peoples about from sovereignty to sovereignty as if they were
property.
*
* * The world can be at peace only if its life is stable,
and there can be no stability where the will is in rebellion, where there
is not tranquillity of spirit and a sense of justice, of freedom, and of
right.
* * *
There can he no sense of sa fety and equality amony the nations if
great preponderating armaments are henceforth to continue here and
there to he built up and maintained. The statesmen of the world must
plan for peace and nations must adjust and accommodate their policy
to I t as they have planned for war and made ready for pitiless contest
and rivalry. The question of armaments, whether on land or sea, is the
most immediately and intensely practical question connected with the
future fortunes of nations and of mankind.
* *
*
Let us plan for peace, Mr. President, by disarming on sensible
lines.
The President said further :
I would fain believe that I am speaking for the silent mass of
mankind everywhere who have as yet had no place or opportunity
to speak their real hearts out concerning the death and ruin they see
to have come already upon the persons and the homes they hold most
dear.
* *
*
No nation should seek to extend its polity over any other nation or
people, but that every people should be left free to determine its
own polity, its own way of development, unhindered, unthreatened,
unafraid, the little along with the great and powerful. * *
* There
is no entangling alliance in a concert of power. When all unite to act
in the same sense and with the same purpose all act in the common
interest and are free to live their own lives under a common protection.
I am proposing government by the consent of the govern ed : that
freedom of the seas which in international conference after conference
representatives of the United States have urged with the eloquence of
those who are the convinced disciples of lib e rty ; and that moderation
of armaments which makes of armies and navies a power for order
m erely, not an instrument o f aggression or of selfish violence. These
are American principles, American policies.
All these principles are involved in Senate joint resolution 94.
Mr. President, the Democratic platform of 191G voiced these
American principles, and the Republicans believe the same doc
trine :
W e hold that it is the duty of the United States to use its power not
only to make itself safe at home but also to make secure its just in
terests throughout the world, and both for this end and in the interest
of humanity to assist the world in securing settled peace and justice.
W e believe that every people has the right to choose the sovereignty
under which it shall live (government with the consent of the gov
erned) ; that the small states of the world have the right to enjoy
from other nations the same respect for their sovereignty and for their
territorial integrity that great and powerful nations expect and insist
upon ; that the world has a right to be free from every disturbance of
its peace that has its origin in aggression or disregard of the rights
of peoples and nation s; and we believe that the time has come when
it is the duty of the United States to join with the other nations of the
world in any feasible association that will effectively serve these prin
ciples and maintain inviolate the complete security of the highways of
the seas for the common unhindered use of all nations.
9633— 17843
15
Mr. Lloyd-George, who is the exponent of English opinion, at
Glasgow, June 29, 1917, struck the keynote when he pointed
out the necessity, in obtaining permanent world peace, of end
ing military autocracies. A e sa id :
W hat will have to be guaranteed first of all by the conditions of peace
is that they shall be framed upon so equitable a basis that nations will
not wish to disturb them. They must be guaranteed by the destruction
of the Prussian military power, that the confidence of the German people
shall be in the equity of their cause and not in the might of their
arms. May I say that a better guaranty than either would have been
the democratization of the German Government.
* *
*
No one wishes to dictate to the German people the forms of govern
ment under which they choose to live. That is a matter entirely for
themselves, but it is right wc should say we could enter into negotia
tions with a free government in Germany, with a different attitude of
mind, a different temper, a different spirit, with less suspicion, with
more confidence than we could with a Government whom we knew to
be dominated by the aggressive and arrogant spirit of Prussian mili
tarism.
Mr. President, the destruction of Prussian militarism may
come in one of three ways—first, by consent of the military
leaders before physical destruction com es; second, by the will
of the German people before physical ruin ensues; third, by the
physical force of the military powers o f the entente allies.
The third means will be more costly in life to all nations, but
will be applied if necessary, and is in very active operation at
this time.
Lloyd-George well sa id :
Now we are faced with the greatest and grimmest struggle of all—
liberty, equality, fraternity not amongst men but amongst n a tio n s;
great, yea s m a ll; powerful, yea weak ; exalted, yea hum blest; Germany,
yea B elgium ; Austria, yea Serbia— equality, fraternity amongst peoples
as well as amongst men. That is the challenge which has been thrown
to us. Europe is again drenched with the blood of its bravest and best,
but do not forget these are the great successions of hallowed causes.
They are the stations of the cross on the road to the emancipation of
mankind. Let us endure as our fathers did. E very birth is an agony,
and the new world is born out of the agony of the old world.
My appeal to the people of this country, and, if my appeal can reach
beyond, it is this :
That we should continue to fight for the great good of international
right and international justice, so that never again shall brute force
sit on the throne of justice nor barbaric strength wield the scepter of
right.
Mr. President, only by international government, backed by
international force, is this ideal possible; only by terminating
competing armaments and substituting therefor international
cooperating armaments shall we see this great prayer adequately
answered. Public opinion in the United States would assuredly
approve permanent world peace on the basis proposed by Senate
joint resolution 94.
The plan is essential—absolutely essential— to attain the ideal
of permanent world peace and the overthrow of progressive
militarism, so ardently desired by the statesmen o f the entente
allies.
Mr. President, we already have 17 nations waging this war
in concert. We already have 17 nations allied together for the
suppression of the Prussian autocracy. We already have na
tions representing three-fourths of the people of the world
allied together for the purpose of crushing the menace to the
liberties of the world of Prussian militarism. These nations
ought to have their representatives meeting around a table
9633— 17843
I
16
for common action, declaring a common policy, and not com
pelled to carry on an interchange of views at variable distances
of thousands of miles which circle the earth from China to the
United States, from Japan to London. We ought to get to
gether in common concert, in a common understanding as to
international rules to safeguard our future relations toward
each other and toward the common enemy. What sound argu
ment can be urged against it? It is not an entangling alliance;
it is what President Wilson very appropriately called a “ dis
entangling alliance.” An alliance with one of two military
groups contending for greater power would be an entangling
alliance. An alliance with all the nations of the world to pre
vent any nation or group of nations threatening the world is
a disentangling alliance, which we ought to establish as speedily
as possible.
Mr. President and Senators, I have submitted the proposal.
I pray it may be considered thoughtfully by you and by the
thinking men of all nations.
Improve upon it, perfect it, but act; act at once, while the
iron is hot to hammer in shape the links which shall bind us
to other nations in bonds of fraternity, liberty, equality, and
guarantee to all mankind, including the Teutonic people, per
petual prosperity and happiness.
[For exhibits A, B, C, D see C o n g r essio n al R ecord, August
23, 1917, p. 6887.]
9633— 17843
W A S H IN G T O N : G O VERN M EN T P R IN T IN G O FF IC E : 1917
REMARKS
OF
HON. ROBERT L. OWEN
A SEN ATO R FR O M O K LA H O M A
ON SENATE BILL 3928
TO ESTABLISH THE FEDERAL RESERVE FOREIGN BANK
and thereby
MAINTAIN THE AMERICAN DOLLAR AT GOLD PAR THROUGHOUT
THE WORLD
FURNISH AMERICAN COMMERCE WITH STABLE EXCHANGE AND
CREDIT FACILITIES IN FOREIGN COUNTRIES, and
PROMOTE THE FOREIGN COMMERCE OF THE UNITED STATES.
IN THE
SENATE OF THE UNITED STATES
FEBRUARY 25, 1918
W A S H IN G T O N
44888— 18251
1918
I
I
lv, a
i
[IK in
h'
:■
V
#1
J
Inf!
B'i
R E M A R K S
OF
II 0 N . R 0 B E E T L. O W E N ,
Mr. OWEN. Mr. President, on February 20 I introduced a
bill (S. 3928) proposing to amend the Federal reserve act, and
to establish a Federal reserve foreign bank.
Mr. TOWNSEND. Mr. President, may I ask the Senator a
question ?
'
Mr. OWEN. I yield.
Mr. TOWNSEND. Does the Senator propose to bring up the
bill this afternoon?
Mr. OWEN. N o ; I do not. I am going to submit some re
marks upon it, because I want to give the reasons justifying the
passage of the measure when it has been properly considered
by the committees. Congress rarely moves beyond accepted
public sentiment, and this is a matter which I regard as of
very great immediate urgency.
I will call attention, for instance, to what is transpiring just
now in Great Britain. I found in the morning press this
statement:
‘ f orty British banks, including some of the largest in the
British Empire, and with oversea branches, organized an asso
ciation of oversea banks for the purpose o f furthering British
oversea trade and for the extension of banking facilities. This
institution will also furnish trade information to British mer
chants.
“ The British Government has fully approved this plan and is
rendering assistance and encouraging the organization of insti
tutions which have for their purpose the extension of British
trade.”
There are several of these important international organizations being limned now in London. .Also Frnnce Is tcilvin0, steps
along the same line. Germany has its bank plans adequatelv
orgauized now.
This bill which I have proposed contemplates a capital of
8100,000,000 authorized with a paid-up capital o f 820,000 000
the stocks to be at 5 per cent, nontaxable, and to be" offered to
banks of the United States and to the public, and if not sub
scribed to be taken by the Treasury of the United States.
It gi\es corporate power to these banking institutions au
thorizes a directorship of nine men to be appointed by the
President of the United States, and that these directors shall
bo merchants and not bankers in the same way that the °-ovoinment of the Bank of England is controlled by merchants and
not by bankers, these directors to serve for a period of nine
years, one being chosen annually. The functions o f the bank,
the powers o f the bank, will be “ to receive the deposits from
44883— 18251
o
4
American and foreign banks and bankers, from the United
States or foreign governments, in current funds in lawful
money, national bank notes, Federal reserve notes or checks,
and drafts, payable upon presentation, and also for the collec
tion of maturing notes and bills.”
“ The foreign bank may discount notes, drafts, and bills of
exchange arising out of actual commercial transactions—that
is, notes, drafts, and bills of exchange issued or drawn for
agricultural, industrial, or commercial purposes, or the proceeds
of which have been used or which are to be used for such pur
poses, the Federal Reserve Board to have the right to determine
or define the character of the paper thus eligible for discount
within the meaning of this act.
“ The aggregate of such notes, drafts, and bills, bearing the
signature or indorsement of any one borrower, whether a person,
company, firm, or corporation, rediscounted for any one bank,
shall at no time exceed 5 per cent of the net unimpaired capital
and surplus of said foreign bank, but this restriction shall not
apply to the discounting of bills of exchange drawn in good
faith against actual existing values. The foreign bank may
discount acceptances of the kinds permitted under the authority
of this act.”
It shall have power “ to deal in gold and silver coin and bul
lion at home or abroad, to make loans thereon, exchange Federal
reserve notes for gold, gold coin, or gold certificates, and to
contract for loans of gold coin or bullion, giving therefor, when
necessary, acceptable security, including the hypothecation of
United States bonds or other securities which Federal reserve
banks are authorized to hold ” ;
“ To buy and sell, at home or abroad, bonds and notes of the
United States, bonds and notes of foreign governments, and bills,
notes, revenue bonds, and warrants, with a maturity from date
of purchase of not exceeding six months, issued in anticipation
of the collection of taxes or in anticipation of the receipt of
assured revenues by any State, county, district, political sub
division, or municipality in the continental United States, in
cluding irrigation, drainage, and reclamation districts, such
purchases to be made in accordance with rules and regulations
prescribed by the Federal Reserve B oard;
“ To purchase and to sell, with or without its indorsement,
bills o f exchange arising out of commercial transactions as
hereinbefore defined;
“ To establish from time to time, subject to review and de
termination of the Federal Reserve Board, rates of discount
and exchange and commissions for the opening of credits at
home or abroad, to be charged by the foreign bank for each
class o f paper, which shall be fixed with a view to accommo
dating commerce and business;
“ To issue bank notes and receive Federal reserve notes upon
like terms and conditions as now provided for the Federal
reserve banks;
“ To open credits at home and abroad for account of domestic
and foreign banks or bankers, to facilitate exports and imports
to and from the United States and exports and imports to and
from one foreign country to another foreign country.”
I pause to say, as from China to Russia, which would go
through the United States, and which might be properly facili44883— 18251
5
tuled by the financial powers ol’ the foreign bank which I have
proposed.
Further powers of the bank, “ upon the direction and under
rules and regulations prescribed by the Federal Reserve Board
to establish branches and agencies in foreign countries for the
purpose of facilitating commerce with the United States.
“ No bank, banker, corporation, or individual, other than the
foreign bank, shall sell dollar balances at less than gold par
except as payment for merchandise imported into the United
States without the express authority of the Federal Reserve
Board.”
Mr. POMERENE. Mr. President-----The PRESIDING OFFICER (Mr. H ollis in the chair).
Will the Senator from Oklahoma yield?
Mr. OWEN. I yield.
Mr. POMERENE. The Federal reserve act authorized the
different banking corporations to form branch banks abroad?
Mr. OWEN. Y es; it did.
Mr. POMERENE. Can the Senator state to what extent the
banks have availed themselves o f that power and privilege?
Mr. OWEN. Practically not at all. At first the Federal re
serve law contemplated that they would do that voluntarily, but
they did not voluntarily establish these foreign branches.
Thereupon the Congress o f the United States, at the instance
of the Federal Reserve Board, passed an amendment authoi'izing the Federal Reserve Board to require them to do th is; but
the Federal Reserve Board seems not to have found it prac
ticable for some reason to compel any of these banks to estab
lish foreign branches.
Mr. POMERENE. They have established foreign branches in
South America, have they not?
Mr. OWEN. No, sir.
Mr. POMERENE. The National City Bank?
Mr. OWEN. The National City Bank is not a Federal re
serve bank. Some American national banks have established
in the last three years several foreign branches. The National
City, of New lo r k , has established a branch at Buenos Aires,
one at Rio Janeiro, and another bank or two in Brazil one at
Caiacas, one in Colombia, one in Cuba, one at Panama I am
told, and perhaps several other branches. That however is a
private bank, a member of the Federal Reserve System and a
very powerful institution, but still an institution run’ neces
sarily by the nature of its organization for profit.
Mr. POMERENE. It is given authority under this act to
organize?
Mr. OWEN. Y es; that is quite true; but there is no publicly
controlled bank with foreign branches all over the world charged
with the duty of furnishing the member banks of the "rent
Federal Reserve System with foreign exchange and with fur
nishing importers and exporters with the credit facilities and
with the exchange facilities which are vital for the legitimate
and urgently needed expansion of our import and export busi
ness.
Mr. President and Senators, with a trade balance in our favor
of over .$3,000,000,000 for 1917, and with the American dollar
backed by the largest amount o f gold in the world, and backed
44883— 18251
by the most active industrial life in the world, the American
dollar is at a discount in the neutral countries of Europe of
over 20 per cent, and even in South American countries is at a
discount as high as 20 per cent.
The Secretary of State a few days ago, before the Committee
on Appropriations of the House of Representatives, found It
necessary to point out in his testimony there the astonishing
condition that the American dollar was at a discount prac
tically all over the world when all the world is indebted to
America. It ought to be at a premium under such trade condi
tions, and there is something radically wrong in our international
management when that condition is permitted to exist. It can
be corrected, as I shall presently show. We lost 5100,000,000
last year by i t ; we lost more than that. We lost practically
$200,000,000 in our international exchange with Europe.
I submit, without reading, a table showing the imports and ex
ports for 1916 and 1917, amounting to $9,183,000,000 total of
visible imports and exports, and showing a trade balance in
favor of the United States of $3,378,000,000. (See Exhibit A.)
I pause to remark that the trade balances must always be
clearly understood as signifying only that state of the census
o f shipment of commodities shown on bills of lading, and do not
in fact measure the full amount of international exchanges of
value, but only commodities shown upon the commodity manifest
customhouse records.
Our trade balance with Spain, for example, for 1917 was
$55,587,690, yet the Spanish peseta, instead of being exchange
able for our dollar at 19.30 cents, is selling for 24.30 cents, a
flat loss of 5 cents out of 20 cents, or 25 per cent loss. In point
of fact, the American dollar should be at 25 per cent premium
in Spain, and not 25 per cent discount, so that our loss justified
by the exchange balance of trade is twice as great as it appears.
At all events, we certainly have a right to demand that our dol
lar, notwithstanding, should be at gold par in Spain.
There is a flat loss of 5 cents out o f 20 cents every time an
American merchant is compelled to buy a peseta with American
gold or with American credit based on gold. In point of fact
the American dollar should be at a 25 per cent premium in ex
change, because they require $55,000,000 of American money in
order to pay their debt to us, They need the dollars, if we are
only dealing with our exchange with them, and it is not fair to
us that we should be put in the attitude of being required to pay
a premium on their money when they ought to pay a premium
on ours, if the exchange of commodities between the two coun
tries is to determine that matter.
The fact that the Spanish peseta, however, is at a premium of
25 per cent means, in round numbers, that instead of an Ameri
can dollar buying 5 pesetas it buys 4. It means that our mer
chants who bought $36,000,000 worth o f goods from Spain, which
they paid for in pesetas, receive in Spanish commodities 25 per
cent less than they would have received if our dollar was at gold
par in Spain. It means that the Spanish merchants who bought
$92,000,000 worth of goods from us get with their currency one
American dollar for 4 pesetas, and with that dollar, bought with
4 pesetas, get a like advantage in buying American goods, not
withstanding the fact that these pesetas in Spain do not leave
44883— 18251
7
Spain. The Spanish currency in gold thus buys more and our
gold currency buys less because of this unadjusted condition.
It means, as I understand it, that out of the transactions be
tween Spain and the United States in 1917 of $125,000,000 we
suffered a net loss amounting to a fourth of this sum, approxi
mately $33,000,000. It is just as much taken out of the United
States as if it had been taken out of the Treasury of the United
States and transferred in gold and given to Spain. It is taken
out from our merchants, from our consumers, from our pro
ducers, and given to the merchants and consumers of Spain.
The United States Government understands this difficulty and
is trying to correct it just now by arranging with France to
establish a French credit in Spain that will bring Spanish ex
change to par, because Spain is an international creditor. Take
it altogether she has shipped out more goods than she has
shipped in. So she is entitled to an international credit trade
balance, and that has to be offset either in commodities, gold, or
credit. The United States Government understands this diffi
culty, as I said, and is trying to arrange it. Spain has been re
luctant to do this because of the extraordinary trade advantage
of a premium on her currency to her and the matter has been
hung up by the Spanish authorities. Besides this, we were com
pelled to ship Spain $88,000,000 of gold to meet the debts of
Great Britain and France to Spain, only to end, nevertheless, to
our still unbalanced trade disadvantage, because Spain is still
an international commodity creditor. The Spanish merchant
takes 4 of his pesetas and buys an American gold credit dollar
in London and with these dollars buys American commodities
at a like discount, so the American exporter gets for his dollar
a Spanish credit of but 4 pesetas when he should get 5 pesetas.
He loses 1 peseta on every 4 pesetas, or 25 per cent loss. When
the American importer wants to buy in Spain he takes his
American gold dollar and, through London, gets 4 pesetas credit
in Spain, suffering a like loss, which then falls on the American
consumer in due course o f trade.
Notwithstanding our furnishing $88,000,000 of gold to Spain,
we still suffer the consequences o f the credit trade balance of
Spain internationally considered.
The British and the French, both through private sources and
by pm ately owned banks, are correcting this trade disadvantage
of the premium on Spanish money, as far as some of their own
special merchants are concerned, by establishing private banking
credits in Spain and branch banks in Spain, which they will
maintain until this unjust premium on Spanish exchange disap
pears, thus avoiding the loss to certain favored merchants of
France and England, which our merchants are compelled to
endure by the failure of our officials and of our bankers to safe
guard in like manner our merchants. We have so far failed in
the adjustment above referred to of furnishing credits in Spain
The premium on the Spanish exchange can be removed in the
following ways :
Either by shipments o f gold to Spain to settle her international
credit trade balances or by arranging national or individual
credits in Spain to cover these international credit trade balances
until the international credit trade balances are removed, or by
shipments o f commodities to Spain to overcome the international
44883— 18251
credit trade balances due Spain, or by forbidding arbitrage and
having England and France settle their balances directly, as
we would then do, and put our dollars at a premium.
The same thing is true in degree with Holland, Denmark, Nor
way, and Sweden. Our trade with Spain, including these coun
tries, amounted in 1917 to $450,000,000, involving a loss in 1917
of approximately $100,000,000 instead o f a gain of $100,000,000,
to which we are entitled by our trade balances.
We have no orderly method to protect our American merchants
and American producers and American consumers against these
losses. Our international bankers are interested as bankers in
selling exchange, but they are not charged with the responsibil
ity of establishing the American dollar at a premium or at gold
par. They are naturally content with their commissions, charges,
and profits for exchanges, which, apart from interest, amount
probably to at least $100,000,000 annually.
The United States, in order to establish the American dollar
at gold par throughout the world and maintain the American
dollar at gold par, must have a mechanism charged with the
duty o f safeguarding the American dollar as far as possible,
such as I propose in the Federal reserve foreign bank.
For a half century the trade balances have steadily been in
favor of the United States. We have a right to expect that this
will continue, and that these trade balances will erystalize in the
ownership by the people of the United States in securities and
properties scattered throughout the world. This is what has
made Great Britain the greatest financial power in the world.
Great Britain has always had the wisdom to maintain the pound
sterling at par. For this reason the pound sterling has become
the standard measure o f value throughout the entire world and
has contributed largely toward making London the greatest com
mercial and financial center of the world.
The British Government buys London bills In New York and
uses credits in New York in order to balance the deficit of an
international trade-credit balance against her In order to keep
the pound sterling at about par, so that a British merchant who
handles the pound sterling as a measure o f the transaction
knows what he is talking about when he makes a contract, and
the British Government finds it necessary to stabilize this
measure of the British merchant’s contracts. America has
not had the wisdom to understand this, and I am now engaged
in the business and the duty, as chairman of the Committee on
Banking and Currency, of calling the attention of the country
to this matter in the hope that the Congress of the United
States will speedily correct it.
Mr. SHEPPARD. Mr. President-----Mr. OWEN. I yield to the Senator.
Mr. SHEPPARD. Through what agency does the British
Government perform that function—through the Bank o f Eng
land?
Mr. OWEN. Y es; through the Bank o f England, which
serves as the treasury of Great Britain; and the Bank of Eng
land is a bank whose directorship is controlled by merchants
and not by the bankers.
Mr. SHEPPARD. I understand that no commercial banker
is a member of the board of directors.
44883— 18251
Mr. OWEN. N o ; he Is not permitted to be, for a reason the
United States ought never to lose account of— that that great
bank has for its function the protection of the Industry and
commerce of Great Britain as a public institution. Although
the stock is owned by private hands, that matters not at all.
It is a public institution nevertheless, just as I propose here
that this stock may be owned by private hands; but still it
shall be governed by the United States Government. The
trouble with the banker is that he always thinks in terms of
interest, in terms of commission, and that is natural. That is
not a criticism of the banker; that is his business. He is a
merchant in credit and is not to be blamed that he thinks in
terms of interest and commissions, and I must not be under
stood as meaning to criticize him at all.
I am only pointing out that he is not properly the custodian
of the commerce of the United States; that is a ll; because he
looks at it as a thing to serve his interest instead of looking at
himself as purely to serve its interest. There is a difference iu
the point of view which is obvious.
I have prepared a bill, which I now submit (S. 89281) amend
ing the Federal reserve act so as to establish a Federal re
serve foreign bank. The 12 Federal reserve banks have found
a field of such enormous activity in the domestic banking life
of the United States that they have not been situated for ade
quately handling foreign business, further than the acquisition
of a very small part of available foreign bills. They have utterly
failed to meet the services expected. The foreign bank proposed
is intended to serve as a medium through which all the reserve
banks may safely, conveniently, and economically transact for
eign business, if they w ish; may buy and sell foreign exchange,
and thus accommodate all of the banks in the United States,
doing business with the Federal reserve banks, and to give like
accommodation even to those banks and bankers who are not
members of the Reserve System, in order that our importers and
exporters, wherever located, may have every facility of buying
and selling foreign exchange and establishing credits here and
abroad for the purpose of buying foreign commodities and of
selling domestic commodities abroad. It is intended by this act
to provide banking accommodations to all our merchants who are
buying and selling goods abroad, and to enable them the better
to accommodate their home and foreign customers.
It has been said that nearly all the importers and exporters
nre located in New York City or in the immediate vicinity. As
a matter of fact, the lack of these facilities, the very thing of
which the country most justly complains, has compelled importers
and exporters from the Pacific States, the Rocky Mountain
States, the Mississippi Valley, and the Southern States to keep
agents in New York to transact their import and export banking
business, and this at great expense to them, and, moreover, the
expense is one which has no justification in sound reason. In
fact this is a great disadvantage to the importers and exporters
of all the United States except New York City, and against
this the country justly protests. Moreover, it has a most in
jurious effect upon the commerce of the United States, because
44883— 18251
1 See page 37.
10
If) Li f:
the lack of these facilities throughout the body of our country
prevents the expansion o f export and import business with the
body of our country, and is a thing which is against the de
velopment and prosperity o f the United States.
Moreover, it is against the greater expansion and the greater
prosperity of New York City itself, which would be benefited if
the full powers of the United States in the export and import
business could be developed, and that to its highest capacitv for
be it clearly remembered, finance is the handmaid of commerce,
not commerce of finance— financial power follows successful
commerce and decays with decaying commerce.
It has been said that this foreign bank would compete with the
few New lo rk banks having foreign-exchange facilities. It
seems to me I heard something of this kind when we were fram
ing the I ederal reserve act. Then these New York banks bit
terly complained that establishing 12 reserve banks would depnve them of deposits, of prestige, and of money-making power
, heir lack of vision, as seen in the result, is fully evident Thev
have gained deposits enormously; they have gained prestige;
they have gained increased power, with expanding power of
the United States and its banking system. Only a half dozen
ISew lo r k member banks handle foreign exchange, and all of
them should have these facilities through the foreign bank I
propose.
&
the Federal reserve foreign bank would offer them facilities
ror serving their customers more economically, more efficiently
than their own facilities can now afford. They would avoid
the expense of keeping large deposits abroad, the expense of
keeping loieign offices any further than their specialty mi^ht
lequire them, and they could use this bank as an economical
means of transacting their own business and would be able to
liquidate their foreign bills through this bank in a manner which
they can not easily do now. It would expand their power. It
is tine, I think, that where they are charging unreasonable com
missions, unfair profits, and imposing unjust exactions which
hinder the commerce of America, they would be, in the course
of time dissuaded from these practices by having a standard of
fair value operating side by side with them. It would not
nterfere 'with their legitimate business. It might abate to some
extent piactices which are injurious to American commerce in
jurious to our national development, and indirectly injurious to
them in so far as they may be disposed to kill the goose that
lays the golden egg. Our American bankers have not sufficiently
realized that banking grows with commerce. The power and
dignity of London are based on the verity of this conception It
will be remembered that the Bank of England has its director
ate composed exclusively o f merchants and not of bankers. Thev
do not permit bankers merely to be on this board of directors for
t ie ob\ ious reason that the banker, who thinks in terms o f inteiest and commission and profits and exactions, is not happily
constituted to determine the best methods of serving commerce.
Many bankers fail to really understand commerce. When Secretary McAdoo introduced Lord Cunliffe, governor o f the Bank of
England, as a banker, Lord Cunliffe quickly corrected this and
said no, he was a merchant.
44883— 18251
11
This foreign bank would make mobile and liquid the foreign
deposits of American banks and would attract from abroad very
large deposits of foreign banks who would like to use the facil
ities of this Federal reserve foreign bank.
The powers given to the foreign bank are the same which have
been given to the reserve banks, except that the foreign bank
does not look to the reserve banks or to the member banks either
for capital or for reserve deposits. The capital to be used by
the foreign bank it is proposed to obtain by the issuance of 5
per cent cumulative nontaxable stock, giving to the United
States the surplus earnings after a 50 per cent surplus is pro
vided for the foreign bank. It is proposed that this bank shall
begin with a paid-up capital stock o f $20,000,000 and a present
authorized capital o f $100,000,000.
The resources of this bank will be further supplemented by
deposits from banks transacting foreign-exchange business, in
its international transactions, from the deposits of the United
States, of foreign Governments, and of foreign bankers. The
same safeguards are thrown around the foreign bank as have
been found wise in the case of the Federal reserve banks, with
the same powers of issuing notes and receiving Federal reserve
notes. But the foreign bank is particularly charged with the
duty of facilitating financial transactions involving imports and
exports of our merchants, and it will be the duty of this bank,
as far as possible, to promote the parity of the American dollar
in other countries, which will itself be a very great aid for
American commerce.
The establishment of a gold fund in Washington by the 12
Federal reserve banks for adjusting their balances with each
other by bookkeeping entries instead of by actual transfer of
gold has served a great public economy, and the same thing can
be done with international exchanges by establishing a gold fund
in the United States and abroad to serve a like function.
A very important proposal of this bill is the concluding para
graph, to w it: “ No bank, banker, corporation, or individual, other
than the foreign bank, shall sell dollar balances at less than gold
par, except as payment for merchandise imported into the United
States, without the express authority of the Federal Reserve
Board.” It is the intention of this provision to prevent the
transfer of credits to the injury o f the parity of the gold dollar.
I digress here to say that we may now make the American
dollar at par in Spain by transferring credits to Spain. All in
the world we need to do is to transfer a credit to Spain sufficient
to cover the international trade balance or a credit to pay for
our own imports from Spain. The moment that is done the
premium on the peseta disappears, because in normal times
there is no premium on the peseta ; and if you establish a credit
there to be paid at some future time in pesetas, when the peseta
is at par you are obviating this 25 per cent premium now on the
peseta. It is perfectly plain. A citizen can do that; a single
bank can do that; the Federal reserve banks can do it; the
United States can and ought to do that now in order to safe
guard our merchants from loss, and not to safeguard alone the
merchants from loss, but to safeguard the American consumer
and the American producer from such losses.
A nation is composed of the sum of its parts; a nation consists
of individual units. When the individual merchant, as one of
44883— 18251
12
th« units of our commercial and financial life, suffers a severe
loss he transmits it to the body of the people through the goods
which he handles. If he buys the goods where the American
dollar is worth only 75 cents on the dollar lie passes the loss on
to the consumer; or, vice versa, he passes it to the producer, if
he is buying for shipment under such conditions.
The reason for this is that the present tremendous discount
of 25 per cent on the American dollar in Spain has been brought
about by the transfer of American credits through London and
Paris to Spain and the refusal of Spain to adjust the interna
tional differences by like credit transfers. If Spain can do this
to our injury and to her advantage, we should protect our dollar
by the same principle, and it takes actions, not words.
The United States, Great Britain, and France are now urging
Spain to agree to take French securities or French credits for
the purpose of correcting this injurious discount on American,
English, and French money, all of which are suffering from a
like discount in Spain, due to Spain’s refusal to adjust by trans
fer o f international credits.
Mr. POMERENE. Mr. President-----The PRESIDING OFFICER. Does the Senator from Okla
homa yield to the Senator from Ohio?
Mr. OWEN. I yield to the Senator.
Mr. POMERENE. The Senator from Oklahoma has indi
cated that Great Britain has been able to protect herself, be
cause of the Bank of England and her methods of doing busi
ness throughout the world, against the very conditions from
which we are now' suffering. If she has those facilities, why is
she not at present able to protect herself against Spain?
Mr. OWEN. Mr. President, what Great Britain does actu
ally now, so far as Spain is concerned, is that private banking
concerns in Great Britain have established branches in Spaiii
and have established credits in Spain; and by establishing
credits in Spain they have those credits represented in pesetas.
They are carrying those pesetas as a credit and selling those
pesetas now to favored British merchants in London, to the pro
tection of those merchants who have the wit to see what the loss
is, while they leave the current exchange at a discount in Lon
don for the “ accommodation ” o f those who do not see. What
I am trying to do is to make America see. I do not want this
to continue, and that is why I am delivering this address now
to the Senate in the hope o f also persuading the people of the
United States.
I have many letters from importers and exporters urging that
the dollar be brought to gold par.’
The present war binds the United States to Great Britain and
France so closely that the United States dollar, the English
pound sterling, and the French franc suffer in precisely the
same way so long as wre extend the American credits to our
allies in excess of our actual net nominal balance of trade.
The nominal balance of trade is arrived at by ascertaining
the difference in commodity shipments and the actual balance
of trade is a very different thing. The actual balance of trade
must be ascertained not merely by commodities but also by
credit transfers, and into the determination of the actual bal
ance of trade we must consider not only exchange of commodi44SS.T 1S251
13
ties and exchange of securities but many other factors, such as
freight charges by Great Britain, for example, at $150 a ton
for furnishing our supplies to them, but also the charges, com
missions, and profits paid by us in foreign ports; the purchase
by our troops in France of large local supplies; the traveling
expenses of our citizens abrond, and many such items which
are>not registered in any census bureau; also the purchase of
foreign properties by Americans, and also interest payments
which the United States is required to pay on stocks and bonds
held abroad; also the interest payments which are payable from
foreign countries to the United States; also remittances by for
eign -residents in the United States abroad to their friends and
relations and many such factors which are not within the power
of anyone to give. But we know that when the demand for
the American dollar ceases and the American dollar is not at
par that then a condition has arisen from these various causes
at which we are being injured in a very subtle and very prac
tical way, which falls first upon both our importers and export
ers, and, secondly, upon our consumers of imported products
and upon our exported products, injuring America in its most
vital parts. This I wish to correct. I demand its correction
find appeal to our business men in America to hold up my hands
in the effort to furnish them a mechanism through which these
unjust discriminations against the American dollar shall abso
lutely cease.
When peace comes the United States will be charged with the
duty of maintaining its dollar at par, whether Great Britain or
France protect their money at par or not, but the United States
and our allies should attend to this matter now, for it is injuring
us all.
The bankers in the Scandinavian countries and in Spain do
not feel safe in carrying large balances in the United States,
notwithstanding the stability of our Government, because, since
wo permit a fluctuation in exchange, they do not know whether
they will receive the same amount back when the time comes
that they will want their funds at home, and for the same
reason American bankers hesitate to place credits in these for
eign countries because when they want their money back they
may find that the differences in exchange are interrupting them
and preventing them from receiving their funds back dollar
for dollar. For that reason the lack of parity in the currencies
of the various countries comprise a very serious obstruction to
commerce find prevent the easy establishment of an interna
tional gold fund which would safeguard all countries from the
expense of shipping gold back and forth 8,000 miles across the
Atlantic.
Any person of sound reasoning faculty ought to be able to see
this. Nevertheless those who are called expert in banking seem
not to have had the vision to properly apprehend it.
Some of the New York bankers in foreign exchange advise me
that the exchanges nre now furnished to importers and exporters
at such low rate that there is no profit in the business. Strangely
enough the same gentlemen advised me that this foreign bank
is highly undesirable because it will compete with them in this
undesirable business.
My attention was called yesterday to an interesting transac
tion involving the purchase of commodities from Spain, in44883— 18251
14
volving in round numbers approximately $100,000, on which
there was a charge o f one-half of 1 per cent by a bank of Wash
ington, D. C .; one-half of 1 per cent by the bank in Baltimore,
M d.; one-half o f 1 per cent by a bank o f New York C ity ; and
one-half of 1 per cent by the bank in Barcelona, Spain, amounting
to $2,000 charges outside of interest, without any risk whatever
against commodity shipments insured at par and a transaction
which would take probably 30 days to cover, thus imposing a
tax on this 30-day accommodation o f 2 per cent. I do not com
plain o f these banks in the least. They are looking at it from
the point of view of the banker and not from the point of view of
merchants, but since the bank in Washington had no facilities
to deal directly with the bank in Barcelona, they go thi'ough
two other correspondents for sundry reasons. Evidently, if
there were a Federal reserve foreign bank, a member bank could
furnish its customers the accommodation more economf&lly
than by this crude, unscientific, and very expensive system.
It is probably true that in some very large international transac
tions the rate might be very low, but taking it as a whole these
rates are high, and, moreover, it not infrequently happens that
the bankers take other advantages of those engaged in commerce
to participate in their commercial profits with which the bankers
have no proper connection, just as under the old system bank
directors would negotiate accommodations through their banks
and be paid privately for their valuable influence, a practice
which the Federal reserve act found necessary to stop, because
it was levying an unfair tribute upon American commerce.
There are bankers engaged in foreign exchange who advise me
that this foreign bank is highly desirable and that it will enable
them to transact their foreign-exchange business more econom
ically by having one Government-managed agency through which
this business can be conveniently and economically handled. ,
I was astonished to be told a few days ago by gentlemen em
ployed by the Government as experts that it was desirable to
have the American dollar at a discount in the neutral countries
of Europe, because, among other reasons, while it was against
the interests of the American importer, it was beneficial in the
same degree to the American exporter, because one was the
opposite of the other. I have carefully analyzed this astonish
ing statement and I am of the opinion that there is no founda
tion whatever for any such suggestion; that the exact contrary
is true. It injures the exporter as much as it does the importer.
The American commodity producer who has a thousand dol
lars’ worth of commodity in America is entitled to buy a thou
sand dollars’ worth of commodities in Spain on a par gold basis,
but when he exchanges his commodities for American dollars,
or exchanges his American dollars for Spanish pesetas, he gets
4,000 pesetas instead of 5,000 Spanish pesetas. He loses 1,000
Spanish pesetas in the exchange. He is entitled to receive 25
per cent more than he gets. An attempt has been made to con
fuse this proposition by saying that commodity prices in the
United States have risen more than they have in Spain and in
the neutral countries of Europe. This confusing suggestion
would be better plead if it were a fact. It-happens not to be a
fact, however, and would have nothing to do with the case if
it were a fact.
44883— 18231
15
Tlie point is that the American gold dollars will not buy on
parity Spanish gold money. The fact is that the American gold
dollar, because of international trade balances, arbitrage, gold
embargo, and so forth, will buy only 75 per cent of Spanish gold
money, regardless of commodities, and any attempt on the part
of "e x p e rts” to cloud this issue with the suggestion that Span
ish .commodities have l'isen less than American commodities
shows the poverty of argument of these gentlemen. They appeal
to a statement of fact, which if true would be immaterial, and
which is not shown to be true. Norway products rose on an
average 110 per cent since the w a r; Sweden, 66 per cent; Den
mark, 66 per cent; Netherlands, 54.8 per cent; Spanish com
modities probably about 50 per cent. The average of staple
commodities in the United States have not risen greater tlinn
this, although some specialties have done so where the allies
urgently needed them.
The one unhappy fact appears to be that when the American
producer, with his thousand dollars’ worth o f commodities, buys
a thousand American gold dollars, he exchanges it for 75 per
cent of Spanish gold money, and then with but 75 per cent of
Spanish gold money he buys less of Spanish commodities than
he would in normal times.
COM M ERCE
THE
V IT A E
M ATTER.
It is not a question, however, of merely accommodating foreign
exchange banks, although this purpose will be served. The much
more important matter is stabilizing foreign exchange as we
have stabilized credits in the United States and lowered the
interest rates in the United States by the Federal reserve banks.
This bank ought to be controlled by merchants just as the Bank
of England is controlled by those who are trained and specially
skilled in commerce.
In a striking editorial by one o f the greatest editors in the
United States, Arthur Brisbane, of the Washington Times, of
February 12, 1918, appears the following:
, .
th® seventeenth century, when Cromwell had power, he asked
himself first of a l l : ‘ W hat does England n e e d ? ” He knew that a com
mercial nation needed men that understood coAmerce.
And he points out that the policy of England established at
that time of inviting to England men who understood commerce
had resulted in the tremendous commercial growth of England,
while those countries which treated men who understood com
merce with Indifference find with neglect and even with perse
cution went into decay.
America needs men Who understand commerce. This hank
ought to be controlled by men who understand commerce and not
by bankers. The mechanism of banking is understood perfectly
well by those who understand commerce, but the banker, who
is engaged in banking for the purpose of making commissions,
of getting the highest interest rate he can, does not sympatheti
cally deal with commerce as commerce.
Men who have this point of view should not be in unrestrained
control of American commerce, of the business of American
importers and exporters, of American manufacturers, o f Ameri
can producers, of the interests of American consumers.
It was the inability of bankers to perceive that the commerce
and industrial interests of America were superior to their pri
vate acquisition of property that made necessnrv the Federal
44883— 18251
16
reserve act and which took out o f their hands the power to fix
credits in the United States, to make panics or squeeze credits
from time to time in order that they might multiply their for
tunes at the expense of the American people. They can still do
that within degree, and they still do it within degree, beyond a
shadow of a doubt. Any man who is familiar with Wall Street
knows it perfectly well. The traders in stocks are very skillful
in diagnosing the conditions when that situation arises, and
those who are experts are enabled to play successfully on
either the bull or the bear side, just as credits are being ex
panded or being contracted by those who measurably control
the credit market in New York City. Under the Federal Re
serve System, however, they can only now operate within a
very restricted field.
It may be expected that gentlemen who take this view will
oppose any activity of Government that will undertake to pro
tect American foreign commerce. I shall desire these gentlemen
to record their objections before the Committee on Banking and
Currency in public, where their objections may be scrutinized
with a microscope and answTered by men engaged in importing
and exporting in order that the truth may be made clear and
that private interests shall no longer control the foreign com
merce o f the people of the United States. The United States
Government should have as sympathetic an attitude toward
foreign commerce as toward domestic commerce.
I call attention to an interesting editorial of Mr. Arthur Bris
bane in the Washington Times of February 12, appealing for
justice in this matter. [See Exhibit B.]
I submit an interesting editorial of the Journal of Commerce
of February 11. [See Exhibit C.]
This very able editor of the Journal of Commerce points out
that making foreign bills readily subject to rediscount would
make such bills as liquid as domestic commercial paper. He
points out that private banks sometimes hesitate to invest heavily
in foreign bills because in case o f a stringency they might not be
readily saleable, while the foreign bank could immediately pro
vide a ready market for such bills and when exchange was
scarce, or when rates tended to advance, could ease the situation
by selling exchange and so help in a most important way and
lessen the injurious fluctuation o f exchanges.
He points out the sound maxim that trade follows the loan,
and that having a foreign bank properly organized for this
service could be of substantial service to those engaged in ex
panding the foreign trade of the United States.
lie points out very wisely that the prestige of Great Britain
had been due to the fact that her foreign trade was established
not only by efficient labor but by capital available in the right
spot and at the right time and under the right conditions to
facilitate foreign business and that this fact developed in Great
Britain a large body o f investors, accustomed to employing their
capital in other countries; that their investments became the
channels or outlet for the products of British industry just as
the returns that came to them became the means of their financ
ing other British imports and exports; that this accounts for
the great world market in London. The same conditions are
obviously essential to make New York City, and San Francisco,
44883—18251
and Galveston, and Chicago world markets by affording them
like facilities.
He calls attention to the last words o f President McKinley,
warning “ against the illusion that we could possibly have a
permanent one-sided trade.” In the long run imports are paid
for by exports and exports are paid for by imports. The nations
can not discharge balances of trade merely in gold, for they
would exhaust quickly the gold basis upon which their cur
rency is founded. America must encourage imports and exports.
America must establish reciprocal trade relations with other
countries. America must furnish her importers and exporters
with a mechanism by which to accomplish this. This is the
purpose of the bill I submit.
Through this bank we can accomplish many important re
sults: First, we can give better facilities to our importers and
exporters, and thus serve our manufacturers and our producers
in field, forest, and mine. Second, we can thus enormously
increase our foreign trade by extending these facilities through
suitable credits, for commerce follows credit. We can make
the capital of our importers and exporters go much further by
giving them these facilities.
We can make more useful and more available United States
credits now in foreign banks.
We can make and keep the United States dollar at gold par
throughout the world and thus make the dollar the medium of in
ternational exchange and clear not only our own import and ex
port business in American centers, but we can cause business be
tween Asia and Europe to be transacted as it should be, through
intervening financial centers in America, clearing sales of China
tea, for example, to Russia through New York. These facilities
will make the United States the financial center of the world,
because we have the most gigantic and highly perfected banking
system on earth, with the largest available capital resources in
the world. The resources of the reserve banks alone are over
three billions, and the bank resources o f the United States now
have a visible supply exceeding thirty billions.
It will lend to banks all over the world carrying balances in
this foreign bank for the purpose of getting its accommodation.
It will bring balances from foreign governments to this bank.
I desire to see this bill perfected so as to meet the requirements
of American commerce.
Recently the United States Chamber of Commerce held a very
important convention o f American business men at Atlantic
City, lasting four days, September 17 to 21, 1917. This or
ganization represents 400,000 mercliants, wholesalers, jobbers,
manufacturers, and business men, and they unanimously adopted
tlie following resolution:
“ Whereas the foreign trade o f the United States for the last
fiscal year shows a balance in favor of this country of
nearly $4,000,000,000; and
“ Whereas loans to our allies greatly exceed our ‘ favorable
balance of trade ’ ; and
“ Whereas the continuance of any set of conditions which tend
to curtail imports, because imports represent the only form
of cash payment which our entire foreign trade is yield
ing; and
44883— 18251------ 2
“ Whereas high foreign exchange premiums penalize imports
and tend indirectly to increase the enormous inflationary
debit balance which the Nation is rolling up against the
future in the form o f foreign loans; and
“ Whereas the advances to our allies are now proving a boom
erang, leading to the depreciation of the American dollar
in foreign markets because of lack o f governmental regula
tion ; and
“ Whereas all our allies are now taking every step necessary to
protect their own currencies abroad; and
“ Whereas the American dollar is now at a discount o f from
3 to 20 per cent in neutral foreign countries: Be it
“ Resolved, That the United States Government, through its
proper departments, take whatever action may be necessary to
keep at parity the American dollar In every country of the
world.”
I believe that the Congress and the President of the United
States and the executive officers of the Government should re
spect this expression o f public opinion, especially when it is
founded on sound reasoning and good sense.
The President of the United States undoubtedly is in cordial
sympathy with this desire of the business men of America to
improve their facilities for doing international business, and I
respectfully submit some of the expressions from addresses
made by the President referring to this question and pointing
out in advance who may be expected to oppose it, and why.
Mr. STONE. Mr. President, if the Senator will permit me,
it is quite important that the parity of our money should be
maintained abroad in every country. Is the Senator going to
follow what he has just been stating by suggestions as to the
best way to do that?
Mr. OWEN. I have already made suggestions by which it
may be done in four different ways.
Mr. STONE. Well, I was not present at the time.
Mr. OWEN. I will repeat them for the Senator. It is a very
simple matter. It can be done by a transfer o f commodities, by
a transfer o f gold, by a transfer of credits, or by the forbidding
of arbitrage. Tlie forbidding of arbitrage, I* might explain,
means that a debt of Spain to the United States can not be
canceled through London; it must be canceled direct. It prevents
the shifting of credits from one nation to another nation for
the purpose of canceling credits between other nations; in other
words, if we forbid arbitrage, then our commodity trade balance
would put the American dollar at a premium in Spain, and the
same thing is true with regard to all the neutral countries.
Great Britain could not then borrow from us large amounts of
money, pay her debts to Spain and other neutrals, and leave
the American dollar at a discount while she safeguards her
private merchants by private arrangements of credit transfers
from London to Barcelona and to Madrid. That is what I am
trying to call attention to.
Mr. HENDERSON. Mr. President-----The PRESIDING OFFICER. Does the Senator from Okla
homa yield to the Senator from Nevada?
Mr. OWEN. I yield to the Senator.
44883— 18251
19
Mr. HENDERSON. Do I understand the enactment of the
bill which the Senator advocates would correct the evil o f which
the Senator is now speaking?
Mr. OWEN. N o; it would provide a mechanism by which to
prevent its recurrence.
Mr. HENDERSON. It would be another one of the means
for curing the evil referred to by the Senator from Oklahoma in
reply to the Senator from Missouri?
Mr. OWEN. Y es; it would provide a mechanism by which the
evil would not be permitted to recur in future and could, if
passed, effect almost an immediate remedy.
Mr. HENDERSON. I merely refer to that because I do not
think the Senator from Missouri quite caught the point the
Senator from Oklahoma was making.
Mr. STONE. Not being a financier, or the son of one, I do
not quite understand why, if England borrows money of the
United States and gives her securities at par for our money at
par, she w-ould transfer that borrowed money to Madrid or
Barcelona or any other place to pay debts at 75 cents on the
dollar. How could she do that without very great loss?
Mr. OWEN. England, when she borrows money from the
United States, immediately pays it out to her manufacturers-----Mr. STONE. Yes.
Mr. OWEN. And her manufacturers, having these credits
transferred to London, can then transfer them to Spain to
settle their debts to merchants in Spain; and when they do
that they give Spain an international credit balance. The con
sequence is Spain does not need our dollars to pay her debts
here, but she uses the dollars which she has obtained from
the British merchant to pay her debts here and that leaves us
with our dollars at a discount.
Mr. STONE. Well, what kind of dollars do they get from
the British merchants to pay their balances?
Mr. OWEN. They get them in payment for commodities im
ported to Ixmdon from Spain.
Mr. STONE. But are the dollars English dollars?
Mr. OWEN. N o ; they may be in the form o f English money
or American money— either one.
Mr. STONE. Or they may be an exchange of credits?
Mr. OWEN. They may be an exchange o f credits. The dol
lar and the pound sterling are merely measures of value; that
is all. When Great Britain borrows from us in dollars she
converts them in pound sterling, which does not change the
substance at all, but when she gets this money at London and
transfers it to Spain she puts the dollar at a discount unless we
protect it by a similar transfer of credits.
Mr. STONE. I presume that is perfectly clear, but I am still
confused as to just how it can be done.
Mr. OWEN. It is not a difficult question if the Senator has
had his attention directed to it at all. It at last comes down
simply to this, that when Spain is an international creditor of
commodities there is due to Spain either in French francs or in
British pounds sterling or in American dollars a certain amount
of gold in exchange for the commodities which she shipped in
excess of those which she had imported.
Mr. STONE. And the money is to settle the balance?
44883— 18251
Mr. OWEN. These funds are required to settle the balance.
When Spain occupies the position ©f an international creditor,
then our money and the money of foreign countries dealing
with her will be at a discount, unless we forbid arbitrage;
and in that case she can not deal with us as one of a number
of international allies, but must deal with us simply and
directly on her indebtedness to us.
Mr. STONE. How is it with the pound sterling or the
franc ?
Mr. OWEN. They are both at a discount in Spain.
Mr. STONE. On a par with our dollar?
Mr. OWEN. N o ; they are a little below our dollar.
Mr. STONE. They run along the same general line, I pre
sume.
Mr. OWEN. Along similar lines; yes. The pound sterling
is about 2 per cent less and the French franc about 10 per cent
less, due largely to large paper issues.
Mr. STONE. That is rather arbitrary.
Mr. OWEN. No; it simply follows the laws of trade and
the charges which bankers feel justified in placing upon the
business going over their counters.
Mr. POMERENE. Mr. President, the Senator read a mo
ment ago the preamble and resolutions adopted by the United
States Chamber of Commerce. In the preamble they make a
statement to the effect that our loans to our allies have proven
a boomerang, and as a result of these loans the American dol
lar has been depreciated abroad. Does the Senator indorse
that sentiment?
Mr. OWEN. I do not indorse the language. The term
“ boomerang ” is not an apt description of what has occurred
to us. Extending these credits beyond a point where we safe
guard our own balance with Spain, for example, has resulted
in our dollar going to a discount. It could have been adjusted
with comparative ease by the United States placing a credit
with Spain to protect them. It only happened so because we
have not the necessary mechanism. It ought not to have hap
pened ; there ought not to be any reason why such a thing
should occur or should be permitted to remain.
Mr. POMERENE. The difficulty I have is to understand
the casual conned ion which the United States Chamber of
Commerce says exists between our making loans to our allies
and the depreciation of our dollar abroad.
Mr. OWEN. What they mean is this, that Spain shipped
a great deal more of her commodities abroad than she im
ported of foreign commodities into Spain. The consequence
was that the outside world shipped to Spain $88,000,000 in
gold, and there was still a balance due Spain on the excess of
commodities she exported over what she imported, so that the
pound sterling depreciated, so did the French franc, and so did
the American dollar.
Mr. POMERENE. Mr. President, unless I misunderstand,
while that may account in part for the depreciation of the
American dollar in Spain, I fail to see the casual connection
between that depreciation and our making loans to our allies.
Mr. OWEN. What they mean by it is this, that the money
we loaned to our allies went into Spain and put into Spain a
large amount of surplus gold, but still left her an international
44883— 18251
21
creditor. The consequence was the Spanish people did not need
American dollars and put our dollar at a discount accordingly.
That is what they mean by it.
Mr. STONE. Mr. President, was the American dollar a gold
dollar?
Mr. OWEN. Yes, s ir ; it was a gold dollar. There is, however,
this to be considered in connection with international ex
changes, that the gold dollar now, to be adjusted by shipment
across the sea, has to run the danger of the submarine; and
the rate of insurance upon shipping gold has been rather high,
at times going up as high as 8 and 10 per cent when the
country was more alarmed than it needed to be. Then, besides
that, there is in Spain a discount of 3 per cent on American
gold, which does not circulate there.
Mr. JOHNSON of South Dakota. Mr. President, may I ask
the Senator, with reference to that 3 per cent discount on gold
imports, if it makes any difference whether the gold comes
directly from this country or not?
Mr. OWEN. Yes. American gold does not circulate. There
is no discount against British or French gold.
There is no reason why we can not have an agreement with
Great Britain and with France to maintain the French franc
and the British pound sterling and the American dollar all at
par. We can do it simply by an adjustment of credits. That
is all that is required, and that is what I am urging now, not
so much for the purpose of dealing with the present mischief
as for the permanent dignity and honor and power o f this
Nation; that our dollars shall be at par all over the world,
and shall be, therefore, a constant measure o f value all over
the world. When that occurs, then we may expect the dollar
to be the standard of measure and we may expect New York
to be the financial center of the world. Until we do protect
the American dollar we shall have failed to take one of the
important steps which it is necessary to take. Of course,
to make New York City, which is our great shipping port, the
world center, as we hope some time it will be, the only way
to do that is by doing as England did in making London the
financial center o f the world. It is through our merchants
sending American-made goods to the ends of the earth and
bringing back foreign goods to our shores for use liere It is
commerce that will make New York a great financial center
and not finance that will accomplish it.
E x tr a c ts from
V a r io u s P u b l ic A d d r e s s e s b y P r e s id e n t W il s o n a t
t h e P l a c e s a n d T i m e s I n d ic a t e d .
The President said in his speech in Baltimore, Md„ September
25, 1916:
“ One of the most interesting circumstances of our business
history is th is: The banking laws of the United States— I mean
the Federal banking laws—did not put the national banks in a
position to do foreign exchange under favorable conditions, and
it was actually true that private banks and sometimes branch
banks drawn out of other countries, notably out of Canada, were
established at our chief ports to do what American bankers
ought to have done. It was as if America was not only unac
customed to touching all the nerves o f the world’s business but
was disinclined to touch them and had not prepared the instru
mentality by which it might take part in the great commerce
of the round globe.” (Baltimore, Md., Sept. 25, 1916 )
44883— 18251
“ I hare always believed, and I think yon have always be
lieved, that there is more business genius in the United States
than anywhere else in the world; and yet America has appar
ently been afraid of touching too intimately the great processes
o f international exchange.” (Detroit, Mich., July 10, 1916.)
“ Men are colored and governed by their occupations and their
surroundings and their habits. I f I wanted to change the law
radically I would not consult a lawyer. If I vtmted to change
business methods radically I would not consult a man who had
made a conspicuous success by using the present methods that
I wanted to change. Not because I would distrust these men but
beeau.se I would know that they would not change their think
ing overnight, that they would have to go through a long process
of reacquaintance with the circumstances o f the time, the new
circumstances o f the time, before they could be converted to my
point of view.” (Detroit, Mich., July 10. 1916.)
“ I do not like to say it, but I have been impressed sometimes
with the very marked difference between American business
men whom I have talked with and foreign business men. I am
not speaking of some of the men who stand highest in the man
agement of American business. They seem to be veritable
provincials, ignorant of the markets of the world, ignorant of
the courses and routes of commerce, ignorant o f the banking
processes, even by which goods were exchanged.” (New York,
Sept. 4, 1914.)
“ We have left it until very recently to foreign corporations
to conduct the greater part of banking business in bills of ex
change. We have seemed to hold off from handling the very
machinery by which w*e are to serve the rest of the world by
our commerce and our industry. And now, with the rest of
the world impaired In its economic efficiency, it is necessary
that we should put ourselves at the service of trade and finance
in all parts o f the world.” (Extract from address delivered at
St. Louis, Mo., Feb. 3. 1918.)
“ America, of all countries in the world, has been timid ; has
not until the last two or three years provided itself with the
fundamental instrumentalities for playing a large part in the
trade of the world. America, which ought to have had the
broadest vision of any nation, has raised up an extraordinary
number of provincial thinkers, men who thought provincially
about business, men who thought the United States was not
ready to take her competitive part in the struggle for the peaceful
conquest of the world. For anybody who reflects philosophically
upon the history of this country that is the most amazing fact
about it. But the time for provincial thinkers has gone by.
We must play a great part in the world whether we choose
or not.” (Detroit, Mich., July 10, 1916.)
“ Our banking laws must mobilize reserves, must not permit
the concentration anywhere in a few hands of the monetary
resources of the country or their use for speculative purposes
in such volume as to hinder or impede or stand in the way of
other more legitimate, more fruitful uses; and the control of
the system o f banking and of issue which our new laws are
to set up must be public, not private; must be vested in the
Government itself, so that the banks may be the instruments,
not the masters, o f business and of individual enterprise and
44883— 18251
23
initiative.’
(Joint session o f two Houses of Congress, June
23, 1913.)
“ I have found that I had a great deal more resistance when
I tried to help business than when I tried to interfere with it.
I have had a great deal more resistance of counsel, of special
counsel, when I tried to alter the things that are established
than when I tried to do anything else. We call ourselves a
liberal nation, whereas, as a matter of fact, we are one o f the
most conservative nations in the world. If you want to make
enemies, try to change something. You know why it is. To do
things to-day exactly the way you did yesterday saves think
ing. It does not cost you anything. You have acquired the
habit; you know the routine; you do not have to plan any
thing; ami it frightens you with a hint o f exertion to learn that
you will have to do it a different way to-morrow.” (Detroit
Mich., July 10, 191G.)
“ We have not been accustomed to the large world o f inter
national business, and we have got to get accustomed to it right
away. All provincials have got to take a back seat. All men
who are afraid of competition have got to take a back seat. All
men who_ depend upon anything except their intelligence and
their efficiency have got to take a back seat. It will be interest
ing to see the sifting process go on.” (Detroit, Mich., July 10,
191G.)
“ We must cooperate in the whole field of business, the Gov
ernment with the merchant, the merchant with his employee
the whole body of producers with the whole body of consumers ;
to see that the right things are produced in the right volume
and find the right purchasers at the right place, and that,
realizing that nothing can be for the individual benefit which
is not for the common benefit.” (Baltimore, Md., Sept. 25,
1916.)
“ Not until the recent legislation of Congress known as the
federal reserve act were the Federal banks of this country given
the piopei equipment through which they could assist American
commerce, not only in our own country but in any part of the
world where they chose to set up branch institutions. British
banks had been serving British merchants all over the world
Gei man b<mks li«id bOGii serving Ggiiquii inercluuits nil over tliG
world, and no national bank of the United States had been
serving American merchants anywhere in the world excent in
the United States.” (Baltimore, Md.. Sept. 25, 1916.)
“ Tlie national banks of the United States, until the recent
currency act, were held back by the very terms of the law under
which they operated from some of the most important interna
tional transactions. To my mind that is one of the most amaz
ing facts o f our commercial history. The Congress of the
United States was not willing that the national banks should
have a latchkey and go away from home. They were afraid
they would not know how to get back under cover, and banks
from other countries had to establish branches where American
bankers were doing business to take care of some of the most
important processes of international exchange. That is nothin**
less than amazing, but it is not necessary any longer. It never
was necessaiy, it was only thought to be necessary by some
eminently provincial statesmen. We are done with provincialism
in the statesmanship of the United States, and we have got to
44883— 13251
24
have a view now and a horizon as wide as the world itself.”
(Detroit, Mich., July 10, 1916.)
“ My fellow citizens, this is what I believe: If I understand
the life of America, the central principle of it is this, that no
small body o f persons, no matter how influential, shall be
trusted to determine the policy and development of America.
You know what you want in your business. You want a fair
field and no favor. You want to be given the same opportunity
that other men have, not only to make known what you have
to sell, but to sell it under as favorable conditions as anybody
else; and the principle of the life of America is that she draws
her vitality not from small bodies o f men who may wish to
assume the responsibility of guiding and controlling her, but
from the great body of thinking and toiling and planning men,
from whom she draws her energy and vitality as a Nation.”
(Philadelphia, Pa., June 29. 1916.)
“ A literary friend of mine said that he used to believe in the
maxim that * everything comes to the man who waits,’ but he
discovered after awhile by practical experience that it needed
an additional clause, ‘ provided he knows what he is waiting
for.’ Unless you know what you are looking for and have trained
eyes to see it when it comes your way, it may pass you un
noticed. We are just beginning to do, systematically and scien
tifically, what we ought long ago to have done, to employ the
Government of the United States to survey the world in order
that American commerce might be guided.” (Washington, D. C.,
Feb. 3, 1915.)
“ Then came the currency reform. You remember with what
resistance, with what criticism, with what systematic holding
back, a large body of bankers in this country met the proposals
o f that reform ; and you know how, immediately after its pas
sage, they recognized its benefit and its beneficence, and how,
ever since the passage o f that reform, bankers throughout the
United States have been congratulating themselves that it was
possible to carry out this great reform upon sensible and solid
lines.” (Washington, D. C., June 26, 1914.)
“ Bankers, as body of experts in a particular, very responsible
business, hold, and hold very clearly, certain economic facts and
industrial circumstances in mind, and potssess a large and unusu
ally interesting mass of specialized knowledge of which they
are masters in an extraordinary degree. But I trust you will
not think me impertinent if I say that they excuse themselves
from knowing a great many things which it would manifestly be
to their interest to know, and that they are oftentimes singularly
ignorant, or, at any rate, singularly indifferent, about what I
may call the social functions and the political functions o f bank
ing.” (Denver, Colo., Sept. 30, 1908.)
“ The trouble with some men is that they are slow in their
minds. They do not see; they do not know the need, and they
will not allow you to point it out to them. If we can once get
in a position to deliver our own goods, then the good? that we
have to deliver will be adjusted to the desires of those to whom
we deliver them, and all the world will welcome America in the
great field of commerce and manufacture.” (Detroit, Mich.,
July 10, 1916.)
“ Not until the recent legislation of Congress known as the
Federal reserve act were the Federal banks of this country given
44883— 18251
25
tlie proper equipment through which they could assist American
commerce, not only in our own country hut in any part of the
world where they chose to get up branch institutions. British
banks had been serving British merchants all over the world,
and no national bank of the United States had been serving
American merchants anywhere in the world except in the United
States.” (Baltimore, Md., Sept. 25, 1910.)
“ We have not been accustomed to the large world of interna
tional business and we have got to get accustomed to it right
away. All provincials have got to take a back seat. All men
who are afraid of competition have got to take a back seat. All
men who depend upon anything except their intelligence and
their efficiency have got to take a back seat. It will be interest
ing to see the sifting process go on.” (Detroit, Mich.. July 10,
1916.)
Mr. Paul M. Warburg, in “ Essays on Banking Reform in the
United States,” says:
“ The only modern bills in our country are the so-called
* foreign-exchange ’ bills drawn on European banks and bankers,
which are indorsed, and which always have a ready market.
But what an anomalous position! Instead of having the credit
of the entire country available in the shape of millions upon
millions of modern paper which Europe might and would buy,
we must rely on the willingness and the ability of a few banks
and bankers to use their own credit by drawing their own long
bills on Europe. This is a costly and most unscientific mode of
procedure which is in no way adequate to the necessities of the
situation.”
Aud in his ‘‘ Discount System in Europe” Mr. Warburg said:
“ It is inconceivable that the United States, a Nation that
leads the way in industrial progress and that more than any
other nation weeds out old machinery and replaces it by the
newest appliances, should be either unable or unwilling to
modernize thoroughly its financial system aud to discard''oldfashioned financial machinery which other people have long
since thrown upon the scrap heap.”
Mr. Justice Brandeis, in “ Other People’s Money,” said :
“ The great monopoly in this couutry is the money monopoly.
So long as that exists our old variety and freedom and indi
vidual energy of development are out of the question. A great
industrial nation is controlled by its system of credit. Our sys
tem of credit is concentrated. The growth of the Nation, there
fore, and all our activities are in the hands of a few men who,
oven if their actions be honest and intended for the public in
terest, are necessarily concentrated upon the great undertak
ings in which their own money is involved and who necessarily,
by every reason of their own limitations, chill and check and
destroy genuine economic freedom. This is the greatest ques
tion of a ll: and to this statesmen must address themselves with
an earnest determination to serve the long future aud the true
liberties of men.”
The Reichsbank of Germany has a foreign portfolio which
has increased in importance from year to year until the paraly
sis of the present war, but the German Government is now
making the most elaborate plans for protecting its commerce
after the war, to the ends of the earth, with proper credit and
banking facilities.
44883— 18251
26
The Bank o f France has the right to discount foreign paper,
and is using it with great ability. But France is also making
elaborate preparations for safeguarding its commerce at the
end of the war.
The Bank of England has relied upon acceptance houses and
private bankers in England to handle a large part of the foreign
banking business, but nevertheless the English Government is now
making elaborate preparations to safeguard its commerce, pro
viding adequate credit and banking facilities throughout the
world at the end o f this war. The details of what is being
done by Great Britain and by France I add as a supplement to
my remarks as taken from the Commerce Reports, December 27
and 28, 1917, pages 1177 and 1194. I ask to have those exhibits
printed without reading.
The PRESIDING OFFICER. Without objection, it is so
ordered.
(See Exhibits E and F.)
Mr. OWEN. No thoughtful man can deny that the United
States must rise in its dignity and majesty of power and ade
quately meet the demands which will arise at the immediate close
o f this great world war.
What I have desired to point out, Mr. President and gentle
men of the Senate, is that our present facilities and our present
statutes have proven ineffective. We authorized the Federal
Reserve Board to require the Federal reserve banks to estab
lish this foreien accommodation and it has not been done; and
I do not think it would be easy to accomplish it through the
mechanism, for instance, of the Federal reserve bank of New
York, for the reason that the directorship of the Federal re
serve bank at New York City is controlled by a few banks that
are engaged in these international banking operations, and
they probably would regard it as trespassing upon their pre
serves in some way. They will not stop to digest it. They will
regard it as an innovation, just as they did the Federal reserve
act, and they will be opposed to i t ; and I have no doubt that they
have been enabled to prevent its being done in New York, al
though I have no detailed information about that. But I will
say that the Federal reserve bank of New York has enough to
do to handle the great volume of domestic business piling in
upon them ; and that work, I am sure, they have done with great
ability and with great efficiency.
What I want to point out is the need for a mechanism by
which the commerce and industry and manufacturing powers
of the people of the United States shall have the means of im
ports and exports, shall have the opportunity of buying and
selling bills o f exchange against imports and exports, and shall
have the necessary credit facilities, and shall have a competent
authority where a merchant can wire and ask whether or not a
merchant in Buenos Aires has a good credit, and whether he
would be safe in making an important shipment of merchandise
to him from the United States. Until our people have that
kind of information conveniently at their hands, free from any
suspicion of personal interest, the commerce and industry of the
people o f the United States will not have the means for ade
quately expanding.
44883— 18251
27
I regard this matter as one of very great importance, and will
have it considered in due time by the Committee on Banking and
Currency of the Senate; and I hope the House committee will
consider it, and that we may arrive at some substantial adjust
ment of the matter.
I thank the Senate for its patience.
APPENDIX.
E x h ib it A.
D
B ureau
of
epartm ent
F oreign
and
of
Com m erce,
D om estic C om m erce ,
Washington, February If, 1918.
Im
ports
and
E
xports, by
G
rand
D i v is io n s a n d Co u n t r ie s .
Total values of merchandise imported from and exported to
each of the principal countries (luring December, 1917, and the
12 months ended December, 1917, compared with corresponding
periods of the preceding year, were made public to-day by the
Bureau of Foreign and Domestic Commerce of the Department
of Commerce, as follows:
M onth o f D ecem ber—
12 m o n th s ended D ecem
ber—
Im p orts from —
1917
1916
1917
G rand divisions:
E u ro p e ............................
N orth A m erica .............
South A m erica .............
A s ia ..................................
O cea n ia...........................
A fr ic a ..............................
$40,617,322
66,506,340
40,669,439
62,142,195
12,792,801
6,183,397
$59,107,818
47,686,900
43,786,488
45.422,209
4,827,542
4,003,231
$551,144,599
871,982,524
598,818,532
758,237,165
99,221,199
73,063,939
$633,316,883
653,43S, 120
427,609,562
516,704, 047
93,673,382
61,893,338
T o ta l............................
227,911,497
204,834,188 2,952,467,955
2,391,635,335
P rincipal countries:
A u stria -H u n ga ry........
B elgium ..........................
.F ra n co.............................
G erm a n y........................
I t a ly .................................
N eth erland s..................
N o rw a y ...........................
Ifu ssia in E u ro p e ........
Spa in...............................
. Sw eden............................
Sw itzerlan d...................
U nited K in g d o m ........
C anada............................
8,682,632
451
3,219,301
747,674
261,481
2,661,145
3,498,232
329,403
1,826,252
16,874.793
36,232,364
Mexico..........................
C u b a .............. ..............
A rg en tin a .......................
B r a z il..............................
C h ile.................................
C h ina...............................
B ritish East I n d ie s .. .
J a p a n ...............................
Australia and N ew
Z a a la n d .......................
P h ilip p in e Isla n ds___
Egypt.......................
44883— 1S 251
9,8.58,406
5,053,741
17,560,443
8,233,119
13,618,362
8,402,995
20,992,304
23,692,557
7,403,284
4,633,395
27,980
156,835
10,488,210
138,269
4,789,202
3.689,940
844,802
83,848
3,675,167
5,505,941
1,927,928
25,765,390
23,753,953
64,937
158,022
98,639,653
159,352
36,480,807
22,744,504
6,280,233
12,350,179
36,881,630
18,069,487
19,834,668
280,080,175
10,399,693
9,108,597
12,509,181
14,286,609
5,914,498
6,352,337
17,138,997
17,288,621
413,674,846
130,434,722
248,598,199
178,245,833
145,274,931
142,597,929
125,103,020
259,629,897
253,669, 709
1,682,769
2,718,912
2,944,041
32,002,203
62,386,641
27,352,444
1916
631,251
1,479,342
108,893,119
5,819,472
60,235,172
43,602,076
6,430,316
4,478,990
32,577,377
18,856,633
22,414,383
305,486,952
237,219,040
105,065,780
243,728,770
116,292,647
132,067,378
82,123,995
80,041,851
201,190,844
182,090,737
55,826,228
34,162; 081
29,533,795
28
12 months ended Decem
ber—
Month of December—
Exports to—
1917
Grand divisions:
$323,G90 436
155'135,'812
33,' 700' 646
60,465,901
14,591,876
6,279,609
593,864,280
1917
1916
1916
$349,558,509 $4,054,362,029 $3,813,278,324
924.553.649
93,285, 797 1,264,688,666
312,420,985
220,266,818
22,787, 859
361,959,155
42,447,145
431,149,591
105.572.649
117,158,921
9,751,896
54,010,506
5,402,574
51,464,784
6,231,244,976
5,482,641,101
6,691,02.3
22,628,659
4,165,928
32,388,861
58,706,507
940;S10,070
3,275
1,142,353
8 ,477; 603
1,431 702
37’, 974; 651
419; 095', 473
11,345,624
90,520,301
62,866,850
4,224,745
314,639,528
23; 097’, 932
92,469,320
6,577,521
20’ 900;854
5'960; 309
185,209,430 2 ,00l', 031', 104
829,972,331
60,939,523
52,206,466
i, 00*; 658
lli; 111,541
4,415,374
196,350,315
18,846,295
107,W1,905
7,192,128
66,207,970
5,210,987
57,483,996
3,919,899
40,208,612
3,643,538
42,746,7-19
3,775,091
14,821,946
186,347,941
16,540,391
100; 169,243
61,771
30,998,923
56,329,490
860,821,006
2,260,634
33,685,689
303, .530,476
US; 730; 162
66; 209', 717
309,806,581
64,316,888
47,967,590
1,887,380,665
601,908,190
46,531,841
54,270,283
161,066,037
76,874,258
47; 669’, 050
33,392,887
31,516,140
30,799,916
109,156,490
lC0;70i;673
76,909,225
38', 148', 726
39,023,443
81,305,968
22', 775,491
32,448,177
523,233,780
Principal countries:
8,400
134,363
73,564,381
Itussia in Europe........
United Kingdom.......
Chile ............................
British East Indies...
1 030,494
46', 162^ 066
7,899,931
1,668,338
816,462
10,139,988
503,364
177,433', 009
101,767,255
A, 861', 129
15,485,408
24; 652', 166
li;553;945
6; 566', 030
7,586,866
6,366,898
7,290, OGO
40,199,201
Australia and New
6 ,474,755
7,801,316
5,215,449
Philippine Islands___
S ta te m e n t
o f im p o rts
and
7,351,503
2,268,853
2,508,294
e x p o r t s , 12 m o n t h s
ended
Exports.
D e c e m b e r , 10V7.
Imports.
Netherlands............................................................. $90,520,301 $22, 744,504
6,280,233
62,866,850
92,469,320 36,881,630
20,900,854 18,069,487
Balance in
our lavor.
$67,775,797
56,586,617
55,587,690
2,831,367
E x h ib it B .
[E d ito r ia l, A r th u r
To
t h e P r e s id e n t a n d M
t h e A m e r ic a n D o l l a r
A broad?
B r i s b a n e , E s q ., W a s h i n g t o n
b
T im e s .]
M c A do o — I s T h e r e A n t W a y o f M a k i n g
W o r t h 1 0 0 C e n t s in N e u t r a l Co u n t r ie s
.
This question, it seems to us, is important.
The United States has forbidden gold exports, which is wise.
Since gold is a fetish among the nations, let us keep our fetish
supply at home.
44883— 18251
29
But while we keep our gold at home, let us arrange in some
way so that the American dollar will not be marked down too
low on the bargain counter of other countries.
The dollar in Spain is worth 75 cents or less in Spanish money.
The same thing is true of China, Sweden, Norway, Holland,
and Denmark. In all the neutral countries the American dollar
is worth much less than 100 cents.
There ought to be some way to stop this.
Mr. Warburg, of the Federal reserve bank, might devote his
mind to the problem—he has excellent financial ability.
This is written primarily for the President of the United
States and the Secretary of the Treasury.
I f it is the duty of the Government to protect the American
citizen abroad, it is also the duty of the Government to protect
the dollar abroad. The dollar travels and buys for the citizen.
Federal reserve exchange and credit banks on the other side
properly organized would be able to attend to the matter.
This is a creditor Nation in every sense of the wrord.
The world owes us billions.
And our exports are far in excess of our imports.
In other words, the outside countries, including the neutrals,
owe us much moi'e than we owe them. Therefore our dollar
should be the best dollar.
The thing can be arranged, and it ought to be.
The four big neutral countries— Spain, Norway, Netherlands,
Denmark—owe us every year tens of millions more than we owe
them, because our exports exceed our imports.
Spain, for instance, must pay us forty-one millions more than
wTe pay to Spain in one year.
Our money ought to be at a premium; it is just the other way
round.
Senator O w e n , chairman of the Banking and Currency Com
mittee of the United States Senate, is to be congratulated upon
the interest that he lias shown in this unnatural and harmful
condition.
The American buying in a neutral country should not be
obliged to pay $1.25 for $1 worth of goods.
And the buyer from a neutral country should not be able to
buy a dollar’s worth of American goods for 75 cents of his own
money. And that is the present condition.
E x h i b i t C.
( “F r o m
tlie
Journ al
of
C om m erce
and
C o m m e r c ia l
B u ll e t i n .]
F u t u r e C o n d i t i o n s o f F o r e ig n T r a d e .
The bill introduced by Senator O w e n to establish in con
nection with the Federal Reserve System of banking an organi
zation designed to furnish facilities not now available for the
promotion of American foreign trade seems to be a step in the
right direction. The idea is that the Federal foreign-trade
bank shall occupy somewhat the same position toward inter
national trade that the reserve banks at present occupy toward
domestic trade. As matters stand, private banks can extend a
certain amount of credit to exporters and importers, and may
derive some assistance from the reserve hanks by having their
foreign hills rediscounted under prescribed restrictions. Should
the proposed system come into operation, the investment o f an
individual bank in foreign bills, being readily subject to redis44883—18251
30
■::!! v*:'i
■V
count, would become practically as liquid as its domestic com
mercial paper, which can be immediately discounted at the
reserve banks. Under the existing system banks sometimes
hesitate to invest heavily in foreign bills because in case of
stringency they might not be readily salable. The foreigntrade bank, however, would provide an immediate market for
such bills, and when exchange was scarce and rates tended to
advance would ease the situation by selling exchange and so
helping to lessen the fluctuation in rates. All this is very much
to the good, and, considering the soundness of the axiom that
trade follows the loan, the proposed legislation, properly
guarded, could hardly fail to be of substantial service to the
men engaged in expanding the foreign trade of the United
States.
But in this matter it is well to keep a firm hold on first prin
ciples. The United States grew and prospered and built up
great wealth out of the natural resources of this continent. But
there has been a steady flow of raw materials from this country
to Great Britain and western Europe, to be there manufactured
and distributed around the world. A protective tariff enabled
us to keep some of these materials for manufacture here, chiefly
for domestic consumption. But the necessity of the tariff was
an admission that the sum of the influences for cheap prodncion
and distribution was against us. These influew es were chiefly
the supply, first, o f labor and then of capital, but they included
experience in industry and foreign trade, and the prestige, good
will, and facilities of an established business. The superabund
ance of capital which existed in Great Britain before the war
caused an overflow from that country to be directed around the
world. There was thus developed in the United Kingdom a
large body of investors accustomed to employ their capital in
other countries, and their investments naturally became the
channels of outlet for the products of British industry, just as
the returns that came to them were the means of financing Brit
ish import?. There has been a great, free, readily accessible
market in London for all the commodities of commerce, not
merely a market for the country’s own products and for what
it consumes, but a distributing market for the rest of the world.
British ships have been in every port, British bankers ami trad
ers in even’ mart. There has been British capital available
everywhere, ready to build a railway, buy a brewery, open a
mine, or move the products of the country to market. It is the
combination of these conditions which made London the clearing
center of the world and the pound sterling the standard of,-value.
Our success in taking the place that rightly belongs to us in
the markets of the world must largely depend on our readiness
to imitate the liberal conception of what really constitutes com
merce which gave the United Kingdom the position which it
bad attained. One of the last words of the late President Mc
Kinley was a warning against the illusion that we could pos
sibly have a permanently one-sided trade, but there are abun
dant evidences that the false conception which he tried to dissi
pate still retains a good deal of its vitality. If Great Britain
must resume her financial and industrial r6ie after the war, with
greatly impaired resources and enormously increased burdens,
she at* least takes up the commercial struggle with the enormous
advantage of having to learn very little about the conditions
44883— 18251
1
31
under which It can be most successfully prosecuted. In one re
spect the war has been almost incredibly beneficial to British
industry, and that is by demonstrating the extraordinary gains
that may be made in manufacturing efficiency. Take, for ex
ample, this illuminating passage from a book just published by
authority of the Council of the British Association on Industry
and Finance: “ The increased output in shells which has in
large measure been attained since the foundation of the ministry
of munitions and the subsequent recruitment of female labor
for work in the factories, with all the adaptation and rearrange
ment that has been effected for the purpose of speeding up, has
never been more strikingly illustrated than when it was offi
cially declared that a year’s output at the rate attained in
1914-15 is now provided in the following periods: Eighteenpounder ammunition, in 13 days; heavy howitzer shells, in 7 days;
shells for medium guns and howitzers, in 5 days; shells for
heavy guns, in less than a day.” As the London Economist re
marks, this record not only shows a wonderful achievement in
time of war, but gives serious reasons for thought concerning the
inefficiency, whatever may have been its cause, o f the organiza
tion on which it has been an improvement. That the keying-up
process has not been confined to war industries is sufficiently
evident from the returns of British foreign trade for the last
calendar year. Here commercial exports figure for the very
respectable total of $2,625,000,000, which, though less than half
the total of our own export trade, excludes most of the supplies
incidental to the promotion of the war. which in our case figure
for over ,$000,000,000. It may be incidentally noted that the
British exports for the year of cotton yarns and textiles aggre
gated $730,000,000, while our own appear to have been very
little in excess of $150,000,000. That a Britain with only one
arm free should have been able to make such a record in the
competition for the world’s trade suggests possibilities, of which
we would do well to take hoed, of what may be accomplished
by a Britain with both arms available for industrial production.
■ ,
E x h ib it E.
Ca p it a l
[A lfr e d
,!l,
fob
A f t e b -W ab
T hade.
N u t t i n g , c le r k in A m e r i c a n C o n s u l a t e G e n e r a l, L o n d o n , E n g l a n d ,
N o v . 3 0 .]
’
The minister of reconstruction has established, in conjunc
tion With the treasury, a committee on financial facilities after
the war, the object of which is to anticipate and provide methods
to overcome the financial difficulties that will arise in connection
with commerce and industry. The vast number o f factories
which have been diverted from their normal trade to war work
will face a critical period between the time when hostilities
cease and the time when it is possible for them to return to
their prewar activities, for an interval more or less lengthy
must occur during which it will not be possible to revert to
former productiveness, while the question of cost in restoring
factories to conditions formerly prevailing will require careful
consideration and the preparation of plans to provide the neces
sary money and capital. Apart from that aspect there is the
certainty that largely increased costs of rftw materials, higher
44883— 18251
32
wages, and a much greater value on stock in hand or on credit
will have to be met, requiring fresh capital, while longer credit
may be necessary.
Some of the most important matters with which the com
mittee will be empowered to deal will be the extent of the aid
that banks and financial houses will be able to render; if such
help should appear likely to prove insufficient, what other sources
of credit can be sought; and by what method can the required
capital be most efficiently distributed, in the event of a shortage,
among essential trades and commerce.
C O M M IT T E E REP RE SEN T S ALL BRA N CH ES OF CO M M ERCE AND IN D U ST RY .
The members of the committee appointed to deal with this
fundamental subject of finance and capital after the war include
representatives of banking, financial, commercial, and industrial
circles, and are not restricted to London concerns, but include
those vitally interested in industries and workshops throughout
the country. The chairman of the committee, Sir It. V. VasearSmith, Bart, (chairman of Lloyd’s Bank, one o f the two largest
banking corporations in the United Kingdom), in a recent ad
dress before the Institute of Bankers, said:
“ The financing of our industries will be immensely facilitated
by trade organization. During the war we have seen our pro
ductive industries organized on a large scale and under the con
trol of the State. Both organization and control wrere forced
upon us by war. As regards State control, I hope and believe
that the necessity for it is temporary. As to trade organiza
tion, I firmly believe that the necessity for it will remain after
the war. It is no new thing, this tendency to production and or
ganization on a large scale, though it 1ms not shown itself so
much in this country as in some others. The day of small indus
tries on individual lines is gone. Our manufacturers and tind
ers must organize for united effort. This will have the closest
bearing on questions of finance. An unstable, unorganized in
dustry is the despair of bankers. I have confidence in stating
that an industry organized on large lines has seldom lacked
financial support in this country, and in spite of financial
stringency, which we shall doubtless have to face, it is not likely
to suffer in the future.”
It is stated that the committee will commence work immedi
ately.
E x h ib it F
F
rench
P
r e p a r a t io n s
[C o m m e r c ia l A tta c h ^
C. W .
for
T
rade
A . V e d itz ,
A
fter
W
ap ..
F a r is , O c t. 2 6 .]
Since the outbreak of the war numerous French writers upon
commerce and Industry have discussed in detail the economic
consequences of the war and the problems of reorganization
that will need to be solved after the termination of hostilities.
Nearly all of them have insisted upon the importance o f de
veloping France’s export trade, and their suggestions in this
connection have been both critical and constructive. That is to
say, they have pointed out those features of the present situa
tion that must he remedied and liave also proposed a series of
new measures and organizations thf.t ai*6 now totally lacking.
Naturally enough, the French foreign service has been sub
jected to a critical examination with regard to its efficiency as
an a g e n c y
the promotion of export trade; and an impression
14883— 18251
33
lias prevailed Uiat it is susceptible of improvement in tliat re
spect.
The chief Government agency for the promotion of French ex
port trade in the office national du commerce exterieur, intrusted
by the la w o f March 4, 1898, with the task of furnishing French
merchants and manufacturers with such commercial informa
tion as is likely to contribute to the development of French
foreign trade and the expansion of French markets in foreign
countries and in the French colonies and protectorates. The
office national has the aid in this task o f three groups of
agencies— the diplomatic and consular services, the French cham
bers of commerce, and the foreign-trade counselor's. The office
maintains a collection of foreign-trade catalogues, which it
analyzes and brings to the attention of interested French firms.
It puts the benefit of its investigations at the disposal of French
merchants and manufacturers. Unlike the United States Bu
reau of Foreign and Domestic Commerce, which is the corre
sponding American institution, it furnishes confidential informa
tion concerning the standing and financial resources of particular
foreign firms. The office receives daily inquiries from foreign
agents and importers, who are put in touch with French firms
that have indicated an interest in foreign markets, and it keeps
a classified list of French exporters. The office also undertakes
to bring together groups of French exporters who would be
unable individually to maintain an export organization. When
ever the office has cognizance of foreign-trade opportunities,
particularly of important orders to be placed competitively by
public or private corporations, such opportunities are brought
to the attention of interested French chambers of commerce,
trade associations, or even individual firms whose names are
registered with the office.
T U B FOUR D E P A R T M E N T S AND T H E IR F U N C T IO N S .
The work of the office is carried on by four departments. The
first has to do with publications and information concerning the
commercial standing and reputation of foreign houses.- The pub
lications of the office are the following:
The Moniteur Officiel du Commerce is normally issued everv
Monday. Its publication ceased at the outbreak o f the war but
will shortly be resumed. The Moniteur reports changes in foreign
tariff laws, in French commercial legislation, a n d in the c o m
mercial laws of foreign countries. This p u b l i c a t i o n has the ex
clusive right to the reports of French consuls and diplomats on
commercial subjects. In brief, the Moniteur is the commercialinformation periodical of the French Government, resembling
in general the daily Commerce Reports of the American Gov
ernment. It contains the trade opportunities brought to its
notice that are likely to interest French exporters and manu
facturers.
The office ordinarily issues weekly a Feuille dTnformation. or
Bulletin of Information. This publication also was stopj>ed at
the outbreak o f the war but will soon be taken up again. It
contains the more important news items and reports issued in the
Moniteur Officiel. This bulletin is regarded as an efficient agency
of trade propaganda; it has a large circulation in France and
is posted publicly in railway stations, city halls, schools o f com
merce, and other places where it is likely to attract public atten
tion. Its aim is to furnish general ti’ade information and to
44883— 18251----- 3
34
stimulate an interest in export trade, even among those manu
facturers and tradesmen who have previously shown no dispo
sition to seek business in foreign markets.
The third class of publications of the Office National consists
of the so-called Dossiers Commereiaux, or commercial docu
ments, each relating to a particular commodity or group o f com
modities, or to the export market offered by a particular country
or district. These documents often contain confidential infor
mation not intended for general circulation. They furnish de
tailed and specialized information along some specific line, likely
to interest only those French dealers or manufacturers engaged
in that line. They are furnished only to bona fide French firms
located either in France or in its colonies.
Finally, the office publishes, in the form o f monographs, the
results o f special investigations into the market for particular
products singled out for such surveys. There have already been
published such special monographs relating to wines, cutlery,
porcelain, glassware, canned-food products, and the collection
o f credit claims abroad. The most recent of these Notes Com
mercialese concern the different sections of Morocco, investigated
from the standpoint of exports and imports and with regard to
agriculture and colonization.
The office national furnishes, free o f charge, information con
cerning the standing and commercial rating of foreign firms and
has in its files a large collection of catalogued cards enabling it
in many instances to furnish such data without delay. It also
furnishes the names of lawyers prepared to take charge of claims
for the collection o f unpaid bills abroad.
Another department of the office Is concerned with the dis
pensation o f general commercial information, the transmission
of samples, and the furnishing of technical data. It undertakes
to provide exporters of a given product with data concerning
the principal nations exporting that product and with details
concerning the requirements o f particular markets. It fur
nishes lists of foreign dealers and importers and undertakes, on
behalf o f French inquirers, to purchase, on their account,
samples, catalogues, and so forth.
A third department of the office specializes in matters of cus
toms tariffs and trade statistics. It undertakes to furnish in
formation with regard to import and export duties, commercial
and navigation treaties and regulations, importation in bond,
certificates of origin, trade-marks and patents, etc. It also
seeks to keep fully informed concerning statistics of production,
consumption, imports, and exports.
A fourth division o f the office national is concerned with
transportation matters. It keeps track of transportation
charges, both by water and by rail, of ocean freight and insur
ance rates, of postal charges and regulations, of telegraphic
rates and regulations, of port charges and navigation taxes.
A SSO C IA T IO N N A T IO N A L * D 'E X I'A N S IO N E CO X O M IQ C B.
Since the outbreak of the war the importance of encouraging
French export trade, particularly after the termination of the
conflict, has seemed to warrant the establishment o f several
new organizations and agencies, and special attention has been
given to the efficiency of German methods of trade expansion
(as set forth, for example, by Henri Hauser in his book, Les
44883— 18251
35
M6thodes Allemandes d’Expanslon Gommerciale). Several new
groups have been founded to aid and encourage the exportation
of French products. The first and one of the most important
of these is the Association Nationale d’Expansion Economique,
formed under the leadership of the Paris Chamber of Com
merce, which is a semiofficial organization having close relations
with the French Government and especially with the ministry
of commerce. The purpose of this organization is to prepare
for competition after the war, for the new economic and com
mercial dispensation that will inevitably follow the cessation of
hostilities. The association is divided into several committees
intrusted with the study of particular branches of the export
trade. It comprises the most important, if not all, o f the cham
bers of commerce throughout France and o f the various manu
facturers’ and merchants’ associations in the Republic.
This association held an important commercial congress last
March, which was presided over by the minister of commerce
and which discussed some of the more important problems that
will confront the nation in connection with the resumption of
normal economic life at the end of the war. The most impor
tant single accomplishment of the association thus far is the
preparation and publication of a rather complete survey of the
industry, commerce, and agriculture of France, with particular
reference to the problems and conditions that will arise after
peace is restored. The reports in which the results of this
survey are given number 70, and their subjects are as follow s:
General report; the woolen industry; the felt industry; silk
and silk goods; ribbons and silk and textiles partly o f silk;
trimmings and braid; ready-made clothing; the cotton indus
try ; flax and hemp goods; laces and embroideries; ju te ; hosiery
and knit goods; dressmaking; women’s wear ( “ la m ode” ) ;
furs, lingeries, perfumery, etc.; leather, hides, and shoes; chemi
cal fertilizers and other chemical products used in agriculture;
dyestuffs; the products of large-scale chemical industry; co a l;
the extractive industries; the metallurgical industries; mechani
cal construction; electrical materials and construction; hard
ware ; watches and clocks; optical glass; the photographic and
cinematographic industries; jew elry; toy s; ceramics and glass
ware; chirurgical and sanitary articles; paper; book publishing;
resin and resinous products; trade in wood and lumber; food
products; fishing; the merchant marine; mineral-water and
health resorts; the hotel industry and tourist business; bank
ing and credit; insurance; colonial administration; the cereal
crops; the cattle industry; the meat industry; cattle raising in
the colonies; dairy products; the exportation of wines; the
exportation of liqueurs; forestry after the w ar; fruit and truck
farming; horticulture; industrial plants (beet sugar, hemp,
hops, etc.) ; the trade in seed; agricultural resources o f colonial
France; agricultural machinery and equipment; agricultural
labor; the exportation of farm products (on which subject there
are nine reports, covering the principal export markets for
French agricultural products).
The Association Nationale maintains a bureau of commercial
information prepared to advise French exporters concerning
customs duties, import and export regulations, black lists and
the blockade, transportation rates and regulations, the exchange
situation, taxes, antifraud legislation, colonial conditions, and
44883—18251
36
trade opportunities. It also maintains a department for com
mercial translation work and issues a bulletin designed to keep
its members informed promptly o f changes in commercial laws,
tariff rates, etc. The association will publish annually an
Index of French Producers in the French, English, and Spanish
languages, to be circulated widely among foreign jobbers, pur
chasers, and importers. It lias already begun the publication of
a monthly review, called L’Expansion Economique, containing
a section of industrial and commercial notes, a section of agri
cultural notes, articles on current economic topics, and a sum
mary of industrial and commercial news relating to France and
the principal commercial nations of the world.
O TH ER
N EW
O R G A N IZA TIO N S
TO
PRO M O TE
AND
PRO TECT
FRENCH
TRADE.
Of somewhat more recent formation than the Association
Nationale is the Union Nationale pour l’Exportation des Prodnits Franqais et pour l’lmportation des Matieres Premieres,
founded by M. Raoul Peret, former minister of commerce. This
organization seeks above all to encourage the grouping of French
manufacturers and dealers in order that by this means smaller
producers who are unable independently to maintain an export
organization may be able to enter the export trade. It is be
lieved that by forming such cooperative groups of comparatively
small concerns it will be possible to deal advantageously with
steamship and railroad companies and to obtain the special
benefits now confined to the larger establishments that have
created and maintained their own export organizations. It is
the ambition of this association to foster the creation o f such
groups and to create transportation companies under its own
control.
Quite different are the aims of the Union In ter syndicate des
Marques (a union of manufacturers’ associations for the pro
tection of trade-marks), founded by a well-known electrical
engineer, M. Raynald Legouez. The main purpose of this or
ganization is to protect French manufactures against imitation
and misrepresentation. It is held that the Germans have been
in the habit of selling their own goods as of French manufacture,
not only on neutral markets but even in France; also that prod
ucts nearly finished in Germany have in the past been shipped
to France and finished there in order that they might be sold
as French goods. The Union Intersyndicale is therefore carry
ing on an active campaign to persuade French manufacturers
to place upon the market only goods that bear the distinctive
label of the union—with the letters U. N. I. S.—as a guaranty
of French origin. The union hopes to include all important
groups o f French manufacturers and thus to prevent the sale of
goods that are not marked with the label of the union.
M O VE M EN T FOR E S T A B L IS H M E N T OF AN N U AL F A IR S .
In addition to organizations of the kind described, attention
should be called to the movement in France in favor of annual
fairs or markets comparable to the famous German fairs at
Leipzig. The first experiment in this direction was made by
Senator Herriot, the mayor of Lyon, in March, 1916, when Lyon
held its first sample fair (Foire d’lOchantillons) and 1,342 ex
hibitors took part. The second Lyon fair, held in March and
April, 1917, was attended by 2,593 exhibitors, 424 of them being
from foreign countries, with 25 representing American firms.
!
44883— 18251
37
It is reported that during the fair the exhibiting firms obtained
orders amounting to about 200,000,000 francs.
In September, 1916, Bordeaux held a fair, but this was con
sidered as devoted especially to the products of French colonies
and to wines and foodstuffs, for which Bordeaux has always
been a center of great importance. The second Bordeaux fair,
held in September, 1917, repeated the success of the first.
Ir May, 1917, Paris inaugurated a fair, in which special atten
tion was given to the so-called “ articles de Paris ” and “ articles
de luxe ” that play so important a part in the industrial and
commercial life of the French capital. Other cities have indi
cated a disposition to undertake similar projects; it is stated,
for example, that Marseille contemplates having its annual fair.
There is, of course, some danger here that the rivalry of French
cities may militate against the establishment o f a fair that will
be truly national or international, and it now appears likely that
the fairs o f Paris and Bordeaux will specialize in certain groups
of commodities, in the production or handling of which these
cities play a leading part, whereas the Lyon fair will be of a
more general character and thus become a real rival of the one
at Leipzig.
N EW CO M M EH C IAL P U B L IC A T IO N S .
In addition to the new organizations to which reference has
been made, and to the newly established French fairs, the
awakening interest in French export trade is manifested by the
publication o f a large number of new reviews, newspapers, and
other periodicals devoted to commercial subjects, and especially
to the expansion of French foreign trade. Easily the foremost of
these Is the Exportateur Francais, published weekly under the
editorship of Maurice Ajam, deputy and former under secretary
of state. Mention should also be made of Le Soir, a daily com
mercial newspaper; La Victoire Eeonomique, a weekly news
paper ; Le Moniteur du Commerce, published weekly ; L’lnitiative
Commerciale, a monthly review; Commerce et Industrie, a
monthly ; and Mercure, the organ of the French Federation of
International Commerce. All these publications give special
attention to French export trade.
A
b ill
th e
* ° a m e n ,l t h e a c t a p p r o v e d D e c e m b e r 2 3 , 1 0 1 3 , k n o w n
ed era l reserve a c t. a s a m en d ed by th e a c ts o f A u g u s t 4 , 1 9 1 4 ,
P ) 1 7 1St
1914’
M a r c l1
1915,
S e p te m b e r
7,
1916,
lie it enacted, etc.,
r e s e r v e a c t be, a n d
S tr ik e
th e re o f:
out
a ll
in
T h a t s e c tio n 1 4 o f th e a c t k n o w n
is h e r e b y , a m e n d e d a s f o l l o w s :
paragraph
(e )
of
s e c tio n
14
and
and
June
a s th e
in se r t
21,
F ederal
in
lie u
“ (e ) T o e s ta b lis h a c c o u n t s w it h o th e r F e d e r a lr c s e r v e b a n k s a n d w i t !
t h e f e d e r a l r e s e r v e f o r e ig n b a n k .”
A f t e r s e c tio n 2 5 in s e r t a n e w s e c tio n , a s f o l l o w s :
“ S e c . 2 5 a T h e r e is h e r e b y c r e a t e d a F e d e r a l r e s e r v e f o r e i g n b a n k oi
th e U n ite d S t a t e s , to b e u n d e r th e s u p e r v is io n o f t h e F e d e r a l R eserve
B o a r d , a n d t o b e lo c a t e d in th e c i t y o f N e w Y o r k , S t a t e o f N e w Y o r k
“ T h e F e d e r a l re s e r v e fo r e ig n b a n k o f th e U n ite d S ta t e s , h e r c in a fte i
r e fe r re d to a s th e fo r e ig n b a n k , s h a ll h a v e a n a u th o r iz e d c a p it a l ol
$ 1 0 0 ,0 0 0 , 0 0 0 , a n d s h a ll b e g in b u s in e s s w it h a p a id -u p c a p it a l s t o c k ol
$ 2 0 ,0 0 0 ,0 0 0 .
T h e s t o c k o f s u c h b a n k s h a l l b e o f f e r e d a t p a r t o th e
b a n k s o f t h e U n i t e d S t a t e s a n d t o t h e p u b l i c b y t h e S e c r e t a r y o f th e
T r e a s u r y , a n y sto c k n o t su b s c r ib e d fo r to b e ta k e n b y th e T r e a s u r y ol
t h e U n i t e d S t a t e s s u b j e c t t o s a l e a t t h e o p t i o n o f t h e S e c r e t a r y o f th e
T reasu ry.
“ T h e c a p ita l sto c k o f th e fo r e ig n b a n k s h a ll p a y 5 p e r c e n t a n n u a l
d iv id e n d s i f e a r n e d a n d s h a ll n o t b e ta x a b le b y a n y S t a t e o r m u n ic ip a l44883— 18251
38
lt y o r b y th e U n ite d S ta te s .
T h e 5 p e r c e n t d i v i d e n d i f n o t e a r n e d in
a n y o n e y e a r s h a ll b e c u m u la tiv e .
A n y s u r p lu s s h a ll b e d is tr ib u te d a s
fo llo w s : O n e -h a lf to s u r p lu s a n d o n e -h a lf t o th e U n ite d S ta t e s , u n t il 5 0
p e r c e n t s u r p lu s on th e th e n o u ts t a n d in g c a p it a l s h a ll h a v e b e e n a c
c u m u la te d , a n d th e r e a fte r su ch s u r p lu s d iv id e n d s s h a ll b e p a id in to th e
T r e a s u r y o f th e U n ite d S ta t e s .
“ T h e F e d e r a l R e s e r v e B o a r d s h a ll p r e p a r e a n o r g a n iz a t io n c e r tific a te
a n d file t h e s a m e w i t h t h e C o m p t r o l l e r o f t h e C u r r e n c y .
“ U p o n th e tilin g o f s u c h c e r t ific a t e w it h th e C o m p tr o lle r o f th e C u r
r e n c y a s a fo r e s a id , th e s a id fo r e ig n b a n k s h a ll b e c o m e a b o d y c o r p o r a te ,
a n d a s su c h s h a ll h a v e t h e p o w e r —
“ F ir s t . T o a d o p t a n d u se a c o r p o r a te s e a l.
“ S e c o n d . T o h a v e s u c c e s s io n fo r a p e r io d o f 2 0 y e a r s fr o m it s o r g a n i
z a t io n , u n le s s it is s o o n e r d is s o lv e d b y a n a c t o f C o n g r e s s .
•• T h i r d . T o m a k e c o n t r a c t s .
“ F o u r t h . T o s u e a n d b e s u e d , c o m p l a i n a n d d e f e n d , in a n y c o u r t o f
la w o r e q u ity .
“ F i f t h . T o a p p o i n t b y i t s b o a r d o f d i r e c t o r s s u c h o ffic e r s a n d e m
p lo y e e s a s a r e n o t o t h e r w is e p r o v id e d f o r in t h i s a c t , t o d e fin e t h e ir
d u t i e s , r e q u i r e b o n d s o f t h e m a n d fix t h e p e n a l t y t h e r e o f , a n d t o d i s m i s s
a t p le a s u r e s u c h o ffic e r s o r e m p l o y e e s .
“ S ix t h . T o p r e s c r ib e b y it s b o a r d o f d ir e c to r s , b y -la w s , n o t in c o n
s i s t e n t w it h la w , r e g u la t in g t h e m a n n e r in w h ic h it s g e n e r a l b u s in e s s
m a y b e c o n d u c t e d , a n d th e p r iv ile g e s g r a n te d to i t b y la w m a y b e e x e r
c is e d a n d e n jo y e d .
“ S e v e n th . T o e x e r c is e b y it s b o a r d o f d ir e c to r s , o r d u ly a u th o r iz e d
o ffic e r s o r a g e n t s , a ll p o w e r s s p e c if ic a lly g r a n t e d b y th e p r o v is io n s o f
t h is a c t a n d su c h in c id e n ta l p o w e r s a s s h a ll b e n e c e s s a r y t o c a r r y on th e
b u s in e s s o f b a n k in g w it h in th e lim it a t io n s p r e sc r ib e d b y th is a c t.
“ T h e fo r e ig n b a n k s h a ll b e c o n d u c te d u n d e r t h e s u p e r v is io n a n d c o n
t r o l o f a b o a r d o f d ir e c to r s , c o n s is t in g o f n in e m e m b e r s , a p p o in te d b v
th e P r e s id e n t, u p o n th e a d v ic e a n d c o n s e n t o f th e S e n a te .
“ O n e o f th e d ir e c to r s a p p o in te d b y t h e P r e s id e n t s h a ll b e k n o w n a s
t h e g o v e r n o r , o n e a s v ic e g o v e r n o r , a n d o n e a s t h e F e d e r a l r e s e r v e a g e n t .
T h e d i r e c t o r s s h a l l n a m e a c o m m i t t e e o f fiv e a s a n e x e c u t i v e b o a r d t o
a c tu a lly m a n a g e th e a ffa ir s o f th e b a n k .
T h e m em b ers o f th e b o a rd
s h a ll b e c itiz e n s o f th e U n ite d S t a t e s , o v e r 3 5 y e a r s o f a g e , a n d b e m e n
o f te ste d m e r c a n tile e x p e r ie n c e , a n d b e f a ir ly r e p r e s e n ta tiv e o f th e v a r i
o u s p a r ts o f th e U n ite d S ta te s .
“ T h e d ir e c to r s s h a ll be d e s ig n a te d b y th e P r e s id e n t to s e r v e fo r fr o m
o n e to n in e y e a r s , r e s p e c tiv e ly , a n d t h e r e a fte r e a ch m e m b e r so a p p o in te d
s h a ll se r v e f o r a te r m o f n in e y e a r s , u n le s s s o o n e r r e m o v e d f o r c a u s e b y
th e P r e s id e n t.
“ A f t e r th e fir s t y e a r th e d ir e c to r s s h a ll a n n u a lly e le c t th e g o v e r n o r
a n d v ic e g o v e r n o r fr o m a m o n g th e d ir e c to r s a p p o in t e d b v th e P r e s id e n t
o f th e U n ite d S ta te s .
“ T h e s a la r ie s o f t h e d ir e c t o r s a n d o ffic e r s s h a ll b e fix e d b y t h e F e d
e r a l R e s e r v e B o a r d a n d b e p a id fr o m th e e a r n in g s o f th e fo r e ig n b a n k :
P r o v i d e d , T h a t th e g o v e r n o r o f th e fo r e ig n b a n k s h a ll r e c e iv e $ 2 5 ,0 0 0 ,
t h e v ic e g o v e r n o r $ l o ,0 0 0 , a n d th e r e s e r v e a g e n t $ 1 0 ,0 0 0 .
“ T h e d i r e c t o r s o f t h e f o r e i g n b a n k s h a l l r e c e i v e in a d d i t i o n t o t h e i r
s a la r y a r e a s o n a b le a llo w a n c e f o r n e c e s s a r y e x p e n s e s in a t t e n d i n g m e e t
in g s o f th e b o a rd .
“ T h e b o a rd o f d ir e c to r s s h a ll p e r fo r m th e d u tie s u s u a lly a p p e r t a in
i n g t o t h e o ffic e o f d i r e c t o r s o f b a n k i n g a s s o c i a t i o n s a n d p e r f o r m a l l
su c h d u t ie s a s a r e p r e sc r ib e d b y la w .
“ S a id b o a r d s h a ll a d m in is t e r th e a ffa ir s o f t h e fo r e ig n b a n k f a ir ly
a n d im p a r t ia lly a n d w ith o u t d is c r im in a tio n , a n d s h a ll, s u b je c t to th e
p r o v is io n s o f la w a n d th e o r d e r s o f th e F e d e r a l R e s e r v e B o a r d , e x te n d
t o F e d e r a l r e s e r v e b a u k s a n d to m e m b e r b a n k s , a n d to a ll o t h e r b a n k s
a n d b a n k e rs th r o u g h o u t th e c o u n tr y , a n d to fo r e ig n b a n k s a n d b a n k e rs
s u c h a c c o m m o d a t i o n s a s m a y b e s a f e l y a n d r e a s o n a b ly m a d e in r e l a t i o n
to fo r e ig n b a n k in g b u s in e s s
“ T h e p o w e rs o f th e fo r e ig n b a n k s h a ll be a s f o llo w s :
“ T o r e c e iv e d e p o s its fr o m A m e r ic a n a n d fo r e ig n b a n k s a n d b a n k e r s ,
fr o m
t h e U n i t e d S t a t e s o r f o r e i g n G o v e r n m e n t s , i n c u r r e n t f u n d s in
la w f u l m o n e y , n a tio n a l-b a n k n o te s . F e d e r a l r e s e r v e n o te s o r c h e c k s a n d
d r a ft s , p a y a b le u p o n p r e s e n t a tio n , a n d a ls o fo r t h e c o lle c tio n o f m a t u r
in g n o te s a n d b ills .
“ T h e fo r e ig n b a n k m a y d is c o u n t n o te s , d r a ft s , a n d b ills o f e x c h a n g e
a r is in g o u t o f a c tu a l c o m m e r c ia l t r a n s a c t i o n s ; t h a t is , n o te s , d r a ffs ,
a n d b ills o f e x c h a n g e is s u e d o r d r a w n fo r a g r ic u lt u r a l, in d u s tr ia l, o r
c o m m e r c ia l p u r p o s e s , o r th e p r o c e e d s o f w h ic h h a v e b e e n u se d o r w h ic h
a re to be u sed fo r su ch p u rp o se s, th e F e d e r a l R e se rv e B o a r d to h a v e th e
r ig h t t o d e t e r m in e o r d e fin e t h e c h a r a c t e r o f t h e p a p e r t h u s e lig ib le f o r
d is c o u n t w ith in th e m e a n in g o f th is a c t.
44883—18251
39
‘ T h e a g g r e g a te o f su ch n o te s , d r a ft s , a n d b ills , b e a r in g th e s ig n a tu r e
o r in d o r s e m e n t o f a n y o n e b o r r o w e r , w h e t h e r a p e r s o n , c o m p a n y , fir m ,
o r c o r p o r a tio n , r e d is c o u n te d fo r a n y on e b a n k , s h a ll a t n o tim e e x ce e d 5
p e r c e n t o f th e n e t u n im p a ir e d c a p it a l a n d s u r p lu s o f s a id fo r e ig n b a n k ,
b u t t h is r e s t r ic t io n s h a ll n o t a p p ly t o t h e d is c o u n t in g o f b ills o f e x
c h a n g e d r a w n in g o o d f a i t h a g a i n s t a c t u a l e x i s t i n g v a lu e s .
T h e fo r e ig n
b a n k m a y d is c o u n t a c c e p ta n c e s o f t h e k in d s p e r m itte d u n d e r th e a u th o r
it y o f th is a c t.
'< “ T h e f o r e i g n b a n k s h a l l n o t a t a n y t i m e b e i n d e b t e d o r i n a n y w a y
lia b le to a n a m o u n t e x c e e d in g th e a m o u n t o f it s c a p it a l s to c k a t su c h
t i m e a c t u a l l y p a id in a n d r e m a i n i n g u n d i m i n i s h e d b y l o s s e s o r o t h e r
w is e , e x c e p t on a c c o u n t o f d e m a n d s o f th e fo llo w in g n a t u r e :
“ F ir s t . N o t e s o f c ir c u la tio n .
“ S e c o n d . M o n e y s d e p o s ite d w ith o r c o lle c te d b y th e fo r e ig n b a n k .
“ T h ir d . B ills o f e x c h a n g e or d r a fts d ra w n a g a in s t m o n ey a c tu a lly on
d e p o s it t o th e c r e d it o f th e fo r e ig n b a n k o r d u e th e r e to .
“ F o u r th . L ia b ilit ie s to th e s to c k h o ld e r s o f th e fo r e ig n b a n k fo r d iv i
d e n d s a n d r e s e r v e p r o fits .
“ F ift h . L ia b ilit ie s
in c u r r e d
under
th e
p ro v is io n s
of
th e
F ederal
r e se r v e a c t.
T h e d is c o u n tin g an d r e d is c o u n tin g a n d th e p u rc h a se or
s a le b y t h e fo r e ig n b a n k o f a n y b ills r e c e iv a b le a n d o f d o m e s t ic a n d f o r
e ig n b ills o f e x c h a n g e a n d o f a c c e p ta n c e s s h a ll b e s u b je c t t o su c h lim
it a t io n s , r e s t r ic t io n s , a n d r e g u la t io n s a s m a y b e im p o s e d b v th e F e d e r a l
R eserve B oard .
“ T h e fo r e ig n b a n k s h a ll h a v e p o w e r —
“ ( a ) T o d e a l in g o ld a n d s i l v e r c o in a n d b u l li o n a t h o m e o r a b r o a d ,
to m a k e lo a n s t h e r e o n , e x c h a n g e F e d e r a l r e s e r v e n o te s f o r g o ld , g o ld
c o m , o r g o ld c e r t ific a t e s , a n d to c o n t r a c t f o r lo a n s o f g o ld c o in o r b u l
lio n , g iv in g t h e r e fo r , w h e n n e c e s s a r y , a c c e p ta b le s e c u r ity , in c lu d in g th e
h y p o t h e c a tio n o f U n ite d S ta t e s b o n d s o r o th e r s e c u r itie s w h ic h F e d e r a l
r e s e r v e b a n k s a r e a u th o r iz e d to h o ld ;
“ (b )
T o b u y a n d s e ll, a t h o m e o r a b r o a d , b o n d s a n d n o te s o f th e
U n ite d S ta t e s , b o n d s a n d n o te s o f fo r e ig n G o v e r n m e n ts , a n d b ills , n o te s ,
rev e n u e b o n d s, a n d w a r r a n ts, w ith a m a tu r ity fr o m d a te o f p u rch a se o f
n o t e x c e e d in g s ix m o n t h s , is s u e d in a n t ic ip a t io n o f t h e c o lle c t io n o f
t a x e s o r in a n t i c i p a t i o n o f t h e r e c e i p t o f a s s u r e d r e v e n u e s b y a n y S t a t e ,
c o u n t y , d i s t r i c t , p o li t i c a l s u b d i v i s i o n , o r m u n i c i p a l i t y in t h e c o n t i n e n t a l
U n ite d S ta t e s , in c lu d in g ir r ig a t io n , d r a in a g e , a n d r e c la m a tio n d is tr ic ts ,
s u c h p u r c h a s e s t o b e m a d e in a c c o r d a n c e w i t h r u l e s a n d r e g u l a t i o n s p r e
s c r ib e d b y th e F e d e r a l R e s e r v e B o a r d ;
“ ( c ) T o p u r c h a s e a n d t o s e ll, w ith o r w it h o u t it s in d o r s e m e n t, b ills
o f e x c h a n g e a r is in g
o u t o f c o m m e . 'a l t r a n s a c t i o n s
as
h e r e in b e fo r e
d e fin e d ;
“ ( d ) T o e s ta b lis h fr o m t im e to tim e , s u b je c t to r e v ie w a n d d e t e r m in a
tio n o f th e F e d e r a l R e s e r v e B o a r d , r a t e s o f d is c o u n t a n d e x c h a n g e a n d
c o m m is s io n s fo r th e o p e n in g o f c r e d its a t h o m e o r a b r o a d , to b e c h a r g e d
b y th e f o r e ig n b a n k f o r e a c h c la s s o f p a p e r w h ic h s h a ll b e fix e d w it h a
v ie w to a c c o m m o d a tin g c o m m e r c e a n d b u s in e s s .
“ ( e ) T o is s u e b a n k n o te s a n d r e c e iv e F e d e r a l r e s e r v e n o te s u p o n lik e
t e r m s a n d e o n d itio n s _ a s n o w p r o v id e d f o r t h e F e d e r a l r e s e r v e b a n k s .
“ ( f ) T o o p en c r e d its a t h o m e a n d a b r o a d fo r a c c o u n t o f d o m e s tic a n d
fo r e ig n b a n k s or b a n k e rs, to fa c ilita te e x p o r ts a n d im p o r ts to a n d fro m
th e U n ite d S ta te s , a n d e x p o r ts a n d im p o r ts to a n d fr o m o n e fo r e ig n
' c o u n tr y to a n o th e r fo r e ig n c o u n tr y .
'■
“ ( g ) U p o n th e d ir e c tio n a n d u n d e r r u le s a n d r e g u la t io n s p r e s c r ib e d
b y t h e F e d e r a l R e s e r v e B o a r d t o e s t a b l i s h b r a n c h e s a n d a g e n c i e s in f o r < o lg n c o u n t r ie s f o r t h e p u r p o s e o f f a c i l i t a t i n g c o m m e r c e w it h t h e U n i t e d
SicltCS.
“ (h ) N o b a n k , b a n k e r, c o r p o r a tio n , o r in d iv id u a l, o th e r th a n th e f o r
e ig n b a n k , s h a ll s e ll d o lla r b a la n c e s a t le s s t h a n g o ld p a r e x c e p t a s p a y
m e n t fo r m e r c h a n d is e im p o r te d in to th e U n ite d S ta t e s w it h o u t t h e e x
p r e s s a u t h o r i t y o f t h e F e d e r a l R e s e r v e B o a r d ,”
44883— 18251
o
PUTTING THE AMERICAN HOLLAR AT PAR ABROAD.
S P E E C H
OF
HON. R O B E R T
O F
L.OWEN,
O K L A H O M A ,
I n t h e S e n a t e of t h e U n ited S t a te s ,
May 1, 1918.
P U T T IN G
THE
A M E R IC A N
D O LLAR A T
PAR
ABROAD.
Mr. OWEN. Mr. President, on Monday, April 22, 1918, ap
peared an ostentatious article with big headlines explaining
“ why the Federal Reserve Board allows United States cur
rency to remain at a discount abroad, as explained by F. I.
Kent.” Mr. Kent delivered this speech before the National For
eign Trade Council at Cincinnati. Mr. Kent is in charge of the
Foreign Exchange Division under the Federal Reserve Board.
He is said to pass on all foreign exchange transactions. In this
article Mr. Kent argues against putting the dollar at par. The
article, in my opinion, in its argument that the dollar should
remain at a discount abroad, is adapted to serve the German
interests, because tbe effect of it is to prevent the American
dollar buying its full value in neutral countries, and just to the
extent that the American dollar is deprived of its purchasing
power to that extent the taxes of the American people and their
sacrifices in this war will be rendered abortive, unproductive,
and useless.
If it is a good thing, as Mr. Kent thinks, that the dollar
should be at 30 per cent discount, as it is at present in Spain,
then it would be a better thing, according to Mr. Kent, to have
it at 50 per cent discount, or at 60 per cent discount, and the
bigger the discount the better for the American people. It is a
“ reductio ad absurdum.” The argument is false and serves
Germany’s interest.
Mr. Kent is posed in the press as a scientific expositor on
foreign exchange and as a man “ in high authority.” I have
carefully examined his article, which opens with the following
paragraph:
T h e c r y o f th e o r a t o r f o r a d o lla r a t p a r t h r o u g h o u t th e w o r ld m a y
b e v a lu a b le in t i m e o f p e a c e a s c o m m e r c i a l p r o p a g a n d a , b u t it h a s n o
p l a c e in t im e o f w a r , p a r t i c u l a r l y w i t h a w o r ld ’ s w a r , s u c h a s e x i s t s
t o -d a y .
Among others I have been crying “ for a dollar at par,” as
the chairman of the Banking and Currency Committee of the
United States Senate. A dollar at par abroad is just as im
portant as a dollar at par at home, precisely in degree to the
American business involved.
Mr. Kent’s advice is injuring America, and thereby serving
Germany, and on behalf of the American people— whatever
58830— 18530
2
the good purposes of the advisor— I denounce the advice as
hostile to the interests of America.
Keeping the pound sterling at par “ has a place ” in Great
Britain’s policy.
Keeping the India rupee at par “ has a place ” in East India
policy, and the United States Senate and House of Repre
sentatives passed a bill, at the request of the Treasury De
partment, to melt 350,000,000 of silver dollars, among other
things, to preserve the parity of British currency in India,
which German propaganda was deliberately trying to break
down.
The advice of foreign exchange expert. Mr. Kent, that the
cry of a dollar at par has no place in time of war I shall an
swer. and will show the utter fallacy of his arguments, which
are so misleading and so certain to injure America.
Any man who argues against doing what reasonably lies
within our power to put the American dollar at par is giving
advice injurious to the United States, even if he be in charge
of the Foreign Exchange Division under the Federal Reserve
Board. The National Foreign Trade Council needs better ad
vice than it got at Cincinnati from Mr. Kent. The United
States Treasury needs a new set of advisers, because their ad
visers are advising against the interests of the people of the
United States, and I am not willing to be silent when this
injury to America is being perpetrated.
The President of the United States is in favor of keeping the
dollar at par, notwithstanding Mr. Kent.
The Secretary of the Treasury is in favor of keeping the
dollar at par, notwithstanding Mr. Kent.
The Assistant Secretary of the Treasury, Mr. Leffingwell. is
in favor of keeping the dollar at par, notwithstanding Mr.
Kent, and the chairman of the Committee on Banking and
Currency o f the Senate, and the chairman of the Banking and
Currency Committee of the House of Representatives are both
in favor of keeping the dollar at par.
The obvious reason why the dollar should be kept at par
is that we are compelled to buy many necessities for ourselves,
as well as for our allies, of neutrals, and to that extent we must,
in making war purchases, have our dollar buy as much as
possible, and not as little as possible. Any person of good sense
might understand this unless his brain had become hopelessly
confused in the tangle of his excessive knowledge as an expert.
Let us examine this expert’s advice. The first argument made
by Mr. Kent is as follows:
T h e U n i t e d S t a t e s , in o r d e r t o c a r r y o u t h e r p a r t i n t h e w a r , i s g o i n g
to be o b lig e d to s u p p ly fr o m h e r o w n r e s o u r c e s a n d fr o m t h o s e o f m a n y
o th e r c o u n tr ie s o f th e w o r ld c o m m o d itie s to th e v a lu e o f m a n y b illio n s
o f d o lla r s .
R e g a r d le s s o f h e r g r e a t w e a lt h , t h e r e is a p o s it iv e lim it to
h e r a b ilit y to fu r n is h su c h s u p p lie s .
I n o r d e r to w in t h e w a r s h e m u s t
b e in a p o s itio n to d o so fo r a lo n g e r p e r io d t h a n th e e n e m y .
The
le n g th o r tim e t h a t sh e c a n c o n tin u e to fu r n is h n e e d e d s u p p lie s w ill
d ep en d u p o n h er a b ility to c o n se rv e h er re so u rce s.
And Mr. Kent thinks we can conserve our resources by selling
gold dollars in Spain for 60 cents, instead o f selling them for a
dollar.
The simple truth is that to the extent we are required to buy
from neutral countries we should control the shipments from
them to our actual necessities, and this we can do under the
existing law. We can and do control our exports in like man58830— 18530
3
ner under existing law. Great Britain and France do the same.
And France, who has borrowed funds from Spain at 7 per cent
to meet her balances there, sets a suitable example to Great
Britain to do the same thing.
It is better for Great Britain and France, and for the United
States, for that matter, to pay 3 or 4 per cent interest above
the normal rate than it is to pay a 40 per cent discount, and
anybody should be able to see this, especially a person engaged
in conserving the resources of the United States, which Mr.
Kent so anxiously desires to do. It is better to pay 6 per cent
or 7 per cent or 8 per cent in Spain for money or on Spanish
balances here rather than to compel our importers to pay 30
and 40 per cent for money in Spain. It comes back immediately
upon our own consumers. It comes back upon them with the
merchant’s profit added. Great Britain understands this per
fectly well, and so does France, and both of them are making
strenuous efforts to place credits in Spain for the purpose of
putting their own currency more nearly at par; and an attempt
is being made now by the Treasury Department, on our behalf,
to do the same thing. In other words, the Treasure Department
is trying to do now what Mr. Kent, the Treasury expert, argues
it is against our interest to do. They are trying to put the
dollar at par, and Mr. Kent is arguing before the country that
its dollar ought to be at a discount.
Mr. Kent argues that our interest and that of our allies de
mands that we maintain such commercial relations as will
enable us to continue the purchase of neutral commodities con
stantly for a long period. And he argues in consequence that
by this system—
. W e w ill a ls o b e h e lp in g t o k e e p t h e c o u n tr ie s w ith w h ic h w e t r a d e
i n a h e a l t h i e r f i n a n c i a l c o n d i t i o n , w h i c h s h o u l d b e o f g r e a t b e n e f i t in
h e l p i n g u s t o fin d a m a r k e t f o r o u r g o o d s w h e n t h e w a r is o v e r ,
*
*
*.
Selling Spain American dollars at 60 cents on the dollar would
certainly serve to keep Spain in a healthier financial condition,
but at our expenses, and at our serious expense. It is unpar
donable to permit our gold dollar to be at 40 per cent discount.
It is shameful to the United States, and I shall not submit to
it if I can help it.
Mr. SHAFROTH. Mr. President-----The PRESIDING OFFICER (Mr. C u r t i s in the clufir).
Does the Senator from Oklahoma yield to the Senator from
Colorado?
Mr. OWEN. I yield.
Mr. SHAFROTH. The proposition which is made is. it
seems to me, so absolutely void of any reason, that I should like
to know whether Mr. Kent gives any other reason.
Mr. OWEN. I shall put the article in full in the C ongres
s io n a l
R e c o r d , and I invite Senators to read it.
It is abso
lutely shameful and disgusting. It has no argument in it
worthy of the name.
Yet this man as an expert of the United States Treasury goes
out and addresses a great convention of business men in "the
United States to persuade them that the dollar should be kept
at a discount. The President wants our dollar at p a r; the Sec
retary of the Treasury wants it at par. and this alleged expert
argues against having it at par. As the Senator from Colorado
said there can be no reason why the dollar of the United States
a dollar worth par in gold, should be selling at 60 cents on the
58830—18530
4
dollar in Spain. There is no just reason for it. It is because
the dollars we have loaned to our allies have been used in large
part to meet the trade balances due to Spain for the Spanish
commodity shipments to Great Britain and France, and because
our own purchases here by our own importers compel our peo
ple, our importers, to have a certain limited number of pesetas,
and the banks control the supply of commercial bills in pesetas
and are speculating upon them and compel our importers to pay
any price that they please. That is the reason of it It is all
right from the bankers standpoint, but it is highly offensive to
a good American.
„ ,,
It is argued that the United States will find it advisable to
curtail its exports to neutral countries and to hold our imports
within reasonable limits, and says:
A n a d v e r s e e x c h a n g e r a te is th e k e y t o su c h fo r c e , a n d is a g r e a t
r e g u la t o r o f t r a d e .
I t p u t s s u c h d iffic u ltie s in th e w a y o f o u r im p o r t s
t h a t w i t h o u t o t h e r p r e s s u r e w e e n d e a v o r to d o w i t h o u t t h e m in s o f a r
a s p o s s ib le .
Certainly if our gold dollar buys 60 cents’ worth in Spain, our
merchants do regard it as a serious difficulty, because they
must impose this excess charge on Spanish commodities on their
own consumers, with the merchants’ profit in addition. It is
a very serious difficulty, obstructing trade, interfering with
legitimate commerce. It is precisely for this reason that such
a difficulty should be removed, and imports and exports con
trolled by our other mechanism provided by law by means of a
license system. We provided for that by a license system.
To argue that this obvious evil is a benefit because it is a
means of preventing Americans from buying their necessities
is illogical and senseless. The things they are obliged to have
they will buy at the market cost. The purchase and sale of
things nonessential to war can be and has been stopped by the
license mechanism otherwise provided by law.
The discredited American gold dollar puts the United States
in the attitude of having its currency dishonored and its finan
cial credit abroad impaired. It gives psychological encourage
ment to the German and psychological discouragement to the
allies. It has no commercial sense in it for the reason that just
as France borrowed money from Spain at 7 per cent—3 per cent
above the normal— and to that extent avoided the tax, we
could borrow and avoid the tax we pay of 40 per cent on im
ports. It is better to pay 3 per cent per annum than 40 per cent
with each turnover. The merchant keenly feels this. A bank
expert does not. His class profits on fluctuating high exchange
rates.
Mr. Kent’s article emphasizes the fact that the Federal Re
serve Board, through its Division of Foreign Exchange, knows
the exact cash balances each Wednesday night which every
country in the world has in the United States, and he states
that the neutral countries are putting heavy balances into the
United States. If this is true, then these balances have been
transferred 10 the United States by bankers by the sale of cred
its acquired in neutral countries (by the sale of their commodi
ties. payable in terms of their own money), and the New York
bankers may sell such pesetas at a high rate to merchants com
pelled to compete injuriously for such pesetas or croners or
guilders. 1 would discourage this profiteering. Mr. Kent’s
advice would encourage it. I look at the problem from the view58830— 18530
5
point of the importer, exporter, consumer, and producer. The
banking expert looks at the problem from the opposite side.
His class profits on fluctuating exchange.
Moreover, the neutral countries are voluntarily sending their
balances to America, which is the only thing required to bring
the dollar immediately to par if sufficiently encouraged, but Mr.
Kent is opposed to encouraging the putting of the dollar at par,
if his general thesis be correct. While it is to our obvious ad
vantage, as Mr. Kent says, to encourage these countries to put
their balances in the United States, what 1ecomes of Mr. Kent’s
argument that it is to our advantage to keep the dollar below
par when he would encourage these balances which would bring
the dollar to par. The one argument contradicts the other.
We can put the dollar to par in several different ways.
First, by forbidding the sale of pound sterling for dollars
and compelling the Spanish merchants to buy dollars with
pesetas. And this only means limiting arbitrage until the
dollar reaches par.
Second. We may accomplish it by placing United States
bonds payable in pesetas in Spain, and thus buy pesetas neces
sary to meet the urgent, though limited, demand of our im
porters.
Third. We can accomplish it by encouraging what Mr. Kent
says is taking place without encouragement. That is, encour
aging foreign banks to keep balances in the United States at
interest, and we can afford to pay them 6 per cent or 7 per cent
for such balances, rather than compel our merchants to pay 40
per cent for exchange and the customer in the United States
40 to 50 per cent for commodities.
^ Moreover, if the dollar was at p a r; if the policy of the United
States was to keep the dollar at par, these balances of neutral
countries would greatly expand, because then foreign bankers
would know that they would not suffer any loss in the future
by the depreciation o f the American dollar by this adverse ex
change. When they know that they will get their principal
back with interest in terms of their own currency at par thev
will deposit their balances here more readily.
Fourth. We can bring the American dollar to par by impos
ing an extra tax on goods required by Spain, putting the export
tax at the currency rate of the exchange, whatever it is. It
would not take Spain long to discover the wisdom o f exchang
ing pesetas for dollars at par, but I do not believe in such a
friction-arousing policy.
Fifth. Another way to put the dollar at approximate par is bv
negotiating with the Government of Spain, with the cooperation
of France and Great Britain, and seeking their just treatment as
a matter of amity and commercial decency. This, however
would require a constant series of negotiations, and while of
value, is not of as much value as using the absolute power which
we have to require commercial justice through the regulation of
individual transactions.
It will be remembered we put upon the finance-corporation
bill a provision that those bonds might be issued in terms o f for
eign money, and we put in the third liberty-loan bill that the
bonds of the United States might be issued in terms of foreign
money, so that a person acquiring those bonds in foreign coun
tries would know he would get his principal and interest back
without the discount of an adverse exchange rate. Congress did
58830— 18530
6
that very thing for the purpose of bringing the dollar to par,
showing that the Senate of the United States desires to put the
dollar at par, that both Houses desire to put it at par, and yet
this expert of the Treasury is advising the bankers of the United
States and argues in favor of keeping the dollar at a discount.
The Congress of the United States expressly authorized the
President of the United States not only to embargo gold and
silver, if desirable, but also to embargo credits; and when we
put an embargo on the sale of dollars for pound sterling and
compel Spain to buy the dollars she requires of us with pesetas,
thus giving us pesetas in exchange for these dollars, we have an
immediate remedy without dealing unjustly in the slightest de
gree with Great Britain.
Because Spain imported from us last year $92,000,000 of goods
and we imported from her only $36,000,000, she owed us on a
net balance $55,000,000. Yet the American dollar has come to
so low a level that it only brings 60 cents in Spain, when, in
point of fact, if we compelled Spain to buy her dollars from us
exclusively we could make a dollar worth 60 per cent above par,
because she is obliged to have our dollars.
Our loans to our allies have been injuriously, if not wrong
fully, used against us. On May 21, 1917, in Des Moines. Iowa,
Hon. W. G. McAdoo delivered at a meeting of business men and
bankers of Iowa an address, in which he explained that the
loans already authorized to be made our allies of $3.000,000,000—
and that was enough to consume our credit trade balance for
that year—would go to “ five billions or six billions,” and said in
relation to the bond issue: “ This money is not going to be taken
out of the country. All of this financing is largely a matter of
shifting credits; it is not going to involve any loss of gold ; it
is not going to involve any loss of values.” and so forth.
The money was taken out by hundreds o f millions. We
shipped, I understand, 80,000,000 gold dollars to Spain last
year, through London. Spain owed us $55,000,000. We let
Great Britain have that $55,000,000 to pay Spain, and we fur
nished $88,000,000 more of our gold to pay British balances
due Spain; and on top of that our dollar has been permitted
to go to a tremendous discount, and every dollar we buy now
is costing our consumers 50 per cent more than it ought. In
our normal purchases in Spain it would cost us one-hall of
$36,000,000, or $18,000,000, per annum. In that one country
there is a great net loss to America. Is that to the advantage
o f the United States in a great war? It is against the interests
of the United States, it is in the interest of Germany, and I
object to it most seriously. I filed my objection in the Treasury
Department. I argued this matter before the Federal Reserve
Board, with Mr. Kent present, and Mr. Kent told me to my
face it is better for the dollar to be at a discount. That argu
ment was made in the Federal Reserve Board room ; and, after
I presented the answer fully on the floor of the Senate, to
have this expert go out in the United States carrying on a
false propaganda is unendurable and ought not to be per
mitted by the Government of the United States.
The money was taken out by hundreds o f millions, involving
loss of gold and of values, and then Congress passed an act au
thorizing the President to control the sale of dollars or transfer
of credits. The President put the power in the hands of the
Secretary of the Treasury by his proclamation of October 12,
58830— 18530
7
9
r
1917, and Mr. McAdoo trusts it, apparently, to Mr. Kent, who
now seriously argues against keeping the dollar at par, as the
President and the Secretary of the Treasury desire, and as the
Congress desires it shall be done.
We must stand by our allies, and we can do so and still
protect the dignity o f our own currency. We ought to protect
the American dollar, and as economically as possible. We can
be as generous as we please with our allies and still preserve
the honor and dignity of the American dollar.
What was the anxiety shown by the British Government a
few days ago when an appeal was made to us for $350,000,000
of silver. It was to keep the rupee at par. Did Great Britain
think it important? She thought it vital. The rupee was being
put below par by a well-organized German propaganda in
India. I will not stand for any propaganda to put the Ameri
can dollar below par for this country; I do not care what the
motive of the man is. and I assume, indeed, I am glad to be
lieve, that his motives are not bad. I do not think his motives
are necessarily bad. I merely think that he lacks common
sense.
If necessary for us to borrow from these neutral countries
who are without effort placing their balances here and paying
them a high rate, 6 per cent, 7 per cent, it would only be 2
or 3 per cent margin per annum on enough money from the
Spanish banks to pay foi our imports from Spain at par, whereas
Mr. Kent would advise us to pay 40 per cent discount on our
goods shipped from Spain as a means of winning the war. It
is bad advice, and if Mr. Kent does not know better he ought
to be retired. If he does really know better— and I do not think
he does— he ought to be indicted for aiding the enemy.
It is a serious thing, putting the dollar at a discount. It is
a veiy serious thing. Suppose the American dollar were to
fall to a discount to-day in the United States, what would it
hifimJ t , T " U T ai‘ - that ever-v gold dollar would go in
hiding. I hat is what it would mean. It would mean that
every contract in the United States would be suddenly thrown
upon a fictitious basis and dislocated. It would mean the most
complete upset of all our business life. Every man knows that
aad y'e have taken infinite pains to store up gigantic quantities
of gold for the purpose of keeping the American dollar at par in
the United States, so that everyone who deposits in our 25 000
banks should know that he can get his deposit in gold on'de
maud. To say that the dollar should be at a discount abroad
while it is at par at home has no logic, has no justification and
is mischievous in the highest degree.
Mr. Kent emphasizes the fact of the bank balances of neu
tral countries piling up in the United States; also that the
neutral countries have stripped themselves of commodities
to sell them at a high price to Germany, and they must after
the war look to us for commodities. This is true- and it
means that the normal demand for commodities from Amer
ica after the war would give us the equivalent o f probably
in excess of an annual commodity trade balance of a thousand
million dollars. In addition to this will come interest char ms
from Europe amounting to a half billion more, and in addition’ to
this will come the mercantile marine freight credits of American
ships, so that America may be expected to have a flow of balances
58830— 18530
due her amounting to two or three billion dollars per annum
after the war is over.
,
,
..
.
All of these neutrals will need their trade balances then in
the United States, and they need, and they know they need,
them now to begin the arranging of credits in America to supply
them with needed commodities after the war, for America will
be In a position to control commodities all over the world be
cause of the balances which will be due her.
Mr. Kent does not see that these facts comprise an overwhelm
ing argument why the dollar should go to par and stay at par.
because the necessity of the world for the American dollar will
be gigantic. We have the right to anticipate their needs for
this dollar and place our own bonds abroad and invite neutral
balances here. Indeed, our trade balance last year was $3,000,000 000 That must be paid with dollars, or commodities, or
gold, or securities. Indeed, it forms the basis upon which the
American dollar would go to a premium if it were permitted to do
so, which we ought not to allow, however, as the dollar should be
used as a standard measure of value, never varying, utterly de
pendable", the standard of value throughout the world, if we
want money to protect every other place as the financial center
of the world.
The bankers should not be permitted to tamper with our
financial yardstick, even if they do profit by it or profiteer bj
it, as I verily believe some of them are doing n ow ; I hope not
with Mr. Kent’s knowledge.
Mr. SMOOT. Will the Senator yield?
Mr. OWTEN. Certainly.
Mr. SMOOT. I am very much interested in what the Senator
is saying, and I think it would be good if the American people
generally understood the situation. I wish the Senator would
also add to his remarks that it is not only the banks in Spain
that are profiting by a depreciated United States currency, but
speculators, and the speculator to-day is making all the way
from 20 to 25 and 30 per cent on every dollar of foreign•currency bills that he can secure.
Mr. OWEN. I have no doubt that is the case, but we ought
not to allow a condition to remain where this kind of thing can
be done at the expense of the American people. That is the
point I am making.
Mr. Kent justifies our gold embargo and enlarges upon our
exact knowledge of balances held by neutral countries in
America. This is the end of the argument of Mr. Kent in telling
why the Reserve Board allows United States currency to re
main at a discount. His alleged explanation of three columns is
no explanation whatever. It explains nothing. And the lauda
tory headlines of the article, with its boast that it is a scientific
exposition is utterly inaccurate but very serviceable as a piece of
propaganda. He makes no adequate or convincing explanations
whatever to justify keeping the dollar at a discount.
The utterly fallacious argument has been made that while
importers lost heavily exporters gained.
That argument appears on page 158 of the Federal Reserve
Bulletin of March 1, 1918. As a matter of fact, an exporter
neither gains nor loses. A man who takes a thousand dollars’
worth of goods from New York to Barcelona gets his $1,000, and
if he pays the freight and commission he gets his freight and
commission back and $1,000. If he gets 3 pesetas for a dollar
58830— 18530
9
he immediately sells his pesetas for dollars and gets the dollars
back, and it comes out the same $1,000; and that is all there is
of that.
As a matter of fact, in a country where the currency is depeciated workmen are temporarily paid less and goods are made
for less and exports are stimulated by this fact of the goods being
made cheaper at the expense of labor.
1 hat is an old truism in the doctrine of international ex
changes, explained by various writers, and a school boy who has
studied international exchange knows about it. But this is a
transitory matter and has no relation to the United States be
cause the dollar in the United States has not depreciated. Labor
is not underpaid in the United States ; goods are not selling below
a normal profit in the United States. The contrary is true of
Germany. German labor is underpaid, her currency at home has
depreciated, and she is making goods cheaper than they can be
made in Sweden, but at the expense of her own German work
men, and Germany is thus underselling the manufacturers in
Sweden. Sweden is on the point of passing a tariff act to exclude
that advantage over Swedish manufacturers gained by Germany
at the expense of the poor, underpaid German workmen. While
that appears in the Federal Reserve Bulletin, it affords no
justification in keeping the American dollar at a discount because
we gain no advantage in exports.
Mr. Kent is advertised as having complete control of all
foreign-exchange transactions. If he had exercised the powers
given to the President and restricted the transfer of United
States credits abroad, the American dollar would have been at
par now. It can be brought to par within a very short time in
most o f the neutral countries.
It is perfectly plain to any man who will follow this with the
east attention. If we forbid the sale of dollars for pounds
sterling, then the only way Spain can get dollars from us to
pay her $92,000,000 of bills to us is to buy dollars from our
market by the sale of her commercial bills in payment for shininent from the United States to Spain. Spain would have, then,
to buy $92,000,000 worth of dollars from us, less our purchases
of $36,000,000 of commodities from Spain.
Purcnases
Mr. SMOOT. Or send gold for it.
Mr. OWEN. Or send gold for it, and therefore our dollars
would immediately go to par. They would go to par inside of
a week. Congress gave that power to the President, and he
gave it to the Secretary of the Treasury, and the Secretary of
the Treasury gave it to Mr. Kent, and Mr. Kent advises us now
not to do it, notwithstanding the President wants it done and
Congress wants it done.
Mr. GALLINGER. Mr. President-----Mr. OWEN. I yield to the Senator.
Mr. GALLINGER. If the Senator will pardon me, I ought
to have understood his statement concerning Mr. Kent but I
was engaged otherwise. Will he state who Mr. Kent is?’
Mr. OWEN. Mr. Kent has charge of the foreign-exchange
business of the Federal Reserve Board, and he vis£es the trans
fers of credits from the United States. Congress authorized
the President to control the transfer o f credits from the United
States. The President authorized the Secretary o f the Treas
ury to discharge this function. The Secretary put Mr. Kent in
charge, and Mr. Kent tells us it is better not to do it.
58830— 18530
Mr. GALLINGER. So Mr. Kent in a sense speaks officially;
that is, he is an official of the Government?
Mr. OWEN. Y es; he is supposed to speak officially; but I
insist that he is misrepresenting the officers who are in control
of that department. I am satisfied from what he has said to
me that the Secretary of the Treasury wants to put the dollar
at par.
The Spanish Government in 1916, finding that there was
danger of Spanish credits and Spanish commodities migrating
from Spai-i to furnish the sinews of war to the belligerents,
passed an act prohibiting the placing in Spain foreign or
Spanish securities except with the approval of the council of
ministers. I wish, without reading, to put the Spanish royal
decree and act of the Cortez in the R e c o r d for the information
of Senators. I will not take the time to read it.
The VICE PRESIDENT. Without objection, permission to
do so will be granted.
The matter referred to is as follow s:
[ T r a n s la t i o n .]
ROYAL
DECREE.
In a c c o r d a n c e w it h t h e c o u n c il o f m in is t e r s , I h e r e b y a u t h o r iz e th e
m i n i s t e r o f fin a n c e t o p r e s e n t in t h e C o r t e s a p r o j e c t o f l a w p r o h i b i t i n g
t h e in tr o d u c tio n in to S p a in o f fo r e ig n s e c u r it ie s w it h o u t t h e a u t h o r iz a
tio n o f th e G o v e r n m e n t.
G i v e n in t h e r o y a l p a la c e t h i s 1 4 t h d a y o f J u n e , 1 9 1 6 .
A lfon so.
The
M in iste r
o f F in a n c e , S a n tia g o
A lb a ,
to
th e
C o rtes:
T h e a b n o r m a l c o n d it io n s c o n t r o llin g th e e c o n o m ic lif e o f a ll c o u n tr ie s
in c o n s e q u e n c e o f t h e p r e s e n t E u r o p e a n w a r d e m a n d in o u r o w n c o u n t r y ,
a s in o t h e r s , t h e a d o p t io n o f m e a s u r e s o f a n e x c e p t io n a l c h a r a c t e r to
p r e v e n t , a s f a r a s fe a s ib le , t h e e m ig r a tio n o f S p a n is h fu n d s to t h e d e t r i
m e n t o f t h e d e v e lo p m e n t o f n a tio n a l w e a lth , a n d th e w it h d r a w a l fr o m
th e S ta te o f th e m e a n s fo r c a r r y in g o u t, a t th e p ro p e r m o m e n t, su ch
c r e d i t o p e r a t i o n s a s m a y be d e m a n d e d * b y p u b lic in te r e s ts .
B e a r i n g t h e s e c o n s i d e r a t i o n s in m i n d , a n d w i t h o u t f o r g e t t i n g t h a t
m e a s u r e s o f th is n a tu r e m u s t a lw a y s h a v e su ch e la s tic ity a s m a y p e r m it
th e G o v e r n m e n t to a lte r th e m a s th e c a se a n d c ir c u m s ta n c e s m a y d e
m a n d , t h e u n d e r s i g n e d m i n i s t e r , in a c c o r d w i t h t h e c o u n c i l o f m i n i s t e r s
a n d w it h H is M a j e s t y ’ s a u t h o r iz a t io n , h a s th e h o n o r to s u b m it to th e
d e lib e r a tio n o f t h e C o r te s t h e fo llo w in g
PR O JE C T O F L A W .
A r tic le 1. A f t e r th e p r o m u lg a tio n o f th e p r e s e n t la w , a n d u n til a d a te
w h ic h s h a ll be fix e d b y d e c r e e a g r e e d u p o n a t a c o u n c il o f m in is te r s ,
t h e r e s h a l l b e p r o h i b i t e d : A n n o u n c i n g , i s s u i n g , p u t t i n g in c i r c u l a t i o n o r
f o r s a l e , p a w n i n g o r i n t r o d u c i n g in t h e S p a n i s h m a r k e t s e c u r i t i e s o f tind e b t a n d o t h e r le g a l t e n d e r s o f fo r e ig n g o v e r n m e n t s , a s w e ll a s s t o c k s ,
o b lig a tio n s , o r title s o f a n y
k in d
o f c o m p a n ie s o r c o r p o r a t io n s
not
S p a n is h .
N e v e r t h e le s s , o n tn e p r o p o s a l o f th e m in is t e r o f fin a n c e , t h e c o u n c il
of m i n i s t e r s s h a l l b e a b l e t o g r a n t , in r e s p e c t t o p r o v i s i o n s in t h e p r o
c e d in g p a r a g r a p h , t h e e x e m p tio n s h e m a y ju d g e p r o p e r .
A r t ic le 2 . T h e G o v e r n m e n t lik e w is e , o n th e p r o p o s a l o f th e m in is te r
o f fin a n c e , m a y p r o h ib it th e in tr o d u c tio n in to S p a in o f S p a n is h s e c u r i
tie s . o f c o r p o r a t io n s o r s o c ie t ie s , a ls o S p a n is h , w h e n e v e r t h e s e s to c k s a r e
d o m ic ile d
abroad .
T h ose
w ho
d e s ir e
to
in tr o d u c e
th e m
are
hereby
o b lig e d to r e p o r t t o t h e G o v e r n m e n t a s to s u c h in tr o d u c tio n a n d d e s t in a
tio n .
A r t ic le 3 . T h e v io la t io n o f th e p r e s e n t la w s h a ll b e p u n is h e d w ith a
f i n e o f 1 . 0 0 0 t o 1 0 , 0 0 0 p e s e t a s , a n d i n c a s e o f r e p e t i t i o n , w i t h a t in e
o f f r o m 1 0 , 0 0 0 t o 2 r > .0 0 0 p e s e t a s .
A r t ic le 4 . T h e m in is te r o f fin a n c e w ill d ic t a t e th e p r o p e r o r d e r s fo r
t h e e x e c u t io n o f t h is la w .
M a d r id , J u n e 1 4 , 1 9 1 6 .
S a n t ia g o A l b a ,
T h e M in is te r o f F in a n c e .
58830— 18530
Mr. OWEN. It was precisely the same principle which
caused Congress, as a war measure, to pass the trading with
the enemy act, approved October 6, 1917; among other things
the act providing—That
th e
P r e s id e n t
m ay
in v e s tig a te ,
r e g u la t e , o r
p r o h ib it
under
su e h r u le s a n d r e g u la t io n s a s h e m a y p r e s c r ib e , b y m e a n s o f lic e n s e s
o r o th e rw is e ,
any
tr a n sa c tio n s
in
fo r e ig n
exch ange, export or
ea rm a r k in g s o f g o ld o r s i lv e r c o in o r b u llio n o r c u r r e n c y , t r a n s f e r s o f
c r e d it in a n y fo r m
(o t h e r t h a n c r e d its r e la tin g s o le ly to t r a n s a c tio n s
to be e x e c u te d
w h o lly w it h in
th e U n ite d
S ta t e s I. a n d
tra n sfe r s o f
e v id e n c e s o f in d e b te d n e s s o r o f
th e o w n e r s h ip
o f p ro p e rty
b etw ee n
th e
U n ite d
S ta te s an d an y
fo r e ig n c o u n tr y , w h e th e r e n e m y , a llv o f
e n e m y , o r o th e rw is e , o r b e tw e e n r e s id e n t o f o n e o r m o re fo r e ig n c o u n
tr ie s , b y a n y p erso n w ith in
th e U n ite d
S t a t e s ; a n d h e m a y r e q u ir e
a n y s u c h p e r s o n e n g a g e d in a n y s u c h
tr a n s a c tio n to fu r n is h , u n d er
o a t h , c o m p le te in fo r m a tio n
r e la tiv e t h e r e to , in c lu d in g th e p r o d u c tio n
of any
b o o k s o f a c c o u n t , c o n t r a c t s , le t t e r s , o r o t h e r p a p e r s in c o n
n e c tio n
th e re w ith
in
th e
c u sto d y
or c o n tro l o f su ch
p e r s o n , e ith e r
b e fo r e o r a f t e r s u c h t r a n s a c t io n is c o m p le te d .
Why? For the very reason that I have mentioned, so as
to prevent credits migrating from the United States, unjustly
and unfairly to us, and putting our dollar below par abroad.
It was the same principle that caused Congress to pass the
espionage act, approved June 15, 1917, which among other
things provides—
•finuEC+ w t N
,.n "
Jrat
# * v .e o
o u t o f th e
a n y a r t 'c l e
A '
(lu r in g th e p r e s e n t w a r th e P r e s id e n t s h a ll
;
s a f e t -y
80
r e q u ir e ,
and
s h a ll
m ake
p r o c la m a rr
u n la w fu l to e x p o r t fr o m o r s h ip fr o m o r ta k e
U n i t e d b t a t e s t o a n y c o u n t r y n a m e d in s u c h p r o c l a m a t i o n
o r a r t i c le s m e n t io n e d in s u c h p r o c l a m a t io n , e x c e p t a t s u c h
i0 -1
arul a a d e r su ch r e g u la t io n s a n d o r d e r s , a n d s u b je c t to
su c h lim it a t io n s a n d e x c e p t io n s a s th e P r e s id e n t s h a ll p r e s c r ib e , u n til
o th e r w is e o rd e re d b y th e P r e s id e n t o r b y C o n g r e s s : P r o v id e d , tw ic e v e r ,
of
a n o t h e r e fe le D C e
Sha11 b °
g iv e n
to
t lle
p o r ts
of
one
S ta te
over
th o se
tt ° n <)etober
the President vested in the Secretary of
f,.le ireasui'y the control of foreign exchange, exporting, gold
ansfer. credits, etc., in the following terms:
t r a t i o n ' ' ( ! ' / n r f v ^ in w n J l? S e c r e t a r y o f t h e T r e a s u r y t h e e x e c u t i v e a d m i n i s t i n n in f n roicrn i n v e s t i g a t i o n , r e g u l a t i o n , o r p r o h i b i t i o n o f a n y t r a n s a c -
of
Jr
b u h io n
e u r r e m
c r e d it s r e l a t f n ^ « o t« iv y
t h e T in ite r i s t n f e a i J h
th e U n ite d s t a t e s , a n d
T v e X p 0 ,r t ’ ^ e a r m a r k i n g o f g o l d o r s i l v e r c o i n ,
’ tJ ^ s fe r s
c r e d lt in a n y
fo r m
(o th e r th a n
J
tr a n s a c tio n s to be e x e c u te d
w h o lly
w ith in
t r a n s fe r s o f e v id e n c e s o f in d e b te d n e s s o r o f th e
^
0 L ? r<!.P e f VV ^ ‘ ' t w e e n t h e U n i t e d S t a t e s a n d a n y f o r e i g n c o u m
t i y , o r hi tw e e n rt s id e n ts o f o n e o r m o re fo r e ig n c o u n tr ie s , b y a n v p e r
s o n w i t h i n t h e U n i t e d S t a t e * ; a n d 1 h e r e b y v e s t in t h e S e c r e t a r y o f t h e
( t r e a s u r y t h e a u t h o r i t y a n d p o w e r t o r e q u i r e a n y p e r s o n e n g a g e d in a n v
to fu r n is h u n d e r o a th c o m p le te in fo r m a tio n
r e la tiv e
th e r e to , in c lu d in g th e p r o d u c tio n o f a n y b o o k s o f a c c o u n t , c o n t r a c t s
l e t t e r s o r o t h e r p a p e r s in c o n n e c t i o n t h e r e w i t h in t h e c u s t o d y o r c o n t r o l
o f su ch p e r s o n , e ith e r b e fo r e o r a ft e r s u c h tr a n s a c tio n is c o m p le te d .
At tlie same time the President vested in the W ar Trade Board
the authority to issue licenses for exports or imports in para
graphs 2 and 3 of his Executive order of October 12, 1917 in
the following language:
I h e r e b y v e s t in s a id b o a r d t h e p o w e r a n d a u t h o r i t y t o is s u e l i c e n s e s
8 i a ‘h t e r m s a n d c o n d i t i o n s a s a r e n o t i n c o n s i s t e n t w i t h l a w
o r to
w it h h o ld o r r e fu s e lic e n s e s , fo r t h e e x p o r t a t io n o t a ll a r t ic le s
exceD t
c o in b u llio n , o r c u r r e n c y , t h e e x p o r t a t io n o r t a k in g o f w h ic h o u t o f t h e
U n ite d S ta te s m a y be r e s tr ic te d b y p r o c la m a tio n s h e r e to fo r e o r h ere
a f t e r is s u e d b y m e u n d e r s a id T i t le V I I o f th e e s p io n a g e a c t
1 fu r t h e r h e r e b y v e s t in s a id W a r T r a d e B o a r d th e p o w e r a n d a u
t h o r i t y to is s u e , u p o n s u c h t e r m s a n d c o n d itio n s a s a r e n o t in c o n s is te n t
w ith la w . o r to w ith h o ld o r r e fu s e , lic e n s e s fo r im p o r t a tio n o f a h a r t ic le s
th e im p o r t a tio n o f w h ic h m a y be r e s t r ic t e d b y a n y p r o c la m a t io n h ere
a f t e r is s u e d b y m e u n d e r se c tio n 2 o f th e t r a d in g w it h -t h e -e n e m y a c t
The President of the United States, the Secretary o f the
Treasury, and the best bankers, and various international ex
58830— 18530
perts with whom I have discussed this matter are convinced
o f the wisdom of maintaining the dollar at par. The only diffi
culty having been the means by which to accomplish it. I re
gard it as grossly unbecoming in Mr. Kent to attempt to create
public opinion in favor o f keeping the dollar below par. Such
conduct I regard as disloyal and insubordinate to the Presi
dent’s wishes and deserving a stern rebuke. Mr. Kent should
devote his knowledge in suggesting and perfecting plans by
which the dollar could be put at par and the Reserve Board and
the Treasury Department officials should find a means of thus
protecting American interests, and Mr. Kent's conduct in going
before the National Foreign Trade Council and attempting to
mislead public opinion I regard as very reprehensible.
In my judgment the Secretary of the Treasury should dismiss
Mr. Kent from office as unfit to advise the Treasury Department
o f the United States. It is this kind of advice, the advice of
the banker who thinks in terms o f interest, or profit and of com
missions, that is calculated to mislead the Government officers.
Some banks profit by fluctuating exchange rates, and some
banks profit by speculating in exchange rates, by acquiring for
eign credits at a low rate and selling them to our merchants
who are compelled to have foreign credits in foreign currency
at a high rate. The bankers, however, should not prevail over
our importers and consumers.
Mr. GALLINGER. Mr. President, alluding to Mr. Kent, I
will ask the Senator from Oklahoma if he has knowledge as to
whether or not any member of the Federal Reserve Board in
dorses Mr. Kent’s views? It has been suggested, or at least I
have heard it suggested, that at least one member of the Federal
Reserve Board was in harmony with Mr. Kent.
Mr. OWEN. I think that the influences surrounding Mr. Kent
have been persuasive with some members of the board. I should
not like to quote their names, unless they wish to put themselves
on record with regard to i t ; but I think one or two members of
the board have been led to that belief; and it is perfectly ob
vious that they have been grossly misled.
Mr. GALLINGER. I do not wish to mention any name
myself, but it has been suggested to me that such is the fact.
Mr. OWEN. I think it is the fact. That is the reason why
I regard this advice as particularly mischievous, because the
members of the Federal Reserve Board who have lived only
within our domestic lines, who have not been engaged in inter
national banking, and who have had no particular reason to
have studied this matter, necessarily would rely upon such
alleged expert advice; I should not be inclined to blame them
for accepting the opinion of a man whom they regard as very
high authority; but when I see the advice is wrong I feel it
my duty to the country to speak out and show why it is wrong,
because it is injuring American interests in this war, and I do
not think we ought to permit it.
I submit a statement o f the exports and imports from the
neutral countries o f Europe with the United States, showing a
net balance due us of about $200,000,000 last year. These bal
ances must increase because those countries have denuded
themselves in large measure in supplying the belligerents
around them, and they have to call on us more and more for
supplies.
58830— 18530
13
Balance of trade in the commerce of the United States tcith the neutral
countries of Europe during the calendar year 1917.
Excess o.—
Countries.
Imports.
Exports.
Imports
Denmark.............................
Netherlands............................
Norway...................................
Spain........................................
Sweden........................................
Switzerland....................................
2977, 453 $32,388,864
22,744,504 90,520,301
6,281,233 62,866,850
30,881,030 92,469,320
18,000,487 20,900,854
19,834,008 19,502,045
Exports.
531,411,411
67, 775, 797
56,586,617
55,587,690
2,831,367
$332,623
I lie international credit trade balances to the neutral coun
tries of Europe were large, and they received in lieu thereof
gold and credit and securities, the securities being merely a form
of credit. The Government of the Uuited States can control
both imports and exports under the law. It can, as far as the
neutral countries are concerned, immediately bring the dollar
to par, because they owe us more than we owe them, and we
only need to require them to buy the dollars they owe us in
terms of their own currency to give the American consumers
the benefit through tlieir merchants of foreign currency at par.
Inducing the foreign banks to place their balances in the
United States directly is another way to do it to accomplish
the same end.
Selling United States bonds in these neutral countries is an
other way to accomplish it.
All of these factors should be employed and through every
available agency the dollar should be brought to par and kept
at par as a means of helping us win this war.
I ask permission to put the article of Mr. Kent into the
R e c o r d , without reading.
The VICE PRESIDENT. Without objection, it is so ordered.
The article referred to is as follows:
111 rom the New York American, Apr. 22, 1918-1
K e Ss U
uL
lT
t TF
kom J iP O
oL
l iIC
cy
NEn
NT
T ? TC
<“H IL
NE
0WFOB C R E D IT S . t h e
IvL
i ’ KOM
Y*—
H I!N
T TO
W ar W il l
Attention has been so intensely centered on the increasing discount
to which the dollar has been falling abroad that an explanation of the
international financial position of the United States at this moment is
°f
1
Ute^rLt‘ . More s °, if this explanation comes from one in high
authority.
The following simple and yet almost scientific exposit on
of the foreign exchange relations of this country was given in a sneerh
by Fred I. Kent before the National Foreign Trade Council at it's con
vention just closed at Cincinnati. Mr. Kent is in charge of the Foreign
Exchange Division under the Federal Reserve Board
He passes 'on
all foreign exchange transactions, and in his hands is concentrated
the stupendous task of seeing that no funds pass out of the country
into enemy hands. This^requires examination of an immense number
of drafts and papers.
But t also places in his hands information
invaluable to the country while at war.
W hy certain of our exchanges
have been allowed to depreciate is fully explained bv Mr Kent
He nfso
outlines the general policy with regard to our giving aid to strengthen
allied exchange rates in other countries.
6
[B y Fred I. Kent in his speech before the National Foreign Trade
Council.]
The cry of the orator for a dollar at par throughout the world may be
valuable in time of peace as commercial propaganda, but it has no place
in time of war, particularly with a world’s war, such as exists to-dav
The United States in order to carry out her part in the war is
going to be obliged to supply from her own resources and from those
58830— 18530
of many other countries of the world commodities to the value of many
billions of dollars. Regardless of her great wealth, there is a positive
limit to her ability to furnish such supplies. In order to wrm the war
she must be in a position to do so for a longer period than the enemy.
The length of time that she can continue to furnish needed supplies
will depend upon her ability to conserve her resources. There are many
products which she can obtain from within her own territory that will
outlast the war needs. There are many others, however, which need
supplementing from other countries of the world if we would maintain
the highest efficiency of the war engines which we produce and of tne
men who operate them.
OUR B E ST COURSE.
Our greatest interest, therefore, and that of our allies, demands that
we maintain such commercial relations with the neutral countries wnicn
have commodities that will be needed by us as will enable the united
States to continue the purchase of such commodities constantly tor a
long period. W hile there are probably none of these commodities wnicn
we can not (if need be) develop substitutes for, yet if we can continue
their purchase from other countries, partly in exchange for tilings
which we can better spare than the articles received for them, we will
have accomplished two most important results— we will have main
tained our foreign trade with other nations and so have held their in
terest in this country, and we will have saved the time of that portion
of our population which might otherwise have had to be engaged in
creating and manufacturing substitutes, in work that will result to our
greater advantage. W e will also be helping to keep the countries with
which we trade in a healthier financial condition, which should be of
great benefit in helping us to find a market for our goods when the war
is over and our manufacturing interests turn from war industries.
M U ST C U RTAIL E X PO R T S.
As the war goes on, the United States will find that it will have to
curtail its exports to neutral countries, as Great Ilritain, France, and
Italv have been obliged to do, so that it is reasonable to suppose that
t h e ‘ balance of trade with many neutral countries will be constantly
against us throughout the war. This being true, and it being greatly
to the advantage of neutral countries to have our market for their
goods continue in as large a way as possible, we must have some strong
force to hold our imports within reasonable limits.
An adverse ex
change rate is the key to such force and is a great regulator of
trade. It puts such difficulties in the w ay of our imports that without
other pressure we endeavor to do without them in so far as possible.
The countries of export, in order to keep a market for their goods,
will strive to find ways to allow continuation of such exports as we
must have, even to the point of allowing funds to pile up in this
country or through the extension of credits.
FU N DS ACC U M U LATE.
A s funds accumulate here which can not be exported there will be an
increasing tendency on their part to purchase commodities from this
country with them, which will offer a great inducement to the people
of the United States to strive along with their war work to pay a part
of their accumulating indebtedness through current exports.
In Argentina, for instance, we find that for the protection of its people
the Argentine Government considered it to its very great interest to
make an arrangement with the United States under which Argentine
funds would he left on deposit in this country until alter the■ w rt ,
provided the disbursement of the equivalent in Argentina teas made for
exports from Argentina to the United States. It is also true that the
exports from the United States to Argentina increased from $ 1 6 . 8 .4 ,2 5 8
in 1910 to $107,641,905 in 1917, even though we were not at war in
the first year and were at war in the second. A s long as exchange con
tinues against us with Argentina the same tendencies will continue
active, and when the war is over we will be as much less in debt to
Argentina as the amount of exports which we have been able to furnish
her year by year, that have been withdrawn from this country by her
in order to "get her funds home and make it possible, together with
the extension of such credits as she can afford, to keep our market for
her goods open,
AS TO ARG EN TIN E W OOL.
On our part we have, for instance, been induced to conserve and in
crease our supply of wool, so as to be able to Import less from Argen
tina. As a result as the war goes on, we can hope to keep our rela
tions with Argentina in such position that she wdli look upon us as be
ing a country of great value to her, and, further, that she will accept
us as her banker, so to speak, in that her surplus funds made through
her war profits will have been accumulated in this country only to a
natural extent, and not to such tremendous sums that she wtll become
588 3 0 — 18530
15
for tlu“,ir safefy
;
or In actual need of them
l)elieve that a f t e r thp , , . , , Z
exist
there is also excellent reason to
our commodities t o o u r g o M and" ’’ t hat ' The”
hankin, rdationsldp which she has Established
«... p,™;1a s
H K M H »
iS T o :
ln 1i rge part
t0 C° ntlDUe the
“ whWcbite'.to»rstr.
w il. enable u V w conti'oue^to"import
isXwnToTJ2* IK?
^
E
S
#
P
. S
balance of trade has ffeen in 011^ fa v o r8’ ! ^ en1^
S 5 S % W > ®
Wf F
m
The exchanne
STU BS
1
S
k
'
s
ugh *,n this case the
we ' W O " * ' 10 S M I" / o X
to“ tPbert™ ioe0o“
?
«
'
by the s a i e T A t e r K K n S ^ A S " 0
and, second, by the sale by this country
a m ' ^Untry by ^Pain 1
Spanish pesetas.
y
country to South American countries of
H E L P IN G GREAT B R IT A IN .
in 1 if to a$M.swto,s88 i“ t j i ™ A r to ° m i a
a
i ’ S r * 45.v T h 4(i2
llrifain etoPobtaln" from ° 4 C?e" , ' “ ' " V ”
a'llles. as Vt' m . b M c S t
which rnniri h E a i i f r0m. i c o m m o d i t i e s required by her in France
to SouthU!Emerica for °th E h1*?h ' rfr1 EE!a FIII6 1 * '
When * » « “* Pesetas
for much-needed
fmm
prices obtained, we were helping pay
ered to us wi t hE t d'fne r
cou° trIef- and as they could be delivintcrest, w h i l e S
, 1" T ^
marm1s- i* V(,s to our c e n t e r
America and pay in pesetas t h a >e/ w-fA ma&e, to import from South
pesetas.
Pesetas than to import from Spain and pay in
D OLLARS P IL E D P.
which has again, as has airf « l v h » n
for our exports.’ When the war t
ove
»
X
„‘ ? Spanish
* « :s s :nbankers,
**, < *
i of
‘ s ^ n f a i T 60* dema” d
sheFwiH ^prefer
^
" S
5
b X ^ t C
time in this country for the purchase of our goFds a ^ sl^ i^ tfr e s ^ h E m
SUCh ° f
^ l a n c I /^ a V S
We now come to a group of countries— the neutral countries adineem
to Germany— in all of which exchange rules against th s country and
where in every case it is undoubtedly of grEat value to us
T h ese
countries are Denmark, Netherlands, Norway, Sweden and SwitzeHand
Taken as a whole, our exports to those countries have Seen over^ th ree
times as great as our imports from them, and yet th r « c h a n a e h™
ruled constantly against us for a lone neriod 3
cnange has
turned against us through the sale in the United sfaWs of sterlTng e ?
change and through the remittance to the neutral countries ronEerned
of German money. The transfer of funds to these c o u n t r i e f ^ f ^ E
many has been most detrimental to the allies, as it has Enabled that
country to pay for much-needed imports that she might othErw se have
been unable to obtain in the desired quantities.
omerwise nave
N EUTRAL
MONEY
H E RE.
The purchase by this country of sterling exchange from „ii o* a ,
countries in this group has resulted in the accumulation
the
States of huge balances belonging to the banks of t h e ^ u ra countri^
^ “ tioned
As in the case of the other countries which we hEEe con
sidered, this caused a strong tendency to import from the United S tated
58830— 18530
crates,
16
b u t a f t e r w e e n te r e d t h e w a r a n d p la c e d a n e m b a r g o u p o n e x p o r t s t o
s u c h c o u n tr ie s , e x c e p t w h e r e w e c o u ld fe e l r e a s o n a b ly c e r t a in t h a t th e y
w o u ld n o t p r o v e o f v a lu e to th e e n e m y , s u c h e x p o r t s h a v e b e e n r e d u c e d .
To
D e n m a r k , fr o m
$ 5 6 ,3 2 9 ,4 9 0
in
1916
to $ 3 2 ,3 8 8 ,8 6 4
in 1 9 1 7 ; to
N e th e r la n d s , fr o m
$ 1 1 3 ,7 3 0 ,1 6 2
in 1 9 1 6
to $ 9 0 ,5 2 0 ,3 0 1
in 1 9 1 . ; t o
N orw ay!
fro m
$ 6 6 ,2 0 9 ,7 1 7
to
$ 6 2 ,8 6 6 ,8 5 0 ;
and
to
Sw eden,
fr o m
$ 4 7 9 6 7 5 9 0 to $ 2 0 ,9 0 0 ,8 5 4 .
T o S w itz e r la n d th e re h a s b ee n a n In c re a se ,
a s s h ip m e n t s h a v e b e e n m a d e to h e lp o b ta in im p o r t s f r o m t h a t c o u n tr y
to F r a n c e .
T h e f ig u r e s w e r e $ 1 3 , 6 5 4 , 2 5 6 in 1 9 1 6 a n d $ 1 9 , 5 0 2 , 0 4 5 in
1917
A s w e w e re n o t a t w a r th e fir s t th r e e m o n th s o f th e y e a r , th e se
fig u r e s d o n o t te ll th e w h o le s t o r y .
A s a r e s u lt th e b a la n c e s m a in
t a in e d in t h e U n i t e d S t a t e s b y t h e s e c o u n t r i e s a r e v e r y la r g e .
In c o n n e c tio n w ith t r a n s fe r s fo r G e r m a n a c c o u n t, t h e a c c u m u la tio n
o f s u c h .b a l a n c e s a n d t h e d i f f i c u l t y i n v o l v e d i n w i t h d r a w i n g t h e m a t
th e m o m e n t is o f g r e a t v a lu e to th e a llie s .
T h e e x c h a n g e s b e in g h ig h ,
it m e a n s t h a t e v e r y s u c c e s s fu l t r a n s fe r m a d e fo r G e r m a n a c c o u n t re
s u l t s in t h a t c o u n t r y r e c e i v i n g a m u c h s m a l l e r s u m t o b e u s e d in p a y
m e n t f o r im p o r t s in t h e c o u n t r y o f d e s t i n a t i o n .
I t a ls o h a s g r e a t ly
in c r e a s e d t h e d iffic u lty o f m a k in g s u c h t r a n s f e r s a t a n y r a t e , ™ r , a s
b a la n c e s
c o n tin u e
to
grow
here,
even
lo a n in g
a g a in s t
th e m
in
tn e
n e u t r a l c o u n tr ie s c o n c e r n e d b e c o m e s m o r e d iffic u lt.
E v e n so, th e n eed
o f G e r m a n y f o r f u n d s in t h e s e c o u n t r i e s i s s o g r e a t t h a t w e c a n n o t
e x e r c i s e t o o m u c h v i g i l a n c e in p r e v e n t i n g t h e i r t r a n s f e r .
Practically all of these countri-es are understood to h a t e s o
them selves of much-needed commodities in order to obtain the high
prices being paid by Germany that after the mar they will be obliged
to replace them through import.
.
,. ^
T h e ir s i t u a t io n a s t o g o ld is a ls o a n e a s y o n e , s o t h a t w e s h o u ld be
a b le to p a y b a c k th e s e b a la n c e s a f t e r t h e w a r w it h o u t f r ic t io n i f w e
a r e p r e p a r e d t o s u p p ly t h e g o o d s t h a t t h e s e c o u n tr ie s w ill r e q u ir e .
M A IN T A IN
ST E ltL IN G .
of these countries have increased the balance of ef
us by selling drafts on London in the A c t o Y o r k market .
A ll
ch ™9 e
against
I f it h a d n o t
b e e n f o r s u c h s a l e s t h e U n i t e d S t a t e s m i g h t h a v e b e e n j u s t i f i e d In c o n t i n u
in g th e s h ip m e n t o f g o ld , b e c a u s e o f th e t r e m e n d o u s s u p p ly h e ld b y u s .
W hen
h o w e v e r , w e w e r e t a k in g o v e r s t e r lin g c r e d its w h ic h th e s e n a
t i o n s s o l d t o u s , because we were helping maintain the sterling e^ h a nge
r a t e , t h e a c c o m m o d a t i o n w a s bn o u r s i d e a n d w e w e r e w a r r a n t e d
in
h o ld i n g o u r g o ld u n t i l a f t e r t h e w a r . u n le s s w e s h o u ld fin d i t t o o u r
a d v a n t a g e t o r e l e a s e it s o o n e r .
T h i s i s p a r t l c u a r l y t r u e in t h e c a s e o f
th e n e u tr a l c o u n tr ie s a d ja c e n t to G e r m a n y , w h e r e w e h a v e fu r n is h e d
t h e m m i l l i o n s o f d o l l a r s m o r e in g o o d s t h a n t h e y h a v e g i v e n t o u s a n d
w h e r e w e h a v e ta k e n s t e r lin g o ff t h e ir h a n d s w h e n e v e r t h e y c o n s id e r e d
i t t o t h e i r i n t e r e s t t o s e l l i t in o u r m a r k e t .
Our 8 ° ^
em b arg o, th e re
fo re
i s n o t in t h e n a t u r e o f a r e f u s a l t o p a y .
I t i s m e r e ly a
to th e w o r ld to th is e f f e c t : T h a t w e d o n o t a t th e m o m e n t p r o p o s e to
w a s t e -o u r g o ld b v e x c h a n g in g it fo r im p o r t s w h ic h w e c a n g e t a lo n g
w ith o u t
a n d t h a t n e it h e r d o w e p r o p o s e to p a y g o ld f o r s t e r lin g e x
c h a n g e w h ic h w e a r e p u r c h a s in g w ith d o lla r e x c h a n g e a t a h ig h e r r a te
t h a n it s n o r m a l v a lu e b a se d on th e p r e s e n t c a s h p o s itio n o f th e B r itis h
Government w i t h t h e r e s t o f t h e w o r l d , b u t in t h u s c o n s e r v i n g o u r g o l d
u n til a ft e r th e w a r w e a r e h o ld in g it a s a r e se r v e a g a in s t t h t d e p o s its
w h i c h a r e a c c u m u l a t i n g in t h e U n i t e d S t a t e s t o t h e c r e d i t o f t h e o t h e r
c o u n tr ie s
of
th e
w o r ld .
_______
EXACT BALANCES KNOWN.
In th e m e a n t im e w e w ill a llo w su c h b a la n c e s to b e u se d a s fr e e ly a s
m a v b e d e s i r e d f o r t h e p u r c h a s e o f s u c h g o o d s in t h i s c o u n t r y a s t h e
e x i g e n c i e s o f t h e w a r j u s t i f y u s in a l l o w i n g t o b e e x p o r t e d , o r t h r o u g h
i n v e s t m e n t in s e c u r i t i e s o r p r o p e r t y o f a n y o t h e r k i n d i n t h i s c o u n t r y .
In th is c o n n e c tio n it w ill in te r e s t y o u to k n o w t h a t th e F e d e r a l R e
serve B oard
t h r o u g h i t s D i v i s i o n o f f o r e i g n E x c h a n g e , i s in P o s s e s s i o n
o f t h e e x a c t c a s h b a la n c e a s it e x i s t s a t t h e c lo s e o f b u s i n e s s e a c h e d n e s d a v n ig h t b e tw e e n th e U n ite d S t a t e s a n d e v e r y c o u n tr y o f th e w o r ld .
I t is ifls o h i p o s s e s s i o n o f e x a c t k n o w l e d g e a s t o w h a t c a u s e s t h e c h a n g e s
in s u c h b a la n c e s f r o m w e e k t o w e e k .
A s t h e s e fig u r e s d e v e lo p , th e“ P o s i
t i o n o f o u r c o u n t r y t o t h e w o r l d w i l l b e a s c l e a r l y b e f o r e the; F e d c r a 1
R e s e r v e B o a r d a s is t h a t o f a b a n k e r t o h is d e p o s ito r s .
T h is w ill m a k e
it p o s s ib le fo r u s to a p p ly a b a n k e r ’s k n o w le d g e to t h e q u e s tio n o f t h *
p r o b a b le d e m a n d s t h a t w ill b e m a d e u p o n u s fr o m tim e t o t im e a n d « o
e n a b le u s to d e te r m in e h o w th e y m a y b e s t be m e t.
T h e r e w ill b e n o n eed
f o r l e a p i n g in t h e d a r k , b u t e v e r y p r o b l e m a s a r i s e s c a n b e c o n s i d e r e d
fr o m th e s c ie n tific b a s is o f c o m p le te u n d e r s t a n d in g o f th e a t u a t l o n a s
a w h o le a s it d e v e lo p ^ , a n d if w e p r o v e o u r s e lv e s w is e c u s t o d ia n s o r t h e
w o r ld ’s m o n e y w e c a n h o p e to r e m a in a s th e w o r ld s b a n k e r s fo r n u n s
a year
to
com e.
58830— 18530
7
. 1Q1,
WASHINGTON t GOVERNMENT PRINTING OFFICE . 1918
A League
of
Nations
SPEECH
OF
HON. ROBERT L. OWEN
OF O K LA H O M A
IN THE
SENATE OF THE UNITED STATES
FEBRUARY 26, 1919
WASHINGTON
1919
1107(54— 19405
S P E E C H
OF
I I OX.
ROBERT
L.
O WE N .
A TEAGUE OF NATIONS.
Mr. OWEN. Mr. President, the people of Europe and the peo
ple of the world are heartsick. Crepe hangs on their doors. Men
without arms, men without legs, men without eyes, men who are
maimed in every conceivable way can be seen everywhere
throughout the world as a result of this last great exhibition of
human folly and ambition— the world war precipitated by the
Hohenzollerns.
The world is anxious to establish world peace, world com
merce, world happiness. And every statesman, it seems to me,
Mr. President, should feel himself charged with the responsi
bility of trying constructively to attain this end.
Delegates representing the United States. Great Britain,
France, Italy, Japan, Belgium, Brazil, China, Czecho-Slovakia,
Greece, Poland, Portugal, Itoumania, and Serbia have submitted
for the consideration of the world and of the statesmen of the
world a report formulating a plan for a league of nations.
No thoughtful man, certainly no thoughtful statesman, ac
quainted with the fallibility of man would expect that this first
formulation of a draft would be absolutely perfect. It is not
perfect, hut it is a beginning and contains many things of very
great value. And it can be perfected so as to completely safe
guard the world against war and at the same time completely
safeguard the sovereignty and absolute independence of eacii
one of the member nations.
Statesmen anxious to serve the world should deal with this
formulated plan in a spirit of helpfulness, o f construction rather
than in a spirit ot tearing down or of destruction; much less
should they show an intemperate or an ungenerous attitude
in criticizing a document, the importance of which to the pres
ervation of the future liberty and happiness of mankind is so
obvious.
Mr. President, modern science, with the mastery of the air,
with the submarine, with poisonous gases, with the steel war
tank, with the machine gun, with rapid transportation facili
ties, with tremendous output of war machinery and the muni
tions of war make it unthinkable that the world will permit
itself to be destroyed by a repetition of the recent war, which,
if it is to be repeated, will be far more terrible than the last
war, and which will break down civilization itself. The men
and the women and the children of the world who labor to
produce the values of the world are entitled to peace and to
happiness, and woe be to those blind statesmen who fail now to
safeguard the people of the world in their rights to life, to
liberty, and to the pursuit of happiness.
110764— 19405
O
We liave already seen the effect in Russia, in Germany, and
in Austria of the complete failure of government to protect
life, and we have seen the great mass of men moving like a
terrible ocean sweeping the Romanoffs to their graves and
tearing down the standards of government which have failed
the reasonable expectation of the people. It was the blindness
and the dullness, it was the stupidity, it was the greed, it was
the arrogance o f the officials o f France that lead to the French
Revolution. These same forces led to the revolution in Russia
and then to the extreme form of political madness— the Bolsheviki movement of a class war— the war against those who have
property or education by those who suffer from famine.
The representatives of the belligerent nations are now as
sembled at Paris conferring with the representatives of nations
newly born and to be born, with a view to using the great in
fluence of the belligerent powers in the establishment of selfgoverning nations, with territories properly delimited and
with a view to giving protection to the backward nations oc
cupying colonies and dependencies, such as the ignorant blacks
of the German African colonies.
T H E T A S K IS TH E R E .
Mr. President, the immediate peace of the world, the cessation
and prevention of actual war between the Balkan States, be
tween Bulgaria and Roumania, between Roumania and the
Ukraine, between Poland and Prussia, between the various
States that are being born and the surrounding States impera
tively demand that the conference o f the great powers at Paris
lay down the terms fixing territorial boundaries and establish
the means by which to keep ambitious States from assailing each
other and disturbing the peace of the world. They must con
sider the question o f arbitration of international disputes. It
was only the power of Germany and her allies which prevented
the nations o f the world from agreeing at The Hague to inter
national arbitration and international disarmament in 1899 and
1907.
The Paris conference must consider the question of disarma
ment as a means of protecting the future peace and to prevent
Europe again being thrown into an universal war. All the
nations of the world are ready to agree to arbitration of in
ternational disputes and to disarmament. As far as the United
States is concerned the House of Representatives has just
voted in favor of reducing our Army to the minimum o f do
mestic protection. We have made treaties with nations all over
the world to arbitrate our differences. The people o f the
United States are in favor of international disarmament. They
are in favor of arbitrating differences with other nations, and I
say flatly and emphatically that it is better to leave any dispute
that might arise between the officials of the United States and
the officials o f Brazil or Persia or South Africa or Great Britain
unsettled, as some o f the Revolutionary claims are still unset
tled, than to fly to arms and kill millions o f men to gratify
official impatience, arrogance, or anger.
Mr. President, I have read carefully the so-called “ Formula
tion of a plan for the league of nations.” It interposes a num
ber of obstacles to those who might desire to make war.
First. Article 10 pledges all of the member nations “ to respect
the territorial integrity and existing political independence” of
110764— 19405
5
all States members of the league. This is a guaranty of all the
nations of the world of the utmost importance. Moreover, article
10 pledges all the nations of the world “ to preserve against ex
ternal aggression the territorial integrity and existing political
independence” of all the States members of the league, whether
great or small. This is an undertaking of gigantic magnitude
and is a positive bond safeguarding the territorial integrity and
existing independence of all States. And no war can happen in
the future if this pledge is respected either in the first or second
of its provisions. If all nations respect the territorial integrity
and political independence of other nations, we will have peace,
and if any nation have the temerity not to respect this bond
and be guilty of external aggression, it will face all the world
pledged to oppose it in its aggression. Aggressive war under
such a menace is well-nigh inconceivable. Is not this a mag
nificent barrier against a future ambitious or warlike State?
Article 11 declares that any war or threat of war is a mat
ter of concern to the league, and the high contracting parties
reserve the right to take any action that may be deemed wise
and effectual “ to safeguard the peace of the nations.” In
other words, it is the declared intention of all of the nations of
the world to take steps to prevent war, and to take these steps
in time.
Article 12 pledges every nation that it “ will in no case resort
to war without previously submitting the question and matters
involved either to arbitration or to inquiry by the executive coun
cil, and until three months after the award by the arbitrators
or a recommendation by the executive council, and that they
will not even then resort to war as against a member of the
league which complies with the award of the arbitrators or the
recommendation of the executive council.”
Is not this pledge under article 12, made by all nations to
every nation in the world, of great value as a deterrent and
obstacle to war?
What official will dare to face the whole world with a breach
o f article 12?
Article 13 agrees to submit questions to arbitration and carry
out in good faith the award.
Is not this agreement with all the nations of the world a most
important means of preventing unsettled disputes leading to
war?
If this had been the rule of international procedure it would
have prevented the last war.
Article 14 provides a permanent court o f international jus
tice, which may sit as an arbitration tribunal under article 13.
Under article 15 the members agree to refer to the executive
council any dispute likely to lead to rupture which is not sub
mitted to arbitration, and if the council fails to agree, then to
publish the arguments for and against by the majority and
minority members, and here is also provided an appeal to the
larger “ body of delegates.”
In this way the most troublesome cases would be submitted
first to the council and, secondly, to the representatives of all
the nations of the world for consideration, so that world opinion
can be brought to bear upon the merits of the controversy and
time ensue in which world opinion may be formulated and dur-
110704— 19405
G
ing which the litigants may feel the pressure of world opinion
before they venture to go to war.
Mr. WILLIAMS. And world prejudice be obviated.
Mr. OWEN. And world prejudice be obviated, as the Senator
from Mississippi very properly observes.
Mr. President, the only objection which I have to articles
12, 13, 14, and 15 is that they permit war as a remedy after
having provided these means for conciliation and arbitration.
In my own opinion, the making o f war for the settling of
a civil dispute is a heinous crime, and it should be branded by the
league of nations and by the opinion of mankind as the highest
of all international crimes. Nothing could be more wicked or
more dastardly than the organized killing of human beings be
cause of an odious dispute relative to property or relative to some
alleged insult. As long as man remains with passion or with
defective reason, so long may the world expect that some man
will insult another man. And the bigger the fool and the more
arrogant the ass, the more likely he is to offer an insult. But
those who have brains and self-control should know how to deal
with those who lack brains and self-control.
Article 16, air. President, provides a world penalty for any
member nation that wages war without previously submitting
the matter o f dispute to arbitration and inquiry and determina
tion. This penalty is that when such an arrogant, warlike
nation wages aggressive war in violation o f the law laid down
by the league, such nation—
“ shall thereby, ipso facto, be deemed to have committed an act
of war against all o f the other members of the league which
hereby undertake immediately to subject it to the severance of
all trade or financial relations, the prohibition o f all intercourse
between their nationals and the nationals of the covenantbreaking State, and the prevention o f all financial, commercial,
or personal intercourse between the nationals of the eoveuantbreaking State and the nationals o f any other State, whether
a member of the league or not.”
What official on the face of the earth would dare face this
penalty. The penalty should be directed, however, in my judg
ment, against any nation that invades the territorial integrity of
another nation. Official murder by aggressive war o f offense
should be stopped by the mandate o f the people of the world,
and officials who violate that mandate should be held personally
responsible.
Is it not clear, Mr. President, that the captains of Industry
and the great financiers of the country whose support is vital
to successful war and whose support in Germany was expressly
solicited by William II ns a primary condition to enable him
to wage the late war, would never under such a threat as this
dare to support an aggressive war which would of necessity
mean the instant paralysis o f all their enterprises and their
ultimate financial and industrial destruction? And is it possible
that any official charged with the authority o f declaring war
would feel justified in declaring an aggressive war against all
the world? The human imagination can not picture such a prop
osition. Moreover, we must now remember that every military
dynasty is gone. Where are the Hapsburgs? Where are the
Hohen/.ollerns? Where are the petty kings o f the German
States? Where is King Constantine of Greece? Where is the
1107G 4— 19 40 5
Romanoff family and the Czar of all the Russia*? Where is the
Sultan of Turkey? Where the King of Bulgaria? Where is the
King of Roumania? Abdicated all, and tied to cover! What
real war-making power has any king on the globe? Not one is
left.
Mr. WILLIAMS. Mr. President, will the Senator permit me
to interrupt him?
The PRESIDING OFFICER. Does the Senator from Okla
homa yield to the Senator from Mississippi?
Mr. OWEN. I yield to the Senator from Mississippi.
Mr. WILLIAMS. I want, in reenforcement of what the Sena
tor has said in the first clause of his last argument, to suggest
to his mind this consideration: Why can not we in the treaty of
peace take a leaf out of American history? The Senator remem
bers that the thirteenth amendment to the Constitution declares
that no debt made by the Confederacy or by any State forming
a member of the Confederacy should be valid or ever paid.
That was passed with the idea of discouraging future projects
of that sort. Suppose that in the treaty of peace we provided
that all debts made by Germany, Austria, Turkey, find Bulgaria
for the furtherance of their objects in this war were declared to
be nullified and invalid, and that those respective Governments
should issue an amount of bonds equal to the amount thereby
nullified and rendered invalid, and that the proceeds of those
bonds should be devoted to the restoration of Belgium, of north
ern France, and of Serbia, what would be the effect, I want to
ask the Senator?
Mr. OWEN. I think it is a good suggestion as it would
help to deter nations from making aggressive war for pri
vate objects. It would prove unprofitable under such circum
stances.
Mr. WILLIAMS. Moreover, would it not have an effect upon
the people who finance wars?
Mr. OWEN. Assuredly.
Mr. WILLIAMS. Hereafter would not bankers who have
financed wars say to the country wanting to finance, an unjust
or aggressive war, “ Stop a minute; I must think as to whether
or not this war is just, whether it is aggressive or defensive.
I f it is not just, the example of the American Republic in the
thirteenth amendment and the example of the world in this
treaty of peace leads me to suppose that I may lose my money.”
And if bankers are threatened with losing their money, does the
Senator think they would finance any unjust war in the world?
Mr. OWEN. It is perfectly practicable to write into this
formulated plan the suggestion made by the Senator from Mis
sissippi, and it ought to be done, I think, for it would operate
as one of the additional deterrents to w ar; and what we want
to do is to deter war making.
Mr. WILLIAMS. I am not talking about writing it into
these 20 articles of the league of nations, but I am talking
about writing it into the final articles of peace.
Mr. OWEN. I am agreeable to its b<Mng written into both,
to apply to Germany now and to apply to any other nation in
the future that dares to make aggressive war on mankind. I
thank the Senator for his suggestion. I think Senators ought
to consider this matter from a constructive standpoint and help
to perfect this formulated plan.
110704— 19405
8
Mr. WILLIAMS. I do not propose to put it in this plan, for
I think if you go to amending this plan you will have 14 other
people to amend it, and you will never get it through; but I am
talking about it as a part of the treaty of peace.
Mr. OWEN. Mr. President, the greatest of all democracies, the
United States, threw its financial power, its man power, on the
side of democracy against autocracy, on the side of right against
might, on the side of decency and justice and humanity against
those who assaulted the great principles of human life. And
autocracy lies in its political grave, never to be resurrected on
this earth. Great Britain is a republic, and so are the great
dominions speaking the English tongue— Canada, whose border,
lying between the United States for 3,000 miles, is undefended
except by those who love liberty and justice on both sides of
this line; Australia, New Zealand, the South African Union
are all republics, and all the colonies and dependencies of
Great Britain are in effect republics in greater or less stages of
advancement. France and her colonies are republics. Switzer
land is a republic. Italy is a republic with a nominal King,
who has no power against his parliament or against his people
under their structure of government. And so Portugal is a
republic, and Spain and Belgium and Holland and Denmark
and Norway and Sweden are in substance republics. Mr. WILLIAMS. They are democracies.
Mr. OWEN. They are democracies. They have the form of
kingdoms, but the substance o f democracies.
The nations being born in the Balkans and in Russia are being
born as republics. And the subject people of Turkey, under the
protection of the great democracies of the world, are being
brought into being as embryo republics. China is a great repub
lic. Siberia can not be conceived as being anything less than a
republic. The Poles, the Jugo-Slavs, and Czechoslovakia are
avowedly republics. Even Japan under an Emperor is ruled
by a body of elders cooperating with the parliament chosen to
represent every class of the people, and Japan, when this war
broke out, threw herself at once without hesitation on the side
o f the great democracies o f the world. What greater testimony
could Japan have given o f her attachment to the doctrines of
liberty, justice, and civilization and o f her hostility to dy
nastic autocracy? Where is there on earth remaining a mili
tary dynastic autocracy that would threaten the future peace of
the world?
All the Governments o f North and South America, all the Gov
ernments of Africa, of Asia, of Europe, of the East Indies, and
o f the West Indies are republics or under the patronage of
republics.
The doctrine that might makes right is dead.
The doctrine o f terrorism is dead.
The divine right to rule has gone to hell, whence it came.
The doctrine of liberty, justice, and humanity is triumphant
and is writing its Magna Charta to last for all future time.
Let the United States Senate honor itself by lending its very
best efforts to perfecting this charter.
Mr. President, what was it that protected the liberties of
mankind, that protected civilization, that protected the democra
cies of the world against the military domination of the Teu
tonic dynastic autocracies? It was a league of nations in arms
1107C 4— 19405
0
cooperating as one great league o f democracy against autocracy.
It was a league of nations in arms willing to pay the penalty
in gigantic sacrifice of property and of human life; willing to
die upon the battle field in joint, concerted, cooperative action
to protect liberty and civilization. Gen. Foeh, as commander
in chief of the armed forces of this great league of nations,
directed on the battle line from his headquarters Belgians, Eng
lish, Scotch, Irish, French, Italians, Greeks, and Americans, and
many others, all of them operating in a league to maintain
liberty and to protect human life and organized society through
out the world. Shall this lesson bear no fruit? Shall our
sons have died in vain who are buried upon the bloody battle
fields of Europe?
The world wants peace, justice, and liberty, and has shown
itself willing to die for this cause. Do not underestimate the
demand, Mr. President. Do not deny or ignore this profound
aspiration of the human heart. At Paris are assembled repre
sentatives— military, economic, political—of all the great democ
racies of the world, facing the task of making the world safe
against the chaos and disorder of war. The geographical lines of
the newborn States must be delimited and agreed upon and
authorized. The relations of these nations with each other must
be so protected that they do not instantly fly at each others’
throats on some mad issue of geographical boundary or fancied *
interest. There must be established by some power somewhere
the relations which shall exist between these nations, between
them and the balance of the world. The colonies which the Teu
tonic dynasty has shown itself unworthy to control must be pro
tected and safeguarded by some definite agreement under some
safeguard of administration that will establish and maintain
peace and order and good conduct, internal and external. This
task of readjustment is now being performed at the peace table
at Paris, of necessity, by the very nature of the case. Shall all
the delegates be withdrawn from the peace conference and the
world left in turmoil with the Bolsheviki in control soon to bring
on another world war and drag the people of the United States
from their peaceful avocations to the havoc and destruction of
war? No, Mr. President; there is a better way. The way of
order out of chaos. And the proposed league of nations is wise
and sound and just in its fundamental principles. It represents
the aspirations of the peoples of the world to safeguard the
peace of mankind.
I have pointed out some of (lie more important provisions, but
there are others which must not be overlooked.
Article 17 takes care o f the disputes which might arise
between members of the league and those who are not members
of the league and imposes suitable penalties if a State not a
member of the league disregards the provisions of article 12,
forbidding it to make war as a remedy because of a dispute with
other nations.
Article 18 authorizes the league to be intrusted with the
joint supervision of the trade in arms and ammunition with the
countries in which the control of this traffic is necessary and
in the common interest.
Article 8 provides for steps to be taken to control the manu
facture of munitions by private enterprise, so that private inter110764— 19405-------2
ests may not be made provocative of war, and this article recog
nizes the great principle that the maintenance o f peace—
“ will require the reduction of national armaments to the lowest
point consistent with national safety and enforcement by com
mon action o f international obligations, having special regard
to the geographical situation and circumstances of eacii State.”
Is not article 8 of tremendous importance in removing one
of the great dangers to war? Do we not all know that the Teu
tonic dynasty for over 20 years was manufacturing on a gigantic
scale the munitions of war and organizing armaments far
beyond domestic need with the intent and purpose to assail the
liberties of Europe and to dominate the world by military force?
And shall we not remove this danger from our future by inter
national agreement? All the nations o f the world except the
Teutonic allies at The Hague in 1907 were ready to agree to
disarmament, but were prevented by the King of Prussia and
his allies. Now is the most opportune time to write these safe
guards by treaty into the international law by the consent and
approval of all nations.
Article 19 provides a reasonable and just method for ad
ministering the affairs of subject peoples and developing them
into democracies under charters granted from the league to
advanced nations qualified by their resources, their experience,
their geographical position to undertake this responsibility as
mandatories on behalf o f the league. And the consent, even
in these cases, of the backward peoples is recognized, the pro
posed formulated plan expressly providing that “ the wishes
of these communities must be a special consideration in the
selection of the mandatory power,” and “ the mandatory must
be responsible for the administration of the territory, subject
to conditions which will guarantee freedom of conscience or
religion, subject only to the maintenance of public order and
morals, the prohibition o f abuses, such as the slave trade, the
arms traffic, and the liquor traffic, and the prevention of the
establishment of fortifications or military and naval bases, and
o f military training o f the natives for other than police purposes
and the defense of territory, and will also secure equal oppor
tunities for the trade and commerce o f other members o f the
league.”
And this provision could be further amended to provide that
the bill of rights of civilized States, as far as applicable, should
be recognized as a part of the principle o f the government of
these backward peoples.
I suggest the following amendment to article 19— and I feel
entirely at liberty to suggest this amendment; and amend
ments which are offered or suggested on this floor, I have no
doubt, will receive respectful consideration from those who
are assembled at Paris, and if they have value I have no doubt
that action by our peace commissioners will be taken accord
ingly: “ The mandatory must, as far as practicable, recognize
the principles of the bills of rights of civilized States in ad
ministering the law in such territories, and the charter to the
mandatory shall prescribe these principles.”
Article 20 provides, as a part of the organization of the
league, a permanent bureau of labor, with a view of securing
and maintaining fair and humane conditions of labor for men,
1 1 0 7 0 4 — 1 9 -1 0 5
u
women, and children by the good offices of the league. Shall
we have no means: of objecting when the blacks of the Kongo
have their hands cut off because they failed to bring in suffi
cient ivory, as we have seen in the bloody days of the past?
They, too, must have justice and liberty, and should be educated
and civilized as rapidly as circumstances will permit.
Mr. President, the happiness of mankind absolutely depends
on those who labor; they comprise the world, they are the
world. Does this mean that the league of nations, will interfere
with the internal sovereignty of member nations? Not at all.
Article 10 and article 2ft and other articles protect this vital
requirement, and other safeguards can be added. In this mat
ter the league would function with no more authority than that
of a bureau of publicity— I speak of the particular organization
of a “ bureau of la b or”—which coukl appeal to the opinion of
mankind for the protection and conservation of human life
where it is not adequately safeguarded.
Article 21 provides that the high contracting parties agree
that provision shall be made through the instrumentality of the
league to. secure and maintain, freedom of transit and equitable
treatment for the commerce of all members.
Is not this decent and just and right? Shall interior nations
having no access to. the sea be bottled up without the right to
ship their goods under bond in transit to the sea? It was tins
denial of an outlet that has been one of the contributing causes
for war in the Balkans.
Why shall not suitable provisions be drawn up by amendments
to the plan to secure and maintain, these rights':
Mr. KELLOGG;. Mr. President, will it interrupt the Senator
ill I ask him a question?
M'r, OWEN. Not at all.
The LMvEtSIDXNG OFFICER. Does the Senator from Okla
homa yield to. the Senator from Minnesota?
Mr. OWEN'.
I yield.
Mr. KELLOGG. I understood the Senator to say that the
proposed constitution of the League did not interfere with the
internal affairs of the various governments. I should like the
Senator's opinion as to whether articles 12. 15, and 16 together
provide for the arbitration of all questions without distinction,
and whether or not disputes as to political questions, such as
trade relations with other countries, import duties, and so forth,
would come under the provisions of the proposed constitution?
Mr. OWEN. In my judgment, it only relates to those things
which are external, because internal affairs are safeguarded, by
article 10; which guarantees to respect and to preserve the
territorial integrity and the existing political independence of
every nation.
Mr. KELLOGG. Does that include all laws pertaining to our
dealings with other countries, such as immigration laws, tariff
laws, and trade relations?
Mr. OWEN. The question, of immigration and tariffs affects
the infernal affairs of our own country and concerns our exist
ing political independence, and certain *vade relations might
do SO;
Mr. KELLOGG. Would the proposed constitution prevent us
from changing our existing political, eruditions?
11 0 7 6 4 — 19 4 0 5
Mr. OWEN. Not at all. I shall deal with that a little later
on. I have not quite come to that, but I am going expressly to
discuss that and show what my opinion is with regard to it.
Mr. McCUMBER. Mr. President----- The PRESIDING OFFICER. Does the Senator from Okla
homa yield to the Senator from North Dakota?
Mr. OWEN. I yield.
Mr. McCUMBER. I call the Senator’s attention to the fact
that article 12 does not require the nations to submit every
controversy to arbitration-----Mr. OWEN. That is perfectly obvious.
Mr. McCUMBER. But when difficulties arisef it simply pro
vides that “ they will in no case resort to war without previously
submitting the question and matters involved either to arbitra
tion or to inquiry ” by the league.
Mr. OWEN. I think that is quite clear.
Mr. KELLOGG. If the Senator from Oklahoma will pardon
me, the inquiry is enforced in exactly the same way as the judg
ment o f the arbitration tribunal.
Mr. McCUMBER. I do not agree with the Senator.
Mr. OWEN. Article 22 agrees to place under the control of the
league all international bureaus already established by general
treaties, if the parties to such treaties consent. What objection
could there be to this by consent? Is it not better to have a clear
ing house between the nations to which all international business
may be directed, and where through a common center interna
tional relationships may be conveniently adjusted? Having a
common center for international business is just as convenient
and necessary as having a clearing house for the bankers of
New York City, where around a common board they can in
stantly dispatch their business with each other. Suppose each
nation of 50 nations must transact all business by an inde
pendent means, then each nation would have to send 50 rep
resentatives to 50 nations, making 2,500 representatives alto
gether, at great expense, great confusion, great delay. But,
meeting around a common council table, one representative of
each nation would meet one representative from every other
nation at a common board, and 50 men would transact the busi
ness of 2,500 men.
This is merely common sense and a practice based upon mod
ern science and usage in the business world.
Article 23 provides for publicity of international agreements
with the penalty that they shall be void unless registered with
the league.
This prevents secret treaties. It makes them void and an
act of treachery to all other nations. It is a powerful deterrent.
Article 24 merely provides for the reconsideration of obso
lete treaties which might contain some element of danger to
the peace of the world. This article is entirely justified, and
no man would deny it.
Article 25 provides that the high contracting parties agree
that the present proposed covenant is accepted as abrogating
all obligations as between themselves inconsistent with the great
principles laid down in the proposed agreement to safeguard the
peace of the world, and contains an engagement that the mem
ber nations will not hereafter enter into any engagements incon
sistent with the terms thereof.
1107G 4— 19405
13
Is not this a wise provision of importance in safeguarding
tiie future peace of mankind? And there is imposed the fur
ther duty that new powers admitted to the league shall come
under the same rules. Is not this common sense, and in the
interest of the world?
Article 26 provides that amendments to the covenant of the
league shall only take effect when ratified by the States whose
representatives compose the executive council and by threefourths of the States whose representatives compose the body of
delegates.
Mr. President, do you not here observe that this gives a
veto upon any amendment to this instrument not acceptable to
the United States, and gives a like veto to Great Britain and
to France and to Italy and to Japan, and is it not obvious that
no amendment would therefore be possible to this proposed
agreement betwreen the nations except with the approval and
consent of the United States?
Is this not a great safeguard against the possibility o f any
thing being written in the relations between the member na
tions of the league that might at any tim'e be embarrassing to
any of the great powers or to the world?
But, Mr. President, a great objection has been made by vari
ous honorable and able Senators to the formulated plan on the
ground that it wras proposed to govern the world by the over
lordship of a body of delegates representing the' high con
tracting parties and by an executive council and by a perma
nent international secretariat.
It has been urged with giieat eloquence and zeal that article
1 would invade the sovereignty of the United States.
I confess very frankly that article 1 should be left in no
obscurity, but it is easy to amend article 1. The interpretation which has been put upon article 1 by its critics could cer
tainly not have been the intention of the representatives of
Great Britain and France and Italy and Japan or others of
the 14 nations who approve this draft. They certainly had no
intention of sacrificing the sovereignty of Great Britain or
France or Italy or Japan or Belgium or China or of other mem
bers. On the contrary, they have taken great pains in the
body of the formulated plan to safeguard the territorial integ
rity and political independence of all State members of the
league as they now exist in article 10, where the members
mutually undertake to respect and preserve against external
aggression, the territorial integrity, and existing political inde
pendence of each other. This is not consistent with the inter
pretations o f article 1, that would permit the body of delegates
to invade by statutes any domestic concern of any nation.
The proposal of Lieut. Gen. Smuts, who represents perhaps
the best English thought, was as follow s:
“ Tenth. The constitution of the league will be that of a per
manent conference between the governments o f the constituent
States for the purpose of joint international action in certain
defined respects, and will not derogate from the independence of
those States. It will consist of a general conference, a council,
and courts of arbitration and conciliation.
“ Eleventh. The general conference, in which all constituent
States will have equal voting power, will meet periodically to
1107G 4— 19405
n
discuss matters submitted to it by the council. These matters
will be general measures of international law or arrangements
or general proposals for limitation of armaments or for securing
world peace, or any other general resolutions, the discussion of
which by the conference is desired by the council before they
are forwarded for the approval of the constituent governments.
Any resolutions passed by the conference will have the effect
of recommendations to the national governments and parlia
ments.”
That was Gen. Smuts’s idea. That idea is prevalent all over
Great Britain. That is the general conception of the authority
to be granted to these delegates who would meet around a coun
cil table, representing the nations of the world.
It will here be observed that Gen. Smuts only proposed that
the resolutions passed by the conference would have the effect
of recommendations to the national governments and parlia
ments— nothing more. It is perfectly easy to amend article 1
by inserting the following words:
“ T h e b o d y o f d e l e g a t e s a n d t h e e x e c u t iv e
H A V E NO A U T H O R IT Y TO M A K E L A W S , BU T M A Y
c o u n c il
sh all
PROPOSE
IN T E R
N A T IO N A L R E SO LU TIO N S TO BE SU B M ITT E D TO T H E M EM B ER N A T IO N S
FOR CO N SID E RA TIO N .
AND
W HEN
SUCH
RE SO LU TION S
H A V E BEEN
R A TIFIE D B Y A L L T H E S T A T E S W H O S E RE PR ESE N TATIV ES COM POSE
T H E E X EC U TIVE CO U N C IL AN D B Y T H R E E -F O U R T H S OF T H E S T A T E S
W H O S E RE PR ESE N TATIV ES COM POSE T H E BODY OF DELEGATES S H A L L
H A V E T H E EFFECT OF IN T E R N A T IO N A L L A W .”
This is the method proposed in article 20 for amendments to
the formulated plan. Any amendment must, under article 20,
have the approval of the United States before it can be amended.
Mr. President, the peace of the world is too important, the
future happiness and security of our people is too important,
that we should fail at this wonderfully auspicious time to adopt
a plan which will safeguard the future of the world.
I am quite willing to agree, and determined as well, that no
obscurity whatever should be permitted in the proposed plan,
because it is one of the frailties of human nature to have powers
construed into a constitution by those who are charged with the
duty of its administration, and therefore it is of special impor
tance to put in negative proposals, such as our forefathers
inserted in the Constitution of the United States.
We should insert in the proposed formulated plan that “ n o t h
in g
CO N TAIN ED IN T H E IN S T R U M E N T IT S E L F SH O U LD BE CONSTRUED
A S G RA N TIN G A N Y R IG H T S TO T H E LEAGUE OVER T H E IN T E R N A L A F
F A IR S
OF
M EM BER
N A T IO N S ,
BU T
TH AT
EVERY
M EM B ER
N ATIO N
SH O U LD BE RECOGNIZED A S H A V IN G CO M PLETE R IG H T OVER ITS E M I
GRATION AND IM M IG R A T IO N , ITS IM PO R TS AN D EXPO RTS, AN D A L L ITS
DOM ESTIC A F F A IR S W IT H O U T A N Y IN TERFEREN CE W H A T E V E R BY T H E
LE AG U E .”
Mr. KELLOGG. Mr. President-----The PRESIDING OFFICER. Does the Senator from Okla
homa yield to the Senator from Minnesota?
Mr. OWEN. I yield.
Mr. KELLOGG. That is exactly what I had in mind. As
Senators seem to disagree as to the meaning of sections 12,
15, and 16, it does seem to me that it should be made plain,
so that no political question can be raised.
110764— 19405
15
Mr. OWEN. I agree with the Senator that an instrument
of such importance as this should be made absolutely plain;
and, frankly, I should not feel justified in supporting an instru
ment of this magnitude and this importance unless it were
made plain, and I think the Senate of the United States are
in a position to make it plain. They have the capacity; they
ought to have the will. As far as I am concerned. I shall stand
firmly for seeing that this instrument shall be free from any
ambiguity whatever.
It is not necessary for the league to interfere with the in
ternal affairs of any member nation. I am sure that Great
Britain and France and Italy and Japan do not contemplate
granting this right to the league of nations.
Mr. FRANCE. Mr. President-----The PRESIDING OFFICER. Does the Senator from Okla
homa yield to the Senator from Maryland?
Mr. OWEN. I yield to the Senator.
Mr. FRANCE. I am very much interested in what the Sen
ator is saying. Would he care to define what he means by
“ internal affairs” ? Would he consider a question arising
between Great Britain and one of her colonies— Ireland, for
example— as being an internal affair, or not?
Mr. OWEN. I would. We can not at this time and in this
way undertake to settle the disputes between member nations
and the component parts of member nations, unless we want to
tear asunder the whole procedure. We can not undertake that.
We can not go into it. You might as well undertake to deal
between the United States and Texas as a part of this proposal.
It i* easy enough to have an amendment that the league of
nations shall not exercise any powers except those that are ex
pressly granted to the league. But the great principles o f inter
national law which are laid down in this formulated plan are
vital to our own future and to the peace of the world, and I
venture to express the hope that the Senate of the United States
will consider this matter constructively, with a view to perfect
ing the plan rather than with a view to confusing counsel and
exciting suspicion and arousing the hostility of our people on
the theory that this instrument is full of pitfalls and dangerous.
We assuredly have the wisdom to analyze the formulated plan
and to point out how it may be improved and made free from
any objection, and this ought to be done.
I do not care, Mr. President, to repeat the arguments which
have already been presented with such force upon the floor
relative to the views of our revered first President in his Fare
well Address. 1 am altogether in accord with the principles
expressed in the Farewell Address o f Washington. But the day
of American isolation has long since ended. Our interests are
bound up in the welfare and happiness of mankind. We are
no longer isolated. A submarine could come up the Potomac
River and blow down the Capitol of the United States, it could
drop a gas bomb in the Senate that would smother the most
glorious declamation and the most magnificent oratory. We
are not isolated; we can never be isolated. We are face to
face with the duty and the task of using the influence of this
great Nation to bring about the security and peace of the world.
110704— 19405
16
Our people realized this when they determined that the time
had come for 11s to engage in suppressing the military autoc
racy of the Teutonic allies, and we have just completed that
task at a stupendous cost in treasure and in human life. We
can not afford to have another world war. The interests of
tire American people demand peace, security, stability, in order
vliat they may enjoy the rights guaranteed by our Constitution
of life, liberty, and the pursuit o f happiness.
Mr. President,, may I not be permitted to pray that my
colleagues shall consider this mater with very great patience,
and deliberation, to the end of perfecting this proposal estab
lishment of international law in order that our people may
have the peace to which they are so thoroughly entitled?
America brought this war to an end. to the imperishable glory
of her gallant and intrepid sons, who, over every obstacle of
barbed wire, sunken trenches, concealed machine guns, against
poisonous gases, against a hurricane of shrapnel, and high ex
plosives, never paused and never failed to advance until the
German military commanders collapsed.
The people of Europe and the people of the world owe to
America a debt which can never be paid, and America must not
depart from her high standards o f human service. The time is
at hand to establish the conditions which will verify the prophecy
of a thousand years of peace. The time has come when there
shall be established upon the earth the great principles of liberty,
of justice, of humanity, and America should take the leading
part in that constructive work. I am one of those who strongly
advised the President of the United States to go to Europe iit
order that the ideals of America might be presented to the-Euro
pean statesmen, whom I knew were embarrassed because of
their long and painful experience with militarism. I knew that
they could not help thinking in terms of strategic boundaries, in
terms o f battalions, in terms o f armaments, and I am rejoiced
that our President was able to favorably influence European
opinion, so that wc now have laid before us the preliminary
formulation of a plan which when perfected will effect and
maintain forever the peace of the world. Let America take her
place in the front rank in this forever-glorious enterprise.
I ask permission to insert in the R ecord a quotation from Mr.
Roosevelt upon this matter, which he made in his Nobel speech,
as an exhibit to my remarks.
The PRESIDING OFFICER. Without objection, it is so or
dered.
The matter referred to is as follow s:
[F r o m
an a d d re ss on “ In te r n a tio n a l P e a c e ”
b e fo r e th e N o b e l
C o m m it t e e , d e liv e r e d a t C h r is t ia n ia , N o r w a y , M a y 5 , 1 0 1 0 , by
d o r e R o o s e v e lt .]
P r iz e
Theo
( I t a l i c s a r e in s e r t e d to e m p h a s iz e c e r t a in p r o p o s a ls .— R
L. O )
N o w , h a v in g fr e e ly a d m it t e d th e lim it a t io n s to o u r w o r k a n d th e
q u a l i f i c a t i o n s t o b e b o r n e in m i n d , I f e e l t h a t I h a v e t h e r i g h t t o h a v e
m y w o r d s t a k e n s e r i o u s l y , w h e n I p o i n t o u t w h e r e , in u :v j u d g m e n t ,
g r e a t a d v a n c e c a n b e m a d e in t h e c a u s e o f i n t e r n a t i o n a l p e a c e .
I sp eak
a s a p r a c t i c a l m a n , a n d w h a t e v e r I n o w a d v o c a t e I a c t u a l l y t r i e d tc d o
w h e n I w a s f o r th e t im e b e in g th e h e a d o f a g r e a t N a t io n , a n d k e e n ly
je a lo u s o f it s h o n o r a n d in te r e s t.
I a sk o th e r n a tio n s to d o o n ly w h a t
I s h o u ld b e g la d to se e m y o w n N a t io n d o .
T h e a d v a n c e c a n b e m a d e a lo n g s e v e r a l lin e s .
F ir s t o f a ll. th e r e c c n
be tr e a tie s o f a r b itr a tio n .
T h ere a re, o f cou rse. S ta te s so b ack w ard th a t
a . ' f u V tv.z e ( * c o m m u n i t y o u g h t n o t t o e n t e r i n t o a n a r b i t r a t i o n
tre a ty
w ith th e m , a t le a s t u n til w e h a v e g o n e m u ch fu r th e r th a n a t p r e se n t
in s e c u r in g s o m e k in d o f i n t e r n a t io n a l p o lic e a c t io n .
B u t a il r e a lly
t
110764— 19405
c iv iliz e d c o m m u n it ie s s h o u ld h a v e e ffe c t iv e a r b it r a t io n t r e a t ie s a m o n s
t h e m s e lv e s .
I b e lie v e t h a t t h e s e t r e a t ie s c a n c o v e r a lm o s t a ll q u e s tio n s
lia b le to a r is e b e tw e e n s u c h n a t io n s , i f t h e y a r e d r a w n w it h th e e x
p lic it a g r e e m e n t t h a t e a ch c o n t r a c t in g p a r ty w ill r e s p e c t th e o t h e r s
t e r r i t o r y a n d i t s a b s o l u t e s o v e r e i g n t y w i t h i n th a t- t e r r i t o r y , a n d t h e
e q u a lly e x p lic it a g r e e m e n t t h a t (a s id e fr o m th e v e r y r a r e c a s e s w h e r e
th e n a tio n s h o n o r is v i t a l l y c o n c e r n e d ) a ll o t h e r p o s s ib le s u b j e c t s o f
c o n tr o v e r s y w ill be su b m itte d
to
a r b itr a tio n .
Such
a tre a ty
w o u ld
in s u r e p e a c e u n le s s o n e p a r t y d e lib e r a te ly v io la t e d it .
O f cou rse
as
y e t th e r e is n o a d e q u a te s a fe g u a r d a g a in s t su c h d e lib e r a te v io la t io n ,
b u t t h e e s t a b li s h m e n t o f a s u ffic ie n t n u m b e r o f t h e s e t r e a t i e s w o u ld g o
a - l o n g w a y t o w a r d c r e a t i n g a w o r l d o p i n i o n w h i c h w o u l d f i n a l l y fin d
V io la tio n *1
***
^ p r o v is io n
of
m e th o d s
to
fo r b id
or
p u n ish
any
su ch
th e re is th e fu r t h e r d e v e lo p m e n t o f T h e H a g u e T r ib u n a l,
o f th e w ork o f th e c o n fe r e n c e s a n d c o u r ts a t T h e H a g u e .
It h a s been
w e l l s a i d t h a t t h e f i r s t H a g u e c o n f e r e n c e f r a m e d a M a g n a C’ h a r t a f o r
t h e n a t i o n s ; it s e t b e f o r e u s a n i d e a l w h i c h h a s a lr e a d y to s o m e e x t e n t
^
n, , i ' e a U ? e ,d ’ a n l L t o w a r d
th e
fu ll r e a liz a tio n
o f w h ic h w e c a n
a ll
s te a d ily
s tr iv e .
1 he secon d
c o n fe re n c e
m ade
fu rth e r
p rogress;
th e
th ir d s h o u ld d o y e t m o r e .
M e a n w h ile th e A m e r ic a n G o v e r n m e n t h a s
.b a n o n c e t e n t a t i v e l y s u g g e s t e d m e t h o d s f o r c o m p l e t i n g t h e c o u r t
+i, „
v
1
A
"■ ‘ V 1
u i d m o v n ana o / A s ia , s n a il s e t
s e r io u s ly .t o t h e t a s k o f d e v is in g s o m e m e t h o d w h ic h s h a ll
n c tv n ip lix h th is r e s u lt.
I f I m a y v e n tu r e th e s u g g e s t io n , it w o u ld he
w e ll f o r t h e s t a t e s m e n o f t h e w o r ld , in p la n n i n g f o r t h e e r e c t io n o f
t h i s w o r l d c o u r .t , t o s t u d y w h a t h a s b e e n d o n e i n t h e U n i t e d S t a t e s b v
th e S u p re m e C o u rt.
I c a n n o t h e lp t h in k in g t h a t th e C o n s t it u t io n o f
t h e U n it e d S t a t e s , n o t a b ly in t h e e s t a b li s h m e n t o f t h e S u p r e m e C o u r t
and
in t h e
m e th o d s a d o p te d
fo r
s e c u r in g p e a c e a n d g o o d
r e la tio n s
a n io h g a n d b e tw e e n t h e d iffe r e n t S t a t e s , o ffe r s c e r ta in v a lu a b le a n a lo
g ie s t o w h a t s h o u ld b e s t r i v e n f o r in o r d e r t o s e c u r e , ‘ t h r o u g h T h e
H a g u e c o u r ts a n d c o n fe re n c e s, a s p e c ie s o f w o r ld fe d e r a tio n fo r in te r
n a tio n a l p e a c e a n d ju s tic e .
T h e r e a r e , o f c o u r s e , fu n d a m e n t a l d iffe r e n c e s b e tw e e n w h a t th e U n ite d S ta t e s C o n s titu tio n d o e s a n d w h a t w e
s h o u ld e v e n a t t e m p t a t t h is t im e to s e c u r e a t T h e H a g u e , b u t th e m e th
o d s a d o p t e d in
th e A m e ric a n
C o n stitu tio n
to p r e v e n t h o s tilit ie s b e
t w e e n t h e M a t e s a n d t o s e c u r e t h e s u p r e m a c y o f t h e F e d e r a l c o u r t in
c e r u iln c la s s e s ol e a s e s , a r e w e ll w o r th t h e s t u d v o f t h o s e w h o see k
a t i n e H a g u e t o o b ta in th e s a m e r e s u lt s on a w o r ld s c a le .
In th e t h ir d p la c e , s o m e t h i n g s h o u ld b e d o n e a s s o o n a s p o s s ib le to
c h e c k th e g r o w th o f a r m a n ie n ts , e s p e c ia lly n a v a l a r m a m e n ts , b y i n t e r
n a tio n a l a g r e e m e n t.
N o o n e p o w e r c o u ld o r s h o u ld a c t b y i t s e l f , fo r
it is e m in e n t ly u n d e s ir a b le , fr o m t h e s t a n d p o in t o f th e p e a c e o f r ig h t
e o u s n e s s , t h a t a p o w e r w h ic h r e a l ly d o e s b e lie v e in p e a c e s h o u ld p la c e
i t s e l f a t th e m e r c y o f s o m e r iv a l w h ic h m a y a t b o tt o m h a v e n o s u c h
b e lie f a n d n o in te n t io n o f a c t in g o n it .
R u t. g r a n te d sin c e r ity o f p u r
o f th e w o r ld
sh o u ld
fin d n o
in s u r m o u n ta b le
p ose, th e g rea t p o w e r s
d iffic u lt y in r e a c h in g a n a g r e e m e n t w h ic h
w o u ld p u t a n e n d
to th e
p r e s e n t c o s t ly a n d g r o w in g e x tr a v a g a n c e o f e x p e n d itu r e o n n a v a l a r m a
m e n ts.
A n a g r e e m e n t m e r e ly to li m i t t h e s iz e o f s h ip s w o u ld h a v e
b een v e r y u s e fu l a fe w y e a r s a g o , a n d w o u ld s t i l l h e o f u s e , h u t th e
a g r e e m e n t s h o u ld g o m u c h fu r th e r .
F in a lly , it w o u ld be a m a s te r s tr o k e if th o s e g r e a t p o w e r s h o n e s tly
b e n t on p e a c e w o u ld fo r m a le a g u e o f p e a c e , n o t o n l y to k e e p t h e p e a c e
a m o n g t h e m s e lv e s b u t to p r e v e n t, b y fo r c e if n e c e s s a r y , its b e in g b ro k en
b y o th e rs.
T h e s u p r e m e d iffic u lty in c o n n e c t io n w it h d e v e lo p in g t h e
p e a c e w o r k o f T h e H a g u e a r i s e s f r o m t h e la ck o f a n y e x e c u t i v e p o w e r ,
o f a n y p o lic e p o io c r , to e n fo r c e th e d e c r e e s o f th e c o u r t.
In a n y com
m u n it y o f a n y s iz e t h e a u t h o r it y o f th e c o u r t s r e s t s u p o n a c t u a l o r
p o te n t ia l fo r c e , o n t h e e x is te n c e o f a p o lic e , o r o n t h e k n o w le d g e t h a t
t h e a b le -b o d ie d m e n o f t h e c o u n t r y a r e b o th r e a d y a n d w i lli n g to s e e
t h a t th e d e c r e e s o f ju d ic ia l a n d le g is la t iv e b o d ie s a r e p u t in to e ffe c t.
I n n e w a n d w ild c o m m u n itie s w h e r e th e r e is v io le n c e , a n h o n e s t m a n
m u s t p r o te c t h im s e lf, a n d , u n til o th e r m e a n s o f se c u rin g h is s a fe t y a re
d e v is e d , it is b o th f o o lis h a n d w ic k e d t o p e r s u a d e h im t o s u r r e n d e r h is
a r m s w h ile th e m e n w h o a r e d a n g e r o u s to th e c o m m u n ity r e ta in th e ir s .
H e s h o u ld n o t r e n o u n c e t h e r ig h t to p r o te c t h im s e lf b y h is o w n e ffo r ts
u n t il th e c o m m u n it y is so o r g a n iz e d t h a t it c a n e ffe c tiv e ly r e lie v e th e
In d iv id u a l o f th e d u t y o f p u t t in g d o w n v io le n c e .
S o it is w ith n a tio n s .
E a c h n a tio n m u s t k eep w e ll p r e p a r e d to d e fe n d i t s e l f u n til th e e s t a b lis h
m e n t o f s o m e fo r m o f in te r n a tio n a l p o lic e p o w e r , c o m p e te n t a n d w illin g
to p r e v e n t v io le n c e a s b c tic e c n n a tio n s .
A s th in g s a re n o w , su ch p o w er
1 1 0 7 0 4 .— 1 9 4 0 5
18
to command peace throughout the world
c o u ld b e s t b e a ss u r e d b y s o m e
c o m b in a tio n b e tw e e n t h o s e g r e a t n a tio n s w h ic h s in c e r e ly d e s ir e p e a c e a n d
h a v e n o th o u g h t th e m s e lv e s o f c o m m ittin g a g g r e ssio n s.
The combina
tion might at first be only to secure peace within certain definite limits
and certain definite conditions ; b u t t h e r u l e r o r s t a t e s m a n w h o s h o u l d
b r i n g a b o u t s u c h a c o m b i n a t i o n w o u l d h a v e e a r n e d h i s p l a c e in h i s t o r y
f o r a ll t i m e a n d h is t i t l e t o t h e g r a t i t u d e o f a ll m a n k in d .
Mr. FRANCE. Mr. President, will the Senator yield?
Mr. OWEN. I yield to tlic Senator.
Mr. FRANCE. I have been very much interested in the ad
dress of the Senator, because I know that he entertains some
very progressive political views. I desire to ask him one or two
questions, for I know that lie has given much study to the phrase
ology of the proposed constitution of the league. Does he ap
prehend that under the present phraseology we might be called
upon to conscript our soldiers for the purpose of fighting Ireland,
for example, if Ireland should desire her independence, or of
fighting India, if India should desire her independence from
the British Empire?
Mr. OWEN. The exact reverse, of course, is true. The con
ditions which, under the old regime, made subject nations a
military asset will no longer exist if the league be established;
and nations would not regard subject nations as an asset, but
as a liability, where they were discontented.
Mr. FRANCE. I ask that question in view of the state
ment of the Senator that he thought the language should be
made clear, so that it would be apparent always that member
nations should not interfere in internal disputes.
Mr. OWEN. There is nothing in this proposed league of
nations which would require the United States to furnish her
troops on the battle field. It is one thing to have an aggressive
nation invading the territorial integrity or political independ
ence of a nation, and by that act, in violation of these terms,
making war itself upon all nations. We had war made on us
a long time before we yielded to the affront and to the danger
which threatened us. A nation can make war under the terms
o f this constitution without involving us in any degree to
furnish any troops. On the contrary, instead of its leading to
conscription, Gen. Smuts in his book on the League o f Nations
argues that conscription is a potent means o f promoting war,
and he is opposed to conscription.
Mr. FRANCE. Certainly there is great ambiguity in the
language when it is susceptible of so many different interpre
tations.
Mr. OWEN. I think some of the interpretations of the lan
guage used are not justified at all by the language itself, but
are quite hypercritical and entirely unjustified by anything in
the instrument.
Mr. FRANCE. Now, I desire to ask the Senator one more
question. What does he consider to be the purpose o f this
league o f nations? Is it merely to secure peace, or is it really to
secure justice and the advancement of the welfare of all men,
including the advancement o f the backward nations of the
world?
Mr. OWEN. They are coincident. Justice and peace go hand
in hand. You can not have peace if you do not have justice.
11 0 7 G 4 — 1 9 4 0 5
19
Mr. FRANCE. I am very glad the Senator is bringing out
that thought-----Mr. OWEN. The Senator himself brought it out.
Mr. FRANCE. Because, according to the idea that I enter
tain, the two things are not always synonymous. Sometimes
there can not he justice if there is to he peace; sometimes justice
can not he advanced by peaceable means; and it seems to me it
should he clearly stated what the purpose is. If it is merely to
he a league of peace for the preservation of the status quo, that
is one thing. If it is to he a league which is to express the
great cooperative spirit for the advancement of the world and for
the uplifting of those peoples of the world who are backward
and have been kept down because heretofore there has been ex
ploitation rather than a desire for elevation, then the league is
quite a different thing.
Mr. OWEN. Mr. President, so far as Great Britain is coneel 116(1 , I think, the best evidence that she had tried to give
justice to her colonies was shown by the loyalty and zeal of
her colonies in coming to her support in this great crisis of the
war.
Mr. FRANCE. To try is not enough. To try for justice is
not enough. Justice must be accomplished, flow about the
great country of Africa, composing approximately- one-fourth of
the earth’s land surface? The same heathenism, the same
savagery, exist to-day in the heart of Africa as existed when
the pyramids were new. A mere good-natured will is not enough.
The liberals of the world to-day demand results, and they wili
have them.
Mr. OWEN. I am pleased to see the Senator's enthusiasm
in favor of justice. I am in accord with his desire.
Mr. FRANCE. I believe that the Senator is; but let us keep
the gieat purpose to the front, not merely a stagnant universal
passivity but a purpose of-progress and advancement That is
what I hope to see come out of this great cooperative movement.
Mr. OWEN. I think great advancement will come from this
league, because the principles-of justice and right are written
in the provisions of the proposed league; and when those prin
ciples are made the universal law I have no doubt that they will
become more and more potent, and that they will become the
universal rule.
ilr. FRANCE. Mr. President, if I am not disturbing the
Senator, may 1 ask him this question: As the Senator from
Oklahoma entertains very progressive views, does Ik* not realize
that many countries of the world have been in the hands o f re
actionary ministries who look with suspicion upon any effort to
advance and improve the conditions of the backward nations
o f the world?
Mr. OWEN. Undoubtedly. That is not altogether untrue of
the United States.
1 1 0 7 0 -1 — 1 9 4 0 5
o
The Peace Treaty and League of Nations
SPEECH
OF
HON. ROBERT L. OWEN
O F O K LA H O M A
IN TH E
SENATE OF THE UNITED STATES
JU L Y 31, 1919
WASHINGTON
1919
133035— 10751
■■■
.. ..............
SP E E C H
OF
HON. ROBERT L. OWEN.
THE P E A C E T R E A T Y A N D L E A G U E O F N A T I O N S .
Mr. OWEN. Mr. President, the Senate of the United States
is facing its greatest responsibility in the history of the Re
public. We are face to face with the acceptance or the rejection
of a treaty of peace with Germany, and the acceptance or re
jection of a covenant establishing a league of nations and a
new world order of liberty, justice, and humanity.
In a great enterprise of this character we must not permit our
selves to deal with the shadows ; we should deal only with the sub
stance.
The treaty with Germany establishes the disarmament of
Germany as a great vital fact, absolutely breaks its military
and naval power, its dynastic ambition and militarism, and com
pels reparation for the damage done by, the German people. It
compels the German and Austrian Governments to recognize the
rights of subject peoples heretofore dominated by Germany and
her allies. They are compelled to recognize the Poles, the
Czecho-Slovaks, the Jugo-Slavs, and to recognize the new bound
aries of these peoples and their right to self-government, their
right of self-determination, and equitable treatment to their com
merce and industry. The reduction o f the military power of
Germany is an event of the first magnitude. It is the reduction
of the only great power which in modern times has entertained
the ambition of world dominion; it is the reduction of the only
great power deliberately building up a military force for ag
grandizement, for annexation, for indemnity, and for profit.
The reduction of German war power and lust for dominion by
this war and by this treaty is one great fact that must color
everything which follows. Above all, there is established by a
world agreement the covenant of the league of nations with a
force of sufficient financial, commercial, military, and naval
power to command the peace of the w’orld for all time.
I have studied the covenant o f the league of nations with
care. I have read many speeches hostile to this covenant, and
have weighed the arguments against the covenant. I have
found them very hypercritical, partisan, and without convincing
force.
I am profoundly convinced that it is my duty as a Senator
of the United States, representing the people of the United
States, to give this covenant my support without amendment or
reservation. I regard it as my duty to the world to support
this covenant.
Mr. President, the peace of the world might have been se
cured by the conventions at The Hague in 1899 and 1907 if it
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had not been for the military autocracies governing Germany,
Austria, Bulgaria, and Turkey, whose representatives refused
to agree to arbitration or to disarmament and who, when ready,
violated all The Hague conventions and their solemn treaties
with other nations in their violent attempt in 1914 to establish
world dominion.
The great obstacle to world peace of 1899 and 1907 is happily
removed.
These autocratic military governments are now disarmed.
They will be compelled to accept the principles of international
morality, and it may well be believed that with the overthrow of
the military autocracies which governed these peoples, which
dominated and drove them into battle, the people themselves
will soon realize their deliverance and will appreciate and sup
port with heartfelt loyalty the new world order.
Mr. President, the great conflict between military autocracy
and the growing democracies of the world was almost unavoid
able. The Romanoffs, the Hohenzollerns, the Hapsburgs, and the
Bourbons, by the Secret Treaty of Verona, had sworn, in 1822, to
destroy the democracies of the world. That treaty, articles 1 and
2, provided:
A R T IC L E 1. T H E H IG H
C O N T R A C T I N G P O W E R S B E IN G C O N V IN C E D T H A T
TH E SYSTEM
OF R E P R E S E N T A T IV E G O V E R N M E N T IS E Q U A L L Y A S IN C O M
P A T IB L E
W IT H
THE
M O N A R C H IA L P R IN C IP L E S A S T H E
M A X IM
OF TH E
S O V E R E IG N T Y O F T H E P E O P L E W I T H T H E D I V IN E R I G H T , E N G A G E M U T U A L L Y ,
I N T H E M O S T S O L E M N M A N N E R , T O U S E A L L T H E I R E F F O R T S T O P U T AN
5N D TO T H E S Y S T E M
O F R E P R E S E N T A T I V E G O V E R N M E N T S IN W H A T E V E R
C O U N T R Y I T M A Y E X I S T IN E U R O P E A N D T O P R E V E N T I T S B E IN G I N T R O
D U C E D IN T H O S E C O U N T R IE S W H E R E I T I S N O T Y E T K N O W N .
A R T . 2 . A S I T C A N N O T BE D O U B T E D T H A T T H E L I B E R T Y O F T H E P R E S S
IS T H E M O S T P O W E R F U L M E A N S U SED BY T H E P R E TE N D E D S U P P O R T E R S OF
T H E R IG H T S O F N A T IO N S TO T H E D E T R IM E N T OF T H O S E OF P R IN C E S , T H E
H I G H C O N T R A C T IN G P A R T IE S P R O M IS E R E C IP R O C A L L Y T O A D O P T A L L P R O P E R
M E A S U R E S T O S U P P R E S S I T , N O T O N L Y I N T H E I R O W N S T A T E S B U T A L S O IN
T H E R E ST OF EUROPE.
They immediately overthrew the limited monarchy in Spain
and established an absolute monarchy under the same prince.
They did the same thing in Italy with a view to establishing
absolute monarchies throughout the world and keeping the
people of the world as subjects, as political slaves, and*as in
dustrial slaves subject to the mastery of the ruling powers.
The Monroe doctrine was declared for the express purpose of
checking this monarchical movement and preventing its exten
sion to the Western Hemisphere. The Hohenzollerns were the
leaders o f this conspiracy from 1822 down to 1914, and down
to the day when William II fled to Holland before the victorious
powers o f the democracies o f the world.
This great war was fought by America on the principle that
the peoples o f the world had the right to govern themselves,
and the allied Governments confirmed the American theory on
November 5, 1918, as the basis of the armistice. The present
dictated treaty of peace is the result and is before us.
This war was a war to establish right against might, justice
and humanity against injustice and inhumanity; to establish
the rule o f conscience throughout the world against the rule
of brute force, the right of men everywhere to govern them
selves.
The principles of righteousness were successful, and In the
final months of battle the great powers of the United States were
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marshaled and thrown upon the battle field, giving vitality to
the flagging forces of Great Britain, of France, of Italy, and of
Belgium, and brought an imperishable glory to the American
Republic as the world apostle of liberty and righteousness.
l e a g u e o f v ic t o r io u s n a t i o n s .
Mr. President, on the battle field a league of victorious nations
was established, led by the United States, Great Britain, France,
Italy, Belgium, and Japan, and including 20 others. It may be
fairly said that the sympathy of all of the nations o f the world,
of all the people of the world was finally aroused against the
wicked lust for dominion exhibited by the rulers of Germany,
and that finally on the inside of Austria and on the inside of
Germany disintegration commenced because of the discontent of
the Austrian and German people with the false leadership they
had been compelled to follow.- It was a pathetic scene when we
saw the Czecho-Slovaks, who had deserted Austria and fought
for the Allies, having passed around the world, reached Wash
ington and marched before the White House as a tribute to the
United States and as an evidence of their own devotion to the
cause of justice and righteousness.
Mr. President, the still small voice coming from the Divine
Spirit moves the hearts of all men and ultimately makes truth
triumphant and justice victorious.
We have now, Mr. President, a league of nations in actual
operation— a league of victorious nations, with their representa
tives in Paris completing the task imposed upon the world by
William II.
A league o f victorious nations, through their representatives,
has presented to us a treaty of peace with Germany, with a
covenant of a world league of nations approved by the represent
atives of 32 nations: United States, Belgium, Bolivia, Brazil,
the British Empire (including Canada, Australia, South Africa,
New Zealand, a’nd India), China, Cuba, Ecuador, France, Greece,
Guatemala, Haiti, Hedjaz, Honduras, Italy, Japan, Liberia,
Nicaragua, Panama, Peru, Poland, Portugal, Roumania, SerbCroat-Slovene State, Siam, Czechoslovakia, and Uruguay.
Mr. President, 13 other great States—Argentina, Chile, Colom
bia, Denmark, Netherlands, Norway, Paraguay, Persia, Salva
dor, Spain, Sweden, Switzerland, Venezuela— in effect Republics
more or less advanced, are ready and have been invited to join
the covenant of the league of nations.
Mr. President, I can not but believe that within a short period
of probation Germany, Austria, and Bulgaria will be admitted
to the league of nations, and that Russia— a united Russia, a
great Republic of Russia, or perhaps several republics com
posed of Russian people— will gladly join the league when they
shall have established orderly, democratic government.
All of these nations stand for peace and justice and sympa
thetic cooperation, and the Hohenzollerns, the Hapsburgs— the
governments based on militarism and lust for world dominion—
are dead beyond the possibility of resurrection.
We are entering a new world order. The representatives of
32 nations have been conferring together since the 11th day of
November, 1918, and have finally worked out with infinite pains
a treaty of peace with Germany which is now before us ( S. Doc.
No. 49. 66th Cong., 1st sess.). It comprises 440 articles—a
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volume of 194 pages. It is the most important treaty the world
has ever seen. It deals not only with Germany but in effect
it deals with the new nations that are brought into life by this
peace treaty.
I shall support the treaty of peace as the best settlement
found possible by the representatives of the great nations light
ing together for liberty and justice.
We have a league of nations now, born of necessity, created
by war, by the exigencies of life and death, and they are trans
acting business without any other charter than the charter of
necessity. This treaty has not been carelessly drawn. The
United States alone had a large number of expert men engaged
in an advisory capacity to gather together the information for
our peace commissioners, and it is quite a wonderful tribute
to the excellence of this treaty and to its thoroughness and to
its accuracy that the opponents have found in 440 articles so
few of which they can complain. I shall refer to some of these
objections later.
But, Mr. President, what I now wish to emphasize is that we
have a league of nations working without a charter, establish
ing by military force the peace o f Europe, a peace which is
essential and necessary to the peace o f the American people;
that the league of victorious nations in arms through its repre
sentatives has finally reached an agreement. Germany has
ratified the terms; Great Britain has ratified it; France in a
few days will have ratified it, and so will Japan. Are these
great voices o f no persuasive force? It is a dictated peace, as I
had the honor to advise the honorable Senator from Massachu
setts [Mr. L odge] it would be, when he denounced the armistice
and President Wilson’s question to the German people which
preceded the armistice. It is as much a dictated peace as if the
Allies had gone to Berlin after having devastated hundreds of
cities and villages and marched over the bodies-of hundreds of
thousands of the slain.
Never was a greater assemblage of scholars, technical experts,
historians, and trained statesmen assembled.
Their work
should command the respect of all thoughtful men who respect
authority and are moved by competent argument.
Mr. President, the nations composing the league o f victorious
nations discovered that while they were bound together by the
exigencies of war in framing the future relations of the nations
of Europe wi i Germany and her allies, and compelling compli
ance to the decrees of the great Allies, it was essential to estab
lish a league o f nations that should embrace all the nations of
the world, 32 of whom were already at the peace table joining in
the making of peace with Germany, and it was well known that
all the other nations in the world, except Germany and her
allies and disordered Russia, were ready to adjust themselves
to a world-wide league of nations for the preservation of the
future peace of the world and for the very vital purpose of mak
ing effective the settlement with Germany and her allies, making
a certainty that militarism should not again raise its martial
head, and that Germany and Austria should respect the penal
ties imposed upon them and make reparations for the damage
they had done.
Throughout the treaty of peace with Germany the proposed
league of nations is charged with many responsibilities to see
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that this treaty is carried o u t; that the boundaries fixed shall be
respected. This treaty establishes new relations between Ger
many and all other nations in the most important particulars,
with the new States, Czechoslovakia, Poland, Austria, Hun
gary, Schleswig, with Russia and the Russian States, with the
German colonies, with China, with Siam, Liberia, Morocco, with
Egypt, Turkey, Bulgaria, and in respect to Shantung.
This treaty is of gigantic importance in disarming Germany,
demobilizing her forces, limiting her army and navy, her arma
ments, her munitions, her materials of war, abolishing abso
lutely compulsory military service in Germany, preventing short
enlistments in the army to train citizens as soldiers, limiting her
fortifications, depriving her of the right to have military aero
planes or submarines, authorizing interallied commissions of
control, making sweeping provisions for reparation, and propos
ing proper penalties upon the criminal leaders who committed
the hideous crime of the war o f 1914.
This treaty of necessity deals with commercial relations, with
property rights, contracts, judgments, ports, waterways, rail
ways, navigation, and so forth.
Mr. President, the covenant of the league of nations sub
stitutes law and order in place of anarchy between nations.
We have had no such thing as international law. We have
had merely international precedents, international ethics and
agreements. No rule of human conduct not prescribed by com
petent authority and capable of enforcement deserves to be
called a law.
The covenant of the league of nations is the beginning of
international order and international law to govern relations
of the citizens of one nation with the citizens of another
nation. The covenant is drawn up with avowed purpose—
to promote international
peace and security.
cooperation
and
to
achieve
international
The most intense partisan bigotry will not challenge the
nobility of this purpose. The means by which this noble end
shall be accomplished is specifically laid down—
First. By the acceptance of obligations not to resort to war.
Second. By the prescription of open, just, and honorable relations
between nations.
Third. By the firm establishment of the understandings of inter
national law as the actual rule of conduct among Governments.
Fourth. By the maintenance of justice and a scrupulous respect
for all treaty obligations in the dealings o f organized peoples with one
another.
These four proposals are the proposals of the first paragraph
of the covenant of the league of nations, and whatever follows
must be interpreted in the light o f the purpose and the plan
proposed to carry out the purpose of achieving international
peace and security.
The 26 articles then lay out a plan for achieving international
peace and security.
First it pledges every member (art. 10) not to invade the
territorial integrity or existing political independence o f any
other member nation, and not only to respect this principle but
to preserve against external aggression the territorial integrity
and existing political independence of all members of the league.
Abundant means for safeguarding the future peace of the world
is provided as follow s:
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a. By recognizing the importance of reducing armaments to
the lowest point consistent with national safety and interna
tional obligations;
b. By limiting the private manufacture of munitions and
implements o f war and providing a means for abating this
menace to peace;
c. By giving full information with regard to the manufac
ture of armaments and military, naval, and air programs;
d. By establishing a commission to deal with the question
o f military and naval programs;
e. By providing for an immediate call o f the council in case
of war or a threat of war (art. 1 0 );
f. By providing that members of the league shall submit dis
putes to arbitration or to inquiry by the council, and that they
will not resort to war until at least three months after the award
by the arbitrators or the report o f the council (art. 12).
g. By recognizing as suitable for arbitration—
First. All disputes relating to the interpretation of treaties.
Second. Any question of international law.
Third. The existence o f any fact which if established would
constitute a breach of any international obligation.
Fourth. Or as to the extent and nature of the reparation to
be made for any such breach.
h. Provision is made that the members of the league will
carry out in good faith any award that may be rendered, and
that they will not resort to war against a member which com
plies with the award (art. 13).
i. A permanent court o f international justice is contemplated
to be submitted to the members of the league for consideration
(art. 14).
k. A further provision is made to settle disputes by provid
ing that questions not submitted to arbitration shall be sub
mitted to the council for full investigation and consideration.
l. Provision is made for an appeal to be made from the coun
cil to the assembly (art. 15).
m. If any member resorts to war in disregard of its cov
enants to arbitrate or adjust its differences with other nations
under articles 12,13, or 15, it shall, ipso facto, be deemed to have
committed an act of war against all other members of the league,
which undertake immediately to subject the offending nation—
First, to the severance o f all trade or financial relations.
Second, the prohibition of all intercourse between other na
tionals and the nationals of the offending State.
Third, the prevention o f all financial, commercial, or per
sonal intercourse between the nationals of the covenant-breaking
State and the nationals o f any other State, whether a member
of the league or not.
These penalties are sufficient to deter any nation on earth
from attacking another nation in violation of the covenanted
agreements (art. 16).
n. Moreover, it is provided that it shall be the duty o f the
council in the case of an outlaw nation to recommend to the sev
eral Governments concerned what effective military, naval, or
air forces the members of the league shall severally contribute
to the armed forces to be used to protect the covenants of the
league (art. 16).
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This provision is similar to the provision in article 10 that
where any nation is exposed to an exterior aggression of its
territorial integrity or existing political independence by an
other nation, the council shall advise as to the means by which
the obligation to preserve the territorial integrity and existing
political independence of nations shall be fulfilled.
o. Article 16 makes further provision that in the case of an
outlaw nation the members of the league shall cooperate in
financial and economic ways to minimize the harm done by a
blockade and boycott of the offending nation.
p. Article 17 provides for the settlement of disputes between
nations not members o f the league, and provides for the coercion
of any nonmember which assails a member nation contrary to
the principles o f the league.
q. Publicity of treaties is provided for as a safeguard against
secret treaties (art. 18).
r. The assembly is authorized to advise the reconsideration
o f existing treaties that may involve or endanger the peace of
the world (art. 19).
s. The members of the league are to cancel and set aside obli
gations or understandings among themselves which are incon
sistent with the principles of the proposed league, and they
agree not to hereafter enter into engagements inconsistent with
the principles of the league (art. 20).
t. I lie league is intrusted with the general supervision o f the
trade in arms and ammunition with the countries in which the
control of this traffic is necessary in the common interest
(art. 23).
u. The very great and important principle is laid down in the
proposed covenant that the people in German colonies and terri
tories where the people are not yet able to stand by themselves
shall have their right of development placed under the an
tliority of the league o f nations as a sacred trust of civiliza
tion, and that mandatories shall be established comprising
nations trained in the art o f government which shall exercise the
responsibility, under a charter issued by the council in behalf of
the league, determining the degree o f authority, control or ad
ministration to be exercised by the mandatory, and providing
for annual reports, and recognizing the principles of justice
and the right o f the people who are governed to primary con
sideration.
J
v. Some very important principles are laid down in section
23, pledging the member nations—
(a) To endeavor to secure and maintain fair and humane con
ditions of labor for men, women, and children both in their own
countries and in all countries to which their commercial and in
dustrial relations extend, and for that purpose to establish and
maintain the necessary international organizations__
(b) Pledging the members to undertake to secure just treat
ment of the native inhabitants o f territories under their control
(c) That they will intrust the league with the general super'
vision over the execution o f agreements with regard to the
traffic in women and children, and the traffic in opium and other
dangerous drugs.
(e) That they will make provision to secure and maintain
f i eedom of communications and of transit and equitable treat
ment for the commerce of all members of the league
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(f ) That they will endeavor to take steps in matters of inter
national concern for the prevention and control of disease.
That they will encourage and promote voluntary Red Cross
organizations (art. 25).
Mr. President, this covenant provides for the settlement o f
every international dispute that can honestly arise. It pro
vides for the disarmament of nations to the limit of safety.
It provides a gigantic penalty o f international boycott and
blockade of any nation which, contrary to the principles o f the
league, invades the territorial integrity or political independence
of another nation. It lays down the principles of justice and
humanity. It pledges the nations of the world to the great
principles of peace and international justice and international
understanding. And above all the old enemies of peace and
justice are powerless and made incapable of future mischief.
Those who have been opposing the league have not been able
to point out in a single instance where they could improve upon
the precautions taken by this great covenant to prevent war in
future.
We are face to face with either accepting the covenant or re
jecting it. I f I should take part in rejecting it, Mr. President,
my conscience would never cease to distress me as having
failed in a great crisis o f the world’s history to do what I could
to establish peace on earth, good will toward men.
Mr. President, the covenant of the league of nations is the
consummation of a century of the aspirations of the good men
o f the world. It is the work o f many hands. The doctrine of
disarmament and of arbitration would have been adopted at
The Hague in 1907 except for Germany and her allies.
It is absolutely inconceivable that any existing democracy
on earth would disregard the principles laid down in this league.
They would have no motive, in the first place. They would not
dare, in the second place.
P R E S ID E N T W IL S O N .
The political enemies of President Wilson should not throw
themselves in blind fury against the covenant of the league of
nations on the theory that it is his child, conceived by him and
brought forth by him, and therefore deserving a merited
slaughter. The principles of the league are those of The Hague
conventions brought down to date. It represents the best opin
ions of the whole civilized world. As far as the covenant o f the
league o f nations is concerned it is full of wisdom and virtue. It
is a child conceived by all the lovers o f men.
I was one o f those, and I assume the responsibility, who urged
President Wilson to go to Paris and to use his prestige as Presi
dent of the United States to bring about this covenant. I think
he is entitled to very great credit for having succeeded in bring
ing back a covenant fundamentally sound, which will accom
plish the purpose of world peace, world order, and world pros
perity. History will give him a credit which his political oppo
nents would now deny.
O P P O S IT IO N
TO
THE
COVENANT.
Mr. President, one of the lirst principles which I learned as a
Member of the Senate, in its capacity to pass upon foreign
treaties, was this—
That in the Senate of the United States party lines should cease at
tidewater.
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I have been profoundly disappointed to find the distinguished
Senator from Massachusetts, the present chairman of the Com
mittee on Foreign Relations [Mr. L odge] , ignoring this sound
principle with his round robin, marshaling all the Republican
Senators whom he could influence to protest against the cove
nant establishing the league of nations, making hostile speeches
against it, and leading other Senators to do the same thing.
The opponents of the league have proven too much.
The distinguished Senator from Illinois [Mr. S h e Um a n ] un
dertook to demonstrate that the league would be controlled by
the Catholic Church by controlling a majority of the votes of the
assembly and that the Catholic Church would thus rule the
world.
Another Senator undertook to prove in the same way that the
colored races would control the league of nations, and therefore
control the world.
Other Senators to their own satisfaction have shown that
Great Britain would in like manner control the league and
therefore control the world.
These Senators might do well to reconcile their own differ
ences before they ask the people of the United States to follow
a leadership that leads in all directions at once.
But, Mr. President, they are completely put to confusion by a
fair interpretation o f the covenant itself. The action of the
league (art. 2) must be effected through the instrumentality
of an assembly and of a council. It is expressly provided in
article 5 that—
Except where otherwise expressly provided in this covenant or by the
terms of the present treaty, decisions at any meeting of the assembly
or of the council shall require the ayreement oj all the members of the
league represented at the meeting.
In other words no decision except by unanimous vote.
The only exceptions provided for by the covenant are in
respect to matters of procedure, the appointment of committees
(these arrangements may be decided by a majority) (art. 5),
and in the case of an appeal to the assembly o f a pending dis
pute it is provided that a decision may be arrived at if con
curred in—
by the representatives of those members of the league represented on
the council and of a m ajority of the other members of the league,
exclusive in each case of the representatives of the parties to the
dispute.
In other words, the decisions of the assembly or of the council
in relation to international affairs must be unanimous. Where
is the possibility of the dominance of any nation over other
nations represented on the council or in the assembly? Where
is the danger of dominance by England, the Catholic Church, or
the colored races when no action can be taken except by unani
mous consent?
Great stress has been laid upon the number of votes given
to Great Britain as in the cases o f Australia, South /A frica,
New Zealand, Canada, and India, while only one is given to the
United States.
The answer to this is that since a unanimous decision is re
quired it is not of the slightest importance; and, second, that in
so far as mere votes are concerned, the United States has a
number of small nations whose support could be relied upon, as
Cuba, Haiti, San Salvador, Panama, Liberia, Nicaragua, Hon13 3 03 5 — 19751
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duras, and Guatemala, whose population is negligible but whose
dependence upon the United States is of such a character that
their cooperation with the United States can be as much relied
upon as the cooperation of Canada with Great Britain.
But there is nothing in the argument one way or the other
Ihe argument is specious, it is fallacious, it is misleading, and
unworthy of being presented to the American Senate. A few
votes are of no importance where all must agree.
ENTANCUM NG
A L L IA N C E S .
The opponents o f the covenant establishing the league declare
with suspicious zeal that we are violating the advice o f our
alliarmes'' asbinston and iSnoring llis warning against entangling
The entangling alliances to which Washington referred were
agreements, common in his day, making offensive and defensive
alliances between one autocracy and another, between rival
groups of monarchies. He was very wise to advise the United
States to keep out o f such difficulties where nations were
trigiie 6( ^ milltary and dynastic ambitions and selfish inrevf ed Washington had not the faintest conception of
the piesent covenant establishing a world order bv the democlacies ot the world as a result of the complete overthrow o f the
Hohenzollerns, the Hapsburgs, and the Romanoffs. So far is
,T w bf f f hlPi 11? the league o f nations under the present covewh ch wH, l e iLg an enti nglillg alliance, it is an association
\\hidi will make impossible any entangling alliances such as
those contemplated by Washington.
The present covenant precludes the possibility of military
dynastic alliances. The present covenant establishes peace on
taith, establishes a just and fair relationship between all nauons, with all the nations of the earth pledged to maintain the
political integrity and the existing political independence of
every single member nation. I agree with Senator i m!
speech of June 9, 1915, at Union College, that “ there is no escape
from the proposition that nations must unite to prevent war "
and diaagree wtthhis present attitude. Is it not strange he has
made no constructive proposals?
1
MONROE DOCTRIN E.
. " ‘ f 0111 a gl®a™
humor there are opponents o f the league
who have the hardihood to confront the intelligence of man
kind with the astonishing proposal that the present covenant
r Uw ? ° M Sh the Monroe d°etrine. These unhappy statesmen
think the Monroe doctrine is a charter establishing suzerainty
over the Central and South American Republics and that it is a
species of overlordship by which the United States has a rieht
to manage and control the policies of the other Republics o
the \Vestern Hemisphere. This un-American conception has
been highly mischievous just to the extent that it has had the
temerity by mysterious innuendoes to formulate itself It has
caused the Republics of South America and o f Central America
to look upon the United States as the Colossus o f the North
ready to invade their territory and their existing political in
dependence whenever a pretext arises for the purposes of profit—
commercial, financial, or political.
y
133035— 19751
13
This is the doctrine which the Germans have used in the
Argentine, and Chile, and Brazil, and Colombia, and throughout
the South American Republics and the Central American Re
publics, for the purpose of discrediting the United States and
breaking down our just influence with these neighboring Re
publics whose faithful friend we always have been and whose
faithful friend we always shall remain.
The Monroe doctrine is this: That the United States will
regard it as an unfriendly act for any foreign nation to at
tempt to establish on the Western Hemisphere its system of
government or to interfere with the political independence or
policies of the Republics on the Western Hemisphere.
This doctrine has been somewhat expanded to mean that the
United States would not be indifferent to an attempt on the part
of a foreign Government to acquire additional lands on the
Western Hemisphere.
The Monroe doctrine does not give the United States any
rights of suzerainty. The rights of the United States have
been somewhat expanded, by the necessities of the case, as in
Haiti, under the same principle which is recognized in article
22 of the pending covenant, establishing mandatories over
communities showing themselves incapable of orderly selfgovernment. But this is an entirely different principle from
the Monroe doctrine, and the Monroe doctrine may fairly be
construed to preclude a foreign nation from exercising the rights
of a mandatory on the Western Hemisphere.
Article 10 pledges all the members of the league to respect
and preserve the territorial integrity and existing political in
dependence o f the member nations, and this is a powerful
confirmation of the underlying principle of the Monroe doc
trine, forbidding foreign nations and all other nations to invade
the territorial integrity or to interfere with the poiltical inde
pendence of the Republics of the Western Hemisphere.
But the covenant goes further. It actually recognizes, in
terms, the Monroe doctrine (art. 21), which is all any reason
able man ought to desire; and this great covenant of the league
of nations, instead of weakening the Monroe doctrine, would
strengthen it, confirm it, and cause it to be acknowledged by all
the world.
THE
I .E A G U r
HAS
NOT
S T O rrE D
WAR.
The opponents of the proposed covenant sa;> that it has not
stopped w a r ; that there are a dozen wars pending now.
Nearly all of the so-called wars pending are civil wars, and not
really International wars. A few are over disputed boundaries
or disputed authority.
The league of nations has not yet been established. The
United States has not yet approved the covenant. But the
league of victorious nations, which is giving birth to the league
of all nations, has stopped the greatest war in history, the war
in Belgium, in France, in Italy, in Greece, in Serbia, and in
. Germany, in Austria, Bulgaria, and Turkey, and demobilized
their armed forces.
The gigantic armies of the Teutonic allies are demobilized.
The great warring armies are rapidly returning to civilized pur
suits, and the smaller civil disputes which remain will rapidly
adjust themselves when the great nations of the world act. ,
133035— 19751
1-1
R E SE R V A T IO N S.
nJ , h.e, opponent of the league having observed that article 1
that the members of the league are those who shall
accede without reservation to the covenant now insist upon res'r 0Ukl exell!de- bj’ the conditions of article 1,
the United States from membership in the league of nations
Reservations are not necessary to the covenant as drawn
and are objectionable because by the terms of the covenant
ai*y reservatl0n _to article 1 would exclude the United
f,10111 membership in the league of nations and possibly
defeat the covenant itself by leading to otfier reservations and
withdrawals.
Instead of making reservations which would temporarilv ex
clude the United States from membership in the league it
would be much better to ratify the treaty of peace with Ger
many and let Senators who have doubts remaining pass reso
lutions at the same time stating what the interpretation o f the
Senate or of Senators may be. This would be ratification with
an explanatory interpretation of the meaning coincident to it hv
I n U V 'U , thfi " k th‘.'
' necessary.But „o , e f e ™ £ „ s "U u/.S t
attached to the ratification of the treaty itself, for the reason
that it would exclude the United States from membership in the
league if this were done, or bring the covenant into great confusmn b> inviting oO nations to make reservations and amend
ments, to be in turn submitted to other nations and invite new
amendments or reservations.
., ^ r; Resident, I think it should be remembered by the Senate
that the sovereignty of the United States is vested in the people
ot the United States; that the Senate and House of Represen
tatives merely occupy a position o f temporary authority. No
Congress can bind a succeeding Congress. Any Congress can *bv
act of Congress, repeal any treaty which is made That is the
law of the Umted States, as repeatedly construed by the United
States Supreme Court. The effect of a treaty in the wav of a
promise to another nation only carries with it as valid ami Vnd
mg a moral obligation. A moral obligation, of c o u r t s su
SteantL t0butlnif ti „ T r ntS Ve'l 0£ r‘ w P e o p fu M ^ e UnttSl
Should o n t h e nhmo m ^
this Treat-V with Germany, tliev
resolution slot o f mC
and 111 a separate instrument pass a
StatHl f What’ in the opinion of the Senate, is the
tion^of t L ^
t? e ? ° wer of the Senate. what is the interpretaui! the Senate m agreeing to the covenant, it would comiTnifiii c w 6Very possible objection at any future time that the
United States was not living up to its moral obligation if anv
future shouid put upon the covenant a meaning
^ Inch the Senate of the United States now believes they would
have no right to put upon that covenant. In other words w i
by an independent resolution passed
•cu^eniJnt f r p /’fWlth0Ut Int1erferln» with tlie ratification of this
agieement, free from amendment or ivservation.
* am in favor o f ratifying it without amendment and without
reservation, and I do not think it is even necessary to have a reson? 1 baVe 1described: although for those who are timid
and fearful o f a moral responsibility to nations in the future tliev
th a /co u rs e 6 tbeniseives to themselves and to the world by taking
133035-
107", i
15
The league of nations—•
First. Will prevent future war.
Second. Will establish world peace.
Third. Will promote international law and international un
derstanding and international morality.
Fourth. Will promote international industry, commerce, and
finance.
Fifth. Will promote higher conceptions of liberty and justice
and humanity.
Sixth. Will save the enormous expenditures and waste in
life and property of preparation for war and of war.
Seventh. The economic penalties of the present covenant are
sufficient to prevent war without the use of international police;
the international police being in existence does not imply and
probably would not require its employment, except on very rare
occasions.
Eighth. It will promote democracy throughout the world, the
rule of the people, and make the Government responsible to the
need, the welfare, the health, the happiness, the prosperity of
the people.
Ninth. It will make international agreements relative to
finance, commerce, and industry easier of accomplishment.
Tenth. It will give a new dignity to human life and exalt it
above the conception o f mere property, so that property would
be considered as secondary to human life.
Eleventh. It will mean the freedom o f the seas and freedom
of international waterways, and a new birth of freedom through
out the whole world.
Twelfth. It will promote genuine democracy and end Bol
shevism.
Thirteenth. It will stop civil wars that are now raging in
certain demoralized portions of the world.
Fourteenth. It will promote the better interests of those who
labor throughout the world, of those who create values and give
them a larger part o f the values which they create.
Fifteenth. It will put an end to dynastic ambition and to
military atrocity forever.
Sixteenth. It will end the rule of the few over the many and
establish the rule of the majority for the happiness of the
majority and of the minority as well.
Seventeenth. It will not impair the internal sovereignty of any
nation.
Eighteenth. It will abate racial and class prejudices.
The future success o f the league is forecast by the success of
the British Empire, by the success of the Government of the
United States with its 48 sovereignties, living in peace and in
the most abounding prosperity the world has ever known, for
the very reason that they have complete cooperation instead of
selfish conflict one with another.
The rules of international law are simple and few and imper
sonal, and can be adopted by unanimous agreement o f the rep
resentatives of the nations.
SHANTUN G.
A tremendous outcry has been made over Shantung by the
opponents of the treaty of peace with Germany.
The treaty, in articles 156 to 158, turns over to Japan the
r i g h t s which Germany had under the treaty of March 6, 1898.
133035— 19751
By this treaty with Germany China retained sovereignty
over the Shantung Peninsula, giving Germany, however, cer
tain railroad and mining rights therein and leased for 99 years
to Germany a special tract which only involved 208 square miles
of land and 200 square miles of water at Kiaochow, the total
being less than 1 per cent of the Shantung Peninsula, which
has 55,984 square miles. The population o f the leased area
where Germany was permitted to exercise sovereignty involved
about 200,000 people.
When the war of 1914 arose, Germany, with the port facilities
on the Chinese coast, was in a position to destroy the transports
bringing troops from New Zealand and Australia.
Japan, on the invitation of the Allies, having entered the war
in 1914, took the German concession by military force, broke up
the port which the German ships had, and cleared the Pacific
Ocean of German ships, giving a free right of way to the British
transports.
On May 25, 1915. at Peking, Japan made a treaty with China
by which the Chinese Government agreed to recognize any ad
justment made between the Japanese Government and the Ger
man Government as to Kiaochow, but with the understanding
reduced to writing, at the same time and place, to w it:
*
rE K iX G ,
M a y 25, 1915.
l i t
land and concessions and rights of sovereignty leased or
ceded to Germany should be returned by Japan to China Spon the con
clusmn of the present war upon the condition of opening the Kiaochow
?n n ?m o« ^ f f Ciai+iPOrt’ .perllV tt’‘ Ilg a Japanese settlement there and an
fn»ie+£«tj« na* se.ttlf I ?«nt. and that suitable arrangements should be made
for the disposal of the German public establishments and properties.
1
1
T T hlso ; vas excellently well set forth by Senator R o b i n s o n in
July 24, 1919, C o n g r e s s i o n a l R e c o r d , page 3264. Various
Japanese authorities have recently referred to this obligation of
Japan, which will undoubtedly be carried out in perfectly good
Viscount Uchidi, minister o f foreign affairs o f Japan, in his
address of January 21, 1919, confirmed this understanding, as did
Baron Goto, former minister of foreign affairs of Japan, in a
statement made in New York May 6, 1919. The Associated P ress
repoit from Paris of April 30, 1919. is of like effect. Baron
Makino confirmed this pledge on April 30, 1919.
f-*Fain *iS Jt wonclerful nation. It is a great nation, and is
entitled to the respect o f all the world, especially of the great
Allies with whom Japan joined forces for the defense of civiliza
tion and righteousness.
It has not been possible for Japan to carry out the arrange
ment with China up to this date for the obvious reason that the
treaty concluding the war between Germany and Japan has not
yet been presented to Japan.
It is to be profoundly regretted that Senators occupying such
high responsibility on such an occasion, where the welfare o f the
whole world is in the balance, should speak words reflecting upon
a great and friendly nation, whose fidelity has been so serviceable
and whose right to our confidence and trust has been abundantly
established in the history o f recent years.
I have every respect and confidence In Japan and have not the
slightest doubt that Japan will carry out in good faith her asrree133035— 19751
17
ment with China, and it is the orderly way to settle the Shan
tung matter by providing that Germany shall make a formal
relinquishment to Japan, which conquered it, in order that Japan
may herself, having cleared the title o f German claims, transfer
these lands and sovereignty back to China, as Japan agreed to do.
IN V A D IN G
OUR
S O V E R E IG N T Y .
Some of the hostile critics of the covenant insist that our sov
ereignty would be invaded by the provisions of the covenant;
that the assembly or the council would pass laws authorizing
the Japanese or Chinese to immigrate into the United States.
This whimsical conceit has nothing to justify it. The league of
nations does not contemplate dealing with anything except in
ternational questions, and does not contemplate dealing with in
tranational questions. None of the member nations contemplate
giving up their sovereignty. None of them had such a concep
tion. The only way a decision could be arrived at under the
covenant, even on such questions, is by unanimous vote (art.
5). It is grossly unreasonable to argue that 45 nations would
unanimously vote a precedent to invade their own sovereignty,
and no reasonable man believes it or can believe it if he is
capable of logical, consecutive thought.
Moreover, Mr. President, the sovereignty of the people of the
United States as vested in the people of the United States, is
inalienable, indestructible, and incapable of invasion. The Con
gress of the United States can not invade the sovereignty of the
people of the United States. It might commit political suicide
and be kicked out of office. But one Congress can not bind a
succeeding Congress, for the very reason that the sovereignty
is vested in the people, and they change their servants at will,
and they can. by an act of Congress, repeal any treaty the Senate
can pass if the Senate should pass a treaty that was unaccept
able to the American people.
I shall not criticize the rhetoric or the verbiage o f the cove
nant. This covenant is wise. It is thoughtfully drawn. In
its substance it is splendid. In its purpose it is glorious.
A perfect contract between scoundrels is worthless. An im
perfect contract between trustworthy friends, who have fought
and bled together in a common love of justice and liberty, is of
very great value.
Are we justified in trusting the British people to faithfully and
justly interpret this covenant? Did not that first wonderfully
heroic army of British die almost to the last man in Flanders
defending liberty and justice against the armed Hun? Did not
the British sailors and men of war and destroyers ride through
the misty darkness of the North Sea for five years, day and
night, in storming sens defending the world against Teutonic
aggression? Have they not shown themselves for a century our
faithful friends?
It was Canning, the prime minister of England, in 1822, who
served notice on the Holy Alliance that the British Government
would not stand for the invasion of the liberties of the strug
gling Republics on the Western Hemisphere. It was through
Canning and the influence of the British Government that Mon
roe was informed and encouraged to send his great message to
Congress establishing the Monroe doctrine.
133035— 19751
18
Shall we be afraid of France and refuse to trust France? Did
they not, when this Republic was struggling for its liberties in
the beginning come with all the force they had and all that we
required to establish our liberties upon this continent? Did they
not cede to us a mighty continent in the Louisiana Purchase?
And have they not been faithful to the uttermost in defending
civilization against the Teutonic allies?
Shall we doubt Italy? The'Italian people have shown them
selves to be glorious in war and magnificent in peace. When
Paris was about to be struck down by the advancing field-gray
troops of Germany, coming like swarms o f locusts down upon
the Marne, it was Italy that told the French statesman, “ You
need not guard the borders between France and Italy. Italy
will not stand by Germany in a war of aggression.” Italy made
a treaty with Germany and Austria, a defensive alliance,
against aggression on Germany and Austria, but not by Ger
many and Austria on undefended borders o f others or any
unprovoked assault upon their neighbors. Shall we question
Italy when the Italians by tens o f thousands and hundreds of
thousands died for a common cause with us?
An agreement between scoundrels is worthless, no matter
how well drawn. An agreement between these great nations
who have common ideals and common purposes is worth while.
It is a great step forward, no matter how awkwardly, how
immaturely, how poorly drawn. The language and the rhetoric
might be finer perhaps, but the purpose is there, the substance
is there, and the covenant deserves the support of the American
people.
Some of the critics of the league o f nations complain it is
not strong enough. I deny it. It is as strong as need be.
THE
i
133035— 19751
U
LEAGUE
P R O V ID E S
ABUNDANT
FORCE.
The league provides a world-wide boycott, a world-wide block
ade— commercial and financial—by land and by sea, and cuts
off the citizens of any outlaw nation from communication with
any other part of the world. This is the most gigantic penalty
ever proposed in history.
The effect of the war with Germany was to destroy the value
of the bonds issued by her and her allies, and reduce such
bonds to the level of waste paper. This will serve to be a sound
warning to the citizens of any future proposed aggressor nation
that they can not afford to finance a war against the world
with an overwhelming prospect o f complete loss o f every dollar
invested in such a nefarious enterprise.
While it is impossible to think of a force much greater than a
world-wide blockade and boycott against an outlaw nation,
still the league goes further and provides that armed forces o f '
all the nations of the world can be summoned, in addition to
world-wide blockade and boycott, to reduce the outlaw nation
to subjugation, to peace, and to recognition of international
duties and international justice.
Moreover, it is to be assumed that since democracy had its
modern birth, with the printing press and the French Revolu
tion, and has grown like the green bay tree in the last 100 yeaVs
until it has assumed to establish this covenant o f a world-wide
league for the purpose of protecting itself, there is no possibil-
19
ity of any nation in the world having the temerity to assail a
democratic world and to put itself in the attitude of an outlaw
nation.
There is not the slightest danger of Japan doing so, and if
she did the powers visible at her very doors could be used to
restrain Japan from any unlawful aggression against the peace
of the world or of any of the other nations of the league.
The force is sufficient to safeguard the peace of the world,
and far-seeing men will realize the gigantic character of the
force which can be summoned through this league for the pro
tection of mankind.
The league will safeguard the peace o f the world, as well as
our own. It will end war. It will not interfere with our sov
ereignty. It is the blessing o f God descended on earth.
Mr. President, we are entering upon a thousand years of
peace; into an era of great world prosperity; into an era
where the productive capacity of man is being multiplied in a
very wonderful way so that within the generation the time will
come when every man, every industrious man, will be able to
supply himself and his family with shelter, with clothing, with
abundant good food, and be afforded an opportunity for educa
tion and for leisure to enjoy the providence of nature. Let us
be devoutly thankful for the opportunity to bind the world to
gether in bonds of amity and peace.
133035— 19751
o
IN THE
SENATE OF THE UNITED STATES
A U G U S T 30, 1919
Replying to th e Speech of
H on . H enry Cabot Lodge
of M assach u setts of
A ugust 12, 1919
j|
■
W A S H IN G T O N
1910
1 3 5 5 5 5 — in S 2 .*»
Sid i *
! !' ll
r
S i i<„
SPEECH
OP
H o n
. ROBERT
L. O WE N
T H E LEAGUE OF N A T IO N S .
Mr. OWEN. Mr. President, on Tuesday, August 12 last, the
honorable Senator from Massachusetts [Air. L o d g e ] , chairman
of the Committee on Foreign Relations of the United States Sen
ate, and the chosen leader of the majority party in this Chamber,
delivered a very carefully prepared argument against the league
of nations. The Senator from Massachusetts is recognized as
a learned scholar and a very studious historian, and an argu
ment which he delivers after the debate has proceeded for
months may fairly be regarded as the ablest possible presenta
tion of the case against the league o f nations. If this argument
can not stand an analysis, the case of the opposition to the
covenant falls to the ground.
The honorable Senator lays down the first proposition:
That mankind from generation to generation is constantly repeating
itself.
And says:
W e have an excellent illustration of this fact in the proposed ex
periment now before us of making arrangements to secure the perma
nent peace of the world.
Thereupon he calls attention to the alluring promises made
in the treaty of Paris of November 20, 1815, and the high pur
poses alleged in the treaty of the Holy Alliance, and shows his
torically that wars followed and not peace. He argued by
necessary inference that these promises of peace and assurance
of high purposes did not produce peace but war, and therefore
that the declaration of purposes found in the present covenant
of the league of nations would naturally be followed by war,
because “ mankind repeats itself.”
The Senator quotes in derision the preamble to the covenant,
and says:
Turn to the preamble of ihe covenant of the league of nations, now
before us, which states the object of the league.
It is formed—
“ In o r d e r t o p r o m o t e i n t e r n a t io n a l c o o p e r a t io n , t o a c h ie v e i n t e r
n a t i o n a l p e a c e a n d s e c u r it y b y t h e a c c e p t a n c e o f o b l ig a t io n s n o t t o
r e s o r t t o w a r , b y th e p r e s c r ip t i o n o f o p e n , j u s t , a n d h o n o r a b le r e la t i o n s
b e t w e e n n a t i o n s , b y t h e fir m e s t a b lis h m e n t o f t h e u n d e r s t a n d in g s o f
in t e r n a t io n a l l a w s a s t h e a c t u a l r u le o f c o n d u c t a m o n g g o v e r n m e n t s
a n d b v t h e m a i n t e n a n c e o f j u s t i c e a n d a s c r u p u l o u s r e s p e c t f o r a ll
t r e a t y o b l ig a t io n s in t h e d e a l i n g s o f o r g a n i z e d p e o p le s w it h o n e
a n o t h e r .”
The Senator then said:
N o o n e w o u ld c o n t e s t t h e l o f t i n e s s o r t h e b e n e v o l e n c e o f t h e s e p u r
p oses.
B r a v e w o r d s , in d e e d .
T h e n d o n o t d iffe r e s s e n ti a l l y
p r ea m b le o f th e tr e a ty o f P a r is
( 1 8 1 5 ) , fro m
w h ic h s p r in y
A llia n c e.
fr o m
th e
th e H o ly
In other words, Mr. President, the promises made by the treaty
of the Holy Alliance having led to war, these promises will also
lead to war, because “ mankind repeats itself.”
135555— 19825
o
The obvious fallacy o f this argument is that the alleged
“ purposes ” of the Holy Alliance had nothing to do with the con
sequences which ensued from that alliance. War did not result
from the virtuous promises made to the people by the Holy
Alliance. The Holy Alliance made willfully, deceitful, and false
promises of brotherly love and peace in order to deceive the
people of Russia, Prussia, and Austria, and thus prevent them
from going into a revolution as the people had done in France
under likfe conditions of tyranny and bnite military power. The
fact that wars followed the treaty o f the Holy Alliance was be
cause this treaty was between military dynasties, made by
monarchial autocracies, each controlled by intrigue, by rival
armaments, and by ambitious secret purposes. They were lined
up against other similar governments at that time not greatly
in advance of them in structure of government or in conception
o f liberty and popular rights. England, however, was becoming
steadily more democratic, and soon withdrew from the treaty of
Paris. France ultimately withdrew from the Holy Alliance.
The cause o f war was wrapped up in the treaty of the Holy
Alliance o f Russia, Austria, and Prussia because o f their
then severe 1 secret, dynastic, military ambitions. There was
during that period no available or possible provision in the
world providing for conciliation and arbitration in the settle
ment o f international disputes. There was no means of pro
moting progressive disarmament, and the ambitions and the
lust for power, unrestrained by law, unavoidably led to war
as a necessary consequence. There was no adequate restrain
ing power in all the world and no forum where the organized
opinion and power of mankind could make itself effective for
peace as there is available now.
The .Senator from Massachusetts has shown himself unable to
discriminate between the unavoidable consequence of war of
governments based on tyranny and brute force, such as Russia,
Prussia, and Austria, Bulgaria, and Turkey, and the conse
quences favorable to peace o f governments based on the con
sent of the governed, on justice and liberty, such as the United
States and Canada, the South American Republics, Australia,
Great Britain, France, Belgium, and Italy. Such blind leader
ship might easily prove to be a national calamity.
the Senator from Massachusetts has failed to discover what
every student of history ought to know, who has a discerning
mind and an intelligent comprehension, that the instability and
wars of military dynasties had an adequate cause, and that
these causes rest in the “ Rule o f the Few ” moved by intrigue, by
gross human selfishness, by ambition and lust for the property of
other people, leading them to develop great armies nominally for
defense, but always secretly for offense, so well described by
Von Bernhardi, in his description of the Hohenzollers and of
Frederick II. Everybody seems to know this except the
Senator from Massachusetts. The stability of Republics and
their power for peace is not based on preambles nor lofty
promises of high purposes, as the Senator from Massachusetts
seems to think. They are based upon sound principles affecting
the structure o f government, which go to guarantee justice
and liberty and humanity and the organized righteous selfgovernment of the people. These are the principles which
guarantee stability. These are the principles which not only
promise but will make sure the peace o f the world.
— 1982u
o
The Senator loosely argues that since “ mankind repeats
itself,” and since the Holy Alliance made virtuous “ promises”
and war followed, therefore that the virtuous promises of the
present covenant of a league of free nations can mean nothing
but war. The Senator argues from the false premise that the
promises of the autocrats of the Holy Alliance were sincere.
They were not sincere. They were wickedly false. I wondered,
when the learned Senator was quoting the treaty of the Holy
Alliance with its virtuous “ promises,” that he did not also quote
the secret amendments to the treaty of the Holy Alliance of 1S22,
which disclose the infinitely wicked deceit of these promises—
the secret treaty of Verona, in which the “ holy alliance of
lia rs” pledged their undying hostility to the democracies of the
world and the freedom of the press. Since the Senator thinks
it was the virtuous “ promises ” of the Holy Alliance that led to
war, let me call his attention to their pledge to destroy the
democracies of the world, and he will see. I trust, an abundant
cause for war necessarily involved in the treaty of the Holy
Alliance with its secret amendments at Verona, not because of
their virtuous promises but in spite of them. Their secret pur
pose was war.
Listen to the philosophy and historical admonition o f the
secret treaty of Verona:
“ The undersigned, special!)/ authorized to make some addi
tions to the treaty of the Holy Alliance, after haring exchanged
their respective credentials, hare agreed as follows:
“ Article 1. The high contracting powers being convinced that
the system of representative government is equally as incom
patible with the monorchial principles as the maxim of the
sovereignty of the people with the Divine right, engage mutually,
in the most solemn manner, to use all their efforts to put an
end to the system of representative governments, in whatever
country it may exist in Europe, and to prevent its being intro
duced in those countries where it, is not yet known.
You can only put an end to a government by war.
‘‘Art. 2. A.s it can not be doubted that the liberty of the press
is the most powerful means used by the pretended supporters
of the rights of nations to the detriment o f those of princes, the
high contracting parties promise reciprocal!y to adopt all proper
measures to suppress it, not only in their own States but also
in the rest of Europe:’ (Vol. 53, pt. 7, p. 0781, 04th Cong., 1st
sess., Apr. 25, 1910.)
The King of Prussia and the Emperor of Austria were the
real autocratic monarchs behind this deadly compact to destroy
the democracies of the world and establish “ world pow er” for
themselves and their allies as the military autocrats of man
kind.
Here these military autocrats, who had offered themselves to
the people of Europe as the servants of Christ and the
guardians of the peace of Europe, were, in fact, secretly pledg
ing themselves to murder unoffending people of other lands
who had the temerity to believe in representative government
and in the liberty of a free press. They instantly made war
on the unoffending Spanish and Portuguese people and the
innocent Italian people, and put them all under absolute
monarchies, and would have done the same thing to the South
135555— 19825
6
i'
I
American Republics but for G-reat Britain and the Monroe mes
sage.
Does tbe Senator from Massachusetts really believe that it
was tbe virtuous “ promises ” of tbe Holy Alliance tliat led to
war, or tbe “ secret ” purposes and ambitions of these military
monarchical despots who were secretly plotting to rule the
world by brute force? There is a vast difference, Mr. Presi
dent, between the promises of an honest man or an honest
government, o f sincere well-meaning democracies, and. tbe
promises o f trained liars, murderers, and self-seeking despots.
And I feel fully justified in describing the Holienzollerns and
the Hapsburgs and the Romanoffs in these plain terms.
Tbe Senator from Massachusetts believes that the promises
of these royal scoundrels may be justly compared with tire
promises and aspirations of the honest organized democracies
of the whole world, basing an alliance not upon tlieir pretenses
of justice and liberty, hut upon the demonstrated fact that they
are truly willing to die for liberty and justice.
The Senator from Massachusetts really believes in the rule of
the representatives of the people over the people in the rule of
the few over the many. He would draw a wide distinction be
tween “ representative” government and government “ by the
people.” He does not believe that the people o f a State have a
right to instruct or control their elected Representatives or to
initiate and pass the laws that they want or to veto laws they
do not want. He thinks that for the people to express their
opinion upon a public question is dangerous to the principle of
constitutional government.
Am I hasty in making this charge against the leader of the
Republican Party in the Senate? I most certainly am not
The Senator from Massachusetts may have forgotten.'but I have
not forgotten, his famous speech in Boston on September 15,
1907, for I had been but two days in the Senate when, on De
cember 18, 1907, Senator Hale, o f Maine, had printed 20,000
copies of this famous speech o f the Senator from Massachusetts
as Senate Document 114, Sixtieth Congress, first session. This
speech was delivered in opposition to a bill then pending in the
Massachusetts Legislature known as the “ Public-opinion bill.”
The
Public-opinion hill
proposed to permit the people of
Massachusetts the astounding liberty of expressing their opinion
upon a public measure— but not exceeding four measures in
any one year. This hill Senator L odge violently opposed on the
ground that it would overthrow the constitution of Massachu
setts and destroy representative government. I shall not chal
lenge the Senator's integrity of mind or his integrity of purpose
in making this speech. I shall assume that he honestly' believed
that the opinion of the people was dangerous to constitutional
goverument. In all events, this was bis argument.
Twenty thousand copies of his speech were sent into Maine
in order to defeat a campaign then pending for the initiative
and referendum in tliat State.
The Senator said in criticizing the public-opinion bill tliat it—
w o u ld m ea n n o th in g U s e th e n a c o m p le te
o u r G o v e r n m e n t a n d in
th e fu n d a m e n ta l
G o v ern m en t rests.
r e v o lu tio n
p r in c ip le s
m
th e fa b r ic o f
u p o n w h ich
th e
That it—
w o u ld u n d e r m in e a n d u lt im a t e ly b r e a k d o w n
in o u r p o litic a l a n d g o v e r n m e n t a l s y s t e m .
135555— 19825
I
V
th e r e p r e s e n t a t iv e p r in c ip le s
7
With the assistance of Kingsbury B. Piper, secretary of the
State Referendum League of Maine, I prepared and had printed
as a memorial to Congress the answer of the State Referendum
League of Maine to the Senator from Massachusetts (Senate
Document 521, 60th Cong., 1st sess.). I caused 20,000 copies
to be printed and I franked them to Maine, and when the
people of Maine came to pass upon the validity of the argu
ment of the Senator from Massachusetts that the people should
have no right to express their opinions on public questions,
either by public-opinion statute or by the initiative and refer
endum, they decided against the argument of the learned Senator
from Massachusetts, and the honorable Senator from Maine who
circulated the famous Boston speech against the public-opinion
bill did not find it desirable to stand for reelection.
In the State of Massacliusets, in the last election, when the
people were selecting their delegates to a constitutional congress
there was a campaign in behalf o f the initiative and referendum.
I had prepared by the National Popular Government League, by
Judson King, secretary, an argument for this great measure of
popular government, and caused it to be printed as Senate
Document 763, Sixty-fourth Congress, second session, which
was used in the Massacliusets campaign in favor o f the initiative
and referendum. An overwhelming majority of the delegates
who had favored it were elected, and even the president of Har
vard, who opposed it, was defeated. Senator Weeks opposed it,
and he was defeated, and Senator W a l s h , who favored it, was
elected, and is now present in the Senate.
I commend the judgment of the people of Maine and Massachu
setts to the considerate judgment of the honorable Senator from
Massachusetts. His leadership against popular government has
failed both in Maine and in the great Commonwealth of Massa
chusetts.
The Senator from Massachusetts does not believe in the wis
dom of the people. He does not believe that the people have the
intelligence to initiate laws they do want or to veto laws they
do not want, and therefore he does not have any great degree of
confidence in the stability o f a league of the great democracies
of the world or their ability to make sure their own peace. He
looks upon them with less confidence than he did upon the mili
tary autocracies that framed the treaty of the Holy Alliance, for
the Senator favored a league in 1915 when the autocracies were
in full flower.
I am devoutly thankful that there are hundreds of thousands
and millions of Republicans in the United States who do not
agree with the Senator from Massachusetts in this view, and
that there are on this floor splendid Republican Senators who do
believe in popular government and in the right of the people to
govern and who have confidence in democracies.
And I pause to say, Mr. President, that those who believe in
popular government are deeply desirous of having passed
through the Senate a thoroughgoing corrupt-practices act, and I
appeal to the Senator from Massachusetts to give his support to
such a bill in order that the “ representative system” of select
ing Senators and Congressmen may not be perverted by the cor
rupt and sinister influences that by money and fraud are able
unduly to influence the nomination and election o f Congressmen
135555— 10825
and Senators. For six years the Progressive Senators on this
floor have been trying to get a thoroughgoing corrupt-practices
act, hut have not been able as yet to do so. Why? I will leave
to those who opposed it and to those who do not favor it and to
those who secretly throw the weight of their influence against it
to answer that question before the end of the next session o f
Congress.
The Senator’s whole argument is based upon his inability to
perceive the difference between the relative trustworthiness of
democracies and autocracies, and in his violent assaults upon
the league he tries to show that we ought to have no league o f
nations at all. He goes so far as to denounce the banner of the
proposed league of nations of the free nations of the earth, of our
wonderful Allies, of our heroic Allies, who died for liberty and
justice and civilization as a “ mongrel ” banner, and he attaches
to the league of nations the unmerited stigma of “ Bolshevism ”
as illustrating wicked “ internationalism ” as contrasted with
his own admirable “ Americanism.”
Mr. President, all good Americans believe in Americanism in
its highest and purest and truest meaning.
Mr. President, a man can be a good citizen o f a town, of a
county, of a state, of a nation, and of a world without incon
sistency. He can love his home and be utterly devoted to his
own nation, and be a glorious American, and yet be generously
disposed and favor international justice and liberty and good
neighborhood, and the means of attaining them.
The galleries always applaud when a Senator strikes an
oratorical pose and thunders forth his sturdy Americanism,
and the Senator from Massachusetts did not fail to strike this
popular chord. The Senator gloriously sa id :
Call me selfish if yon will, conservative, or r e a c t i o n a r y ; b u t
A m e r ic a n I h a v e r e m a in e d a ll m y life .
I can n e v e r be a n y th in g
b u t a n A m e r i c a n , a n d I m u s t t h in k o f th e U n it e d S t a t e s fir s t.
an
else
' F in e! This is magnificent. The galleries bursted with ap
plause, but, Mr. President, in June, 1915, at Union College, the
Senator was still an American whether “ selfish, conservative,
or reactionary,” and he told the world then in language clear
and forceful— and I use his own words—that—
N a tio n s
m u st
u n ite
as
m en
u n ite
to
preserve
peace
and
ord er,
He stated that nations must be so united as to be able to say
to any single country—
You
m u st
not
go
to
w a r .-
F in e! This is splendid, but a flat contradiction o f his present
attitude that nations must not unite to preserve peace and
order; that they must not be so united as to say to any single
country “ You must not go to war.”
T h e S e n a t o r ’s A m e r i c a n i s m a t U n i o n C o l l e g e d i d n o t p r e v e n t
h i s m a k i n g a n e a r n e s t a r g u m e n t in f a v o r o f a l e a g u e o f n a t i o n s ,
a n d w h e n h e m a d e t h e a r g u m e n t in f a v o r o f a l e a g u e a t U n i o n
C o l l e g e i t w a s fin e A m e r i c a n i s m .
I t w a s fin e A m e r i c a n i s m
w h e n T h e o d o r e K o o s e v e l t m a d e t h e s a m e a r g u m e n t in r e c e i v i n g
t h e N o b e l p r i z e a t C h r i s t i a n i a in 1 9 1 0 .
P re sid e n t T a f t s h o w s h is
fin e A m e r i c a n i s m w h e n h e l o v e s A m e r i c a a n d l o v e s i d s f e l l o w m e n
th r o u g h o u t th e w o r ld a n d s ta n d s f o r a p r o g r a m o f a s s u r e d p e a c e
t h r o u g h th e h o n e s t c o o p e r a tio n o f a ll t h e g r e a t d e m o c r a c ie s o f
e a rth .
135355— 19823
a
It is fine Americanism when the Senator from North Dakota
[Mr. M cC umber ] and other patriotic Republicans and Democrats
stand on this floor and urge a league of free nations.
The Senator from Massachusetts must not attempt to monop
olize Americanism, for selfishness or partisanship in foreign
affairs does not describe Americanism.
When Germany and Austria and Bulgaria and Turkey, the
great military dynasties, were at the height o f their power the
Senator from Massachusetts argued in favor of nations uniting
to prevent war. He was willing to admit military dynasties to
a league of nations to prevent war, but now that the military
dynasties have been humbled to the dust, now that brute force
based on the doctrine that might makes right has been utterly
overthrown by the honest peace-loving democracies o f the
world, the Senator rises up as the chief opponent of what he
himself generously argued as a good American in 1915.
Mr. President, am I going too far if I appeal from “ Philip
drunk to Philip sober ” ?
The one great gigantic fact of all history has occurred to
assure and make possible the future peace o f the world and to
make it comparatively easy to establish peace, and that is the
overthrow o f arbitrary power, the overthrow of the Hohenzollerns, the Hapsburgs, the Romanoff and their brood o f princes,
grand dukes, et id orane genus, and the establishment of the
great doctrines o f liberty, Justice, and self-government and the
establishment o f the overwhelming power of the democracies
of the world.
The Senator from Massachusetts fails to recognize the one
great event which makes this war the most notable war o f all
history and which alone opens wide the door to permanent
world peace.
The Senator from Massachusetts having argued that it
was un-American to recognize this “ mongrel ” flag of the free
nations of earth, proceeds, absurdly enough, to argue that he
and his colleagues will accept the “ mongrel” flag and all its
evils provided reservations be inserted in the ratification,
which do not really change the meaning o f it, but would pre
vent any friendly ally in the future from changing the mean
ing of it.
The Senator does not. recognize any difference between the
leyal and moral obligations o f the league. He says treaty obli
gations are merely moral obligations, and with this view I am
in entire accord. But, Mr. President, an interpretative resolution
separate from the resolution of ratification o f the treaty inter
preting the meaning o f the covenant would protect the United
States from the possibility of any future charge o f moral delin
quency by any nation on earth, and prevent any nations, friendly
or otherwise, from charging that the United States refused to do
what it agreed to do. The only difference between the effect
of a resolution separate and apart as an interpretation and an
amendment or reservation in the face o f the ratifying resolu
tion is, that the latter would require the action o f all other
nations, might produce serious confusion, would certainly post
pone final action for some months at a time when prompt action
in declaring peace is of the highest importance, while a reso
lution of interpretation would avoid these obvious objections.
There is one possible partisan advantage in putting amend135555— 19S25
10
ments and reservations on tlie proposed league. It might to
that extent discredit with some of our own people and with
those of foreign countries the President of the United States
and the members of the peace conference who represented the
United States at Paris.
Is it un-American if I should feel unwilling to discredit our
representatives, either at home or abroad, unnecessarily? The
delay in ratifying the peace treaty is paralyzing our export
trade. Our favorable balance of trade fell oft' $400,000,000 in the
month o f July in 31 days. Our foreign-exchange market has
gone into complete demoralization awaiting the determination
of the conditions of peace.
We hear no proposal from Great Britain or France or Italy
or Belgium or Japan for putting amendments into this proposed
league. They do not have any fear that the friendly nations of
the earth, based on self-government, liberty, and justice will mis
interpret the covenant to their disadvantage. None of them have
imagined that they were relinquishing their rights of self-govern
ment or subjecting themselves to the coercion of a league of
foreign nations. On the contrary, they wrote into the league
section 10, for the protection of the territorial integrity and ex
isting political independence o f every nation. This covenant was
drawn up by the ablest men in the world— if the Senator from
Massachusetts will pardon the apparent neglect—chosen men
representing all of the great nations. It was subjected to the
closest scrutiny. It carries out and makes possible the aspira
tions of The Hague conventions with the addition o f methods for
conciliation and arbitration and disarmament and means for
protecting the territorial integrity and existing political inde
pendence of nations by boycott, blockade, and even armed force,
which will assuredly rarely, if by any possibility ever, be neces
sary.
This should not be made a partisan question. The Senator
from Massachusetts taught me the sound doctrine in one of the
great maxims o f the United States Senate, which has been hon
ored for a hundred years, and that is—
P a rty
lin e s
cease
at
tid e
w a ter.
Is it un-American if I appeal to the honorable Senator to sus
tain this venerable and worthy maxim o f the Senate? Why does
he, before the treaty arrives, sign his round robin? Why does
he marshal his political followers as far as he can in hostility to
the aspirations o f mankind? The world is weary, utterly weary,
of war. The industries, the commerce o f the whole world have
been profoundly shaken by the gigantic destruction and waste
of this war.
The cost of living because of this Great War has become pain
ful and irksome to the people of the whole world. It is of the
most urgent importance that we get back to the basis o f peace,
in order that we may address ourselves to solving the problem
of the high cost of living in this country, which is greatly perplexing to the Congress as well as the people at home.
The unhappy people o f Europe are struggling to reestablish
themselves. Millions of men, women, and children have died in
this great struggle to establish on earth human liberty and the
right o f the people of the earth to self-government. Side
by side in the hills and in the valleys of France lie thousands
of our beloved sons with the cherished youth of Great Britain,
loddOd--- 10S-J
11
Belgium, France, Italy, and of our other allies. They died in a
war whose great purpose was to overthrow arbitrary power, to
establish government upon a sound basis o f the consent o f the
governed, to establish forever “ Peace on earth, good will toward
men.” Surely it is not un-American that we should desire
that their infinite sacrifice should not be in vain. Honest
democracies do not want war, nor the cost o f war. nor to have
their children die in battle. The people who pay the cost of
the war, who send their sons to die upon the battlefield, who pay
the taxes o f war, and control democracies will not permit war
that can possibly be avoided.
Perhaps without a league the future peace of the world
might be accomplished, hut a league o f free nations o f the
earth, established with the power to say to outlaw nations
“ You must not go to war,” as the Senator from Massachusetts
so finely argued in June, 1915, at Union College, will secure and
make certain the ends for which the youth of the world was
sent to the battle fields to die.
May I not be permitted to appeal to the better Americanism
of the Senator from Massachusetts not to throw himself across
the path o f human progress and world peace? He is not
(as he thinks) waging a war against Woodrow W ilson; he is
waging a war against the desires and the hopes of all mankind.
We have joined the sons of France, Great Britain, and Italy
and our other great allies in breaking down the military autoc
racies of Europe. Are we not in honor hound to stand by our
allies until the new governments, the new democracies o f Eu
rope, are established and made stable by the stabilizing force of
the organized powers of mankind that league to preserve peace?
Shall we scuttle like cowards and cravens from the wounded
peoples of Europe before the nations born of this war can bal
ance themselves and be at peace and a blessing to themselves
and to the world when with the league of the great democracies
wo can easily assure them stability and peace?
Is it un-American to carry out our implied obligations to Eu
rope?
Mr. President, the honorable Senator from Massachusetts in
terprets article 10 to mean that the council in ad rising the means
to he employed to preserve the territorial integrity and the ex
isting political independence of member nations will be author
ized to send American troops to the ends of the earth in every
petty quarrel that might arise anywhere in the world.
The Senator urges that we would have a “ moral ” obligation
to take the advice, and the “ m oral” obligation being as strong
as a legal obligation we would be obliged to obey or be guilty of
a breach of our moral obligations, a thing absolutely incon
ceivable to the austere Senator from Massachusetts.
The Senator greatly enlarges upon this great, unhappy thought
and in his imagination he sees our soldiers sent into central
Arabia to protect the Sultan of Hejaz under the irresistible ad
vice o f the council.
Mr. President, with the establishment of a league of nations,
with the great democracies o f the world in honest cooperation,
there are many provisions which will prevent war or the need of
soldiers.
For example:
Every means possible for conciliation.
135555— 10825
12
h{ ?-!!|
Fberj moans for arbitration, and at last if a nation bo deter
mined to be an outlaw nation in violation of the organized
opinion of mankind, and then invades the territorial integrity o f
a member nation and its existing political independence, there
is a penalty so gigantic that no nation would dare to face it.
That is, a world boycott, a complete separation of that outlaw
nation and of its nationals from any commercial, financial, postal,
telegraphic, or any other means o f communication with the citi
zens o f other nations.
No nation could stand this. But this is not all. It is only on
the extremely remote if not impossible contingency that this
\\ould not suffice to restore an outlaw nation to sanity, then and
then only would it be necessary for the council to “ advise ”
means of military and naval coercion.
It is to be assumed by men of common sense and common hon
esty that the council in such a remote contingency would 'dve
sensible and honest advice and that the great, honest peaceloving democracies of the earth would act in good faith in regard
to the advice.
"
ot
If in the extremely refnote contingency which might thus
arise the still more unlikely occurrence should take place that
the advice should prove foolish or tyrannical, no nation would
bo compelled as a moial obligation to observe idiotic advice
The Senator from Massachusetts is unduly alarmed He is
seeing ghosts which do not exist.
Article 10, pledging every member nation its territorial in
tegrity and existing political independence, is vital to the peace
of the world, and under no circumstances should this assurance
be removed from the treaty or modified.
The Senator finds an insuperable difficulty in article 15 because
it provides that any dispute may be submitted to the council
and the council might submit it to the assembly, and the a m ia
bly might make a “ report” unfavorable to the United States
and the dispute might be on the question o f immigration with
Japan. Terrible! The answer is, first, that no such dispute
could arise, because it would be an invasion of our existing
pohtica1 mdependence and territorial integrity, and, second if
it did arise, m spite of the article 10, in spite o f the preamble to
the treaty, and the council did not throw it out o f court because it was ‘ solely within the domestic jurisdiction ” o f the
l luted > fates, and, finally, if the entire assembly made a report
against the United States, nothing would follow, because noth
ing could follow under article 15, except that Japan might imae
a tear, and she can do that now. Nothing would follow, because
there is nothing in the treaty to compel the enforcement o f the
opinion or report o f the assembly in that particular.
It is left to the parties unable to settle their'controversy
under the report then to resort to war, in which the world will
take no part except conciliation, world opinion, and world in
fluence. The report is not made enforceable by article 15. Such
a report is only of the same force as a report by the council
wherein the members agree not to go to war against a member
who complies with the recommendations o f the report. If the
council fails to reach a unanimous report the members reserve
liberty of action.
o i W<r,w.0ukI not be anJ' worse off if the three times impossible
should happen, as imagined by the Senator, for Japan could
135555— 19825
t>
v m
-
13
make war on us now if Japan wished to do so. Besides that,
we could withdraw from the league of nations if we did not
like the administration of it. There is not the slightest possi
bility, however, that any nation will ever withdraw from this
league once it has entered into it, because this league will work
to perfection, giving a forum, a meeting place, where the na
tions of the world can come together and use there the common
sense and common honesty of the human race, and that will be
found sufficient.
The Senator is seeing ghosts, which were not visible at Union
College. The Senator declares that if other nations are willing
to subject themselves to the domination o f a league, he will
never, never consent for the United States to be dominated by
the league.
The Senator need not trouble himself. Other nations are
not willing to subject themselves to the domination of a league,
but enter into the league for the purpose o f protecting them
selves against the domination o f outlaw military tribes or
nations who are not yet sufficiently advanced in civilization to
appreciate the blessings of liberty and justice and self-govern
ment.
The Senator is very' much frightened about the Monroe doc
trine, and it is extremely difficult for me to believe in the sin
cerity of those who argue the Monroe doctrine will be weakened
by tlie proposed covenant which explicitly recognizes it and
implicitly confirms it by every principle o f the proposed cove
nant.
The Senator is terribly afraid that we can not withdraw,
because he thinks that we could not withdraw except bp unani
mous vote, that all our international obligations and all obliga
tions under the covenant had been fulfilled. It never crossed
the mind of any honest man who had part in framing this league
covenant that any member could ho refused the right to with
draw on any such ground. Such an interpretation is not only
contradicted by the President of the United States but is absurd.
Of course, a nation in withdrawing should withdraw and dis
charge its obligations at the same time. But the Senator proves
too much. He discovers that it requires unanimous action to
withdraw.
If it were an affirmative action o f the league (which it is not)
it might he true— for an affirmative action of the league does
require unanimous consent—but this discovery entirely destroys
the long argument which the Senator makes about the league
dominating the United States, interfering with immigration,
tariffs, and so forth, as no one is stupid enough to contend a
unanimous vote of the assembly to deal unjustly with any nation
is possible.
The Senator greatly enlarges upon the United States meddling
in the internal affairs of the nations of Europe. There is noth
ing in the league of nations which justifies this notion of the
Senator from Massachusetts. On the contrary, the 10th article
prevents any interference with the existing political independ
ence of the nations. It was necessary, in setting up the new
Governments of Europe, made up out of the heretofore subject
poples of Austria and Germany, to provide the means by which
they should he established, including Turkey and Bulgaria; but
beyond this the treaty does not go, and in this the covenant of
the league takes no part.
135555—19823
u
Mr. President, I favor the liberty and freedom of all peoples
sufficiently advanced to govern themselves or under mandatories
where backward and not yet qualified. I wish to see Ireland
free and the Philippines. I wish to see Egypt and Porto Rico
fr e e ; I wish to see India and Korea free to govern themselves,
and given honest, faithful help to accomplish this end in safety
and peace.
The members of the league, article 23 (b ), “ undertake to
secure just treatment of the native inhabitants of territories
under their control.”
What is the just treatment referred to? It can be nothing less
than liberty, freedom, and self-government, such as was involved
in the proposals of President Wilson as a basis of the armistice,
and which was accepted by all our great allies.
We set the example in Cuba, we are following it in the Philip
pines, we must perfect it in Porto Rico, and we must use our
influence in having this element of justice carried out throughout
the world undeterred by commercial or industrial selfishness.
Mr. President, the league of nations in this covenant is a
league between the great, honest, peace-loving democracies and
free nations o f the whole earth.
Its moral influence for peace and good will toward men is
the greatest power ever invoked for the peace, the happiness,
the prosperity of mankind. It not only proposes peace; it pro
vides the most abundant means and mechanism by which to
accomplish it. It provides the completest means for the con
ciliation o f disputes and the settlement of controversies by
arbitration.
It provides for disarmament and the reduction of the military
and naval forces o f mankind down to police purposes.
It puts an end to military dynasties. It establishes the great
principles of liberty, justice, and the self-government o f the
people o f the whole world.
On such principles it safeguards the backward peoples of the
world and provides a means for leading them forward to civiliza
tion without exploitation.
It provides for the protection and preservation o f the terri
torial integrity and existing political independence o f every
nation.
It provides the means to enforce the rights o f member na
tions against aggression.
It establishes in the council and in the assembly a meeting
place where all the nations o f the world may in one chamber
communicate with each other freely and openly.
It puts an end to secret treaties and political intrigue and
military dynasties and the doctrine o f divine right and the doc
trine that might makes right and establishes on earth the rule
o f conscience, the rule of morality, the rule o f international
decency and justice and good neighborhood. It is not a mere
peace of idealism based on a rosy dream. It is a real living
vital force, born on the battle field out o f the blood of all of
the nations of earth. The world will not go back. It is moving
forward under the leadership o f God and the everlasting doc”
trines o f Christ. Let the Senator from Massachusetts beware
of throwing himself across the path of the righteous judgment
of mankind.
133555— 19823
o
t
m
r-
I
HON. ROBERT L. OWEN
OF O K LA H O M A
IN TH E
SENATE OF THE UNITED STATES
M A R C H 9, 1920
W A S H IN G T O N
G O V E R N M E N T P R IN T IN G O F F IC E
1920
'l(594 3r»- 20r.91
SPEECH
OF
I I O N . R O B E R T L. O W E N .
Mr. OWEN. Mr. President, I am in favor o f passing the
treaty immediately and am quite ready to support the resolu
tion of ratification either with “ interpretative reservations,”
agreeable to President Wilson, or *he “ Hitchcock reservations,”
or the “ Lodge reservations.” The differences are not suf
ficiently important to justify delay in declaring peace.
The country, with just cause, overwhelmingly demands it,
and is incensed with all those who delay it.
The treaty of peace should pass at once because—
1. Our laws should be on a legal peace basis— not on a war
basis. T he’reduction of the high cost of living demands it. The
social unrest in our country demands it.
2. All rules and regulations based on war and all war boards
and commissions should be revoked. With peace comes auto
matic repeal of war measures.
3. Our relations with enemy nations are definitely fixed by
the treaty determining our rights ac a Nation and as citizens.
Billions of dollars are involved, including all alien property,
Americans’ properties in alien enemy countries, all war damages,
and our trade, social, and political relations.
. 4. The ratification will stabilize Europe and the reconstruc
tion of the nations. It will enable them to pay us, and thus
lower our taxes and lower our high cost of living thereby.
5. The more rapid restoration of Europe’s productive activi
ties means their self-support, larger exports to us, greater sup
plies for Europe and for us.
G. It will cause the rise in value o f European currency and
•international exchange, and restore many impaired fortunes.
7. It will strengthen the prestige and standing of the United
States, and improve our political, social, and trade relations
with all other nations.
8. It will help to end the starvation, social unrest, and growth
of radical socialism and bolshevism in Europe.
The covenant of the League o f Nations ought to pass, because—
(a) It provides for a mechanism to settle all international
disputes, (1) by diplomacy, (2) by conciliation, (3) by arbitra
tion, (4) by a court o f international justice, (5) by the council,
(6) by the assembly, (7) by delay, (8) by agreeing to respect
the territorial integrity and existing political independence o f
member nations, and (9) to preserve it, (10) by boycott, (11)
by blockade, and, if necessary, (12) by military and naval force.
(b ) (14) It provides for gradual disarmament on land and sea,
to abate the high taxes of preparation for war. (15) It ends
conscription and (16) abates private munition making. (17)
2
169435— 20591
3
It ends secret treaties and (18) gives publicity to all war prep
arations. (19) It provides a world forum where subject peoples
can bring their grievances. (20) It establishes a world assembly
where all nations may meet in conference and develop the princi
ples which will promote the peace and happiness of mankind.
(21) It ends military autocracies and establishes for all time
the rule of civilized democracies. It ushers in a new great era
where the diligence, providence, and creative genius of mankind
can fully function under the blessings of peace and liberty.
REASONS
FOR
D E F E A T IN G
TREATY
NOT
J U S T IF IE D .
After 12 months of discussion the only irreconcilable dif
ference remaining unadjusted between the President, Senator
H itc h c o c k , and Senator L odge appears to be over article 10,
which provides:
“ The high contracting parties undertake to respect and pre
serve as against external aggression the territorial integrity
and existing political independence of all States members of
the League.
“ In case of any such aggression, or in case of any threat or
danger of such aggression, the executive council shall advise
upon the means by which the obligation shall be fulfilled.'’
President Wilson, Senator H it c h c o c k , and Senator L odge are
in accord on the United States undertaking “ to respect ” the
territorial integrity and existing political independence of mem
ber Nations, but differ on the United States undertaking “ to
preserve ” the territorial integrity, and so forth.
All three agree that the United States undertake “ to respect,”
the territorial integrity, and so forth. President Wilson insists
that the United States also undertake “ to preserve ” the terri
torial integrity, and so forth, subject to interpretative reserva
tions.
Senator H itch cock agrees that the United States undei'take
“ to preserve,” but not to use military or naval forces or the
economic boycott “ to preserve ” unless Congress authorizes.
Senator L odge refuses to agree that the United States under
take “ to preserve ” by any means whatever, unless Congress
authorizes in each particular instance.
All the world agrees “ to respect and preserve,” President
Wilson and Senator H itch cock agree “ to respect and pre
serve,” Senator L odge “ to respect ” but not “ to preserve ” un
less Congress authorizes in each particular instance.
It is my opinion that with the overthrow o f all the military
dynasties and the world-wide establishment o f democracies, and
the League of Nations with its covenanted safeguards, the
world’s peace is assured even if the United States remains out.
But to keep the United States out of the league be
cause of the very small differences between the President
and Senator L odge would be defeating a very great end for a
very small end. They agree on 99 per cent of the German
treaty and are liable to destroy it over a 1 per cent difference.
To keep the United States out o f the moral leadership of man
kind would be a great wrong. To defeat the treaty would be a
national calamity and would discredit the United States
throughout the world.
If the President’s view prevailed on article-10 no declaration
of war or voting of war supplies could be possible without con-
1G 9435— 20591
g r e ssio n a l
a c tio n ,
and
C on gress
w o u ld
do
w hat
w as
m o r a lly
r ig h t w ith o u t th e s u p p o s e d m o r a l c o e r c io n o f a r t ic le 1 0 “ to p r e
s e r v e ,” a n d s o f o r t h , a s C o n g r e s s d i d in t h e c a s e o f C u b a a n d
in t h e l a s t G r e a t W a r .
Ji S e n a t o r L odge ’ s v i e w p r e v a i l e d t h e s a m e r e s u l t s w o u l d
f o l l o w w i t h o u t t h e m o r a l in f l u e n c e o f t h e s p e c if ic o b l i g a t i o n o f
ai t i d e 1 0 .
1 h e m o r a l o b lig a t io n w o u ld e x i s t a n y w a y to r e s tr a in
an in te r n a t io n a l o u tla w fr o m in v a d in g
u p s e ttin g th e p e a c e o f th e w o rld .
p e a c e fu l
te r r ito r y
and
I a g r e e w i t h P r e s i d e n t W i l s o n in b e l i e v i n g t h e U n i t e d S t a t e s
s h o u ld e n te r on e q u a l t e r m s a n d w ith e q u a l m u t u a l o b lig a t io n s
w ith o th e r n a t io n s a n d n o t a p p e a r to d is t r u s t th e m o r s e e m to
s e e k t h e b e n e fi t s o f t h e t r e a t y w i t h o u t b e i n g w i l l i n g t o m e e t o u r
e q u a l s h a r e o f its b u r d e n s .
I p r e f e r a r t i c l e 1 0 a s i t is , b u t I
a m p re p a r e d , fo r th e s a k e o f p a s s in g th e t r e a ty a n d g e ttin g th e
a d v a n t a g e s o f it , t o y i e l d t o t h e d e m a n d o f a m a j o r i t y o f m y
c o l l e a g u e s in t h e S e n a t e .
The
S e n a t e a r e e n title d to r e sp e c t.
v ie w s
of
th e
m a jo r ity
of
th e
T h e c o u n t r y u n h a p p ily b e lie v e s th e d iffe r e n c e s a r e n o t r e c o n
c ile d b e c a u s e o f p e r s o n a l a n d p a r t i s a n p r i d e .
I r e fu s e to b e a p a r t y to th e d e f e a t o f th e
d e la y .
I a m r e a d y t o s u p p o r t it in a n y f o r m
t r e a t y o r to its
a n d fo llo w a n y
le a d e r w h o le a d s to it s r a t ific a t io n , a n d I w ill n o t f o llo w
l e a d e r w h o is l e a d i n g t o i t s d e f e a t o r d e l a y .
any
M r . P r e s id e n t, th e r e m a r k s w h ic h I h a v e j u s t d e liv e r e d w e r e
" 1 it t e n o n M a r c h 7 , b e f o r e I w a s f u r n i s h e d w i t h a m i m e o g r a p h e d
c o p y o f t h e P r e s i d e n t ’s l e t t e r t o S e n a t o r H i t c h c o c k o f M a r c h 8
a n d a r e s u b je c t, th e r e fo r e , to th a t u n d e r s ta n d in g w h e r e I seem
to h a v e m i s a p p r e h e n d e d t h e P r e s i d e n t ’ s p o s i t io n
It
appears now
to b e th e
w is h
D e m o c r a tic a s s o c ia te s v o te w ith
o f th e P re sid e n t
to
h a v e h is
th e ir r e c o n c ila b le o p p o n e n ts o f
P ie t r e a t y , d e f e a t t h e r e s o l u t i o n o f r a t i f i c a t i o n , a n d m a k e
t r e a t y w i t h o u t r e s e r v a t i o n s ” t h e i s s u e o f t h e n e x t e le c t i o n .
th e
r 1 sllo u l(1 r e g a r d t h i s a s a g r e a t i n j u r y t o o u r d o m e s t i c i n t e r e s t s ,
i h e d e l a y in e s t a b l i s h i n g p e a c e h a s h e lp e d t o r a i s e i n s t e a d o f
h e l p i n g t o lo w e r t h e c o s t o f l i v i n g .
T h e d e fe a t o f th e tr e a ty
w o u ld in ju r e A m e r ic a n p r e s tig e a b r o a d .
M i t h t h e t r e a t y , “ w i t h o r w i t h o u t r e s e r v a t i o n s ,” a s t h e c a m
p a ig n is s u e , th e d is c u s s io n o f o u r v it a l d o m e s tic p r o b le m s o f r e
c o n s tr u c tio n — th e c o s t o f liv in g , m o n o p o lie s a n d p r o fite e r in g , a n d
s o f o r t h — w i l l b e o b s c u r e d a s b e h i n d a s m o k e s c r e e n t o t h e b e n e fit
o f t h o s e s e lf is h i n t e r e s t s
v a n t a g e o f o u r p e o p le .
w h ic h
have
been
ta k in g
u n ju s t
J
ad
I t w i l l b e i m p o s s i b l e a t t h e n e x t e le c t io n t o e l e c t a S e n a t e
f a v o r a b le to th e t r e a t y w it h o u t r e s e r v a t io n s , a n d e v e r y w e llin fo r m e d p u b lic m a n k n o w s it , so t h a t a f t e r th e c a m p a ig n th e
t r e a t y w i l l b e in n o b e t t e r p o s i t i o n r e l a t i v e l y t h a n it is n o w , a n d
w ith th e “ tr e a t y w it h o u t r e s e r v a t i o n s ” a s th e is s u e th e D e m o
c r a t ic P a r t y w o u ld h a v e a r u in o u s h a n d ic a p .
A s fa r as I am
concerned, a s an
A m e r ic a n
S en a to r, w h o fo r
v e r y m a n y y e a r s h a v e a r d e n tly a n d s tr e n u o u s ly se rv e d m y p a r ty
a n d m y c o u n t r y a n d s u p p o r te d th e a d m in is t r a t io n on a ll s u ita b le
o c c a s io n s , I d e c lin e to a s s u m e th e s lig h t e s t r e s p o n s ib ility fo r th e
d e la y o r th e d e fe a t o f th e tr e a ty .
1(50435— 2 0 5 9 1
THE EGYPTIAN QUESTION.
Mr. OWEN. Mr. President, some days ago, October 15, I
introduced a resolution bearing on the treaty of peace with
Germany. I ask to have inserted in the R ecord a memorandum
o f a letter from King George to the Sultan of Egypt, which I
will not take the time to read, together with a cablegram to
Mahmoud Pasha from Mahmoud Soliman Pasha, which I shall
not take the time to read, bearing upon the same question, to
gether with some data submitted by the Egyptian delegation
here, which I ask, without reading, to have also printed in
the R ecord.
T h e r e b e i n g n o o b j e c t i o n , t h e matter r e f e r r e d to was o r d e r e d
to b e p r in te d
in t h e R
ecord,
a s fo llo w s :
“ Resolved, That the United States in ratifying the covenant
o f the league of nations does not intend to be understood as
modifying in any degree the obligations entered into by the
United States and the Entente Allies in the agreement of No
vember 5, 1918, upon which as a basis the German Empire laid
down its arms. The United States regards that contract to
carry out the principles set forth by the President o f the United
States on January 8, 1917, and in subsequent addresses, as a
world agreement, binding on the great nations which entered
into it. and that the principles there set forth will be carried
out in due time through the mechanism provided in the cove
nant, and that article 23, paragraph (b ), pledging the members
o f the league to undertake to secure just treatment of the
native inhabitants under their control, involves a pledge to
carry out these principles.
“ The protectorate which Germany recognizes in Great Brit
ain over Egypt is understood to be merely a means through
which the nominal suzerainty of Turkey over Egypt shall be
transferred to the Egyptian people and shall not be construed
as a recognition by the United States in Great Britain o f any
sovereign rights over the Egyptian people or as depriving the
people o f Egypt of any o f their rights of self-government.
DATA COMPILED BV EGYPTIAN DELEGATION.
Shall
R i g h t or M ig h t
P r evail?
“ Egypt is a country o f immense wealth. It has millions of
acres o f agricultural land greater in value per acre and in pro
ducing power than any other country in the world. The seizure
o f Egypt by Great Britain adds to Britain’s enormous posses
sions an area o f 350,000 square miles and a population of
13,000,000 people. The value o f the natural resources so seized
is beyond computation.
“ Egypt is one compact whole— one nation, one language.
The character o f the people, their conduct, their, habits, their
sympathies, and their inclinations are the same throughout that
country. Because o f geographic situation, however, Egypt has
attracted the avarice o f colonizing powers more, perhaps, than
any other country In the world. In 1798 the French under
Napoleon invaded Egypt. In 1801 the French were expelled
2
147311—20090
3
from Egypt. In 1807 Great Britain attempted to invade Egypt,
but was ejected by tbe Egyptian Army.
“ Egypt continued to be a Turkish Province until 1831, when
war broke out between Egypt and Turkey, and the Egyptian
Army was victorious. Constantinople would have fallen to the
Egyptians, but Great Britain and France interfered in order
to preserve the balance o f power and the Egyptians were com
pelled to give up the full fruits o f their victories.
“ By the treaty of London o f 1840-41 Egypt became autono
mous, subject only to an annual tribute to Turkey of about
83,000,000. The Government of Egypt could maintain an army,
contract loans, make commercial treaties, and enter into inter
national agreements. For all practical purposes Egypt was
independent and free.
“ In 1882 Great Britain occupied Egypt ostensibly to protect
the Khedive against the movement for popular government, and
continued to occupy the country, against the protest of the Egyp
tians,under the protext o f protecting the people from the Khedive.
“ The British Government from the time of occupation up to
the beginning of the recent war promised to withdraw the
British troops from Egypt. Gladstone, when prime minister,
said, ‘ I f one pledge can be more solemn and sacred than an
other, special sacredness in this case binds us to withdraw the
British troops from Egypt.’
“ Lord Salisbury, when prime minister in 1889, solemnly
assured Egypt and the world that Egypt would never be placed
under a British ‘ protectorate ’ or annexed by Great Britain.
“ Great Britain had agreed by the treaty o f London of
1840-41 to protect the autonomy of Egypt, and in the AngloFrench agreement of April 8, 1904, Great Britain declared that
it had no intention of altering the political status o f Egypt.
“ Afer the beginning of the war, and on December 18, 1914,
Great Britain deposed the Khedive and appointed a sultan of
her own choosing to the throne of Egypt. On the same date
Great Britain proclaimed the so-called protectorate over Egypt,
announcing, however, at the same time that it was merely for
the period of 1he war and only a step toward the independence
of Egypt.
“ King George, in a letter which was widely circulated
throughout Egypt and which was published in the London
Times of December 23, 3914, said:
“ ‘ * * * I feel convinced that you will be able, with the
cooperation o f your ministers and the protection o f Great
Britain, to overcome all influences which are seeking to destroy
the independence o f Egypt, * * V
“ This change o f status being announced at the time as a
merely temporary war measure, was assumed by the Egyptians
to be such. The Egyptians with absolute unanimity took sides
with the Allies and served to make, as they believed, the world
safe for democracy and for the right o f national self-determina
tion in all peoples.
“ When the armistice was signed the Egyptians rejoiced in the
thought that the day of their deliverance had come, and that
henceforth they would enjoy that right o f national self-deter
mination proclaimed by President Wilson. A commission was
appointed by the Egyptian people to attend the peace conference,
Where their independence and sovereignty could be consecrated
and acknowledged by the powers.
147311— 20090
“ In violation of its pledges of independence to the Egyptian
people, and regardless of the fact that the Egyptian people had
served and sacrificed in the allied cause, Great Britain arrested
four o f the leading citizens of Egypt, who had been selected by
the Egyptian people to go to Paris, and these four were torn from
their homes without warning and deported to Malta, where they
were thrown into a military prison.
“ When the Egyptian people learned of this act o f perfidy on
the part of Great Britain their indignation was intense. Na
tional self-determination demonstrations were held throughout
E gypt Great Britain answered these demonstrations for na
tional self-determination, the principle for which Great Britain
had ostensibly fought in the war, by firing machine guns into
crowds of these peaceable and unarmed, liberty-seeking people,
killing more than a thousand and wounding vastly more.
“ Egyptians who dared to assert in public that Egypt should
have the right of national self-determination were put in prison. '
The cry for liberty by an Egyptian was answered by British
military punishment.
t1
“ If present conditions are permitted to continue, liberty is
dead to Egypt, and the right of self-determination to all peoples,
for which Americans believed they were fighting, has been made
a hollow mockery.
“ Gen. Allenb.v finally, by force of Egyptian public opinion, ad
vised the British Government to permit the commission to pro
ceed to Paris. When the commission reached Paris they asked
for a hearing before the peace conference. This was denied
them. They wrote to President Wilson and asked for a con
ference with him. Their appeals were in vain.
“ Some days after the commission reached Paris the so-called
protectorate o f Great Britain over Egypt was ‘ recognized.’ The
holding o f Egypt by Great Britain is not a protectorate in the
legal sense o f the word, but under guise of a protectorate Great
Britain is holding Egypt to-day as a subject and conquered
nation.
“ The approval o f this so-called protectorate would be accepted
by the British Government as approval o f the present holding of
Egypt by Great Britain as spoils of war and would rivet the
chains of subject slavery upon the Egyptian people.
“ In a statement issued by the British Embassy at Washington,
September 2, 1910, and which was published in the daily press,
the embassy stated:
“ ‘ Great Britain has carefully avoided destroying the sov
ereignty o f Egypt.’
“ A few days later the British foreign office in London gave
an interview to the International News Service, claiming to
have succeeded to Turkish nominal suzerainty over Egypt.
Great Britain is claiming both a protectorate and a sovereignty
over Egypt at the same time.
“ Great Britain is holding Egypt to-day not by right but
by might o f military force. Great Britain’s seizure o f Egypt
is out of keeping with the world’s new temper. Only by the
exercise o f the gospel o f military force can the continued
holding o f Egypt by Great Britain be maintained. Only in
violation of its sacred pledges and treaty obligations can Great
Britain assert dominion over the people of Egypt.
“ On November 10, 1914, Lloyd-George in a speech called the
world to witness the utter unselfishness of their part in the
1 4 -7 3 1 1 — -2 0 0 9 0
war. ‘ As tin- Lord liveth,’ lie declared, 'England docs not
want one yard o f territory. We are in this war from motives
of pare chivalry to guard the weak.’ Shall Egypt be handed
over to Great Britain in violation o f ilie great principles for
which Americans, Egyptians, and the Allies fought? How can
it be justly said that Egypt is outside the realm of the prin
ciples o f the 14 points and that Great Britain may deny the
right o f self-determination to Egypt?
“ The Egyptian people are liberty loving and peaceful. They
have not interfered with other nations and they ask now that
Groat Britain not be allowed to destroy the inalienable right
o f the Egyptian people to liberty, and the right to have their
own government, controlled by their own people.”
BRITISH PLEDGES.
“ In May, 1882, a British fleet appeared before Alexandria.
In June, 1882, a serious disturbance took place in Alexandria,
and a number o f Europeans were killed. On July 11 and 12,
1882, Alexandria was bombarded by ihe British fleet and Brit
ish soldiers began to occupy Egypt. Great Britain pledged the
Egyptian Government and the world that this occupation would
be only temporary. The solemn pledges to this effect made by
England are evidenced by the following documents:
“ 3. Lord Granville’s dispatch, November 4, 1 8 st (Egypt,
No. 3 (3882), pp. 2, 3 ), said:
“ ‘ The policy o f Her Majesty’s Government toward Egypt
lias no other aim than the prosperity o f the country, and its
full enjoyment o f that liberty which it has obtained under
successive firmans o f the Sultan. * * * It can not be too
clearly understood that England desires no partisan ministry
in Egypt. In the opinion o f Her Majesty's Government a
partisan ministry founded on the support of a foreign power,
or upon the personal influence o f a foreign diplomatic agent,
is neither calculated to be o f service to the country it admin
isters nor to that in whose interest it is- supposed to be
maintained.’
“ 2. In the protocol signed by Lord Dufferin, together with
the representatives o f the five other great powers, Juno 25,
3882 (Egypt, No. 17 (1882), p. 33), it was provided:
“ ‘ The Government represented by the undersigned engaged
themselves, in any arrangement which may he made in conse
quence o f tlieir concerted action for the regulation o f the
affairs of Egypt, not to seek any territorial advantage, nor any
concession o f any exclusive privilege, nor any commercial ad
vantage for their subjects other than those which any other
nation can equally obtain.’ [Italics ours.]
“ 3. Sir Beauchamp Seymour, in a communication to Khedive
Tewfik, Alexandria, July 26, 3882, published in ihe Official
Journal o f July 28, 3,882, said:
“ * I, admiral commanding the British fleet, think it opportune
to confirm without delay once more to Your Highness that the
Government of Great Britain has no intention of making the con
quest of Egypt, nor o f injuring in any way the religion and lib
erties of the Egyptians. I t has for its sole object to protect Your
Highness and the Egyptian people against rebels.'
[Italics
ours.]
147811— 20000
6
“ 4. Sir Charles Dilke, in the House o f Commons, July 25,1882,
said:
“ ‘ It is the desire o f Her Majesty’s Government, after reliev
ing Egypt from military tyranny, to leave the people to manage
their oion affairs. * * * We believe that it is better for the
interests o f their country, as well as for the interests o f Egypt,
that Egypt should be governed by liberal institutions rather
than by a despotic rule. * * * We do not wish to impose on
Egypt institutions of our own choice, but rather to leave the
choice of Egypt, free, * * * . It is the honorable duty of
this country to be true to the principles o f free institutions,
which are our glory.’ [Italics ours.]
“ 5. The Right Hon. Mr. W\ E. Gladstone, in the House of
Commons, August 10, 1882, said:
“ ‘ I can go so far as to answer the honorable gentleman when
he asks me whether we contemplate an indefinite occupation of
Egypt. Undoubtedly of all things in the world, that is a thing
which we arc not going to do. It would be absolutely at vari
ance with all the principles and views o f Her Majesty’s Govern
ment, and the pledges they have given to Europe and with the
views, l may say, o f Europe itself.’ [Italics ours.]
“ G. Lord Dufferin’s dispatch, December 10, 1882, Egypt No.
2 (1883), page 30, stated:
“ ‘ In talking to the various persons who have made inquiries
as to my views on the Egyptian question I have stated that wo
have-not the least intention of preserving the authority which
has thus reverted to us. * * * It was our intention so to
conduct our relations with the Egyptian people that they should
naturally regard us as their best friends and counselors, but
that we did not propose upon that account arbitrarily to impose
our views upon them or to hold them in an irritating tutelage.'
IItalics ours.J
“ 7. Lord Granville, December 29, 1882, Egypt No. 2 (1882),
page 33, officially stated:
“ ‘ You should intimate to the Egyptian Government that it is
the desire of Her Majesty's Government to withdraw the troops
from Egypt as soon as circumstances permit, that such with
drawal will probably be effected from time to time as the se
curity of the country will allow it, and that Her Majesty’s Gov
ernment hope that the time will be very short during which
the full number of the present force will be maintained.' [Italics
ours.]
“ 8. Lord Dufferin’s dispatch, February G, 1883, Egypt No. G
(1883), pages 41, 43, stated:
‘“ The territory of the Khedive has been recognized as lying
outside the sphere o f European warfare and international jeal
ousies. * * *
“ ‘ The Valley o f the Nile could not be administered from
London. An attempt upon our part to engage in such an under
taking would at once render us objects o f hatred and suspicion
to its inhabitants. Cairo would become a focus o f foreign
Intrigue and conspiracy against us, and we should soon find our
selves forced either to abandon our pretensions under dis
creditable conditions or embark upon the experiment o f a com
plete acquisition o f the country.’
“ 9. Again, at page 83, Lord Dufferin sa id :
‘“ Had I been commissioned to place 017011*8 in Egypt on the
footing of an Indian subject State the outlook would have l>een
147311— 20090
different. The masterful hand o f a resident would have quickly
hcnt everything to his will, and in the space o f five years we
should have greatly added to the material wealth and well
being o f the country by the extension o f its cultivated urea and
the consequent expansion of its revenue; by the partial if not
the total abolition of the corvee and slavery; the establishment
of justice and other beneficent reforms. But the Egyptians
would have justly considered these advantages as dearly pur
chased at the expense of their domestic independence. More
over, Her Majesty's Government have pronounced against such
an alternative/ [Italics ours.]
“ 10. Mr. Gladstone, in the House o f Commons August 0,
1883, said:
The other powers of Europe
* * are well aware of
the general intentions entertained by the British Government,
intentions which may be subject, o f course, to due consideration
o f that state of circumstances, but conceived and held to be
in the nature not only of information but a pledge or engage
ment: [Italics ours.]
“ 11. ^ r- Gladstone, in the House o f Commons August 9,
The uncertainty there may be in some portion o f the public
mind has reference to those desires which tend toward the
permanent occupation o f Egypt and its incorporation in this
Empire. This is a consummation to which ice arc resolutely
opposed and which we will have nothing to do with bringing
about. W e arc against this doctrine of annexation; we are
against everything that resembles or approaches i t ; awl we arc
against all language that tends to bring about its expectation.
IFe arc against it on the ground of the interests of England;
wc arc against it on the ground o f our duty to E gypt; wc are
against it on the ground o f the specific and solemn pledges given
to the world in the most solemn manner and under the most
critical circumstances, pledges which have earned for us the
confidence of Europe at large during the course o f difficult and
delicate operations, and which, if one pledge can be more solemn
and sacred than another, special sacrcdncss in this case binds
us to observe. We are also sensible that occupation prolonged
beyond a certain point may tend to annexation, and consequently
it is our object to take the greatest care that the occupation
does not gradually take a permanent character.
* * \y0
can not name a day and do not undertake to name a day for
our final withdrawal, but no effort shall be wanting on our part
to bring about that withdrawal as early as possible. [Italics
ours. |
"12. Lord Granville’s dispatch, June 10, 18si, Egypt No. 23
(18X4), page 13, stated:
•“ Her Majesty’s Government * * * are willing that the
withdrawal of the troops shall take place at the beginning o f the
y «»r
provided that the powers are then of opinion that such
withdrawal can take place without risk to peace and order.’
"13. Lord Derby, In the House o f Lords, February 20 1885
said:
’
’
From the first we have steadily kept in view the fact that
our occupation was temporary and provisional only. * * *
We do not propose to keep Egypt permanently.
* * On
that point we arc pledged to this countrv and to Europe• and
147311—20090
*
’
8
if a contrary policy is adopted it will not be by us.’ [Italics
ours.]
“ 14. Lord Salisbury, in the House o f Lords, June 10, 1887,
said:
“ ‘ It was not open to us to assume tlie protectorate o f Egypt,
because Her Majesty’s Government have again and again pledged
themselves that they tvould not do so. * * * My noble
friend has dwelt upon that pledge, and he does us no more than
justice when he expresses his opinion that it is a pledge which
has been constantly present to our minds. * * * It was un
doubtedly the fact that our presence in Egypt, unrecognized by
any convention * * * gave the subjects of the Sultan cause
for a suspicion Which we did not deserve.’ [Italics ours.]
“ 15. Lord Salisbury, in the House of Lords, August 12, 1889,
said:
“ ‘ When my noble friend * * * asks us to convert our
selves from guardians into proprietors * * * and to declare
our stay In Egypt permanent * * * I must say I think my
noble friend pays an insufficient regard to the sanctity of the
obligations which the Government of the Queen have undertaken
and by rvliich they are bound to abide. In such a matter we
have not to consider what is the most convenient or what is
the more profitable course; we have to consider the course to
which we are bound by our own obligations and by European
law.' [Italics ours,]
“ 16. Mr. Gladstone, in the House of Commons, May 1, 1893,
sa id :
“ ‘ I can not do otherwise than express my general concur
rence * * * that the occupation of Egypt is in the nature of
a burden and difficulty, and that the permanent occupation of
that country would not be agreeable to our traditional policy,
and that it would not be consistent with our good faith toward
the Suzerain power, while it would be contrary to the laws of
Europe. * * * I certainly shall not set up the doctrine that
we have discovered a duty which enables us to set aside the
pledges into which we have so freely entered. * * * The
thing we can not do with perfect honor Is either to deny that
we are under engagements which preclude the idea o f an indefi
nite occupation, or so to construe that indefinite occupation as
to hamper the engagements that we are under by collateral con
siderations.’ [Italics ours.]
“ 17. The text of the Anglo-French agreement of April 8, 1904,
provides:
“ ‘ The Government of His Majesty declares that it has no in
tention of altering the political status of Egypt.’
“ 18. Lord Cromer’s report, March 3,1907, Egypt No. 1 (1907),
page 2, stated:
“ * There are insuperable objections to the assumption of a
British protectorate over Egypt. It would involve a change
in the political status of the country. Now, in Article 1 o f the
Anglo-French agreement o f the 8th April, 1904, the British
Government have explicitly declared that they have no inten
tion o f altering the political status o f Egypt.’
“ 19. In an interview with Dr. Nimr, editor of the Mokattam,
October 24, 1908, acknowledged as official by Sir E. Grey in
the House o f Commons, Sir Eldon Gorst sa id :
“ * It has been said that Great Britain proposes shortly to
proclaim the protectorate or the annexation o f Egypt to the
147311— 20090
British Empire. Will Sir Eldon Gorst i>ermit me to ask him
whether this rumor is well founded or not? ’
“ Sir Eldon Gorst answered:
“ ‘ The rumor has no foundation, and you may contradict it
categorically. Great Britain has engaged herself by official
agreements with Turkey and the European Powers to respect
the suzerainty of the Sultan in Egypt. She will keep her en
gagements, which, moreover, she reiterated in 1904 at the time
of the conclusion o f the Anglo-French agreement. England
Stipulated in that agreement that she lias no intention to change
the political situation in Egypt. Neither the people nor the
Government wish to rid themselves o f these engagements.’
“ 20. Sir Eldon Gorst’s report, March 27, 1909, Egypt No. 1
(1909) , page 1, stated:
“ ‘ There exists among the better-educated sections of society
a limited but gradually increasing class which interests itself
In matters pertaining to the government and administration of
the country. This elass aspires quite rightly to help in bringing
about the day when Egypt will be able to govern herself without
outside assistance. This is also the end to which British policy
is directed, and there need be no antagonism or principle be
tween the Egyptian and English reforming elements.’
“ 21. In the same report, at page 48, Sir Eldon Gorst said:
“ * Since tin; commencement o f the occupation the policy ap
proved by the British Government has never varied, and its
fundamental idea has been to prepare the Egyptians for selfgovernment while helping them in the meantime to enjoy the
benefit of good government.’
“ 22. Sir Eldon Gorst’s report, March 20, 1910, Egypt No. t
(1910) , page 51, stated:
“ ‘ British policy in Egypt in no way differs from that fol
lowed by Great Britain all over the world toward countries
under her influence, namely, to place before all else the welfare
of their populations.’
“ 23. Sir Edward Grey, in the House o f Commons, August,
1914, said:
“ 1England stretches out her hand to any nation whose safety
or independence may be threatened or compromised by any
aggressor.’
“ 24. Former Premier Balfour, speaking for the Government
at Guild Hall, on November 19, 1914, declared:
“ ‘ We fight not for ourselves alone but for civilization drawn
to the cause o f small States, the cause o f all those countries
which desire to develop their own civilization in their own way,
following their own ideals without interference from any insolent
and unauthorized aggressor.’
“ 25. Premier Asquith, speaking at Guild Hal), November 9,
1915, asserted:
“ ‘ We shall not pause or falter until we have secured for the
smaller States their charter o f independence and for the world
at large its final emancipation from the reign o f force.’
“ 2(5. And, again, Premier Asquith, on November 9, 1910, de
clared :
“ *This is a war, among other things—-perhaps I may say pri
marily—a war for the emancipation o f the smaller States.
* * * Peace when it comes, must bo such as will build upon
a sure and stable foundation the security o f the weak, the liber
ties of Europe, and a free future for the world.’
14 7 3 11— 20090
“ 27. Premier Lloyd-George, on June 29, 1917, said:
“ ‘ In my judgment this war will come to an end when the
allied powers have reached the aims which they set out to attain
when they accepted the challenge thrown down by Germany to
civilization.’
“ 28. Asquith, in the House o f Commons, on December 20,1917,
said :
“ 1We ought to make it increasing clear by every possible
means that the only ends we are fighting for are liberty and
justice for the whole world, through a confederation of great
and small States, all to possess equal rights. A league of na
tions is the ideal for which we are fighting, and we shall con
tinue fighting for it with a clear conscience, clean hands, and an
unwavering heart.’
“ After the beginning of the World War, and on December IS,
1914, Great Britain proclaimed a so-called protectorate over
Egypt. The proclamation seizing Egypt and placing Egypt un
der the British flag is published in the London Times of Decem
ber 19, 1914, page 8, column 3. It reads:
“ ‘ In view of the action of his highness Abbas Helml Pasha,
lately Khedive of Egypt, who has adhered to the King’s ene
mies. His Majesty's Government has seen fit to depose him from
the khedirate, and that high dignity has been offered, with the
title o f Sultan of Egypt, to his highness Prince Hussein Gamel
Pasha, eldest living Prince o f the family of Mehemet Ali, and
has been accepted by him.
“ ‘ The King has been pleased to approve the appointment of
Prince Hussein to an honorary Knight Grand Cross of the Order
o f the Bath on the occasion of his accession to the sultanate.’
[Italics ours.]
“ The London Times, in the issue of December 19. 1914, had
large headlines saying, ‘ Egypt under the British flag.’ But the
Times, in an editorial in the Issue of same date, with character
istic British diplomacy, naively said:
“ ‘All that is desired now is to defend Egypt against attack
and to keep the internal administration running smoothly.
Other questions can wait until peace is restored, as Lord Cromer
implies in the letter we published to-day. * * * It is purely
a practical administrative step, dictated by the appearance of
Turkey as a belligerent.’
“ It will be noted that the seizure was sought to be justified
only as a protection to Egypt against Turkish aggression. The
truth is that under the guise of a ‘ protectorate’ Great Britain
seized Egypt and swept away every vestige o f Egyptian freedom
and independence. But the people o f Egypt did not realize at
that time the full meaning o f this action on the part of Great
Britain. They were told that it was a step toward the inde
pendence of Egypt. His Majesty King George, in a letter to the
Sultan whom he had appointed to rule over Egypt, which letter
was widely circulated throughout Egypt and was published in
the London Times of date December 21, 1914, said:
“ ‘ * * * I feel convinced that you will be able, with the
cooperation of your ministers and the protectorate of Great
Britain, to overcome all influences which arc seeking to destroy
the independence of Egypt. * * * ’ [Italics ours.]
147311— 20090
11
TREATMENT OF EGYPTIAN DELEGATES
PEACE CONFERENCE.
TO
11110 C H A IR M A N OF T H E E G Y P T IA N D EL EG As i O N E u % V ? o y i ? * - NALI> W IN G A T E > H K IT ISII H IG H GOMMIS[From the Egyptian W hite Book, p. 19.]
“ •J addressed to British headquarters on the 20tli instant
(November) a letter in which 1 requested for my colleague and
myself the permission necessary for voyage. * * * We have
just received a letter from the military authorities dated to-day,
informing us that dilliculties have arisen which have prevented
iliem from responding before and that as soon as they are
smoothed out we shall receive an answer. * * * We rely
upon
the traditions of Great Britain. The British have not
ceased to give to the world examples of the devotion to the
principles o f individual liberty. Will not our request for pass
ports receive a quick and favorable response? ’
“ *° Hiis the following
ig letter was received on December 1,
1918, page 21:
■■•I am directed by his excellency, the high commissioner, to
acknowledge receipt of your letter of the 29tli ultimo and to
inform you in reply that after reference to His Majesty’s Gov
ernment, his excellency feels unable to make any representations
to the military authorities in the matter.
“ ‘ 1 am to add that should you desire to submit suggestions as
to the government of Egypt, not being inconsistent with the policy
of llis Majesty’s Government as already declared, such sugges
tions can most conveniently be submitted in writing to his ex
cellency. In this connection I may draw your attention to the
communication addressed by Sir Mille Cheetham, proclamation
of protectorate by the British Government, December 38, 1914.
by instruction o f His Majesty’s Government to the late Sultan
Hussein on the occasion of Ids accession.’
- T o this tlie delegation replied on December
1918, as fol
lows. page 22:
•••In response I allow myself to make known to your excel
lency that it is not permitted, neither to me nor to any member
of the delegation, to make propositions which are liot in ac
cordance with the will of the Egyptian nation a s expressed in
the mandates that have been given ns. * * * Forbidding
our departure makes illusory and inoperative the mission that we
have accepted by will o f the people. It is difficult to conciliate
this situation with the principles o f liberty and justice which the
victory of Great Britain stud her allies i s supposed to have caused
to triumph. This victory has repeatedly been declared to be for
the purpose o f opening a new era for mankind through listening
and granting the just demands o f peoples.’
" I n a letter of protest to Premier Lloyd-George against the
virtual imprisonment of the Egyptian delegation at Cairo, the
president of the delegation wrote (p. 26) :
“ *You have certainly been misinformed o f the circumstances
that accompanied our sequestration. We can not imagine how
sneli proceedings can be justified, whether from the point of
view o f law or social usage, or even o f reasonable policy, and
we can not understand how the British can apply systematically
so humiliating a treatment to a nation with the rich and
glorious past of ours. Whatever may lie its present weakness, a
147311—20090
12
nation with a civilization so ancient will always preserve before
the world its prestige and its title to the gratitude of the world.
“ ‘ Deny the civilization o f Egypt in spite of traces that attest
its glorious past; deny its benefits to the culture o f the world;
suppose that it is only an agglomeration of savages ruled by the
brutality of their instincts and without law—do you refuse to
believe that Egypt has been a precious aid to you? The enor
mous sacrifice that we have made during the war in blood and
treasure for the triumph of your cause, were indispensable to
you, and moreover you have recognized many times that these
sacrifices were one of the principal factors of victory in the
Orient.
_
. . ,
•««* * * Even were you to suppose that Egypt had no
civilization and that Egypt gave you no aid. would you none
the less refuse to apply to her the principles which you ha\e
agreed with President Wilson to apply— impartial justice on
every side o f settlement no matter whose interest is crossed,
and not only impartial justice hut also the satisfaction of several
peoples whose fortunes are dealt w ith ?’
“ Egyptian case stated as follows in a letter from Egyptian
delegation to president of peace conference (p. 88) :
“ 4F,)r more than five months the British authorities refused
to allow our delegation to leave for Europe. Public opinion,
realizing that a peace conference had assembled and was taking
up the problems o f the Near East, and preparing a treat\ to
present to Germany, became aroused. The Egyptians insisted
that the authorization for our departure be granted. Standing
by the people, the cabinet presented its resignation, which s\as
accepted. The answer o f the British military authorities to
the official request of the Egyptian Government was to order
the arrest and deportation to Malta of the president of the
delegation and o f three o f his colleagues. They were taken
suddenly from their homes and hurried away under cover of
night. There was no trial, and they were not informed of the
reasons for their arrest and deportation. When they learned
of this act of violence, totally contrary to the law, there were
peaceful demonstrations throughout the country, in which all
classes took part. Government officials and the personnel of
railways and other transportation service, decided to strike.
The English thus saw that in the entire territory o f Egypt the
people of all classes. Irrespective of religion, were against their
domination, nevertheless they persisted in their wish to govern
by force of arms the people who did not want them.
‘“ The manifestations were suppressed by machine guns
which mowed down dozens of unfortunate demonstrators.
Since the Egyptians had no arms, the order to fire was totally
unwarranted. But frightfulness could not stop the Egyptians
from proceeding in their determination to make an effort to
obtain their independence. They had firm faith in the prin
ciples o f President Wilson which had been solemnly accepted by
the Entente Allies. They felt that if their delegation could
only get to Paris that justice would be accorded to them. So, in^
spite of the death that awaited them, they advanced in groupj
in ecstasy, making the sacrifice o f their lives to the cause of
liberty,
“ ‘ Even the women were not spared. Without mentioning
those who fell on the field of honor during the national demon
strations, we can cite the case o f the leading ladies o f Cairo
14 7 3 11— 20090
13
who organized under the leadership of the wife of the prime min
ister, a demonstration to protest to the diplomatic agencies
against the murder of innocent and unarmed citizens in the
streets o f Cairo. Suddenly they were surrounded on all sides
by soldiers who pointed their guns at them. This inspired one
o f the Egyptian women to say “ Make of me if you will a second
Miss Cavell.” They were kept for more than two hours in the
burning sun. In proof ol' this statement, we refer to the testi
mony of the agencies of the United States and Italy.
“ ‘ The British authorities in Egypt were as much disturbed as
provoked by the extent o f the movement and astonished at their
powerlessness to stop it. It was then that the spirit of venge
ance got the better o f them, and they then allowed themselves
to indulge in the most disgraceful excesses. No longer content
to stop the demonstrations by means o f rifles and machine guns,
they were guilty in several places o f rape, o f assassination of
peaceful villagers, o f pillage, o f arson- -all with the most trifling
pretext or even without pretext. No longer was ic a question
of individual abuses committed by stray soldiers such as those
of which the minister o f justice and the'president o f the legisla
tive assembly had been victims—no longer was it a question of
blows and thefts in the streets o f Alexandria and Cairo, attacks
began to be made by strong military attachments under the com
mand of their officers in villages as well as eities.”
BRITISH VIEWS ON THE EGYPTIAN QUESTION.
“ Sir Thomas Barclay, vice president of the Institute ol’ Inter
national Law, says in his book, ‘ New Methods of Adjusting In
ternational disputes and the Future’ :
‘“ Turning to another aspect of international matters, it is
deeply to be regretted that in several instances in our own time
international treaties have not been regarded by public opinion
with the same respect as international awards. The attitude
of England toward Egypt, o f Italy toward Turkey, o f Russia
toward Persia, of France toward Morocco, and especially o f
Germany toward Belgium, all are instances o f eventual bad
faith, however justifiable the original intervention may have been
in the one ease or unjustifiable in the other. They are addi
tional evidence o f the difficulty o f preserving the peace o f the
world even by the most solemn o f international undertakings.’ ”
[ E x c e r p t s f r o m a n a r t i c l e b y 1 lie R i g h t H o n . .T. M . R o b e r t s o n , f o r m e r
m e m b e r o f th e B r i t i s h C a b in e t , in th e C o n t e m p o r a r y R e v ie w o f M a y ,
1 9 1 9 , u n d e r t h e t i t l e o f “ T h e p r o b le m o f E g y p t ,” s a id in p a r t : ]
“ A rebellion in Egypt in 3919 has set all men elsewhere asking
the question, Why? In 1914 a rebellion was planned for by the
German enemy; how thoroughly the world has not yet been
informed. Hud it broken out, the causation would have licen
sufficiently obvious, apart from any known native discontent.
But that rebellion should have been averted then and should
blaze forth now, when the leagued enemies o f the British Em
pire are prostrate in defeat, signifies a new causation. What
is it?
“ Some have put the hypothesis that Egyptian Moslems are
alarmed by the prospect of Jewish domination in Palestine. But
even if there were not express testimony that the Zionist leaders
have maintained thoroughly friendly relations with those of the
147311— 20090
Arabs, such an explanation would be plainly inadequate. Mos
lem feeling in Egypt about Palestine could at most aggravate
other grounds of resentment; it could not motive a rebellion in
which the Moslems of Palestine have no share. Such a rising,
exhibiting no signs of direction from without, must be held to
signify grievances within E gypt; and new and special grievances
at that. The disorders reported from Cairo on April 14 appear
to involve riots directed against the Armenians and Greeks; and
it may be that the presence of a number o f Armenian refugees
has helped to foment fanaticism. But these attacks, as de
scribed, have the appearance of being a sequel to the previous
insurrection rather than a key to its causation. Normally, the
Moslems in Egypt live on perfectly good terms with the numer
ous Greeks; fanaticism being in fact not a normal factor in the
life of the Egyptian mass. And the remarkable statement made
by Miss M. E. Durham, in the Daily News, of April 2 would seem
to yield the explanation. Thus it runs:
“ 11 was in Egypt from November. 1915, to April, 191G, and can
confirm Dr. Haden Guest in his statement that it is to our own
treatment of the Egyptians that we owe the present trouble.
The authorities were certainly to blame in landing colonial
troops in Egypt without carefully instructing them as to the
population they would meet there. So ignorant were numbers
of these men that they imagined that Egypt was English, and
the natives of the land were intruders.
“ ‘ More than one Australian said that he would clear the lot
out if he had his way. They treated the natives with cruelty
and contempt. In the canteen in which I worked a very good
native servant was kicked and knocked about simply because
he did not understand an order given him by a soldier. An
educated native in the town was struck in the mouth and had
his inlaid walking stick forcibly snatched from him by a soldier
who wanted it. More than one English resident said to me:
“ It will take years to undo the harm that has been done here
by the army.” Personally I felt that were I an Egyptian I
should have spared no effort to evict the British. I felt ashamed
o f my country—bitterly ashamed. The opinion of the native for
the soldier was amusingly illustrated by a small conversation
book, one phrase o f which was to the effect; “ You fo o l; what
for you spend ail your money on b eer?” and a dialogue with a
beggar which ended; “ I am p oor; I am miserable,” to which
the Briton replied : “ Go to hell.”
“ ‘ I spoke with great severity frequently to the soldiers,
telling them that by their conduct they were proving themselves
the enemies o f England; that the Germans maltreated the
enemy, but that they were attacking their own side and would
make enemies. This surprised them very much. They ivere
absolutely ignorant of the situation.
“ ' To make matters worse, for the first few days after the
troops arrived in quantities, the drink shops were all open all
day, and the unlovely results filled the natives with disgust and
contempt. It was reported. I do not know with what truth,
that drunken men had snatched the veils from Moslem women.
The tale was believed by the natives.
M‘ Small wonder if they hate and dread us.’
“ It is probably necessary to impress upon many people in
this country that the insolent outrage such as that described,
inflicted upon people In their own country by a dominant alien
147311— 20090
race, is about as maddening to tlie indigenous population as
Englishmen found many of the tales of German brutality to
British prisoners and subject Belgians during the war. The
blood boils in Egypt perhaps more easily than in England. And
if any o f our people continue to argue, as many o f them did a
dozen or more years ago, that Egyptians ought to be too thank
ful for our beneficent rule to feel rebelliously about individual
grievances, it will be more necessary than ever to point out that
such reasoning tells only of an incurable moral blindness. Old
chronicles are full o f rebellion arising out o f individual out
rages ; and a nation collectively grateful to an alien race for
ruling it is not among the portents o f history.
“ How government has gone in Egypt during the war it was
practically impossible for us at home to know. It was no time
for discussing reforms; and military rule had to prevail there
at least as much as here. But when the world is intent upon a
peace settlement which is to remedy as far as may be all the
grievances of subjected peoples, it would be idle to suppose that
wild mutiny and stern repression (going to the length of bomb
ing open villages) can go on In Egypt without comment or
criticism from our allies, to say nothing of our late enemies.
“ If Egypt were under any rule but British, British critics in
general would hold it a matter of course that such a mutiny as
has recently been quelled there must signifv some kind of misgovernment. The fact that we can quell a mutiny by bombing,
from aeroplanes, the open villages o f a population which simply
can not organize a military resistance, is no proof whatever
either o f the general badness of the Egyptian cause or the good
ness of ours.
“ Becollections o f the history of Boland might suffice to move
thinking men in this country to seek for a policy which shall
not merely ‘ hold down ’ the Egyptian people now but make it
unnecessary lo hold them down in future. Whatever the pa
triots in Parliament and the Nortlicliffe press may say for the
moment, this bombing of open villages and flogging o f rioters
can not improve our reputation either in Christendom or in the
Moslem w orld; and it will not be permanently possible even for
the patriots to keep up a denunciation o f Germans for their past
bombing of noncombatants here while we bomb noncombatants
in Egypt. And there is a painful probability that such episodes
Avill recur unless we make a new departure in Egyptian Gov
ernment.
“ B ,s presumably' well known that the present system is one
embodying a few of the forms without any o f the realities of
self-government. At every stage at which those forms have
been adjusted the obvious purpose was to give nothing approach
ing real power o f any kind either to the mass of the people or
to Egyptian ministers who nominally administered. For such
a policy of emasculation the private defense has always been
that neither ministers nor people can be trusted, the former to
govern or the latter to control them. It may simplify the dis
cussion to admit that for this plea there is some justification.
Tt would be hard to prove that the majority o f the electors iii
Britain who polled at the last general election are well qualified
to vote. They are now showing signs o f a change of feeling
which could hardly he paralleled in oriental history for quick
ness and completeness. That being so, it is not to he supposed
147311— 20090
16
that the people o f Egypt are properly fitted to exercise political
power. But that does not alter the fact that in Egypt, as in
Europe, the only way in which any population can become fitted
to exercise political power is to begin using some degree of
political choice.
“ Certainly it is important that some amount o f education, in
the ordinary sense o f the term, should precede political en
franchisement—though a franchise long subsisted with a low
standard o f popular education in our own country. But Eng
lishmen can not long, plead lack o f education in Egypt as a
ground for denying it any measure of real self-government,
when it is bv the decision of the British control that Egypt
remains so largely uneducated. The policy of Lord Cromer in
that regard was fatally transparent. Until within a short
time of his resignation he refused even the appeal o f his Brit
ish (the controlling) minister of education to spend more than
£200,000 a year on the schooling of a nation numbering some
twelve millions. The finances o f Egypt, he declared, did not
admit o f an expenditure much in excess of that. When criti
cism was brought to bear In the British Parliament he quickly
discovered that he could spend the £400,000 his minister had
asked fo r; and since his day the expenditure has greatly in
creased, still without giving Egypt a good system o f schools.
‘‘ The reforms, such as they are, have been largely the result
of native pressure. Egyptians of all classes have long agitated
for better and better schools, and in particular for a good mod
ern university. Before the advent of the British control Egypt
was to a very considerable extent in a state of educational
progress. A study o f the catalogue o f the Khedlval Library in
1900 revealed that quite a large number of scientific and other
works had been translated into Arabic, chiefly from the French,
in the days of Ismail and his predecessors. Yet when it was
urged upon Lord Cromer’s Government that science teaching
should be introduced into the program o f the secondary schools
the official answer was that hooks for the purpose did not
exist. As they had existed a generation before, the irresistible
conclusion was that the British control had let Egypt retro
grade from the level reached under Moslem rule. So reaction
ary was the influence o f the Cromer tradition that only after
much pressure was it made possible for students o f agriculture
in Egypt to secure instruction in their own language. The
Cromer tradition was that they must master either French or
English for the purpose. Let the reader try to imagine what
would he said of a British Government that refused to give
instruction in scientific agriculture to farmers’ sons save in a
foreign language.
“ It is perfectly true that Lord Cromer managed Egyptian
finances well and economically, in contrast with the extremely
bad management of the old regime. Probably no native gov
ernment could have approached to t'le efficiency, to say nothing
of the rectitude, o f the British control in finance. As to all
that there is no dispute; but it savors almost o f burlesque to
argue that the duty of the British control toward Egypt was
fulfilled when Egypt was made to pay full interest on all its
debts and meet the whole costs, civil and military, o f the Brit
ish administration. For generations past it has been an axiom
in our politics that it is the business o f governments to look to
147311— 20090
17
tlie moral welfare of tlic nation as well as to its finance, and
it is upon their contributions to that welfare that political
parties now mainly found their claims to support. The very
backwardness of Egypt was a ground for special measures to
promote her moral progress. To make the defense o f British
rule consist in having regulated her finances and increased her
productivity while leaving her more backward than ever in the
elements of qualification for self-government was to discredit
the cause that was defended. The obvious answer of every im
partial foreigner to such a plea would be: ‘ You claim credit
and gratitude for having secured the safe payment o f your own
bondholders, in whose interest you originally entered Egypt.
Orderly government was essential to that. To earn credit and
gratitude you must do a good deal more. You must raise the
levels of life for the people of Egypt as you confessedly seek to
raise them for your people at home. And you must know—
what nation can know better?—that a people declared unfit to
manage their own affairs are thereby pronounced low in the
human scale.’
“ It is, to say the least, unfortunate for the British Govern
ment that such an outbreak in Egypt should follow immediately
on the close of the World War, when ‘ self-determination for
subject races ’ passes for a principle with the peace conference.
Had those responsible for the control of Egypt in the past
sought to fulfill our old pledges with more o f good will and
good faith, we might have escaped this unpleasant emergency,
though it will doubtless be argued that Lord Morley’s progres
sive measures in India did not avert sedition there in 1914 and
later. But the conclusion come to by responsible inquirers as
regards India is obviously still more compulsive as regards
Egypt. Our duty to prepare that country for self-government
has been again and again officially avowed from the time o f our
first entrance; and those who think we can forever go on sim
ply repressing discontent and maintaining the status quo are
plainly unteachable by events. If the British control does not
get newly into touch with intelligent native opinion, the situa
tion will infallibly go from bad to worse, and this in the eves
of a world newly critical of •imperialism.’ That long-vaunted
ideal has somewhat rapidly become a term o f censure for
whole nations.
“ We shall be faced, as a matter o f course, with the regulation
formula that there can be no talk o f concessions to a people
who have been recently in rebellion. The Russian bureaucracy
used to talk in that fashion, and we have seen the outcome. If
those responsible for British rule in Egypt have in any degree
learned the lesson, they will as soon as possible set about secur
ing native support by taking natives into council; by giving room
for real initiative to the nominal Egyptian ministers, who must
know a good deal more about Egypt than do more than a few
of the British bureaucracy there, civil or m ilitary; and by giv
ing some reality to the form o f self-government which thus far
has been allowed to count for next to nothing in Egyptian
politics. Before the war there were chronic and bitter com
plaints about the disregard o f native wishes, as expressed by
the elected representatives, in regard to matters o f administra
tion nearly concerning Egyptian welfare. During the war there,
as here, must have been the possible minimum o f consultation
147311— 20090
of the people. Perhaps what has happened in the English byelections within the last month or two may suffice to suggest
to the British Government that the sooner it resumes touch
with public opinion everywhere the better it will be for na
tional stability, to say nothing of the stability of the ministry.
Egyptian mutiny is only the nouconstitutional version o f the
dissatisfaction that expresses itself in elections in the constitu
tional country. And, to put the case at its lowest, the safe
course is to set about making Egypt constitutional.
“ J . M. R o b k r t s o x . ”
“ Capt. Wedgwood Bonn, in the House of Commons on May
15, initiated a debate on the state o f affairs in Egypt. Among
other things, he sa id :
“ 4It was not too much to say that the reason for the calm
ness in Egypt, even when the Turks were successful and had
overrun the Sinai Peninsula, was that the Egyptians trusted
that the assistance they had rendered to the Empire In the war
would not be permitted to interfere with the satisfaction of
their legitimate aspirations. * * *
“ 4The peace that had reigned in 1914, because there was
trust, was converted by somebody in 1919, when there was dis
appointment, into a national insurrection. * * * The unrest
among that large, busy, and influential class o f people was
caused by the fact that changes were in the air and nobody
had been consulted. The underlying cause was that the status'
o f Egypt had been altered.’
44Mr. Spoor (Bishop Auckland) said in the House o f Com
mons on the same d a y :
“ ‘ The situation in Egypt appeared to have been aggravated
enormously because Egypt was under military control, and mili
tary control o f a very short-sighted kind. The methods of gov
erning Egypt had become more and more military; and in re
gard to the censorship of information which was allowed to be
sent from that country, it was interesting to note that the Times
asserted ever since 1914 it had been the most inept and most
savagely ruthless censorship in any country under British con
trol.
“ 'There were facts which could be thoroughly well au
thenticated o f atrocities o f the most extreme kind that had
been committed with the full sanction o f our own military au
thorities. * * * The allegation (o f atrocities) had become
so general, not only in this country but throughout Europe,
that it was high time an inquiry was held.’
FRENCH VIEWS.
[Speech of M. d o m i c , of t h e F r e n c h C h a m b e r o f Deputies, at tie- sitting
of S e p t . 4, l'Jli). T r a n s l a t e d f r o m Lc J o u r n a l Otfieiel.)
“ M. Goude: In his speech o f yesterday M. Franklin-Boullon
said that under the appearance o f 4no compromise’ M. Clemenceau had surrendered on every point.
441 will try to show that the president o f the council (prime
minister) at any rate adopted these tactics when it canto to
settling a question that lie understands thoroughly, a question
often discussed from this tribune and itism which the prime
minister lias often spoken.
147311— 20090
19
“ Article 147 of tlie treaty submitted to us for ratification
says:
“ ‘ Germany declares that she recognizes the protectorate
proclaimed over Egypt by Great Britain on the 18tli o f Decem
ber, 1914/
“ This means that Egypt is placed under the protectorate o f
England without this agreement having ever been ratified by
Parliament. Neither in the treaty o f peace nor in the report o f
M. Maurice Long has one dared to directly approach this ques
tion ; it is well known that it is a thorny one and that it is
absolutely contrary to all the principles laid down by the En
tente Governments during the course o f the war.
“ It is known that at the present moment— in spite o f their
appeals to all the parliaments and all the politicians of the
Entente a people are being placed under the domination of
another people. This is being done in an underhand way.
We are not asked at first—we the French Chamber—to ratify
an agreement recognizing the protectorate declared by England
over Egypt in 1914, but we are to ld : ‘ We are compelling Ger
many to recognize the protectorate proclaimed by England over
Egypt/
“ The question is brought up, I repeat, in an underhand
way, because it is known that if the sole question o f the English
protectorate in Egypt was brought before Parliament a great
debate would spring up, and I am convinced that if this question
was the only one under discussion before you such a project o f
the treaty would never be approved. I therefore wish to know
and I ask for what reasons the French Government thinks it
right to place under English domination the Egyptian people,
who protest with all their might and all their energy, as I will
show.
“ Is it not well known that Egypt has always shown its de
termination to be independent? Is it not well known that it is
worthy of this independence?
The prime minister himself has vigorously defended the dig
nity o f Egypt. He knows, as we do, that the production of
Egypt supports its 10,000,000 of inhabitants, including Egyptians
and Soudanese; that almost all the landed property belongs
to Egyptians; that its farms are cultivated by native-born sub
jects to the exclusion o f all others; that this country had in
1913 a foreign commerce amounting in value to 12,000.000,000
francs (about 82,400,000,000) ; that the national budget of
Egypt is 800,000,000 francs (about $160,000,000); that intel
lectual Egyptians cultivate French traditions; that there exists
in this country boys’ and girls' colleges in large numbers, as
well as different high schools, where the French language is
exclusively employed, without forgetting the celebrated law
school.
“ Fifty years ago the Khedive could declare:
“ ‘ My country is no longer in Africa. It is a part of Europe/
“ Thirty years or so ago, the prime minister, rising in this
tribune to defend Egyptian independence as I defend it to-day,
declared:
“ ‘ I do not desire to enter into ethnographic consideration as
regard the Egyptian race—this is not the place for it—but
it is certain that this race, o f which we see some remarkable
specimens amongst us, in our schools, is a calm and docile
147311— 20090
race— too docile, it may be said at certain moments—susceptible
o f culture and application, an industrious race o f which surely
one has every reason to expect much. No one can stand up in
this tribune, no one will come into this Parliament of the
Republic to say that these men are incapable of freeing them
selves and that we owe no other duty to them, except to govern
them with a courbash and a cudgel.’
“ [ ‘ Hear! H e a r !’ at the extreme left.]
“ Thirty-two years ago the prime minister made these declara
tions. Since then, as we know, European civilization has been
spreading itself more and more in Egypt, which ardently
desires to Europeanize its civilization, which is modifying its
political structure, which has extended the suffrage to all
citizens, who have attained their twentieth year—a reform that
certain European nations might well envy.
“ It must be remembered that at the moment of the declara
tion of war, on the 2d o f August, 1914, Egypt was independent under the sole suzerainty o f the Sultan of Turkey.
This suzerainty, approved in 1840 by the European powers,
consisted in the payment each year by Egypt o f a tribute of
15,000,000 francs to the Sultan—and that was all. Having
done this, it had an absolute right recognized by the European
powers, to manage its own affairs according to its fancy and
to have its own constitution. I know well that little by little
England, by the force o f her armies, had got hold o f Egyptian
institutions, that the members o f the Government were hardly
anything more than English officials, and that the President of
the L e g i s l a t i v e Assembly is appointed by the Government. But
this was putting into practice the formula against which we
are all struggling: ‘ Might is right.’ England had no precise
and express right in Egypt. The most famous English poli
ticians, the heads o f the Government, have said so on several
occasions, as, for instance, Gladstone, who in the House o f
Commons as far back as the 2.3d of June, 1884, stated:
“ ‘ We pledge ourselves not to prolong our military occupation
in Egypt beyond the 1st o f January, 1888.’
“ it is the same prime minister who said, on the I8tli o f Sep
tember, 1885:
“ ‘ England ought to withdraw from Egypt as soon as Britisli
honor will permit o f it. We will never admit that there can
ho any question o f annexation, o f a protectorate, or even of an
indefinite prolongation of the English occupation, and we re
pudiate all idea of any compensation whatsoever for the efforts
and sacrifices that we have made up to this day. English
policy is founded on an error, and what is best to be done in
a matter like this is promptly to put an end to such an inter
vention.’
“ It is Lord Salisbury who said on the 10th of June, 1887, in
the House o f Lords:
“ ‘ Her Majesty’s Government, by virtue of its previous en
gagements and o f the rules of international law’, does not think
that it can place Egypt under a protectorate. Its rule should bo
limited to coming to an understanding with the Porte to defend
the interests of 'the Khedive against political calamities and to
main the statu quo in the valley o f the Nile.’
“ There has been a large number o f the declarations, but to
shorten matters I will only quote the one made by Lord Salis
bury In the House o f Lords on the 12th o f August, 18.80:
147311—20090
21
“ ‘ VVe can not proclaim our protectorate over Egypt nor our
intention to occupy it effectively and perpetually f this would
amount to breaking the international pledges signed by Eng
land.’
“ Such was the state of the question during the occupation.
In the agreement called the * entente cordiale,’ concluded in 3904
between France and England, article 1 begins as follows:
The Government o f His Britannic Majesty declares that it
has not the intention to change the political state o f Egypt.’
^ “ In the course of the discussion of the Fashoda affair, when
England asked me to withdraw, it was not because the Sudan
belonged or could belong to England; it was because o f Eng
land s declaration that it was Egyptian territory. England has,
then, clearly recognized on every' occasion the independence of
Egypt.
Has the country, which was independent under the sole
suzerainty o f the Sultan and under the conditions that I have
precisely indicated, become less deserving o f our consideration
during the war? Is there any reason for modifying, by lowering
it, the political status o f Egypt?
\ou know that Egypt came at once and took her stand with
the Allies. It must not be forgotten that the silver thread to
which I referred a moment ago still bound it to Turkey.
“ Before Turkey declared war Egypt placed itself at the dis
posal o f England— of the English consul general—by saying:
“ ‘ If you will promise us our complete independence, if the
English armies undertake to quit our country after the war, we
Mill place our financial resources, our provisions, our arms, and
our sons, all, in fact, that we possess, at your entire disposal ;
we are ready to go with you to the Continent to defend the inter
ests of the Allies.’
“ To the offer thus made at this moment England replied by a
downright refusal.
Later the situation got worse. Turkey, who was suzerain
over Egypt, went to war against the Allies. Egypt renewed its
offer in the same way. The Sultan, be it noted, had proclaimed
a holy war. Do not forget that Egypt is a Mussulman country,
but a country of semi-European civilization, where a very lively
sympathy for Europe exists. In spite o f the powerful effect that
the proclamation of the holy war might have on the peasant
masses, who are profoundly Mussulman in sentiment, Egypt,
attracted by European culture, came to us and said once more •
‘ Insure us our independence after the war and we are with you"
body and soul.’
“ We have made use of Egypt; it is the Egyptian artillery
which checked the impetus of the German-Turkish armies in
February, 1935, when these armies tried to seize the Suez Canal
and to cut our communications. Egypt put its cotton at the
disposal o f Europe. Later on, in face of the necessity of grow
ing wheat, it abandoned the profitable production of cotton in
order to cultivate wheat, and it put all its provisions at the
disposal o f the army o f Salonica, which it victualed to a great
extent.
“ With a population o f 13,000,000 of inhabitants it has placed
1,200.000 workers at the disposal o f the Entente—a figure recog
nized as exact by the English.
All this Egypt has done for the Entente. Have we now
the right as a recompense for these services to violate the very
147311— 20090
'iig
!» 1
t.
*
22
principles tliat everyone here Invokes, the principles which
have been laid down with precision by President Wilson, when,
for instance, lie said, ‘ Peoples ought not be passed on from one
sovereignty to another by an- international conference or an
arrangement between rivals and adversaries.’ [ ‘ Hear, hear,’
from several benches of the extreme left.] The national aspi
rations ought to be respected. The peoples ought to-day be gov
erned by their own consent.
“ Is it not there, besides an international interest, that
Egypt shall not be placed under the domination o f a European
power? I have here under my eyes a short extract from a
speech o f M. de Freycinet, then prime minister, who on the 27th
o f November, 1880, summed up admirably the Egyptian question
by saying:
'■ ‘ Egypt is a sort of crossing for the Old
orld. It is a
j u n c t i o n between Europe, Asia, and Africa.
It is a highway
which permits of the penetration o f the Far East possessions.
Besides, he who is master of Egypt is master to a great extent
o f the Mediterranean. It is certain that if a great power in
stalled itself definitely in Egypt this would be a very heavy
blow to French influence in the Mediterranean in such a man
ner that, in my estimation, France ought never reconcile her
self to the idea that Egypt could definitely fall into the hands of
a European power.’ [‘ Hear, hear,’ from the extreme left.]
“ This is an undoubted fact. And the question ought not to
be examined merely from a material standi>oint, but also from
a moral point of view. This Mussulman country into which
European civilization penetrates little by little is being driven
by us into a corner where violence is its only recourse. This is
henceforth its only political issue. We could, however, have
made of Egypt a point o f contact between eastern and western
civilization. [‘ Hear, hear,’ from the extreme left.] This is ex
actly what we are not doing.
“ Not only will this country, which came o f its own accord
to the Entente, receive no compensation, hut by virtue o f the
treaty of peace its hounds will he tightened and its chains
made heavier.
** * * * ju yds Chamber, which during such a long time
and so very justly complained o f the Bismarekian policy, which
had left in the side of France the painful scar o f AlsaceLorraine, it is my desire to declare that it is helping to create
at this moment another Alsace-Lorraine.
“ 4 M. J ean L onguet . Ten Alsace-Lorraiues.’
*“ M. Goude. Certainly, many Alsace-Lorraiues; but this onc
Is particularly characteristic. * * * ’
“ Egypt, which during the whole o f the war and in order to
insure the victory o f the Allies, has endured without com
plaining the yoke o f English militarism, which lias borne with
all the measures o f censure, with all the house searches, trial
sentences etc.
**4M. J ean L onguet. With the atrocities!
444M. G oude. Atrocities. Yes; that is the word. Egypt will
have no more o f that now. It is in full open revolt. You are
aware that the president o f the Egyptian Council (Egyptian
prime minister), who, however, Is a nominee o f the English
and in a certain sense an English official, found the Egyptian
people so unanimous against this domination and the pro147311— 20090
2a
tectorute that ho resigned. You know that the officials who
are specially under English authority, seeing that their written
protests were distorted, went out on a general strike in order
to emphasize their vote o f independence. You are aware that
the workingmen are on strike; that revolts have taken place
in the streets, in which all classes and creeds have been united
by a common determination to win independence; that crowds
have been fired upon; that there have been massacres; and that
condemnations have been pronounced.’
“ Here we have a university professor— a fellow— condemned
to penal servitude for life for having made a speech in favor
of independence. Here, again—to mention one case amongst
many others— we have Ibrahim Chalami sent to the gallows
for having cried out at the head o f a demonstration, ‘ Liberty,
equality, fraternity.’
^• Haiitiie. They condemn even those who crv “ Long live
France.
“ ‘ M. G oude. There are thousands o f examples o f this kind.
To maintain its protectorate, England has at present 150,000
soldiers, she is obliged to keep soldiers in every village, because amongst university men, notables, commercial men, fella
heen, no one will accept this domination at any price and
everyone demands independence. Thrilling appeals have been
addressed to President Wilson, M. Clemenceau, to the chair
man of our peace commission, to the Italian, American, and
English Parliaments.’
M. J ean L onguet. They are all deaf.’
“ ‘ M. G ouge. But at all times and everywhere everybody
remains deaf except, however, the American Senate, the* com
m is s io n
o f which has proclaimed that Egypt ought to be as
Independent o f English diplomacy as of Turkish diplomacy,
and that It must bo left master o f its own destinies.*
“ ‘ Monsieur le President o f the Council,’ said the orator ad
dressing M. Clemenceau, ‘ not only have you abaudoned Egypt
that you know personally, since, I repeat to you, you have
spoken very hard words against our friends* the English,
from this very tribune when this question was under discus
sion, bnt, what is graver still—what seems to me monstrous—
is that a peace conference brought together to settle the ques
tion of the entire world has, upon the orders o f the English
Government, refused to hear the Egyptian delegation, composed,
as you well know, o f the president o f the Chamber o f Depu
ties o f that country, o f members o f Parliament, o f representa
tives o f the intellectual classes, and of Egyptian notables.
And by refusing to hear them you have precipitated Egypt
into the only path left open to it— the path o f violence»
“ I ask you, M. the president of the council, how can E<wnt
otherwise get out of the situation in which you have placed it?
Yes; by your attitude and your decisions you have decreed for
that country violence and revolution.
“ Tou said o f Egypt that its inhabitants were pacific and do
cile—too docile, perhaps. A heap o f iniquities have indeed l)een
necessary to provoke the revolt o f such a peaceable race.
“ How is it possible to better such a situation? Is there anv
means of doing so? To whom should the Egvptian national rep
resentatives apply? They already have tried all the means at
their disposal.
14 7 3 11— 20090
24
“ The vice president o f the Chamber of Deputies and several
o f his colleagues have been imprisoned simply because they
wanted to come to Europe to be heard by a delegation of the
peace conference. And never at any single moment has tills
conference been willing to listen to them.
“ More Ilian that, the Egyptian Army has been utilized during
the war to occupy Hedjaz. The Egyptian armies have been
equally employed to occupy Soudan and put a stop to the Ger
man maneuvers. To-day at the conference o f the peace, the King
of Hedjaz is received—a King entirely of English manufacture
created in order that England might have an additional vote.
And this King, who has just come into existence, who repre
sents a country inhabited exclusively by nomadic tribes—this
King has been given the right to sign a treaty in which a protec
torate has been imposed on the neighboring Egyptian people.
“ To this point have you gone in your injustices toward Egypt,
and yet, M. le president of the council, when you delivered
the speech that I have recalled— on the question o f Egypt and
the Anglo-French relations—you concluded by saying: ‘Assuredly
i f the end o f the Anglo-French alliance such as it has been de
picted to us and such as it would be applied in practice was to
organize with our aid the slavery o f the Egyptian people and to
reduce them to the position o f an inferior race, I would repudiate
it with the greatest energy, and I would say to our pretended
allies— to our accomplices, I should call them—that I refund
my share o f responsibility in such a reprehensible undertaking.
“ Thirty years ago you expressed yourself in this manner.
Since then Egypt has progressed; it has come closer and closer
to European civilization. And you want to-day to make us
share the responsibility for the crime committed against Egypt
in the peace treaty. For my part, T will not lend myself to it.
Besides, I am certain that the English people repudiating Eng
lish bourgeois traditions [applause on some benches o f the ex
treme left] and united with the French people, will soon redress
the injustice and the crime that you are committing by once more
enslaving Egypt. [Applause at extreme left.]”
AMERICAN VIEWS.
“ President Wilson, in his great address at Mount Vernon, the
home o f Washington, on July 4 , 1918, sa id :
“ ‘ There can be hut one issue. The settlement must be tiual.
There can bo no compromise. No lialf-way decision would be tol
erable. No half-way decision is conceivable. These are the ends
for which the associated peoples o f ihe world are fighting, and
which must be conceded them before there can be i>eaee. * *
The settlement o f every question, whether of territory or sover
eignty or economic arrangement or o f political relationship upon
the basis of the free acceptance of that settlement by the people
immediately concerned and not upon the basis of th>' material
interest or advantage of any other nation or people which may
desire a different settlement for the sake of its own influence or
mastery. * * * What we seek is the reign of law based upon
the consent o f the governed and sustained by the organized
opinion o f mankind.’ [Italics ours.]
“ Shall Egypt, without the consent of the Egyptians, be turned
over to England for the sake o f England's influence or mastery?
147311— 20000
25
“ In the 14 points advanced by President Wilson we find the fol
lowing pertinent* and applicable provisions:
Point 14. A general association of nations must be formed
under specific covenants for the purpose of affording mutual
guarantees of political independence and territorial integrity to
great and small States alike.' [Italics ours.]
Ibis principle applied to Egypt would lead to a conclusion di
rectly opposite to the indorsement o f the British seizure o f Egypt
and destruction o f Egypt’s independence.
‘‘Applying the principle o f the seventh point to Egypt and only
substituting the word ‘ Egypt ’ for ‘ Belgium,’ the seventh point
w m iln
r o f in •
Egypt, the whole world will agree, must be evacuated and
restoied without any attempt to limit the sovereignty which she
enjoys in common with all other free nations. No other single
act will serve as this will serve to restore confidence among the
nations^ in the laws which they have themselves set and deter*<n t^G‘ £°vernment of their relations with one another.
Without this healing act the whole structure and validity of
international hm is forever impaired.’ [Italics ours.] ”
THE QUESTION OF EGYPT.
[P r o m
.
th e
W a s h in g to n
T o st,
T h u rsd ay,
O c t.
16,
1 9 1 9 .]
“ The question of Egypt’s status is brought to the front by
Senator O w e n ’ s proposed reservation— interpretative resolu
tion— to the peace treaty. The fact that this reservation— resolu
tion— is offered by a Democrat, a strong supporter of the Presi
dent, increases the weight of the objections which are finding
voice in the United States against the snuffing out o f the principle of self-determination of well-defined nationalities. Presi
dent \\ "son gained the support o f liberty-loving men throughout
the world when he set forth that principle and announced that
it would be made effective at Paris. Jn so far as the conference
adheied to this principle its work was good and permanent, and
\\heie\ei the piinciple was violated there have been disorders
ami threats o f war.
“ Senator O w e n ’ s proposed reservation (resolution) provides
that the Biltish protectorate over Egypt shall be recognized as
merely a means through which the nominal suzerainty of
Turkey over Egypt shall be transferred to the Egyptian peo
ple, and shall not he construed to mean recognition by the
United States of British sovereignty over the Egyptian people.
“ The story of British ascendancy over Egypt, now apparently
to cultiminate in the extinction o f self-government is compara
tively brief. The first occupation by British troops was in 1882
and the ostensible object was to suppress a rebellion against
the Khedive. The occupation was to be only temporary aceording to Premier Gladstone. He declared that England had given
‘ specific and solemn pledges to the world * that it would not
annex Egypt, and he added that these pledges had earned for
England the confidence o f Europe. Evidently there was no in
tention at that time to absorb Egypt. Yet the troops were not
withdrawn, and have never been withdrawn, notwithstanding
147311— 20090
6
26
the persistent efforts of the Egyptian people to recover ihe
practical independence they had enjoyed.
“ After the World W ar began the British Government re
moved the Khedive and appointed another, as a war measure,
and announced that Egypt was placed under a British protec
torate. The Egyptian people might have been alarmed by this
had not King George himself sent a letter to the Egyptians,
telling them that the change was but a step toward the com
plete independence o f the people, and that the protectorate
would endure only during the war period. This reassurance
was satisfactory, and the Egyptians joined the Allies heartily,
furnishing troops and large numbers of laborers who built the
railroads, pipe lines, and other military works in Palestine and
elsewhere.
“ When the armistice was signed the Egyptians believed the
day of their national independence to be at hand. They sent a
commission to Paris to attend the peace conference and to ar
range for recognition of the independence of Egypt. But the
leaders o f this commission were seized by British officers and
deported to Malta, where they were placed in a German prison
camp.
“ From that hour there has been a smoldering volcano o f re
volt in Egypt. The people have had several serious clashes with
British soldiers In which machine guns have quelled popular
uprisings. In the meantime Great Britain has obtained from
President Wilson a conditional recognition of the protectorate
over Egypt, and In the peace treaty is a clause requiring Ger
many to recognize the protectorate.
“ The intentions o f Great Britain toward Egypt are some
what confused in the minds of other Governments on account of
conflicting statements issued by British authority. When the
Egyptian question was before the Senate Committee on Foreign
Relations on September 2, the British Embassy here made pub
lic a statement declaring that * the British Government has
carefully avoided destroying Egyptian sovereignty,’ and that the
British flag in Egypt covered only British military establish
ments. But the British foreign ofliee a few days later an
nounced that Great Britain had succeeded to the sovereignty
o f Turkey over Egypt and had acquired Egypt as spoils o f war,
apparently discarding the pledge o f King George and develop
ing a new policy o f permanent control over Egypt.
“ It may be that unfortunately worded or unauthorized state
ments by British officials are at the bottom of the public con
fusion. In that case a clear reaffirmation o f Britain’s intention
to relinquish the protectorate and restore Egypt to its people
as soon as the peace treaty is ratified would remove all appre
hension. In the meantime, taking the treaty as It finds it, the
Senate will doubtless adopt a reservation on the lines sug
gested by Senator O w k n , for it is quite evident that the United
States can not consistently subscribe to si general principle of
self-determination and independence o f nations and yet concur
in the involuntary absorption o f Egypt by Great Britain.”
147311— 20090
27
EGYPTIAN BETRAYAL THE MOST HEINOUS OF
THE REACTIONIST WRONGS.
[ B y G e o r g e H . S li i b le y .]
“ The case o f the people o f Egypt is a betraval the most
heinous o f the reactionist wrongs.
*' Dn December 21, 1914, five months after the opening of the
Avar, the British Liberal Government, after deposing the Egyp
tian Khedive and placing in office a Sultan of their own choos
ing, spoke as follows to the people of Egypt in the name o f the
King o f England:
' I feel convinced that you [the new Sultan] will be able,
wdh the cooperation of your ministers and the protectorate of
Great Britain, to overcome all influences which are seeking to
destroy the independence of Egypt * *
(London Times.)
And yet the so-called peace conference o f the allied coalition
governments has actually refused to the. 13,00Q.000 Egyptians
llicit independence under the protection of the league of nations,
and the Biitish Reactionist Rovernwent has shot down hundreds
of the Egyptians who had the manhood to assert their lawfully
established! lights, won in p a r t o f the lives and the sacrifices
of wc Americans!
EGYPT’S SOVEREIGNTY VIOUTED.
[B y H e r b e r t A d a m s G ib b o n s , s o m e tim e fe llo w o f P r in c e to n U n iv e r s it y
a u th o r o f th e N ew M a p o f E u ro p e, th e N e w M a p o f A s ia , th e N e w
M a p o f A fr ic a , etc ]
“ The ‘ interpretative resolutions ’ presented by Senator O w en
in the Senate on Tuesday greatly encourage liberal thinkers, who
are dissatisfied with the treaty at Versailles not for party or
internal but for international reasons. Senator O w e n is a
Democrat and a loyal supporter of the administration. He makes
it clear that he intends to vote for ratifying the treaty without
amendment or reservation. But he feels that the Senate, while
unqualifiedly accepting the document from a technical point of
view, should not fall to let the world know how the United
States stands in regard to many o f its provisions.
“ Senator O w en wants the United States to start to work
immediately for a change in the league covenant that will give
freedom to subject States capable o f self-government. Senator
O w en mentions specifically a great wrong done to a sovereign
State by the treaty o f Versailles.
“ ‘ That the protectorate which Germany recognizes in Great
Britain over Egypt,’ reads the Owen resolution, ‘ is understood
to be merely a means through which the nominal suzerainty of
Turkey over Egypt shall be transformed to the Egyptian people
and shall not be construed as a recognition by the United States
in Great Britain o f any sovereign rights over the Egyptian peo
ple or as depriving the people of Egypt o f any right of selfgovernment.’
“ This resolution is apt to displease British public opinion,
and Senator O w e n may be accused of indulging in the old
sport o f twisting the lion’s tail. But the accusation Is un
founded. I f we allowed our natural sentiments of affection
147311— 20090
for our kinsmen overseas to keep us silent at this time, we
should find them getting away with a lot o f booty— and our
selves unconsciously or unthinkingly giving sanction to high
handed and unjustified acts o f oppression and international
robbery. We can not he too strong in our condemnation, for
instance, o f the Anglo-Persian treaty, concluded secretly by
intimidation and bribery at the very moment we are asked
to give our cooperation to a society o f nations which Persia
is invited to join.
“ The case o f Egypt stands out with remarkable clearness, it
is one o f 1lie few moot questions o f the treaty <«f Versailles
which has not two sides. The British protectorate over Egypt
is an illegal action, not only violating the sovereignty of Egypt,
hut also the promises officially made by generations <>i British
statesmen. No denial of this fact is possible. Open any history
or go to British official correspondence published by the British
foreign office, and you will read the repeated assurances given
to the Egyptians and to llie other powers that Great Britain
did not intend to stay in Egypt and would not establish a proeetorate over Egypt.
.
“ The excuse for not hearing the representatives of Egypt
at the peace conference was that the question o f Egypt did not
come within the scope of the conference. If this were valid,
why did the treaty of Versailles mention Egypt? And what
right had the powers to deal with Egyptian questions at all?
But Egypt did enter within the scope of the conference,
because it was a country whose status had been changed by the
war and during the war. Technically, as well as morally, the
Egyptians had as much right to participation in the confer
ence as the Arabs of the Hedjaz, and more right to inde
pendence. For Egypt was only nominally under the suzerainty
o f Turkey. By her declaration of war against Turkey, the
bond of. vassalage was broken. Ipso facto Egypt was inde
pendent.
“ But the British, who were occupying the country, pro
c l a i m e d — without taking into their confidence the Egyptian
legislative assembly or asking the consent o f Ilm Egyptian
people— their protectorate over Egypt. In war wliat is exi»edient is justifiable. Although formally protesting against this
violation of pledges given and reiterated, the Egyptians co
operated lovally with the British throughout the war, waiting
for the jieaee conference to deside upon the legality o f British
action. The prime minister, who consented to serve the new
regime and who continued in office throughout the war, told
me when 1 was in Cairo in 191G that lie was simply waiting
until the end c f the war to hold the British to their promises.
After the armistice Rushdi Pasha asked to he allowed to go to
London to take up the matter of the status o f Egypt with the
British. Permission was refused. A rigorous censorship was
maintained. The Egyptians were held prisoners in their own
country.
, , ,
“ Rushdi Pasha and the entire cabinet resigned. A period of
military dictatorship began. When the elected represent a ti\e<
o f the Egyptian i>eople asked for passports to proceed to Paris,
the British suddenly arrested without warrant or warning the
president o f the delegation and three o f its leaders and deported
29
them to Malta. This, led to tlie insurrection put down by ma
chine guns and burning of villages. The British used the means
of suppressing what they called ‘ rebellion ’ which the world
roundly condemned the Germans for in Belgium. Finally, force
of Egyptian public opinion compelled the release o f the dele
gates and the granting o f passports for Paris. But the Egyptian
delegation, after its arrival in Paris, was never heard by the
corifei once. The stipulation compelling Germany to recognize
the British protectorate was inserted in the treaty o f Versailles
in defiance o f the basic principle President Wilson had declared
' ' °V( ( 10 f°*lowed in making peace. A whole nation was robbed
sV ^ .f v e n u g .i t y and its international status changed against
its vu and, without having been heard, Egypt was Shantung
over, again.
“ \ wo,dd n°t have my readers think that I am writing without' kno\\ ledge o f the facts. A White Book has just been pub
lished h\ the Egyptian delegation, which contains documents
setting forth the history o f the past year. The British foreign
office does not deny the authenticity of these documents. As
foi tiie men deported to Malta, I know them personally. No
foreign e l, even a Britisher, who knows Egypt can deny that
these men a ie honorable and capable and that they represent
flu' Egyptian people. The president of the delegation. Zagloul
Pasha, is one of the best loved men in Egypt, a veritable father
o f his people, Mohammed Mahmoud Pasha, a graduate of Ox
ford, was formerly governor of the Suez Canal. The other
members o f the delegation include the Sheik o f the Arabs of
the Fayouni, the foremost landowners and lawyers in Egypt, and
the librarian of the National Eibrary. They are the cream of
the Christian element and the Greek Orthodox and Catholic ele
ment. as well as the Mohammedan element. The Egyptians are
united, irrespective of creed, in their determination not to be
bartered from one sovereignty to another like cattle.” * * *
On November 0, 1018, Secretary of State Lansing published
the following to the world:
‘“ From the Secretary of State to the Minister of Switzerland,
in charge of German interests in the United States.
“ ‘ D e p ar t m e n t
of
S tate ,
**‘ November 5, 1918.
“ ‘ S i r : 1 have the honor to request you to transmit the fol
lowing communication to the German Government:
“ ‘ In my note of October 23, 1018, I advised you that the
President had transmitted his correspondence with the German
authorities to the Governments with which the Government of
the United States is associated as a belligerent, with the sug
gestion that, if tiiose Governments were disposed to effect peace
upon the terms and principles indicated, their military advisers
and the military advisers o f the United States be asked to sub
mit to the Governments associated against Germany the neces
sary terms of such armistice as would fully protect the interests
of the peoples involved and insure to the associated Govern
ments the unrestricted power to safeguard and enforce the de
tails of the peace to which the German Government had agreed
provided they deemed such an armistice possible from the mill’
tary point o f view.
147311— 20090
30
“ ; The President is now in receipt o f a memorandum of ob
servations by the allied Governments on this correspondence,
which is as follow s:
“ '" T h e allied Governments have given careful consideration
to the correspondence which 1ms passed between the President
o f the United States and the German Government. Subject to
the qualifications which follow, they declare their willingness
to make peace with the Government o f Germany on the terms
o f peace laid down in the President’s address to Congress of
January, 1918, and the principles o f settlement enunciated in
liis subsequent addresses. They must point out, however, that
clause 2, relating to what is usually described as the freedom
o f the seas, is open to various interpretations, some of which
they could not accept. They must, therefore, reserve to themsehres complete freedom on this subject when they enter the
pence conference.
“ ‘ “ Further, in the conditions of peace laid down in his ad
dress to Congress o f January 8, 1918, the President declared
that invaded territories must be restored as well as evacuated
and freed, and the allied Governments feel that no doubt ought
to be allowed to exist as to what this provision implies. By it
they understand that compensation will be made by Germany
for all damage done to the civilian population of the Allies and
their property by the aggression of Germany by land, by sea,
and from the air.”
“ ‘ I am Instructed by the President to sqy that he is in agree
ment with the interpretation set forth In the last paragraph
o f the memorandum above quoted. I am further instructed by
the President to request you to notify the German Government
that Marshal Foch has been authorized by the Government of
the United States and the Allied Governments to receive prop
erly accredited representatives of the German Government,
and to communicate to them the terms o f the armistice.
“ ‘ Accept, sir, with renewed assurances o f my highest con
sideration.
‘“ (Signed)
K obkkt L a n sin g .’
“ Among other things the President, on January 8, 191 s, in
his address to Congress sa id :
“ ‘ We entered this war because violations of right had
occurred which touched us to the quick and made the life of
our own people impossible unless they were corrected and the
world secured once for all against their recurrence. What we
demand in this war, therefore, is nothing peculiar to ourselves.
It is that the world be made fit and safe to live in ; and par
ticularly that it be made safe for every peace-loving nation
which, like our own, wishes to live its own life, determine its
own institutions, be assured of justice and fair dealing by the
other peoples of the world as against force and selfish aggres
sion. All the peoples o f the world are in effect partners in this
interest, and for our own part we see very clearly that tmless
justice be done to others it will not be done to us. The pro
gram o f the world’s peace, therefore, is our program; and that
program, the only possible program, as we sett it, is tins:
“ ‘ I. Oi*en covenants o f iteace, openly arrived at, after which
there shall be no private international understandings, o f any
147311— 20000
31
kind but diplomacy shall proceed always frankly and in the
public view.
“ ‘ II. Absolute freedom o f navigation upon the seas, outside
territorial waters, alike in peace and in war, except as the
seas may be closed In whole or in part by international action
for the enforcement of international covenants.
III. The removal, so far as possible, o f all economic bar
riers and the establishment of an equality o f trade conditions
among all the nations consenting to the peace and associating
themselves for its maintenance.
“ ‘ IV. Adequate guarantees given and taken that national
armaments will be reduced to the lowest point consistent with
domestic safety.
"
n iee5 ° l,en' inil_1(l(1d. and absolutely impartial adjust
ment ol all colonial claims, based upon a strict observance of
Hie pi in tuple iliat in determining all such questions o f sover
eignty the interests of the populations concerned must have
equal weight with the equitable claims of the Government
whose title is to be determined.
“ ‘ \ I. The evacuation o f all Russian territory and such a
settlement of all questions affecting Russia as will secure the
best and freest cooperation o f the other nations o f the world
in obtaining for her an unhampered and unembarrassed oppor
tunity for the independent determination of her own jiolitical
development and national policy and assure her of a sincere
welcome into the society of free nations under institutions o f
her own choosing; and, more than a welcome, assistance also
of every kind that she may need and may herself desire. The
treatment accorded Russia by her sister nations in the months
to come will be the acid test o f their good will, of their com
prehension of her needs as distinguished from their own inter
ests, and of their intelligent and unselfish sympathy.
“ ‘ VII. Belgium, the whole world will agree, must be evacu
ated and restored, without any attempt to limit the sovereignty
which she enjoys in common with all other free nations. No
other single act will serve as this will serve to restore confi
dence among the nations in the laws which thev have them
selves set and determined for the government of their rela
tions with one another. Without this healing act the whole
structure and validity of international law is forever impaired.
VIII. All french territory should be freed ami the invaded
portions restored, and the wrong done to France by Prussia
in 1871 in the matter o f Alsace-Lorraine, which has unsettled
the peace o f the world for nearly 50 years, should he righted
in order that peace may once more he made secure in the
interest of all.
“ ‘ 1l x - £ readjustment o f the frontiers o f Italv should he
effected along clearly recognizable lines o f nationaiitv.
‘“ X The peoples of Austria-Hungary, whose place among
the nations we wish to see safeguarded and assured, should he
accorded the freest opportunity o f autonomous development
“ ‘ X I; Roumania, Serbia, and Montenegro should be evacuated •
occupied territories restored; Serbia accorded free and secure
access to the sea; and the relations o f the several Balkan
States to one another determined by friendly counsel alon~
historically established lines o f allegiance and nationaiitv* and
147311—20090
*’
U
international guarantees o f the political anil economic iu'tle-'
pendence and territorial integrity of the several Balkan States
should he entered into.
‘•‘ X II. The Turkish portions o f the present Ottoman Empire
should be assured a secure sovereignty, hut the other nation
alities which are now under Turkish rule should be assured
an undoubted security o f life and an absolutely unmolested
opportunity o f autonomous development, and the Dardanelles
should be "permanently opened as a free passage to the ships
and commerce o f all nations under international guarantees.
“ ‘ X III. An independent Polish State should be erected which
should include the territories inhabited by indisputably Polish
populations, which should be assured a free and secure access to
the sea, and whose political and economic independence and ter
ritory integrity should be guaranteed by international covenant.
« ‘ X IV A general association o f nations must be formed
under specific covenants for the purpose of affording mutual
guaranties of political independence and territorial integrity
to great and small States alike.’ ”
[Letter from K in g G eorg e to th e S u lta n o f E g y p t, published in L o n d o n
T im es D ece m b e r 21, 1914.]
« * * * i feel convinced that you will In' able, with the
cooperation o f your ministers and o f the protectorate of Great
Britain, to overcome all influences which are seeking to destroy
the independence o f Egypt * *
1C ab legram t o M a h m ou d P a sh a , S h oreh a m
t o llm a n P a sh a .]
H o te l, fro m
M ahm oud
« In an interview with Cairo newspapers on the 22d instant
Rushdi Pasha— who was prime minister when the Khedive was
dethroned by England and a Sultan appointed, and continued
throughout the war as prime minister o f Egypt and resigned
toward the end of May last— declared that he never consented
to the “ protectorate ” of Great Britain over Egypt, except that
it was temporary and a war measure, and that it would disap
pear when the Allies’ victory was complete, lie asked England
to hear him and to hear the Egyptian nation duly represented
bv the Egyptian delegation. He adds that Egypt’s aid to Eng
land during the war was immense, and that 1,200,000 Egyptians
served on the allied side.’’
147311— 20090
_
INTERNATIONAL FINANCIAL CONFERENCE
SPEECH
OF
HON. ROBERT L. OWEN
OF OKLAHOMA
IN THE
SENATE OF THE UNITED STATES
FRIDAY, JANUARY 16, 1920
W A S H IN G T O N
G O V E R N M E N T P R IN T IN G O F F IC E
1920
15 9 4 6 9 — 20327
http://fraser.stlouisfed.org/
Federal 1
Reserve Bank of St. Louis
SPEECH
OB'
.
H O N . R O B E R T L. O W E N .
IN T E R N A T IO N A L F IN A N C IA L C O N FE R E N C E .
Mr. OWEN. Mr. President, I wish to call the attention of the
Senate to a matter which I regard as of very great national and
international importance. It is a proposal on the part of the
leading business men o f the United States and of the Go\emments of Europe for an international conference for the purpose
o f bringing about a readjustment of the credits of the world.
The American dollar has lost in its purchasing power in an
important way during the last few years; that is, in terms of
commodities, but not in terms of gold.
The reasons why the American dollar has lost in its purchas
ing power I wish "to call to the attention of the Senate.
First, it is due to a great world shortage of commodities
arising from the destruction incident to the war, the stoppage
of the processes of production and distribution o f goods during
the war, and the extraordinary demand from Europe for the
products of this country; second, great gold imports in exchange
for goods, about $1,100,000,000; third, the expansion of credits
in the United States. We have issued an enormous amount of
bonds. Not only has the United States expanded its bond issues
on a very large "scale, amounting to over $26,000,000,000, but our
municipalities and our States have expanded these forms of
credit. Such bonds in the hands of the people are readily con
verted into money under our system.
The expansion of bank deposits, easily converted into money,
other stocks and bonds, easily salable on the stock exchange
and convertible into money, and in America these dollars are
exchangeable for gold, and the holder o f a note can obtain gold
at his option.
\
The same thing has happened abroad; there has been in the
Old World an expansion of credits in the form of bonds and
other securities on a gigantic scale, and, still worse, a huge
inflation of paper currency, no longer redeemable in gold.
As a currency increases in quantity it diminishes pro rata in
its purchasing power, in its power to obtain goods by exchange of
money for goods.
I call attention to the fact that the so-called resources, and
liabilities as well, of the national banks have increased from
$10,000,000,000 to $21,000,000,000 in the last half dozen years—
since 1913. The expansion of the so-called resources, which
means also liabilities, upon the part of all of the banks of the
United States, including all classes of banks, have increased
from $25,000,000,000 to $47,000,000,000. The same kind of ex
pansion has been going on in Europe. Because of these factors
the American dollar has lost a part o f its purchasing power in
America, and the purchasing power of the currency of Europe
has been still further diminished, measured in terms of American
o
159469—20327
3
gold, because of the inflation there. The German mark has
gone down to from approximately 24 cents in gold to 1.8 cents
in gold; the same currency in Poland is worth 0.8 of a cent; in
Roumania 0.7 of a cen t; and in all other countries which have
been torn by war the expansion of currency has diminished
the purchasing power of that currency, as with the French
franc and the Italian lire; so that when you come to exchange
these forms of currency for the American dollar the exchange
rate has gone down so severely that the pound sterling, which
has always been regarded as the standard currency of the world,
™ayuse SU(* an expression. The pound sterling is bringing
r. i c instead o f $4.86; the French franc instead of exchanging
o.i8 francs for $1— a dollar of this diminishing purchasing
power—is exchanging at the rate of 11.50 francs for the dollar,
and the Italian lire 13 and a fraction for the dollar. The consequence is that the export business of the United States— and I
call the attention of the Senate to its responsibility in this
matter is being tremendously interfered with.
I have appealed from time to time to the administration to try
to inng about an adjustment of this matter by an international
conference, and, without pausing to read it, I place in the R e c o r d
a letter winch I addressed to the President of the United States
on November 6 last, one o f a series of efforts which I have made
to attract the attention of the Senate and the attention of this
Government to the importance of this question.
the PRESIDENT pro tempore. Without objection, the letter
will be printed in the R e c o r d .
The letter referred to is as follow s:
N o v e m b e r 6, 1919.
The P resident ,
The White House.
P r e s i d e n t : Will you not permit me again to call
attention to the importance o f stabilizing international ex
change. Our excess commodity shipments over imports have
fallen from six hundred millions in June to one hundred and
fifty-eight millions in September. Our export houses are in distress and the exchange rates are going down to the lowest re
corded point.
Francs, 9.05; lire, 11.07; sterling, 4.15.
The British sterling was sustained by a recent loan of two
hundred and fifty millions placed in the United States.
British currency, French currency, Italian currency have gone
through a serious inflation, and their paper money is not on a
gold par basis. The Italians buying American goods must pav
the present high prices plus very high transportation charges •
for example, $28 a ton on coal plus twice the total in lire. It is
obvious that this is ruinous to our foreign commerce with Italv
and is making it impossible for our allies to get back to normal
production as promptly as we had hoped.
The Europeans can not sell credits in the terms of their cur
rency, because they are not only not on a gold basis but there
is reason to fear further inflation in the absence o f a declared
policy to the contrary.
The gold standard is temporarily broken down and ouMit to
be promptly restored. It can be done.
The investing public of the United States is able and would be
willing to extend the credits necessary to finance our foreign ex159469—20327
*
M y I ear M r
jo u i
4
ports, provided the mechanism were available and sound economic
policies were declared by the Governments whose trade is in
volved.
The problem is well understood by many men, but apparently
is not well understood by the men and officials responsible for
government.
I regard this question as o f the first magnitude and I respect
fully request you to invite an international exchange conference
to be held in Washington City with representatives of the leading
nations o f Europe present to meet with your representatives here.
I request that this suggestion be submitted to the Secretary
of the Treasury, the governor of the Federal Reserve Board, and
the Secretary of Commerce for an immediate report to you.
Yours, very respectfully,
R o b t . L. O w e n .
Mr. OWEN. I ask to place in the R e c o r d , without reading,
the action taken in New York on the 14th of January, as reported
in the New York Times o f the 15th of January, in which the
representative men o f the United States and o f Great Britain,
o f Holland, of Switzerland, of Denmark, Norway, and Sweden
urged an international conference. In order to have the Senate
realize that this is a very urgently important matter, I call the
attention o f the Senate to the names of some of these men, in
cluding Edwin A. Alderman, of the University of Virginia;
Robert L. Brookings, of St. L ouis; Cleveland H. Dodge, of New
Y ork ; Charles W. Eliot, of Cambridge, M ass.; James B. Forgan,
of Chicago; Arthur T. Hadley, of Yale College; Myron T. Her
rick, of Cleveland; Herbert Hoover, of San Francisco; Darwin
P. Kingsley, o f New York, president of the New York Life In
surance C o.; George H. McFadden, a great cotton exporter of
Philadelphia; A. W. Mellen, o f the Mellen Bank o f Pittsburgh;
J. P. Morgan, of Morgan & Co., New Y ork ; George M. Reynolds,
of Chicago; Elihu Root, o f New Y ork ; Charles H. Sabin, of New
York, president o f the Guaranty Trust Co., and a large numl>er
o f others.
I am not going to read t h e statement made by these men, but
I put it in t h e R e c o r d , and I a p p e a l to Senators who are inter
ested in the commerce of this country to look at it and see
what it means. I think it is of the greatest possible impor
tance that the stability of the credits of the world should be
brought about as speedily as possible.
Mr. GRONNA. Mr. President-----The PRESIDENT pro tempore. Does the Senator from Okla
homa yield to the Senator from North Dakota?
Mr. OWEN. I yield to the Senator.
Mr. GRONNA. I am aware o f the fact that the Senator
from Oklahoma has given this matter a great deal of study. I
should be very much pleased to have the Senator outline or
suggest the remedy.
Mr. OWEN. The remedy, Mr. President, is not very easy,
and it is easier to ask the question than it is to answer it, but
I will undertake to answer it.
Mr. GRONNA. I ask the question, and I think I have a right
to ask it, for the reason that only a short time ago the Senator
from Oklahoma and other Senators argued that the passage o f
a certain measure which was then before the Senate would
159469—20327
5
remedy the situation. The Senator knows as well as I know,
and perhaps better, that it has not remedied the situation.
Mr. OWEN. 1 prefer the Senator should not state what the
Senator from Oklahoma knows, because he might exceed the
mark. I will make the observation to the Senator, however,
that I stated repeatedly that the Edge bill was only a palliative
in a small degree. I favored it only on that ground; but it
was all the Republican Senators would agree to and it is in
adequate. I offered other remedies that were refused support;
it did not at all meet the requirements which I thought were
necessary.
In order to bring back the world to a condition of stability
many things are necessary; it will be necessary to deflate the
currency, which at present is being expanded by the printing
press without responsibility in some countries. Russia has
gone to such an extent that the Russian ruble is put out by the
billions upon top of billions, without any intention of ever re
deeming it, with a steadily diminishng value.
Mr. GRONNA. Mr. President, will the Senator yield?
Ar
* yiel(l to the Senator from North Dakota.
Mr. GRONNA. I am sure the Senator has given this matter
more attention than I have; but, if he will permit me, I will
say that, so far as I am concerned, I do not agree with him
that we should help to detlate the currency, nor do I believe
that that is a remedy. In my humble judgment the remedy is
to help Europe produce more, so as to enable her to offset her
debts, her obligations, with her products. That will regailate
it, and not any act to deflate the currency, either in this coun
try or in any other country.
Mr. GWEN. The Senator has not permitted me, of course, to
answer the question he originally propounded. He has an
swered it himself in part, and I agree with him in the answer
he has made, so far as to assert it is absolutely necessary that
Europe be put back upon production. Men must work, economize, and create values, but the mechanism of exchange, the
moneys o f the world, must be put on a basis o f stability, on a
known basis of value, and men must not use the printing press
to issue securities without intention of redemption nor without
the ability to redeem. These countries, however, in order to be
put back on a condition o f stabilized credit must stop inflating
their currency and must put their currency back upon a basis
which will be approximately the same basis— the gold basis or
some other agreed basis—which is common to the whole world
The European nations must adjust their budgets to their
income from taxes and keep within their income because until
they do the inflation will continue in currency and in bonds.
They must bring their currency back to par of gold and do it
by an arbitrary adjustment at the present relative value of
such currency.
They must adjust their war bonds to same standards and
issue new bonds payable in gold on long time and low rate so
that the taxpayers shall only pay the present gold value of
such bonds and not be required to pay from three to ten times
the present gold value o f such bonds.
Mr. KIRBY. Mr. President-----Mr. OWEN. I yield to the Senator from Arkansas.
Mr. KIRBY. I understand the condition as .stated bv the
Senator from Oklahoma. I do not understand, however whether
159469—20327
6
the remedy suggested or that might be suggested by the confer
ence would be one that would enhance the value of the dollar on
the other side or reduce the value of the dollar on this side. In
other words, I understand that both our dollars have become
cheap in the way o f purchasing commodities, but on the other
side of the world their money has become so much more cheap
that they have to pay two or three times In products thO price
o f our dollar in order to trade with us, and on that account trade
languishes. Now, would we increase the price of the dollar on
the other side; and if so, how can it be done unless at the ex
pense o f our own dollar?
Mr. OWEN. In order to arrive at a just understanding of
this matter it is necessary to observe what the foreign exchanges
really mean. Take, for instance, the exchanges of Norway and
of Sweden and of Holland and of Switzerland. While they are
affected bv the excess of commodity shipments from the 1 nited
States, they are not affected by an inflation of their currency.
The same thing is true of the exchanges with regard to Spain.
Spain being upon a gold basis and the commodity shipments
being somewhat in excess to Spain in our favor, the Spanish
peseta is a little below p a r; but side by side, across an invisible
line, you enter into France, and there the French franc is worth
onlv one-tliird of a peseta, approximately, although nominally
each is equal to 19.30 cents in gold, showing that the inflation of
the currency in France lias affected the value of the currency,
in addition to the balance of trade being against them. The
balance o f trade affects all of Europe, of course; but it is
shown by the currency o f Holland and the currency of Norwav and Sweden and Switzerland and Spain that they are
only comparatively slightly affected by the balance of trade In
our favor, while Great Britain is more seriously affected, be
cause it has inflated its currency, and France still more, be
cause the inflation there has gone to a point where they have
outstanding now 38,000,000.000 francs, amounting to approxi
mately $200 per capita of money in circulation, while here we
have $56 as a gross, and about $46 per capita, considering the
amount which is sequestered in the reserve banks.
The following table will make this clea r:
Foreign exchanges.
Normal rate.
To-day’s rate.
Dis
count.
$4.86 .................
$3.72...............
Per ct.
24
11.50 francs...
55
Currency
dated.
Da
Do.
dollar.
5.18 francs per
dollar.
Spain.................................
159469— 20327
11.40.................
54
13.20.................
62
lar.
$23.83 .............
$1.75.................
90
$,51.44...............
$40.20...........
$3......................
$37.37...............
95
9
$5.18 ............... $5.56.................
i9.30 cents___ 19.10 cents per
peseta.
7
1
in-
Do.
Currency grossly
inflated.
Do.
Currency n e a r
normal.
D o.
Currency normal.
Great Britain has doubled its currency during the war and
more than doubled the deposits, and gold bought with English
money costs 110 shillings an ounce instead of 79 shillings, the
normal rate, before the war— a discount o f 25 per cent in the
purchasing power of English paper money.
Neither Great Britain, France, Belgium, Italy, Austria, Ger
many, Russia, or any of the east European belligerents are on
a gold basis.
It will take world action to put them into production and
world credits. They can not buy; they can not pay unless
assisted by international and internal reconstruction legislative
action. If they do not buy and do ‘ not pay, it will seriously
threaten our financial and commercial stability. Our foreign
exports must cease.
Our banks holding great amounts in foreign securities and
credits will be put in serious danger and industrial disturbances
of a grave nature may be anticipated. No time should be lost.
Much valuable time has been lost already.
The peace treaty should be ratified at once with or without
reservations.
I want to call the attention of Senators to this matter,
because it vitally effects every single State in the Union. It
affects the value of the manufactured products of New England,
and of the cotton of the South, and of the wheat of the West,
and of the mineral ores o f our various States; and you gentle
men who are responsible to this country ought to understand
this and ought to consider it. Now, here the business men
of the country are going to call an international conference
of the first magnitude and bring the leading business men of
the whole world together to try and solve this problem, so that
they with their combined forces can appeal to the statesmen
o f the world to take the steps necessary to stabilize the world
and to reconstruct the world and to put it upon a basis of
stability and credit, so that our merchants and manufacturers
can interchange their commodities, because after all it is an
interchange of commodities or an interchange of the products
o f labor. What the Senator from North Dakota said was truly
said, that the remedy at last is work, orderly work, and avoid
ing extravagance in government and extravagance in private
life, the remedy is to restore the world by personal economy
and by personal production and by improving the processes of
distribution, but the mechanism of exchange and of currency
is absolutely essential to the conduct of international business.
The Governments of Europe must act and put their budgets
in order; must deflate their currency; must readjust their war
debts; must arrange to underwrite the loans needed to buy
raw material and seed and supplies to start production; and the
nations able to furnish the raw material and credits should
do so by opening the doors to the investment public and having
the loans properly secured by the nations seeking credits for
their citizens.
When a convention is called 10 arrange these details, the
representatives of labor should be present; and, above all, the
representatives of the highest rank in the various Governments
should participate to see that justice is done to the people who
will meet the burdens of these readjustments.
The PRESIDENT pro tempore. The request of the Senator
from Oklahoma is granted.
159469— 20327
fr~
It
8
The matter referred to is as follow s:
[F r o m
P
th e
N ew
ow ers
to
Confer
N a t io n s to C a l l
Y ork
T im e s
of
T h u rsd ay,
Jan.
15,
1 9 2 0 .]
on
W o r l d F in a n c e — S i m u l t a n e o u s A p p e a l t o
I n t e r n a t io n a l E c o n o m ic C o n f e r e n c e — N a t io n a l
L e a d e r s S ig n it — P l a n P r o p o s e s t o L i m i t C r e d it s a n d F o r c e t h e
P eople
to
R e h a b il it a t e
E u r o p e — P r iv a t e
A id
is
Suggested—
L e s s e n in g o f t h e F in a n c ia l D e m a n d s o n G e r m a n y a n d A u s t r ia
M a d e in T r e a t y P r o p o s e d .
“ A request that representatives be appointed as soon as possi
ble to an international economic conference is being made simul
taneously to-day to the Governments of Great Britain, France.
Holland, Switzerland, Denmark, Norway, and Sweden to the
United States Government, the Reparation Commission, and the
United States Chamber of Commerce. The request is in the
form of a memorandum, which sets forth, in brief outline, the
ideas of the various signatories as to how the work of rehabili
tating the world’s financial and commercial structure should be
undertaken.
“ The precise origin of this movement has not been disclosed.
Leading American financiers who are interested in it declined
yesterday to say whether or not the matter had first been
broached by them or by some interests in Europe. However,
great stress was laid on the widespread demand for such a con
ference, and it was said that within the last few weeks what
virtually amounted to spontaneous petitions for such a confer
ence had been received by the leading financial and commercial
representatives of all the countries which have become parties
to the memorandum.
“ Abroad, the request is directed to the several Governments.
They, according to the plan, are to appoint the delegates to the
proposed conference. In the United States a somewhat different
procedure is being adopted. The United States Chamber of
Commerce is asked to appoint the American delegates, partly
because of its Nation-wide affiliations and partly because here
it is desired to have participation in the conference kept on an
unofficial basis. The American signatories feel that the problems
outlined in the memorandum should be met, as far as is possi
ble, through private initiative, but with the United States Gov
ernment extending its moral support.
OPPOSED
TO P A IS H
y
-
C R E D IT P L A N .
“ The memorandum takes issue squarely with the scheme,
recently attributed to Sir George Paish, of an international
credit arrangement in which all o f the leading Governments
should take active part. Quite the opposite position is as
sumed by emphasizing the necessity of encouraging to the
greatest extent possible ‘ the supply of credit and the develop
ment of trade through normal channels.’
“ The proposed conference will be composed of representatives
of the leading countries, both belligerent and neutral, of Eu
rope, the central European countries, Japan, and the chief ex
porting countries of South America. These representatives, it
is further purposed, will bring with them all pertinent informa
tion, and it is expected that as a result o f the conference recom
mendations will be made as to what measures may best be taken
in the various countries in order to revive and maintain inter
national commerce.
“ One of the American signatories, in commenting on the re
quest for the conference, said:
jr
159469— 20327
¥
“ ‘ One might sum up the document as a call to the people toreturn to prewar standards of reason, an appeal to the repara
tion commission for wise moderation as to the be^; business
policy for all concerned; an appeal to Governments to arrest
inliation and meet inevitable burdens by increasing their reve
nue rather than by further increasing their debts; an appeal
to the people to work and to save; and, finally, an appeal ro
leaders of commerce and finance to get together in order to study
the problem dispassionately and take it up as a business propo
sition, relying on independent action rather than Government
intervention. Governments must be relied upon, however, to
remove as rapidly as possible the obstacles that impede such a
course.’
m em orandum
to
th e
governm ent.
“ The full text of the memorandum submitted to the United
States Government, the reparations commission, and the United
States Chamber of Commerce follows. It is substantially the
same as the documents submitted abroad:
The undersigned individuals beg leave to lay before their
Government, the reparations commission, and the Chamber of
Commerce of the United States the following observations and
to recommend that the Chamber of Commerce of the United
States designate representatives o f commerce and finance to
meet forthwith (the matter being of the greatest urgency) with
those of other countries chiefly concerned, which should include
the United Kingdom and the British dominions, France, Bel
gium, Italy, Japan, Germany, Austria, the neutral countries o f
Europe, the United States, and the chief exporting countries o f
South America, for the purpose of examining the situation
briefly set forth below and to recommend upon the basis of
authentic information what action in the various countries is
advisable among the peoples interested in reviving and main
taining international commerce.
“ ' * hey venture to add to the above recommendation the fol
lowing observations:
The war has left to conqueror and conquered alike the
problem o f finding means effectively to arrest and counteract
the continuous growth in the volume of outstanding money and
of Government obligations, and, its concomitant, the constant
increase o f prices. A decrease of excessive consumption and an
Increase o f production and taxation are recognized as the most
hopeful, if not the only, remedies. Unless they are promjitly
applied, the depreciation o f money, it is to be feared, will con
tinue, wiping out the savings of the past and leading to a
gradual but persistent spreading of bankruptcy and anarchy hi
Europe.
THE
P E R IL S
OP
IN F L A T IO N .
There can be no social or economi# future for any country
which adopts a permanent policy of meeting its current ex
penditure by a continuous inflation of its circulation and by
increasing its interest-bearing debts without a corresponding
increase of its tangible assets. In practice, every country will
have to be treated after careful study and with due regard to.
its individual conditions and requirements. No country, how
ever, is deserving o f credit, nor can it be considered a 'solvent
debtor, whose obligations we may treat as items of actual value
in formulating our plans for the future that will not or can
1 5 9 4 6 9 — 2 0 3 2 7 -----------2
not "bring Its current expenditure within the compass of its re
ceipts from taxation and other regular income. This principle
must be clearly brought home to the peoples of all countries,
for it will be impossible otherwise to arouse them from a dream
o f false hopes and illusions to the recognition of hard facts.
“ ‘ It is evident that Germany and Austria will have to bear
a heavier load than their conquerors, and that, in conformity
with the treaty of peace, they must bear the largest pos
sible burden they may safely assume. But care will have to
be taken that this burden does not exceed the measure of the
highest practicable taxation and that it does not destroy the
power of production, which forms the very source o f effective
ta “ J‘ Por the sake of their creditors and for the sake of the
world whose future social and economic development is in
volved Germany and Austria must not be rendered bankrupt.
I f for instance, upon close examination the commission des
reparation finds that, even with the most drastic plan of taxa
tion of property, income, trade, and consumption the sums
that these countries will be able to contribute immediately
toward the current expenses of their creditors will not reach
the obligations now stipulated, then the commission might be
expected to take the view that the scope o f the annual contribu
tion must be brought within the limits within which solvency
can be preserved, even though it might be necessary tor that
purpose to extend the period of installments.
“ ‘ The load of the burden and the period during which it is
to be borne must not, however, exceed certain bounds; it must
not bring about so drastic a lowering of the standard of living
that a willingness to pay a just debt is converted into a spirit
■of despair and revolt.
“ ‘ It is also true that among the victorious countries there
are some whose economic condition is exceedingly grave, and
which will have to reach the limits of their taxing powers. It
appears, therefore, to the undersigned that the position of these
countries, too, should be examined from the same point of view
o f keeping taxation within the power of endurance and within
a scope that will not be conducive to financial chaos and social
unrest.
THE
PROBLEM
OF
C A P IT A L .
“ ‘ When once the expenditure of the various European coun
tries has been brought within their taxable capacity, which
should be a first condition o f granting them further assistance,
and when the burdens o f indebtedness as between the different
nations have been brought within the limits of endurance, the
problem arises as to how these countries are to be furnished
with the working capital necessary for them to purchase the
imports required for restarting the circle of exchange, to re
store their productivity, and to reorganize their currencies.
“ ‘ The signatories submit that, while much can be done
through normal banking channels, the working capital needed
is too large in amount and is required too quickly for such
channels to be adequate. They are o f opinion, therefore, that a
more comprehensive scheme is necessary. It is not a question
of affording aid only to a single country, or even a single group
o f countries which were allied in the war. The interests of
the whole of Europe, and indeed of the whole world, are at
stake.
159469— 20327
11
“ ‘ It is not our intention to suggest in detail the method by
which such international cooperation in the grant of credit
may be secured. But we allow ourselves the following observa
tions :
“ ‘ 1. Tlie greater part of the funds must necessarily be sup
plied by those countries where the trade balance and the ex
changes are favorable.
“ ‘ 2. Long-term foreign credit, such as is here contemplated,
is only desirable in so far as it is absolutely necessary to re
store productive processes. It is not a substitute for those
efforts and sacrifices on the part of each country, by which
alone they can solve their internal problem. It is only by the
real economic conditions pressing severely, as they must, on
the individual that equilibrium can be restored.
“ ‘ 3. For this reason, and also because of the great demands
on capital for their own internal purposes in the lending coun
tries themselves, the credit supplied should be reduced to the
minimum absolutely necessary.
“ ‘ 4. Assistance should as far as possible be given in a form
which leaves national and international trade free from the
restrictive control o f Governments.
“ ‘ 5. Any scheme should encourage to the greatest extent pos
sible the supply of credit and the development o f trade through
normal channels.
“ ‘ 6. In so far as it proves possible to issue loans to the public
in the lending countries, these loans must be on such terms as
will attract the real savings o f the individual; otherwise infla
tion would be increased.
“ *7. The borrowing countries would have to provide the best
obtainable security. For this purpose it should be agreed that—
“ ‘ a. Such loans should rank in frontof all other indebted
ness whatsoever, whether internal debt, reparation payment, or
interallied governmental debt.
“ ‘ b. Special security should be set aside by the borrowing
countries as a guarantee for the payment o f interest and
amortization, the character of such security varying perhaps
from country to country, but including in the case o f Germany
and the new States the assignment of import and export duties
payable on a gold basis, and in the case o f States entitled to
receipts from Germany a first charge on such receipts.
MUTUAL
H ELPFU LN ESS
PARAM OUNT.
“ ‘ The outlook at present is dark. No greater task is before
us now than to devise means by which some measure of hope
fulness will reenter the minds o f the masses. The reestablish
ment of a willingness to work and to save, of incentives to the
highest individual effort and of opportunities for every one to
enjoy a reasonable share of the fruit of his exertions must be
the aim toward which the best minds in all countries should
cooperate. Only if we recognize that the time has now come
when all countries must help one another can we hope to bring
about an atmosphere in which we can look forward to the
restoration o f normal conditions and to the end o f our present
evils.
“ ‘ In conclusion the signatories desire to reiterate their con
viction as to the very grave urgency of these questions in point
o f time. Every month which passes will aggravate the problem
and render its eventual solution increasingly difficult.
All
159469— 20327
12
the information at their disposal convinces them that very
critical days for Europe are now imminent and that no time
must be lost if catastrophes are to be averted.’
AM E R IC A N SIG N A T O R IE S .
“ The American signatories are: Edwin A. Alderman. Univer
sity of Virginia; Frank B. Anderson, San Francisco; Julius H.
Barnes, Duluth; Robert L. Brookings, St. Louis; Emory W.
Clark, D etroit; Cleveland H. Dodge, New Y ork ; Charles W .
Eliot, Cambridge, Mass.; Herbert Fleisclihacker, San Francisco;
James B. Forgan, Chicago; Arthur T. Hadley, Yale College; R. S.
Hawkes, St. Louis; A. Batron Hepburn, New Y ork; Myron T.
Herrick, Cleveland; Lolis W. Hill, St. Paul; Herbert Hoover,
San Fi-ancisco; H. E. Judson, University of Chicago; Darwin
P. Kingsley, New York; George H. McFadden, Philadelphia; Al
fred E. Marling, New York; A. W. Mellen, Pittsburgh; A. L.
Mills, Portland, Oreg.; J. P. Morgan, New Y ork; William Fellowes Morgan, New Y ork ; F. H. Rawson, Chicago; Samuel Rea,
Philadelphia; George M. Reynolds, Chicago; R. G. Rhett,
Charleston, S. C .; Elihu Root, New Y ork; Levi L. Rue, Philadel
phia ; Charles LI. Sabin, New Y ork ; Jacob H. Schiff, New Y ork ;
Edwin R. A. Seligman, Columbia College; John C. Shedd, Chi
cago ; John Shmerwin, Cleveland; James A. Stillman, New Y ork ;
Henry Susalle, University of Washington ; William H. Taft, New
Haven ; F. LI. Taussig, Harvard University ; Frank A. Vanderlip,
New Y'ork; Festus J. Wade, St. Louis; Paul M. W arburg, New
Y ork ; F. C. Watts, St. L ouis; Harry A. Wheeler, Chicago; Dan
iel Willard, Baltimore.
“ The names o f the European signers of the memorandum,
classified as to country, are given below. The list o f French sig
natories has not been received here, due to a delay in cable
service:
G R E A T B R IT A IN .
“ Sir Richard Vassar Smith, Bart., chairman o f Lloyds Bank;
Lord Inchcape, G. C. M. G., K. C. S. I., chairman National Pro
vincial & Union Bank and chairman Peninsula & Oriental
Steam Navigation C o; Walter Leaf, chairman London County
& Westminster Bank; Right Hon. Reginald McKenna, P. C.,
chairman London Joint City & Midland Bank; Sir Robert
Kindersley, K. B. E., chairman National Savings Committee,
director Bank of England, partner Lazard B ros.; Sir Charles
Addis, chairman Hongkong & Shanghai Banking Corporation,
director Bank of England; Edward Charles Grenfell, senior
partner Messrs. Morgan, Grenfell & Co., director Bank of Eng
land; Hon. Robert Henry Brand, C. M. G., formerly chairman
Supreme Economic Council of the Allies, formerly assistant
secretary o f state for foreign affairs; Right Hon. Herbert Henry
Asquith, P. C., formerly prime minister; Right Hon. Sir Donald
Maclean, K. B. E., leader, Liberal Party in House o f Commons;
Right Hon. John Henry Thomas, M. P., leader of Labor P arty;
Right Hon. John Robert Clynes, M. I\, leader of Labor P arty;
Viscount Bryce, G. G., V. C., ex-ambassador to the United States.
HOLLAND.
“ Dr. G. Vissering, president, Bank of the Netherlands; C. E.
ter Meulen, banker, member of firm Hope & C o; Joost van
Vollenhoven, manager Bank of the Netherlands; Jonkheer
Dr. A. P. C. van Karnebeek, minister o f state, president Car
negie Foundation; J. J. G. Bai’on van Voorst tot Voorst, presi159469— 20327
13
dent first chamber of Parliament; Dr. D. Fock. president sec
ond chamber of Parliament; Jonkheer Dr W. H. de Savornin
Luhman, president high court of ju stice; A. W. F. Idenburg, for
merly governor general Dutch East Indies, formerly minister of
colonies; S. P. van Eeghen, president Amsterdam Chamber of
Commerce; E. P. de Monchy, president Rotterdam Chamber of
Commerce; C. J. K. van Aalst, president Amsterdam Bankers’
Association; G. H. Hintzen, banker, member of firm R. Mees &
Zoonen, Rotterdam; F. M. Wibaut, alderman o f Amsterdam; G.
M. Boissevain, economist; E. Heldring, manager Roval Dutch
Steamship Co.
SWITZERLAND.
“ Gustave Ador, president International Red C ross; Eduard
Blumer, president National Council; Alfred Fery, president
Swiss Federation o f Industry aiid Commerce; Rodolphe de
Haller, vice president Banque Nationale; Jean Hirter. president
Banque Nationale; Dr. Ernst Laur, secretary Swiss Agricultural
Union; Auguste Pettarel, president State council; Ernest Picot,
Federal judge; Guillanme Pictet, banker; Alfred Sarasin, presi( ciit Swiss Bankers’ Association; Michel Schnyder. president
fewiss Press Association; Dr. Hans Tschumi, president Union
Suisse des Arts et Letiers.
Ift* A 31 Alt IV.
r G- G- Andersen, chairman of the Socialist Party in the
Landsting; F. I. Borgbjerg, member o f the committee of the
A001!1! Group o f the Itigsdag; I. C. Christensen, chairman of
the Liberal Party o f the Folketing; C. C. Clausen, chairman of
the IMerchants Guild; C. M. T. Cold, chairman of the Danish
So,c i*ty : Alex- Voss» chairman of the Cham5 n ^
!
Association; E. Glueckstadt, managing
nn nf ri f
Danske. Landsmandsbank; Johan Knudsen. chair
man o f the, Conservative Party in the Folketing; Thomas Madsen Mvgdal, chairman of the United Danish Agricultural Societrns; A. 1 esdorpf, member of the board of directors of the
J K * J n] sh Agricultural Society; A. Nielsen, president of the
Board o f Agriculture; I. P. Winther, I. Lauridsen, C. Ussing,
Marcus Rubin, and Westv Stephensen, managing directors of
the Na t ional-B an ken in Kopenhagen : Jorgen Pedersen, chair
man of the Liberal Party o f the Landsting; L. G. Piper, chair
man ot the Conservative Party of the Landsting; C. Slengerik
chairman of the Radikal Liberal Party o f the Folketing- Her
man Trier, chairman of the Radikal Liberal Party of the
Landsting.
J
c
“ Otto IL Halyorsen, speaker of Parliament; Jens Tandberg,
bishop of Christiania; F ridtjof Nansen, professor and explorer •
Hakon Loeken governor of Christiania ; Bernt Holtsmark, party
leader; A Jahresn, party leader; J. L. Lemovinkol. party
leader; K. Bomhoff, president Bank of Norway; Alf Buercke
Thune Larnsen, Carl Kierulf, Victor Plahte. Carl Kutcherath
Chr. E. Lorentze, Son H. Aarensen, T. FeamJv, Chr. Platou’
presidents of financial, industrial, and commercial associations’
Thore Myrvang, president Farmers’ and Smallholders’ Associa
tion ; I a trick Volckmar, president Norske Handelsbank.
SW ED EN .
J3* ■
A: af Jochnick, president Sveriges Riksbank; V L
.Moll, first deputy Sveriges Riksbank; C. E. Kinander, president
159469— 20327
1
14
national debt office; J. H. R. C. Ivjelberg, president Swedish
Bankers’ Association; H. L. F. Lagercrantz, president Swedish
Exporters’ Association, ex-minister to America; A. F. \ ennersten, president Swedish Industrial Association, ex-secretary
of the treasury, member o f Parliament; K. A. Wallenberg, presi
dent chamber of commerce, Stockholm, ex-foreign minister; M.
Wallenberg, manager Enskilda Bank; Oscar Rydbeck, manager
Skandinaviska Kredit Aktiebolaget; C. Frisk, manager Svenska
Handelsbanken; K. H. Branting, member of Parliament, ex
secretary o f the treasury, deputy Sveriges Riksbank; Count
R. G. Hamilton, deputy chairman o f the lower house of Par
liament; S. A. A. Lindenman, member of Parliament, rear ad
miral, ex-premier, ex-foreign minister; S. H. Kvarnzelius, mem
ber of Parliament, director national debt office; Ernst Trygger,
member o f Parliament, ex-justice o f the supreme court; K. G.
Cassel, professor of political economy; David Davidson, pro
fessor of political economy; E. F. K. Sommarin, professor of
political economy.”
Mr. OWEN. Mr. President, I submit with my remarks the
report of the committee on foreign trade of the American
Economic Association. I ask the privilege now o f having it
printed in the R ecord.
The PRESIDENT pro tempore. Without objection, it is so
ordered.
The matter referred to is as follow s:
J a n u a r y 9, 1920.
R eport
of
the
C o m m i t t e e o x P'o r e ig x T r a d e
E c o n o m i c A s s o c i a t i o n -.
of
the
A m e r ic a s
This, the second report of the committee on foreign trade,
will cover the effect of the war on the volume, direction, and
the constituent commodities of international trade, and will
attempt to analyze some of the conditions that affect the outlook.
I.
The
e ffe c t
of
th e
w a r.
The war had a very profound effect upon the trade of the
world. In belligerent countries normal production was cur
tailed and therefore exports declined. The domestic produc
tion of commodities needed by the warring nations was insuffi
cient, and these had to be imported. The excess of imports was
financed by shipments o f gold, the sale of securities, and by
borrowing. The trade currents prevailing before the war were
upset.
A.
THE
VO LU M E OF TRADE.
The countries at war greatly increased their exports in
amount and to a less extent in tonnage. The countries on the
American Continent, on the whole, greatly increased their ex
ports. Japan did likewise. The countries blockaded, Germany
and Austria, experienced a tremendous decline in trade. The
trade of Holland, Spain, and Russia, declined as an incident to
the blockade. Because of the long sea voyage involved and the
shortage in shipping, the trade o f British India, Australia, and
South Africa also fell in volume.
B. C O M M O D IT IE S OF TRADE.
Because the belligerents o f Europe needed enormous quanti
ties of war materials and other goods for consumption, their
Imports of manufactures increased relatively and the imports
o f raw material decreased relatively. Western Europe was cut
off from its sources of food supply in Russia and Southeastern
15946& — 20327
J*
15
Europe, and the entire burden of producing food for the western
European countries was thrown upon the Americas. Australia
and India were too far removed to permit the utilization of
much needed tonnage for the long ocean trip. Because Germany
was under blockade, the countries which she had supplied with
chemicals, dyestuffs, porcelain, machinery, electrical goods, toys,
and specialties had to turn to other countries like Switzerland,
the United States, and Japan for their supply. Trade in luxu
ries was much reduced. Japan, the United States, and in gen
eral the neutrals increased their imports of raw materials and
increased their exports o f manufactured goods.
There was an increased demand for commodities of all kinds
from countries that were readily accessible to Europe, and
they, therefore, suffered from a shortage of goods. On the other
hand, the demand upon the countries far removed from Europe
slackened so that there was a glut of goods, as of wheat in
Australia, wool in New Zealand, and sugar in Java.
C.
TRADE CU RREN TS.
The war resulted in the transfer of millions o f men to France,
where they had to be maintained under conditions which in
creased their consumption over that of peace. Shipping routes
were therefore focused upon western Europe and created a
ship shortage in other lanes of trade, which was aggravated by
submarine warfare. The tonnage passing through the Suez
Canal in 1913 was 20,000,000 tons and in 1917 only 8,300,000
tons. Because of the shortage in shipping, supplies for Europe
had to be brought from the nearest available center o f produc
tion. Tonnage was conscripted for the trans-Atlantic service.
There was an increase of exports to Europe and a decrease of
imports from Europe.
Furthermore, trade between near-by countries increased; for
example, the trade among the northern neutrals o f Europe,
between Japan and the countries skirting the Pacific and Indian
Oceans, between the United States and the countries of North
and South America and of Asia. The trade on the Pacific
greatly increased. The countries of Asia, East Africa, and the
west coast of the Americas traded with each other to a greater
■extent than before the war.
Because of the shortage in shipping, heavy commodities were
eliminated to a large extent, and wherever possible home
sources o f supply were developed. The lack o f those goods
which were manufactured chiefly in central Europe stimulated
the establishment o f new branches o f industry in the nonEuropean countries.
D.
EN TR EPO T
AND
T R A N S S H IP M E N T TRADE.
The European countries which were at war had controlled
the shipping of the world and determined the course of com
modity movements. Trade prestige and established custom
were important determinants of the route of trade and of the
location of entrepot centers before the war. During the war
the blockade and economy of shipping were the deciding fac
tors. American cotton was sent to Holland direct instead of
by way of Bremen and Liverpool. Dutch colonial produce
reached the United States directly instead of by way of Amster
dam. African produce could no longer be shipped by way of
Belgium or France. The United States obtained Australian
goods across the Pacific, and not by way o f London. Trade
159469— 20327
16
routes which were temporarily expedient have in some cases
proven to be permanently efficient.
Hamburg and Bremen were closed tight during the blockade,
and the transshipment and entrepot trade which they had con
ducted were eliminated. The European countries which had
traded with the outside world through the medium of Germany
now traded directly. The trade o f Switzerland, Italy, the Bal
tic States, and Spain with the overseas countries greatly in
creased. Furthermore, new centers of transshipment developed
during the war. Copenhagen, Bergen, and Goteborg rose as
ports of transshipment and as entrepots supplying Germany
and the north of Europe.
E.
ECON OM IC
D ECEN TRALIZATIO N .
For four years the countries dependent upon Europe have
been compelled to seek new sources of manufactured goods and
new outlets for their raw materials or else to establish some
local industries to satisfy their needs. The industries of the
world, hitherto concentrated chiefly in Europe, have been tem
porarily disrupted and to some extent permanently decentral
ized. The transshipment o f goods from the Orient to America
or from South Africa to North America by way of Europe has
been partly replaced by direct trade. The international jobbing
business has been reduced and in some lines eliminated. Coun
tries were compelled to become self-sufficient. The old creditor
nations, clustered in Europe, have become borrowers of widely
scattered countries, as the United States, Japan, and Argentina,
hitherto their debtors. The world has hastened toward a stage
of economic development which it might have taken generations
to attain. The predominance of Europe in trade has declined,
and new commercial spheres have become defined in America
and in the Far East, centering about the United States and
Japan.
Agricultural countries and regions producing raw materials
develop eventually into centers of industry and trade. The war
hastened this process. It has hastened the growth of indus
trial self-sufficiency, the decentralization o f trade, and the
lessened dependence upon Europe of the rest o f the world.
The war has hastened the disintegration not only of political
imperialism but of commercial imperialism as well.
Decentralization is the prerequisite o f federalism. In a more
than superficial sense, therefore, the war has prepared the
world for an inevitable league of nations of some sort. As the
backward countries of the world become more industrialized,
as the density o f their population tends to increase by migra
tion, the economic dominance of Europe will probably decline
still further, but the interdependence of the nations o f the
world will increase. The process of economic decentralization
will prepare for ultimate world federalism. More extensive
interdependence of the nations will vitalize a league of nations.
The
II.
A.
o u tlo o k
in
in te r n a tio n a l
tra d e.
THE PREWAR BALANCE OP TRADE.
Before the war the countries of Europe, with the exception
of Russia, had an excess o f imports. On the other hand, the
countries of the American Continent, with the exception of
Canada, and most of the partly developed countries, such as
British India', and South Africa, had an excess of exports.
159469— 20327
J?
**#*■
17
The excess of imports of the European countries was paid
for by services, such as shipping and banking, by interest on
foreign investments, by the expenditures of non-European tour
ists in Europe, and by the remittance <tf European nationals
in foreign countries to their friends and families in Europe.
B.
THE
W A R -T IM E
BALANCE OF TRADE.
The countries of Europe, on the whole, increased their im
ports greatly. The non-European countries, on the other hand,
had a large excess of exports, particularly during the later
years of the war.
Europe paid for the increased excess of imports less by bank
ing and shipping services, more by the shipment o f gold, and
the sale of securities, and most of all by loans.
C.
•
THE
IM M E D IA T E
FUTU RE.
1. Europe needs credit: Europe, in part, is devastated and
everywhere is short of goods. The war-ravaged countries need
food and machinery. But even the neutrals need raw materials.
\\ ithout food and raw materials Europe may fall into chaos,
which may react upon us industrially and perhaps politically.
Europe must have goods, and to get them she needs our credit.
But for purely selfish reasons we must lend. In order to
balance our international debits and credits, the courses before
us are to curtail exports, increase imports, or to lend. Reduc
tion of our exports seems inevitable. However, to curtail our
foreign sales suddenly would mean stagnation of industry and
consequent unemployment in many lines, although in "some
cases the satisfaction of demands at home deferred during
the war would absorb the slack in production as prices de
cline. W e can not at present buy more, for Europe has less
to sell now than before the war. As a temporary expedient
the course open to us is to lend. For the economic welfare of
the country credits of some sort must be advanced in order to
move American goods.
2. 1 lie supply of short-term credit. Some European states
men thought that they could borrow from America sufficient
funds to restore the devastation quickly. Unfortunately, that
is not the case. The credit needed is o f two kinds, long term
and short term. The neutrals and the belligerents not devas
tated by the war will not need long-term credit to any great
extent. The machinery for supplying short-term credit for ex
ports consists of the facilities afforded by the Federal Reserve
System. However, should a scarcity of short-term credit for
exporters arise, there are untapped reserves in the discount
houses which may accept drafts up to several times their
capital. To a great extent these institutions would relieve the
banks of deposit of the risk of too heavy commitments on ac
count of foreign acceptance liabilities in addition to their ordi
nary commercial risks. Several of these have been established.
3. The supply of long-term credit: Six months’ credit, even
with a renewal, would hardly provide for the needs of coun
tries in which factories and even cities will have to be rebuilt
and reequipped.
(a)
Government advances: During the war the United States
Government made advances to other Governments to the ex
tent of about $10,000,000,000. These advances cease with the
proclamation of peace. The sentiment in the United States is
averse to further loans by our Government. Our Government
159469— 20327
has a floating debt of over three billions. This is a revolving
debt and is responsible in part for the inflation of prices and
the high cost of living. The Government could loan to Europe
by issuing more bonds. Congress would hardly authorize such
loans, and the public would hardly take such loans if author
ized. Conceivably conditions in Europe might compel a change
of sentiment in the United States. The evils of inflation may
be less menacing than industrial debility in Europe attended
perhaps by political disturbances.
(b) Indirect Government aid. The United States has, how
ever, undertaken to aid the exporter indirectly, through the W ar
Finance Corporation, which may make advances to the extent
of $1,000,000,000 for periods of not exceeding five years, to ex
porters or bankers upon the promissory notes of the borrower.
However, the difficulty inherent in the act under which the INar
Finance Corporation operates is that while the country as a
whole benefits by the export of goods, the burden of the present
unusual risk is placed entirely upon the exporter. Neverthe
less. the facilities of the corporation are being utilized.
(c) Private means. The financing of foreign trade by the
Government may lead to further inflation. The financing of ex
ports through private channels can be accomplished only through
savings, past or present. The alternative of war financing,
namely, inflation versus savings, face us again during the transi
tion. Possibly the gravity of the after-war situation may com
pel a compromise as in war time between these two methods of
financing.
At present Europe is being financed by private income. Pri
vate aid is being extended to individual enterprises, whose con
ditions meet the credit standards of bankers. The methods of
private long-term finance are various. Either Europe’s hold
ings of neutral securities might be liquidated in the United
States, or else a foreign importer, if his credit is good, might
float a loan here.
The member banks of the Federal Reserve System have been
permitted to invest 5 per cent of their capital and surplus in
subsidiary corporations engaged in the financing of foreign
trade. The Edge law would authorize the establishment and
incorporation under Federal charter of companies to engage in
international financial operations under the supervision of the
Federal Reserve Board.
Furthermore, investment trusts might be established. These
institutions would invest in foreign securities and issue their
own obligations against their holdings, which might be either
Government bonds, industrials of the borrowing country, or the
pledged securities of a third country or of the industries.
Finally the listing on the stock exchange in the United States
o f outstanding foreign securities, under proper restrictions and
with adequate safeguards of the American investors, would
help greatly in accelerating the flow of trade.
(d) The essentials of an acceptable foreign security. If ad
vances are to be made to countries fiscally weak or to indus
tries already under heavy taxation charges, a priority of lien
will be needed to assure the safety of interest and principal o f
the new loan as compared with the old ones. If new loans to
weak countries are to be junior liens, funds for Euroj>e will be
difficult to obtain. Just as a private company that has good
159460— 20327
19
prospects may secure credit through the issue of receiver’s certi
ficates, so the weak European countries will have to give priority
of lien of principal and interest of new money as against old
loans.
The rate of interest on loans to foreign governments or indus
trials will have to be competitive with domestic rates. The
marketability of securities based on foreign loans depends upon
suitable publicity, and whether or not the public will avoid
waste and gather funds for investment, and whether or not they
are favorably disposed toward the investments from the view
point of safety and adequacy of return.
In order not to be the lone and sole creditor of the nations of
Europe, the United States might raise a loan jointly with other
powers, or with the participation of other powers to a sufficient
extent morally to insure payment by the borrower. The in
dorsement of the European banker, and the guaranty of the
foreign government may be essential to secure the funds from
American investors.
Such credits as are granted to Europe should be devoted to
industrial and not governmental uses. They should be utilized
not for meeting current Government expenses, not for the bal
ancing of their budgets, where there is a lack of adequate meas
ures of taxation, and not for the artificial maintenance of their
inflated currencies at parity in the exchange market. Credits
should be devoted to increasing production. The import into
Europe o f essentials and not of luxuries should be financed. If
industry in Europe is benefited the security underlying our
loans, new and old. will be strengthened. As industry in Europe
revives, world-wide economic conditions should benefit.
D.
THE
OUTLOOK IN T H E U N ITED ST A T E S .
What is to be the future of our foreign trade? The theo
retical analysis indicates that during the early stages of lending
a country has an excess o f exports. After this process has con
tinued for many years the lending country has an excess of
imports.
Our present position has been obtained not as a result o f the
slow process of economic development but as a result of the
sudden shifting of trade during the war. However, our read
justment can not be as sudden. It will take years. Europe
took our exports and gave us promissory notes in payment.
She can not liquidate her debt in gold, because European
countries wish to retain their gold supply in anticipation of a
return to a gold basis. Because of the development of American
facilities for financing trade and because o f the creation o f the
American merchant marine, Europe will not be able to pay us
with these services even to as great an extent as before the
war. Securities with which to pay us are either not available
or else will not be sold by Europe because o f the commercial
prestige which attaches to foreign investments.
Ultimately Europe must pay us in goods. A mortgage on
her fixed assets is not feasible politically, because of tlie^anfialien laws of Europe and the fear of economic penetration
Europe will therefore eventually have to pay in merchandise'
The annually accruing interest on the debt to'the United States
will depress the exchange rate of the debtor countrv and thus
stimulate exports and restrict imports. On the other hand
159469— 20327
’
»
the annual credit of the United States for interest will tend
to raise our exchange above par, to stimulate imports and to
restrict exports. Ultimately our excess of exports must decline
and probably change to an excess of imports a feature which
before the war characterized the trade of the creditor countries
of Europe.
.
,
Immediately Europe may be unable to pay in goods. Her
debt to us for interest must be postponed or met temporarily by
further loans to her. The need of additional goods from
America will need to be financed in the same way. Loans b\
us would make possible a continuation of our reports until the
productive capacity of Europe is restored sufficiently to permit
the resumption of exports by Europe. The annual investment
of a sum equal to our excess of exports and the reinvestment
of the interest on loans, both outstanding and to be placed,
would if compounded, reach a huge figure in a generation. Our
balance of trade would thereafter probably be an excess of
imports.
In the present unsettled state of Europe there are many fac
tors which would qualify these conclusions. If Europe falls
into chaos exports from the United States will be greatly
reduced. If the principal and interest of our present loans is
thus wiped out, the conditions which would call for an ultimate
excess of imports will cease to exist.
J aso n A. N e il s o n .
J. R u sse l l S m it h .
O. M. W. S praoite.
F. W . T a u s sig .
E l is h a M. F r ie d m a n .
D avid F r id a y .
W esley F rost .
A. B arton H epbu rn .
P h il l ip B. K e n n e d y .
T hom as W . L am ont.
Chairman.
159409— 20327
0
I
THE SEDITION BILL
SPEECH
OF
H O N . R O B E R T L. O W E N
OF OKLAHOA1A
IN TH E
SENATE OF THE UNITED STATES
TUESDAY, JANUARY 20 1920
<2
W A S H IN G T O N
100550— 20355
1920
S PE E CH
OF
II ON. R O B E R T L. O W E N .
THE
S E D IT IO N B IL L .
Mr. OWEN. Mr. President, after every great war there is
more or less hysteria throughout the world, and the idea of sup
pressing by force those who are advocating violence against the
orderly processes o f government is a very natural feeling, with
which I sympathize. Certainly we ought not to permit the or
ganization of anarchists and of Bolsheviki to use our country as
a breeding place in which they can bring about by force or vio
lence the destruction of the Government which we have estab
lished.
Ihit, Mr. President, the bill which has been passed in the Senate has already become the opening wedge for the substitution
of another bill much more drastic and much more capable of
unsconstiuction than the bill which passed the Senate some days
ago, Senate bill 3317. When that bill passed there were very
few Senatois in the Chamber. It was earnestly debated by
several Senators who were opposed to it, and they spoke to empty
seats, as I am doing now. Hut I think it is worth while to call
the attention o f the country, through the printed R ecord of the
pioieedings in the Senate, to some of the danger in this bill now
propostMl to be substituted for Senate bill 3317.
Mi. NORRIS. Mr. President-----Hie PRESIDING OFFICER. Does the Senator from Okla
homa yield to the Senator from Nebraska’
Mr. OWEN. I yield.
qom'i'l
Senator, interrupting the Senator from
South Dakota [Mr. S t e r l in g ], referred to a certain part of the
House bill, but he did not read the language
it S
, , ™
1 llM rCM "**
» « « » » SOi-S to read
1 WlSl' <he Se“ a,0r " ouM ™w* that objectionMi. OWEN. The House bill is reported as House bill 11430
and is commoiUy known as the Graham bill. Without pausing to
read that bill at this point, I want to submit for the R e c o r d a
careful, analytical statement o f that bill prepared bv a very able
Government servant. It speaks for itself, and bv'the arrange
ment of the words and phrases it makes it easy to understand
howr that bill can be subjected to misinterpretation, and how that
biil can become and will become dangerous in the highest decree
to the liberties ot the people of this country, so that there woJdd
be hanging over the head of every man who desires free speech
oi freedom of.the press the menace o f some bureaucrat who could
suddenly arrest, interfere with, and treat him as a criminal
1G0550— 20355
’
4
with all the powers of this gigantic Government brought down
upon the head of the little citizen, who would find it difficult to
defend himself against an autocratic bureaucrat. I regard this
bill now pending in the House as a bill dangerous in the extreme.
I am not going to take the time of the Senate to go into anv
extended analysis of it, but I call attention to section 5. to which
I alluded when the Senator from South Dakota [Mr. S te r l in g ]
was speaking. The last three lines provide one o f the things
forbidden by this bill. The words “ force or violence” are not
used in qualifying this latter language. Here is the language
which is forbidden:
To
do a n y th in g
th a t
w o u ld
te n d
to
o v e rth ro w , ch a n g e—
Observe the word “ change” —
o r d e fe a t th e C o n s titu tio n
a u th o r ity th e re o f.
of
th e
U n ite d
S ta te s
and
th e
la w s
and
The advocacy of an amendment to the Constitution of the
United States in favor of prohibition, which would be it chttnge o f
the Constitution, would be a criminal act under this proposed
law.
The advocacy of the change in the Constitution to establish an
income tax would be a criminal act under this proposed statute.
The advocacy of the amendment proposing to give women
suff rage in thi§ country by a change o f the Constitution would
be a criminal act, and under this section to wear a button on the
lapel of the coat that indicated the wearer was in favor of the
Avoman suffrage amendment or the prohibition amendment would
be a criminal act under this section.
Is it possible to draw a statute more loosely than that or more
full o f danger to the liberties of this country? I might cite
many other things Avith regard to this proposed bill, which is
proposed to be substituted for the bill which AA’as passed through
the Senate a short time ago.
I have here a comment made by Alfred Bettman, an able con
stitutional laAvyer, during the AA’ a r a special Assistant Attorney
General of the United States, with offices in the Department of
Justice, Washington, D. C., and in special charge of the sedition
cases, commenting on the bill pending in the House proposed to
be substituted for the bill passed by the Senate. He said :
“ In response to your request for a legal opinion upon the
sedition bill reported by the House Judiciary Committee, will
state as follOAVs:
“ Under our constitutional system protection o f private per
sons or property is reposed exclusively in the State governments.
The Federal Government has no jurisdiction over such pro
tection, nor can the alleged purposes for Avhieh acts o f violence
AA-ere committed against private persons or property be used to
give jurisdiction to the Federal Government, for the reason
that that Avould be punishing the purpose and not the acts. To
punish the purpose Avould be contrary to all fundamental prin
ciples o f American constitutional Iuav. Therefore all the pro
visions of sections 2, 5, 9, 10, and 11, in so far as they relate
to private persons or property, would be unconstitutional since
they are beyond the jurisdiction o f the Federal Government.”Me passed laAvs. under the excitement and hysteria of Avar,
with a view to punishing the so-called Bolsheviks in this coun
try ; and I pause to say that in my judgment there are very few
160550— 20355
5
Bolsheviks in the United States. The atmosphere of the United
State's is not such as to encourage bolshevism. We have some
citizens and some aliens who are grossly ignorant, painfully
ignorant, of our laws, of our Constitution, o f our great traditions
ot liberty and justice, law and order; poor, ignorant people,
° ’ iov )mcIerstaru\ing government, and feeling oppressed by
the difficulty o f making a living for themselves and their chil
dren, attribute it to the fault o f government, and therefore are
leady to raise their hands against the Government as an op
pressor, not knowing, not understanding, the great difficulty of
building up orderly processes of effective constitutional, demo
cratic government. Those people, if they commit criminal acts,
must be dealt with under the criminal code; but those people
aie more in need of instruction than they are in need of a statute
such as tins whose provisions are so sweeping that no man would
be sate in Ins liberties in this country if this bill should pass.
1 am opposed to Prussianizing the United States, and making
this Government the instrumentality o f brutal, autocratic
bureaucratic power. Liberty is what the world fought for, and
not the suppression of liberty.
The stupid friends o f vested interests, who would like to use
the powers ot the Government to put a bayonet through everyone who balks against vested interests, would be pursuing a
policy like that of chaining down the escape valve on a steam
boiler by such a policy as passing laws to suppress free speech
and a tree press. To do this under the false pretense o f sun
pressing bolshevism and anarchy is Prussianism and not Amer
icanism.
I do not want any bureaucrat in this Government having
arbitrary power to lay a rough hand upon a man who is expressing his honest opinion and his belief as to what is the
good thing and the better thing for his fellow citizens. It is
freedom o f opinion, it is freedom o f speech, it is freedom of
the press, it is freedom of religion and freedom of education
which have combined to make this country the greatest free
nation m the world, where the conditions of life are the best
in the world, and where they will be better and better as the
days come speedily on. Mr. Bettman, the Assistant Attorney
Geneial in charge of the sedition cases during the war said
also with regard to this bill pending in the House, referring to
the unconstitutionality o f the bill:
J lie same is probably true of violence against a State gov
ernment, because the only method provided in the Constitution
for the protection o f State governments against internal vio
lence is the sending of Federal troops.
“ T h e u s e o f s u c h w o r d s a s ‘ s u g g e s t e d ’ a n d ‘ t a u g h t ’ in s e c
tio n 4 a r e d a n g e r o u s to fr e e d o m o f s p e e c h a n d c o n t r a r y to
A m e r ic a n tr a d itio n .
“ Penal laws should define crime with such exactitude that
nothing is left to arbitrary decision or the prejudices o f the
court and the jury. Section G maintains a peace-time c e n s o r
ship contrary to the American principle, that this is a Gov
ernment o f law and not o f men. It is also contrary to the
fundamental Anglo-Saxon principle of liberty o f speech
i
press, which is that there shall be no suppression in advance
but only responsibility after publication.
1G 0550— 2 0 3 5 5
“ Sections 9, 10, and 11 also violate tlie fundamental prin
ciple o f American and Anglo-Saxon institutions, namely, that
guilt is personal and not by association. If enacted, those sec
tions would place upon American statute books a Prussian and
czaristic Russian institution.
“ Section 6 of the present Penal Code and other sections of
that code cover every possible case of seditious conspiracy
against the Government of the United States and every act of
violence or resistance against the authority of the United
States.
“ I can not see clearly why there should be need for further
legislation, unless it is desired to reach individual advocacy of
violence against Federal officials or Federal property, which
are not a part of any conspiracy. If so, such legislation should
be carefully restricted to advocacv of violence against Fedeinl
officials or property, as is the language of the present seditious
conspiracy section of the Federal Penal Code.
“ The bill as reported by the House Judiciary Committee in
respects, as above pointed out, goes beyond the constitutional
bounds ’o f the Federal jurisdiction and violates the funda
mental principle of American and Anglo-Saxon civil liberties.”
This is the opinion of Alfred Bettman, Assistant Attorney
General of the United States, in charge of sedition cases dur
ing the war, an expert on sedition. He is opposed to the Gra
ham bill for the reasons stated.
I call attention to existing law against those who may be
inciting or encouraging any rebellion against the l nited States
or its authority. The Penal Code, 1911 publication, chapter 1,
provides:
OFFENSES AGAINST THE EXISTENCE OF THE GOVERNMENT.
It describes and punishes treason, misprision o f treason, incit
ing or engaging in rebellion or insurrection, criminal corre
spondence, seditious conspiracy, and so forth, and section 4 says:
“ Whoever incites, sets on foot, assists, or engages in any
rebellion or insurrection against the authority of the United
States or the laws thereof or gives aid or comfort thereto shall
be imprisoned not more than 10 years or lined not more than
$10,000, or both, and shall, moreover, be incapable of holding
anv office under the United States.”
S e c tio n 6 , d e a lin g w it h s e d it io u s c o n s p ir a c y , s a y s :
“ S e c 6. If two or more persons in any State or Territory, or
in any place subject to the jurisdiction o f the United States, con
spire to overthrow, put down, or to destroy by force the Govern
ment of the United States, or to levy war against them, or to
oppose by force the authority thereof, or by force to prevent,
hinder, or delay the execution o f any law of the United States,
or by force to seize, take, or possess any property of the United
States contrary to the authority thereof, they shall each be fined
not more than* $5,000 or imprisoned not more than six years, or
both.”
Mr. President, I ask to have printed in the R e c o r d the analysis
I present of the Graham bill pending, which has been prepared
under the auspices o f the Popular Government League, 637
Munsey Building. Washington, D. G.
160350—-20.355
7
There being no objection, the matter referred to was ordered to
be printed in the R ecord, as follows:
A n a l y s is
op
the
G raham
S e c . 1. That whoever
incites
|
sets on foot
I
/insurrection!
against
assists
f any \or rebellion}
or engages inj
sets on foot
|
or assists
t
the use of
or engages in)
destroy
(
or cause to be destroyed
or change
S e d it io n
B il l .
(th e U n i t e d S ta te s ]
<or t h e a u t h o r it y
to r
(or la w s t h e re o f
w hoever
/f o r c e
,j w i t h i n t e n t
\ o r v io le n c e
th e G o v e r n m e n t
o f th e
U n ite d
S ta t e s
or cause to be changed
or t o /ovcrthrow
\or cause to be overthrown.
And the death of any person/is caused
. , „,
or personsfor results directlv therefrom
[shall be punished by death, or
Shall be guilty of a felony pball be imprisoned not more than 20 years or fined not
and on conviction
’) more than $20,000 or both
ana shall forever be debarred from holding office under
l the United States
hU he'S rd ic /o f1th o rn y!16 d°ath penalty sha11 not be imP9sed unIess recommended
sh 'if]] 0 'H .hS}p Q n L ^ r;S? n s*f;o n s p ir -e ,, ° c o m m i t a n -v O ffen se d e fin e d in t h is s e c tio n t h e y
s h a ll e a c h b e s u b j e c t to t h e p u n i s h m e n t p r o v id e d in t h i s s e c t io n for s u c h o ile n s e .
S e c . 2. That whoever
incites or
sets on foot
or assists
or engages
,,
the use of
„
(destroy
/force
/with
lor cause to be destroyed
\or violence \ intent to [or changes
(or cause to bo changed
or to /overthrow
\or cause to be overthrown
and deat^dwsnot residf1 nit€d ^ ates>J'inEr’s° ned
shall' on comdctlombe
fe} i^ th "
not
m° re than 20
lha” *20’000
years,
shallteachrb ? s u h u ^ to Sth0nSpir®v0 commit anv offense defined in this section they
provided in thLs section f°r such °ffenseora,1y>or
...
[teach
Iincite
printing,
■{advocate
by
or the
propose, or
use of any
forcible resistance to, or
sign,
(advise
forcible destruction of
symbol,
or
picture,
(aid,
[caricature,
■{abet, or
or otherwise
(encourage
the Government of the United States, its Constitution, laws and authority or
the governments of the several States, all or anv of them, or
°
the existence of constituted government generally
orally, or
[teach
by Iwriting
incito
•{printing, or
advocate
destruction of human life,
(the use of any [sign
propose, or
’ /symbol
-----------(advise
Or
injury of any human being,
Ipicture [aid
(caricature Iabet
the injury or de-/of public 1
[encourage, or
struction
for private/Pr<fpcrty
(defend
.or otherwise
, ,
((Constitution)
as a means of changing the) laws, or
lof the U n i t e d S t a t e s or d e fe a tin g th e
,
,
(Government)
authority thereof.
( writing
160550— 20355
V
write or
knowingly
the
print
edit
Issue
circulate
distribute
transport
display, or
sell
(overthrow
[overthrow
•lor
lor
(change
any
book
pamphlet
newspaper
document
handbill
<poster, or
/b y express
\or otherwise
printed
written, or
pictorial
[matter
lof any
[form
(or kind
wherein
or
whereby
/the Government of the United States, or
\the Constitution, laws and authority thereof
lo
|
force
or by levying war against the sam.e, or
violence
incited
resistance to
suggested
force
bv or. ...
, (the execution of any law J r
is
|
taught
(rebellion againstjof the United states b y j^
advocated, or
iolence
.advised.
Sec. 5. That
no person shall
------------play)at
(any red
red flag
flag)
,
Ianarchy
displar
1at any meetings
[any
''lo
lor
lor
las
or
r parade
J-asaasymbol
symbol ofI or of any of the purposes
libit)|or in any other place (banner
|
1 forbidden in this act
exhibit
by
J°r
1’1
o.
And the displaylof such flag fin any meeting! ba<| be prjma facie evidence that it is
hibition
/or banner \or parade
/
1
or exhibition
so displayed and exhibited as such symbol.
And no person shall
flag
banner
which tends to incite or indi
emblem
or ^ >at any
iany
cates a purpose
picture
exhibit)
(parade
motto
or in any other public placej
or device
the Government of the United
[by violence
States
to overthrow j or by physical injury to{P*rp° aperty
,
|gSSS«
1
all
government
[overthrow
overthrow )thp constitution of the United States and the laws and authority
or to-l change
> thereof.
(or defeat )
book
magazine
newspaper
document
handbill
wherein or whereby
Sec. «. That every poster, or
matter
written
memorandum
pictorial, or Sign ,
printed
symbol, or
communication of any form
the overthrow of the Government of the United States by force or violence, or
resistant e to
\{he authority of the Government
or rebellion against/
[overthrow 1 ^constitution of the United States, or
\,J^advocated
or the/change, orj-of|the laws or authority thereof by force or violence,/ISUadvised, or
incited
,
.
.
(force or
(persons or
or wherein orUbc use0fJviolence or
j
whereby |
(physical injury' to or the seizure or destruction of property
industrial
advocated ]
economic
advised
|
defended
las means towards the accomplishment of social
change
or
or
political
incited
)
,
[intended]
or wherein or lan appeal is made to racial prejud ice thelor
1result of which apwhereby
'
(probable!
160550— 20355
9
i ic i
Provided, That nothing in the Act shall re so construed as to authorize any iierson
other than an employee of the Dead better OlKce, duly authorized thereto, or other
person, or other persons, upon a search warrant authorized by law, to open any let» ^ j addressed to himself: Provided further, That any author, publisher, or party
affected or aggrieved by the action of the Postmaster General in excluding materials
from the mans under tins section shall, after such notice to the Postmaster General as
the judge may direct and upsn tiling a bond to cover the actual cost of such proceed
ing, be entitled to a hearing de novo before a judge of the Federalcourt of thedistrict
in which the party affected or aggrieved resides, which judge shall with all rea onable
sl*c^,llearinS and aflirm or reverse the action of the Postmaster
h?ve l)0" er during the pendency of the proceedings to
suspend tlic order of the 1 ostmaster Uenerai: Provided furtlicr. That no such proAc^1118 shall bar or interfere with any criminal prosecution under the terms of this
Sec. 7. That no person shall
[the United States,
import
into! any place subject
I to its
l tion
(to transport
i
[from one State into another
or/or
, .
(any such matter] ?r,
,
, ,
[cause to be transported!
lmto any place subject to the junsdicl tion of the United States.
Sec. 8. That no person shall
knowingly use]
Imails
■> i
or
(thefor
L r (knowingly transport f
attempt to use|
l Postal Service of the United States j lor attemPt
transport]
. /express or otherwise,
. i
Dy ipublic or private conveyance/ ^11-’ matt^r declared by Sections 6 and 7 of thus
[nonmailable*
Act to be/and
(not transportable.
Sec. 9. That any
association,
gathering,
■
(force
human beings,
assembly, which seeks/“ ^ l y
U lor violence,
society,
lor indirectly / ylor injury to or or
or
(destruction of. public or private propertv
corporation
the Constitution
or laws
or
authority
to bring about a change in
of the Government of the United States,
or of any State thereof,
or of all forms of organized government.
teaches,
advises,
{ force or 1
or which proposes,
violence
(to bring about anv such result
threatens,
in any form|1
or
defends
prosecute]
or
(such purpose, is hereby declared to be unlawful
pursue )
cause to be imported!
1
1G 0 5 5 0 — 2 0 3 5 5
E e c . 10. That no person shall act as an officer of any such unlawful organization, orf
become a member thereof,
or become affiliated therewith,
or continue to be a member thereof
or
affiliated therewith,
or eontribute any money or other thm
of value thereto, or to anyone for it
use, or rent .any room, building, osl
place for the use of said unlawfur
association, or permit the occupation
by such unlawful association or any
committee or branch thereof of any
room, building, or other place under
his ownership or control.
Sec 11 That the giving, loaning, or promising of anything of value to any such
unlawful association shall constitute affiliation with such unlawful association;
and the giving, loaning, or promising of anything of value to any person or partnershin or unlawful association engaged in advertising, teaching, advocating, or de
fending any of the things the teaching, advocacy, or defense of which is forbidden
in this Act shall be prima facie evidence of teaching, advocating, or defending said
forbidden things against the person so giving, promising, or loaning anything of
value as aforesaid. ~
, ,,
. .
Sec 12 That any alien convicted under any of the provisions of this Act after
serving his sentence shall he taken into custody and be deported under the immi
gration laws of the United States then in force.
Any person convicted under this Act who has declared his intentions of becoming
a citizen but has not bedn naturalized shall be forever ineligible to citizenship, and it
shallbc the duty of the Attomev General to institute proceedings to cause hispetition
and declaration of intention to'be dismissed and annulled and all court proceedings
in his case quashed and to furnish to the Secretary of Labor such data as to enable
him to cause such person to be deported under the immigration laws of the United
States then in force.
The conviction of any person who is a naturalized citizen of the United States of
any of the things forbidden in this Act shall be sufficient to authorize the cancellation
of his or her certificate of naturalization in the manner provided by the naturalization
laws of the United States then in force. It shall be the duty of the Attorney General
to institute proceedings and conduct the same to a final judgment immediately after
conviction and sentence of the naturalized citizen aforesaid.
Everv alien deported under this Act is hereby forbidden to again enter the United
States or anv Territory' or possession thereof. It shall he the duty of the Attorney
General of the United States to enforce this provision against all deported aliens
returning to the United States as aforesaid.
Sec . 13. That in any investigation or prosecution for any of the offenses specified
in this Act no person shall be excused from attending or testifying or deposing, or
from producing any book, paper, document, or other evidence on the ground that
the testimony or evidence, documentary or otherwise, reqiijred of him may tend to
incriminate him or subject him to penalty of forfeiture: but no natural person shall
te prosecuted or subjected to anv penalty or forfeiture for or on account of any trans
action, matter, or thing as to which in obedience to a subpoena and under oath he
mav so testify or in obedience to a subpoena shall produce evidence, documentary
or otherwise. But no person shall be exempt from prosecution and punishment for
perjury committed in so testifying.
Sec.' 14. That if any clause, sentence, paragraph, or part of this Act shall for any
reason be adjudged by any court of competent jurisdiction to be invalid, such judg
ment shall not affect, impair, or invalidate the remainder thereof, but shall 1-c com
fined in its operation to the clause, sentence, paragraph, or part thereof directly
involved in the controversy in which such judgment shall have been rendered.
Sec. 15. That section 5334 of the Revised Statutes, section 4, Act of March 4, 1909
(Thirty-fifth volume, Statutes at Large, page 10S8), lie, and the same is hereby
repealed. Any offenses heretofore committed in violation of said section 5334 and
all cases pending thereunder may be prosecuted and punished as therein provide i
in the same manner and with the same effect as if this section had not lieen enacted.
Sec. 16. That any person convicted of violating any of the provisions contained
in any of the sections of this Act, except sections 1 and 2, shall be punished by being
imprisoned for not more than twenty years or fined not more than $20,000, cither or
both. And any citizen of the United States convicted under this Act shall be for
ever debarred from voting thereafter and holding any office of profit, honor, or trust
. under the United States.
Mr. OWEN. I ask to have printed the House bill, H. It. 11400,
immediately following the analysis, in order that the comparison
may be shown.
160550—20353
11
T h e r e b e in g n o o b je c tio n , th e b ill r e f e r r e d to w a s o r d e r e d to b e
p r in te d in th e R
A
b ill
ecord,
a s fo llo w s :
(II. R . 1 1 4 3 0 )
to p u n is h o ffe n se s a g a in s t th e e x is te n c e
G o v e r n m e n t o f th e U n ite d S ta te s , a n d fo r o th e r p u rp o se s.
of
th e
B e it enacted, etc., T h a t w h o e v e r i n c i t e s , s e t s o n f o o t , a s s i s t s , o r
e n g a g e s in a n y in s u r r e c t io n o r r e b e llio n a g a i n s t t h e U n it e d S t a t e s o r
th e a u th o r ity o r la w s th e re o f, or w h o e v e r se ts on fo o t or a s s is ts o r
e n g a g e s in t h e u s e o f f o r c e o r v io le n c e , w i t h i n t e n t t o d e s t r o y o r c a u s e
t o be d e s tr o y e d o r c h a n g e o r c a u s e to b e c h a n g e d o r to o v e r t h r o w o r
c a u se to be o v e r th r o w n th e G o v e r n m e n t o f th e U n ite d S ta te s , a n d th e
u ii
i
a n -Y, I) e r s o n o r p e r s o n s i s c a u s e d o r r e s u l t s d i r e c t l y t h e r e f r o m ,
s h a l l b e g u i l t y o l_ a f e l o n y , a n d o n c o n v i c t i o n s h a l l b e p u n i s h e d b y
d e a t h , o r s h a ll b e im p r is o n e d n o t m o r e t h a n 2 0 y e a r s o r fin e d n o t m o r e
t h a n $ 2 0 , 0 0 0 , o r b o t h , a n d s h a l l f o r e v e r b e d e b a r r e d f r o m h o l d i n g o ffic e
u n d e r t h e U n i t e d S t a t e s : Provided, however, T h a t t h e d e a t h p e n a l t y
s h a ll n o t be im p o s e d u n le s s r e c o m m e n d e d in t h e v e r d ic t o f t h e ju r v .
parson s
c o n s p ir e
s e c t i o n ’ f o r s u c t F 'o f f e n s e 1 ^
.
* hat
w hoevcr
to
8 u b je c t
in c ite s
or
c o m m it
to
th e
sets
any
o ffe n se
p u n is h m e n t
on
fo o t
or
d e fin e d
in
th is
p r o v id e d
in
th i3
a s s is ts
or
engages
o r v lo le n c e w ith in te n t to d e s tr o y o r c a u se
°n c a u s e t 0 b e c h a n g e d o r t o o v e r t h r o w o r
to be
cause
n o t ^ e s i d t ^ h n n \ t h nnG o y°*r!n m c ,n t o f t h e U n i t e d S t a t e s , a n d d e a t h d o e s
n o t le s u lt , s h a ll, o n c o n v ic tio n b e im p r is o n e d n o t m o r e th a n 2 0 y e a r s o r
to
c o r iim itT n v
S
* 2 0 ,0 0 0
o r b o th P
I f tw o o r S o r e p e r s o n s c o £ s p i? e
o ffe n s e d e fin e d in t h is s e c t io n , t h e y s h a ll e a c h b e s u b je c t
P r o v id e d in t h is s e c t io n f o r su c h o ffe n s e .
110 P e r s o n s h a l l o r a l l y o r b y w r i t i n g , p r i n t i n g , o r t h e
u s e o f a n y s i„ n , s y m b o l, p ic t u r e , c a r ic a t u r e , o r o t h e r w is e t e a c h , in c it e
a d v o c a te , p r o p o s e , o r a d v is e , o r a id , a b e t, o r e n c o u r a g e fo r c ib le r e s is tt0
?tRCC n n s m
fu O n ’ f
d e s t r u c tio iii o f t h e G o v e r n m e n t
o f th e U n ite d
S ta te s,
S ta te s
o t f Un i ° n ’n i a r / v S n d a u t h ° F l t y * o r t h e g o v e r n m e n t s o f t h e s e v e r a l
s t a t e s , a n o r a n y o f th e m , o r th e e x is te n c e o f c o n s titu te d g o v e r n m e n t
g e n e r a lly , o r o r a lly o r b y w r itin g , p r in t in g , o r th e u T o f a n y S
s y m b o l, p ic tu r e , c a r ic a t u r e , o r o t h e r w is e t e a c h , in c ite
a d v o c a te
n fo F if e o ? rt h e Vi n i i r v d nfa s en ’ ei l c o u r a g P - , o r d e f e n d t h ' “ d e s t r u c t i o n o f h u m a n
n u b lfc o r p r iv a t e n L n " / * b a n ia n b e in g o r th e in ju r y o r d e s t r u c t io n o f
FiFws o r r f ^ v e r n m ^ ri ? ^ / t/ » , aSr r a 14.m ? a o S o f h a n g i n g t h e C o n s t i t u t i o n ,
t h e r e o f F ( o v e r n m e n t o f t h e U n ite d ^ S t a t e s o r d e f e a t i n g t h e a u t h o r i t y
is s u e 0 c ir c u la t e
8 1 ® 11 w r i t p 9 r k n o w i n g l y p r i n t , p u b l i s h , e d i t ,
o r s e l l ° n n v I i . o n k 1 m m n i f i ’t t r a n s P o r t b y e x p r e s s o r o t h e r w i s e , d i s p l a y ,
a ^ r itu > n
et»’ ,n e w s p a p e r : d o c u m e n t , h a n d b i l l , p o s t e r , o r
p r i n t e d , w r i t t e n , o r p i c t o r i a l m a t t e r o f a n y k i n d o r f o r m w h e r e i n or
S t a t e s ' o r ' t h e C o n ^ t i t u H o ^ , c h a n g e ,o f th , ° G o v e r n m e n t o f t h e U n i t e d
W e
o r l , v F e v v in J
/L u d a u t h o r i t y t h e r e o f b y f o r c e o r v i o -
5. That no person shall display or exhibit at any meeting or
nnn rchv°ori ofannv0n fe?hPlace’ any n 'd flaS
banner as a symboi of
anarchy, or, of any of the purposes forbidden in this act, and the dis
play or exhibition of such flag or banner in any meeting or parade shall
be prima facie evidence that it is so displayed and exhibited as such
symbol, and no person shall display or exhibit at any meeting, gathering
or parade, or in any other public place, any flag, banner, emblem pic
ture, motto, or device which tends to incite or indicates a purpose* to
overthrow, by violence or by physical injury to person or property, the
Government of the United States, or all government, or to overthrow
change or defeat the Constitution of the United States and the laws
:111 ■I authority then «.l
Ulwh
resistance to or rebellion against the authority of the Government or
the overthrow, change, or defeat of Constitution of the United States
or the laws or authority thereof by force or violence, is advocated
vised or incited, or wherein or whereby the use of force or violence or
physical injury to or the seizure or destruction of persons or property
is advocated, advised, defended, or incited as a means toward the accom
plishment of industrial, economic, social, or political change, or wherein
160550—20355
12
o r w h e r e b y a n a p p e a l is m a d e to r a c ia l p r e ju d ic e t h e in te n d e d o r p r o b
a b le r e s u lt o f w h ic h a p p e a l is to c a u s e r io t in g o r th e r e s o r t to fo r c e
a n d v io le n c e w it h in th e U n ite d S t a t e s o r a n y p la c e s u b je c t to t h e j u r i s
d ic t io n th e r e o f, is h e r e b y d e c la r e d to b e n o n m a ila b le , a n d th e s a m e s h a ll
n o t b e d e p o s i t e d in a n y p o s t o ffic e f o r m a i l i n g o r b e c o n v e y e d in t h e
m a i l s o r d e l i v e r e d f r o m a n y p o s t o f f ic e o r b y a n y l e t t e r c a r r i e r : P r o
v i d e d , T h a t n o t h i n g in t h i s a c t s h a l l b e s o c o n s t r u e d a s t o a u t h o r i z e a n y
p e r s o n o t h e r t h a n a n e m p l o y e e o f t h e D e a d L e t t e r O ffic e , d u l y a u t h o r i z e d
th e r e to , o r o th e r p e r s o n , u p o n a s e a rc h w a r r a n t a u th o r iz e d b y la w , to
o p e n a n y le tt e r n o t a d d r e s s e d to h im s e lf.
S ec . 7 . T h a t n o p e r s o n s h a l l i m p o r t o r c a u s e t o b e i m p o r t e d i n t o t h e
U n ite d S t a t e s , o r a n y p la c e s u b je c t to it s ju r is d ic t io n , a n y m a t t e r d e
c la r e d in t h i s a c t t o b e n o n m a il a b le a n d n o t t r a n s p o r t a b le , o r t o t r a n s p o r t
o r c a u se to be tr a n s p o r te d a n y su c h m a tte r fr o m o n e S ta t e in to a n o tn e r
o r in to a n y s u c h p la c e s u b je c t to t h e ju r is d ic t io n o f th e U n ite d S t a t e s .
S e c . 8 . T h a t n o p e rso n s h a ll k n o w in g ly u se o r a t te m p t to u se th e m a ils
o r th e P o s t a l S e r v ic e o f t h e U n ite d S ta t e s , o r k n o w in g ly t r a n s p o r t o r a t
t e m p t t o t r a n s p o r t b y e x p r e s s o r o t h e r w is e , b y p u b lic o r p r iv a t e c o n
v e y a n c e , a n y m a t t e r d e c la r e d b y s e c t io n s G a n d 7 o f t h is a c t to b e n o n
m a ila b le a n d n o t t r a n s p o r ta b le .
Se c . 9 . T h a t a n y a s s o c ia tio n , g a t h e r in g , a s s e m b ly , s o c ie ty , o r c o r p o r a
t io n w h ic h se e k s, d ir e c tly o r in d ir e c t ly , b y fo r c e o r v io le n c e , o r b y in ju r y
t o o r d e s t r u c t io n o f h u m a n b e in g s , o r p u b lic o r p r iv a t e p r o p e r t y , t o b r in g
a b o u t a c h a n g e in t h e C o n s t i t u t i o n o r l a w s o r a u t h o r i t v o f t h e G o v e r n
m e n t o f th e U n ite d S t a t e s , o r o f a n y S ta t e th e r e o f, o r o f a ll fo r m s o f
o r g a n iz e d g o v e r n m e n t , o r w h ic h t e a c h e s , a d v is e s , p r o p o s e s , t h r e a t e n s , o r
d e fe n d s t h e u n la w fu l u se o f fo r c e o r v io le n c e in a n y fo r m to b r in g a b o u t
a n y su ch r e s u lt , o r w h ic h a t te m p ts to p r o s e c u te o r p u rsu e su c h p u r p o se ,
is h e r e b y d e c la r e d t o b e u n la w f u l.
S e c . 1 0 . T h a t n o p e r s o n s h a ll a c t a s a n o ffic e r o f a n y s u c h u n la w f u l
a s s o c ia tio n , o r, k n o w in g t h e o b je c t, p u r p o s e , t e a c h in g , o r d o c tr in e s o f
s u c h u n la w f u l a s s o c ia t io n , b e c o m e a m e m b e r t h e r e o f o r b e c o m e a ffilia te d
t h e r e w it h , o r c o n t in u e t o b e a m e m b e r t h e r e o f o r a ffilia te d t h e r e w it h ,
o r c o n tr ib u te a n y m o n e y o r o th e r t h in g o f v a lu e th e r e to o r to a n y o n e fo r
it s u s e , o r r e n t a n y r o o m , b u ild in g , o r p la c e fo r th e u se o f s a id u n la w fu l
a s s o c ia tio n , o r p e r m it th e o c c u p a tio n by su c h u n la w fu l a s s o c ia tio n or
a n y c o m m it t e e o r b r a n c h t h e r e o f o f a n y r o o m , b u ild in g , o r o t h e r p la c e
u n d e r h is o w n e r s h ip o r c o n t r o l.
S e c . 1 1 . T h a t th e g iv in g , lo a n in g , o r p r o m is in g o f a n y th in g o f v a lu e
t o a n y su c h u n la w fu l a s s o c ia tio n s h a ll c o n s t it u t e a ffilia tio n w it h su c h
u n la w fu l a s s o c ia t io n ; a n d th e g iv in g , lo a n in g , o r p r o m is in g o f a n v th in g o f v a lu e to a n y p erso n o r p a r tn e r s h ip o r u n la w fu l a s s o c ia tio n
e n g a g e d in a d v e r t i s i n g , t e a c h i n g , a d v o c a t i n g , o r d e f e n d i n g a n y o f t h e
th itig s t h e te a c h in g , a d v o c a c y , o r d e fe n s e o f w h ic h
is fo r b id d e n
in
th is
act
s h a ll b e
p r im a
fa c ie e v id e n c e
o f te a c h in g , a d v o c a tin g , or
d e fe n d in g s a id fo r b id d e n t h in g s a g a in s t th e p e r s o n so g iv in g , p r o m is
in g , o r lo a n in g a n y th in g o f v a lu e a s a fo r e s a id .
S e c . 1 2 . T h a t a n y a lie n c o n v ic te d u n d e r a n v o f t h e p r o v is io n s o f
t h is a c t a f t e r s e r v in g h is s e n t e n c e s h a ll b e ta k e n in to c u s t o d y a n d b e
d e p o r te d u n d e r th e im m ig r a tio n
la w s o f th e U n ite d
S ta te s th en
in
fo r c e .
A n y p e r s o n c o n v ic te d u n d e r t h i s a c t w h o h a s d e c la r e d h is i n t e n
t io n s o f b e c o m in g a c itiz e n b u t h a s n o t b ee n n a tu r a liz e d s h a ll b e fo r
e v e r in e lig ib le to c itiz e n s h ip , a n d it s h a ll b e th e d u t y o f th e A t t o r n e y
G e n e r a l to in s t it u t e p r o c e e d in g s t o c a u s e h is p e titio n a n d d e c la r a t io n
o f i n t e n t i o n t o b e d i s m i s s e d a n d a n n u lle d a n d a ll c o u r t p r o c e e d i n g s in
h is c a s e q u a sh e d a n d to fu r n is h to th e S e c r e ta r y o f L a b o r su ch d a ta
a s t o e n a b le h im t o c a u s e s u c h p e r s o n t o b e d e p o r te d u n d e r t h e i m m i
g r a t i o n l a w s o f t h e U n it e d S t a t e s t h e n in f o r c e .
T h e c o n v ic tio n o f a n y
p e r s o n w h o is a n a tu r a liz e d c itiz e n o f th e U n ite d S t a t e s o f a n y o f t h e
t h i n g s f o r b id d e n in t h i s a c t s h a ll b e s u ffic ie n t t o a u t h o r i z e t h e c a n c e l
la t io n o f h is o r h e r c e r t ific a t e o f n a t u r a liz a t io n
in t h e m a n n e r p r o
v id e d b y t h e n a t u r a l i z a t i o n l a w s o f t h e U n it e d S t a t e s t h e n in f o r c e .
I t s h a ll be th e d u t y o f th e A t t o r n e y G e n e r a l to in s t it u t e p r o c e e d in g s
a n d c o n d u c t th e s a m e to a fin a l ju d g m e n t im m e d ia t e ly a f t e r c o n v ic t i o n
a n d s e n te n c e o f th e n a tu r a liz e d c itiz e n a fo r e s a id .
E v e r y a lie n d e p o r te d
u n d e r t h i s a c t is h e r e b y f o r b id d e n t o a g a in e n t e r t h e U n it e d S t a t e s
o r a n y T e r r it o r y o r p o s s e s s io n t h e r e o f.
I t s h a ll b e t h e d u ty o f th e
A tt o r n e y G e n e r a l o f th e U n ite d S ta te s to e n fo r c e th is p r o v is io n a g a in s t
a ll d e p o rte d a lie n s r e tu r n in g to t h e U n ite d S ta t e s a s a fo r e s a id .
®
rJ L J *
lfy
.F
, 5 a $ .l n
in v e s tig a tio n o r p r o s e c u tio n
fo r a n y o f th e
0 ^ 1,n
a c t n o p e r s o n s h a ll b e e x c u s e d fr o m a t te n d in g
o r d e p o s in g , o r fr o m
p r o d u c in g a n y b o o k , p a p e r , d o c u -
Z Z n i m t o I ! e L e v i ! r i c c . o n tllP S r o i u >d t h a t t h e t e s t i m o n y o r e v i d e n c e ,
o c u m c n ta r y o r o t h e r w is e , r e q u ir e d o f h im
n la y te n d t o in c r im in a t e
160550— 20355
13
him or subject him to penalty or forfeitu re; but no natural person
shall be prosecuted or subjected to any penalty or forfeiture for or on
account of any transaction, matter, or thing as to which in obedience
to a subpoena and under oath he may so testify or in obedience
to a subpoena shall produce evidence, documentary or otherwise. But
no person shall be exempt from prosecution and punishment for perjury
committed in so testifying.
,
l 4 ' Tllat
any clause, sentence, paragraph, or part of this act
shall fot any reason be adjudged by any court of competent jurisdic
tion to be invalid, such judgment shall not affect, impair, or invalidate
the remainder thereof, but shall be confined in its operation to the
“ v u - •>
ru o a j, lie, ana m e same is nereoy,
Any offenses heretofore committed in violation of said
of
.
cases pending thereunder may be prosecuted and
punished as therein provided in the same manner and with the same
effect as if this section had not been enacted.
lepeakd.
s i°n s
a.
i
c o n ta in e d
„
s « „ i.a „
° tt J
f
™
t
under
k
o
. r ,n -v P e r s o n c o n v i c t e d o f v i o l a t i n g a n y o f
in a n y o f t h e s e c t io n s o f t h i s a c t , e x c e p t
t h e p r o v is e c tio n s 1
p u n is h e d b y b e in g im p r is o n e d fo r n o t m o r e t h a n 2 0
m o r e th a n $ 2 0 ,0 0 0 , e ith e r o r b o th .
A n d a n y c itiz e n
a t ** c o n y ic tc d u n d e r th is a c t s h a ll b e fo r e v e r d e b a rre d
t h e 1U n i t e d ' s t a t e s ™ *
h o h lin g
any
o fflc e
of
Pr o fit> h o n o r > o r
tru st
Mr. OWEN. I ask to have printed the statement of Mr. Alfred
Bettman in its continuous form.
There being no objection, the matter referred to was ordered
to be printed in the R ecord, as follow s:
I n r e s p o n s e to y o u r r e q u e s t f o r a le g a l o p in io n u p o n t h e s e d it io n b ill
r e p o r te d b y th e H o u s e J u d ic ia r y C o m m it t e e , w ill s t a t e a s f o l l o w 's :
U n d e r o u r c o n s titu tio n a l sy ste m
p r o te c tio n
o f p r iv a te p e r so n s or
p r o p e r t y is r e p o s e d e x c lu s i v e l y in t h e S t a t e g o v e r n m e n t s .
T h e F ederal
a lle g e d
n
® P °
P u rp oses fo r
J u r is d ic tio n
w h ic h a c ts
over
su ch
o f v io le n c e
p r o te c tio n , n o r
can
th e
w e re c o m m itte d
a g a in s t
R « 1' ^ , , H ^ * , 0 f ^ ° + u P r o p e r t y
l,e lls e (l f o g i v e j u r i s d i c t i o n t o t h e F e d e r a l
t h a t w o u ld b e p u n is h in g t h e p u r p o s e
n r i m 'I n L
f ? p u n is h th e p u r p o s e w o u ld b e c o n t r a r y to a ll fu u d a A m e r ic a n c o n s t itu tio n a l la w .
T h e r e fo r e a ll th e
aL f C
l i 0 a :S 2 ’
h . 1 0 . a n d 1 1 , in s o f a r a s t h e y r e l a t e to
p r iv a te p e r s o n s o r p r o p e r ty , w o u ld b e u n c o n s t it u t io n a l, s in c e th e y a r e
h ^ X R 11^ t h e j u r i s d i c t i o n o f t h e F e d e r a l G o v e r n m e n t .
T h e s a m e is p r o b a b ly t r u e o f v io le n c e a g a in s t a S t a t e g o v e r n m e n t , b eP r o v id e d in t h e C o n s t it u t io n f o r t h e p r o te c t io n
o f S t a f o g o \ e i n m e n ts a g a in s t in te r n a l v io le n c e is th e s e n d in g o f F e d e r a l
tro o p s.
0 -T u n
Ptl!,C f w T 1n 1 R a„s “ s u g g e s t e d ” a n d “ t a u g h t , " i n s e c t i o n 4 ,
a r t > £ ? ! 1 d !' ,!> ?„f 'i(T (l ° ° t
sp e e ch a n d c o n tr a r y to A m e r ic a n tr a d itio n .
1 A e P a l ia w s s h o u ld d e fin e c r im e w it h s u c h e x a c t it u d e t h a t n o th in g is
le f t t ° a r b itr a r y d e c is io n o r th e p r e ju d ic e s o f th e c o u r t a n d th e ju r y .
S e c t i o n () m a i n t a i n s a p e a c e - t i m e c e n s o r s h i p c o n t r a r y t o t h e A m e r i c a n
p r i n c i p l e , t h a t t h i s i s a G o v e r n m e n t o f law * a n d n o t o f m e n .
I t is a ls o
c o n t r a r y to th e fu n d a m e n t a l A n g lo S a x o n p r in c ip le o f lib e r t y o f sp e e ch
a n d p r e s s , w h ic h is t h a t t h e r e s h a l l b e n o s u p p r e s s io n in a d v a n c e , b u t
o n ly r e s p o n s ib ility a f t e r p u b lic a tio n .
S e c t i o n s 9, 10, a n d 11 a l s o violate t h e fundamental principle of
A m e r i c a n and Anglo-Saxon in stitu tion s; namely, t h a t guilt is personal
a n d not by association.
I f enacted t h o s e sections would place upon
A m e r i c a n statute books a Prussian a n d c z a r is t i c - R u s s ia n institution.
S e c tio n 0 o f th e p r e s e n t p e n a l c o d e , a n d o th e r s e c t io n s o f t h a t c o d e
c o v e r e v e r y p o s s ib le c a s e o f s e d it io u s c o n s p ir a c y a g a in s t th e G o v e r n
m e n t o f th e U n ite d S t a t e s , a n d e v e r y a c t o f v io le n c e o r r e s is ta n c e a g a in s t
th e a u th o r ity o f th e U n ite d S ta te s .
I c a n n o t se e c le a r ly w h y th e r e s h o u ld b e n e e d fo r f u r t h e r le g is la t io n
u n l e s s i t is d e s i r e d t o r e a c h i n d i v i d u a l a d v o c a c y o f v i o le n c e a g a i n s t
F e d e r a l o ffic ia ls o r F e d e r a l p r o p e r ty , w h ic h a r e n o t a p a r t o f a n v c o n
s p ir a c y .
I f so , su ch le g is la t io n s h o u ld b e c a r e fu lly r e s tr ic te d to ad
v o e a c y o f v io le n c e a g a in s t F e d e r a l o ffic ia ls o r p r o p e r ty , a s is t h e la n g u a g e
o f th e p r e s e n t s e d it io u s c o n s p ir a c y s e c tio n o f t h e F e d e r a l p e n a l c o d e ”
T h e b i l l a s r e p o r t e d b y t h e H o u s e J u d i c i a r y C o m m i t t e e i n r e s p e c t s -is
a b o v e p o in te d o u t, g o e s b e y o n d th e c o n s t it u t io n a l b o u n d s o f th e F e d e r a l
160550— 20355
I
14
jurisdiction and violates the fundamental principle of American and
Anglo-Saxon civil liberties.
(Signed)
A lfred B e tt m a n .
Mr. OWEN. I call attention to several other opinions which
have been sent to me regarding this matter.
Prof. C. Chaffee, of the Harvard Law School, says:
This bill, if enacted, will be the first of its kind since the notorious
sedition act o f 1798, opposed by Marshall and denounced as uncon
stitutional by Jefferson and Madison. W ithout such laws this country
has passed through much worse crises than the present.
Dr. Frederick C. Howe says:
This bill makes an end to freedom of the press in America.
the provocateur, espionage, and spying of all kinds.
It invites
Jackson II. Ralston, an eminent attorney o f Washington, says:
Its language is so broad, its terms so indefinite, that no man can
know what is criminal under it until Federal judges tell us what it
means.
Mr. Samuel Gompers, representing as he does several million
workmen, with their dependents amounting to millions o f people
more, is naturally concerned that this bill, under the color of
protecting the Government against force and violence shall not
be used to suppress the rights of those who live and labor in this
country to advocate a betterment of their own condition.
His loyalty ought not to be questioned. That man, when the
world was shaken with war, stood like a rock and like a hero
and marshalled the labor of this country to avoid strikes and
use its utmost patriotic efforts in the making o f munitions and
to the rendering of those services without which the war could
not have been won. No man ought ever to impute to him a lack
of loyalty or a lack of patriotism. He deserves well of his
country; he deserves the respect and affection of his country.
He said, indeed, that—
Section 5 of the bill, unbelievable a 3 it may seem__
Y es; “ unbelievable as it may seem ” —
makes it a crime to wear in public any button of an organization w h o s e
purpose is to obtain an amendment to the Constitution of th” United
States or any existing Federal law.
Samuel Gompers says th at; yes, he says it, and I say it, and
the proposed bill says it. Look at that proposed statute. I
have put it in the R ecord.
Mr. President, the liberties of the people o f the United States
comprise the most precious possession of the people o f this Re
public. It is upon liberty that the wisdom and the conscience
<iih1 the patriotism of tlie muss o f our citizens have boon able,
through their processes of education and of industry, to build up
our great Republic with its wonderful powers. I should regard
it as a national catastrophe if any act should be passed which
would jeopardize those liberties or menace freedom o f speech
or the freedom of the press. I have often been disgusted and
pained by the folly and falsehood of articles printed in the press,
but folly passes and falsehood dies away, while the lessons of
wisdom and truth which also daily come through the modern
press remain and the world is enriched by their fruits.
Liberty— freedoni— freedoin of speech, o f the press, o f religion,
v ° 1 ,imon7 freedo,n from the threats or menace of
h w t v ™ ? ^ eaucrat? ml,St be Preservt>d if “ the rights o f life,
b IGOooO—
ic n -' 1 1 2oA
« « UrSU1 of hai)pincss” are to be preserved.
03ou
O
SEVEN YEARS OF DEMOCRACY
AN ADDRESS
BY
HON. ROBERT L. OWEN
OF OKLAHOM A
DELIVERED BEFORE THE DEMOCRATIC
STATE CONVENTION OF OKLAHOMA
ON FEBRUARY 5,1920, IN THE CITY OF
MUSKOGEE, OKLAHOMA
(Primed in Ihe CONGRESSIONAL RECORD, Friday, February 27,1920)
WASHINGTON
GOVERNMENT PRINTING OFFICE
1920
1G7473— 20515
m
m
■^ gaeggr
AN
A D D R E S S
BY
H O N . R O B E R T L. O W E N .
, i\Ir‘ Chairman and fellow citizens:
1rue Democracy is a religion. It is not completely monop
olized by the members o f the Democratic Party. Many o f its
loyal disciples find themselves affiliated with other parties.
Democracy truly believes in the rule o f the people, in their
wisdom, in their common sense, in their common honesty, in
their justice, in their patience and steadfastness, in their right
and ability to govern themselves. It thinks in terms o f the
greatest good to the greatest number. Its disciples should be
‘ Soldiers o f the Common Good.’ Its great patron saint was
Thomas Jefferson, who stood for freedom of religion, freedom
of speech, freedom o f the press, the education o f the people bv
free schools, the right o f every citizen to vote.
“ On these principles Jeffersonian Democracy took eontrol of
the Government in 1801 and held it for many decades. When
the party organization became weakened by selfishness and fell
under the control o f those who believed in human slavery, it
passed from {tower by a revolt o f Jeffersonian Democrats, who
would not stand for human slavery. They organized a new
party and took the name which the followers o f Jefferson had
employed in 1800, calling themselves Republicans.
“ When the wise and kind Lincoln, on the field of Gettysburg,
prayed that the Government o f the people, for the people, and
by the people should not perish from the earth, he voiced the
spirit of true democracy throughout the world.
“ When the Republican Party got’ control of the Government
dining the ( i\il War, 1861—I860 , every selfish interest that
wished to use the powers of government for private advantage
gradually attached itself to the Republican Party, courted its
leaders, became busy in its organization, contributed to its elec
tions, promoted its nominations, and steadily obtained an in
creasing influence in its management. Unhappily it seems to
be the history of ad parties.
\Vhen in 1912, after many years, it became obvious that an
w lv e government o f organized commercial and financial
selfishness had gained control of the organization o f the Repubhcan Party and of the governing powers of the people of the
united States, the spirit-of democracy, that sleeps but never
aT s e } 1} thr hearts of the Progressive Republicans, under
the leadership of Theodore Roosevelt, and bv this revolt there
we C!em? cratic Party if* first real- opportunity
tion' I ! F lV'
demonstrate that jt had, through tribulftT0'1’
t !>a,'k to the true principles o f Democracy of .Teffer- *nd o f Lincoi». 1111(1 magnificently the Demohv n«tWnHy r>as resPonded. It was assisted on many occasions
by patriotic Progressive Republicans.
w h J t l ^ ^ r ^ 8 °,l new voters who will seek to know
what the party did when it got the power to act Thev will isk
and our unmindful opponents will ask:
3
" h a t did the Democratic Party d o ? ’
Let us answer that:
2
»
1C ,7 4 7 3 — 2 0 7 ,4f»
3
LOW ERED T H E T A R IF F .
“ Immediately it revised the ‘ robber’ tariff. It cut down
the prohibitive schedules that selfishly sheltered monopoly in
the United States. It put the necessaries of life on the free
list—the free-list importations have increased a billion dollars a
year under Democratic management; it removed unjust tariff
discriminations, and by lowering the tariff stimulated our
imports and our exports. (38 Stats., 114, Oct. 3, 1913.) Our for
eign commerce has increased from four billions in 1913 to ten
billions in 1919. Let Democrats always keep in mind that, by
logical necessity, ultimately imports measure exports and ex
ports measure imports.
“ II established the Tariff Commission (39 Stats.. 795), to take
the tariff out o f politics and deal with it strictly as a business
matter. The old rallying cry of the Republican Party o f the
Protective Tariff League, which promoted laws to tax the con
sumers for the benefit o f the selfish members o f the league, is
gone, because of the necessity now o f admitting the commodities
of Europe, as the only available means by which the people o f
Europe can repay the many billions of loans made them by
our Government and by our people. It has been demonstrated
that a revenue tariff, fairly drawn, is abundantly sufficient
to honestly protect American industries against foreign competi
tion.
“ The overwhelming majority o f American industries, because
of the enormous production and productive power o f American
machinery, can now compete on the most favorable terms with
any nation in the world.
“ What did the Democratic Party do?
PRO G R ESSIVE
IN CO M E T A X .
“ It placed the taxes on those best able to pay the taxes, and
Irom whom taxes were more justly due. It took the tax from
the backs o f the consumers and placed it upon incomes, by the
progressive-income tax, so that those who could pav the cost o f
the Government without distress should do so. (39"u. S. Stats.,
750, Sept. 8 , 1916.)
It passed a progressive-inheritance tax so that the wealth
of the country should pav for its own protection. (39 Stats.,
1091, Mar. 3, 1917.)
“ H° the American people want these statutes repealed?
“ It passed the excess-profits tax, to compel those profiting by
war conditions to meet the larger part o f the cost o f war. (39
Stats., 1000, Mar. 3, 1917.)
“ It passed the war-profits tax for the same reason. (40
Stats., 1088, Feb. 24, 1919.)
“ What did the Democratic Phrty do?
THE
F A R M E R S.
“ It made a resolute effort to benefit the farmers of the coun
try, and to improve our agricultural output. For instance:
“ It passed the farm toon act, enabling the farmers o f the
country to obtain cheap money on long time from the investing
public, through nontaxable farm-loan bonds. Over -$300,000,000
have been loaned to farmers, and under this system ultimately
the farmers of the country will get nearl.v.all the money they re
quire at the cheapest rates. (39 Stats., 360, July 17, 1916.)"
“ The farm loan act had the effect o f compelling land-mortgage
banks to lower their interest rates, and thus lues been of great
value to the farmers.
167473- 20545
“ The Republican Semite, without a bearing, reported a bill
recently to repeal the tax-exemption features of the bonds based
on joint-stock bank mortgages authorized under this bill, but
withdrew it when protests were tiled.
“ The Democratic Party passed the Smith-Lever agricultural
extension act, under which the vast knowledge acquired by the
Agricultural Department in agriculture, horticulture, animal in
dustry, bee culture, farm economics, canning and preserving
foods, raising poultry, etc., has been'put at the service o f every
farmer in every agricultural county in America by trained men
and demonstration farms. (.‘i8 Stats.. 1086, Mar. 4, 1915.)
“ The Democratic Party passed the good roads act and appro
priated millions to build, by cooperation with the Slates, hard
surfaced roads connecting the farms with the cities, to the ad
vantage o f both. (89 Stub, 355, July 11, 1916.)
“ The Democratic Party has vigorously expanded the ruralroute system—delivering mail to the farms.
“ It has built up the Parcel Post System, carrying parcels to
and from tin? farm, and to and from the cities. Do the American
people or the farmers want these acts repealed?
“ What has the Democratic Party done?
LABOR L A W S .
“ It has shown its deep desire to serve those who labor.
“ It established a Department of Labor; has developed it; has
made it useful in steadily improving the conditions o f life for
those who labor. (37 Stats.; 736, Mar. 4, 1913.) It has estab
lished employment bureaus, to bring the man and the job to
gether. It helps to settle disputes between labor and capital.
It has developed the Bureau of Mines and the Bureau of Stand
ards.
“ It passed the child-labor act, to prevent employers from deny
ing children their right to be educated, and to have some o f the
freedom of youth. (39 Stats.. 675, Sept. 1, 1916.)
•
“ It passed the eight-hour lair—one of the great accomplish
ments desired by organized labor. (39 Stats T**i Sept 3
1916.)
“ It passed laws providing for the minimum wage.
“ It#passed the workntfh's compensation act, for accidents and
death in industry. (40 Stats., 961, Sept. 13, 1918.)
“ It exempted combinations o f laborers and of farmers from
the inhibitions o? the antitrust act.
“ It passed a great act declaring that ‘ labor is not a com
modity.’ This act is regarded as a magna ehartn for labor, and
forbids labor, consisting of human flesh and blood, to be handed
about as a chattel. (38 Stats., 7:51. Oct. 15, 1915. >
“
passed an act providing for vocational instruction and
is engaged now in giving vocational instruction to many of our
young soldiers returning from abroad who have sought this
advantage. I heartily wish a larger number were being given
rhese advantages o f instruction. (39 Stats., 929, Feb. 23, 1917.1
“ Do they who labor desire to rebuke the Democracy for these
acts and have these laws repealed?
“ It passed the seamen’s act to give liberty to those who
l high seas, to put an end to the slavery practiced
at SC- fnr H prm„U e bet*tr conditIons o f life nt sea, and safety
at sea for the sailors. Tins legislation has been o f very great
li ii
Is
moree Sam
traactive
cH v i ^to W8ges
f f?ni,ors
»^king the profession
11,01
young °men.
It and
was a necessary step in
107473— 20545
ii
a
■
4\ 1
5
order to provide men who would be needed for the great mer
chant marine which the Democratic Party desired. (38 Stats.,
1164, Mar. 4, 1915.)
M E R C H A N T M A R IN E .
“ The Democratic Party has now built up a gigantic merchant
marine, with 1 0 ,000,000 tons o f shipping, big enough and strong
enough to take our commerce and our flag to every port in the
world. This alone is a monumental service to the American
people.
MONOPOLIES.
“ Wluit did the Democratic Party do?
“ It did many things to abate the evils o f monopoly.
■‘ It passed the Clayton Antitrust Act, providing various
means with which to check the practice o f monopoly. (38
Stats., 730, Oct. 15, 1914.)
" It established the Federal Trade Commission, with au
thority to suppress unfair practices in commerce. The Federal
1 rade Commission is destined, by its example, by its policies,
and by its work, finally to teach the American people how to
control the abuses of monopoly and of profiteering. (38 Stats.,
717, Sept. 26, It) 14.)
“■rfhe greatest o f all monopolies in America was the monopoly
of money and credit, known as the Money Trust.
F ED ERAL RESERVE ACT.
‘ The Democratic Party passed the Federal reserve act,
established 12 credit centers, with 12 great Federal reserve
banks under the control o f the Government of the United
States through the Federal Reserve Board, so that any citizen
having sound credit, based on commodities or on actual com
mercial transactions, could have his note underwritten by his
local bank and get money from the Federal reserve bank. This
act took from the Money Trust the monopolv of credits. (38
Stats., 251, Dec. 23, 1913.)
“ This act lias enabled the 25,000 banks in the United States
to accommodate our national commerce without asking per
mission o f any private monopoly. This act has made panics
impossible.^ Tt has given great stability to the banks and to
credits. Under this act in six years the resources o f the
national banks have increased from ten billions in 1913 to
twenty-two billions in 1919. All the banks included have had
their resources increased from twenty-five billions to fortyeight billions under Democratic management in six years. Not
a single national bank failed in 190L9.
“ This act enabled the United States to finance Europe, to
organize and conduct and to win the greatest war in history.
Those who fought this act are now asking the people of the
United States to put them in control.
“ Do the business men of America want this act interfered
with or to rebuke those who passed the act over persistent
Republican opposition?
“ The Democratic Party has developed the postal savings
banks for the accommodation o f those timid people who do not
deal with the banks but are willing to trust their deposits
with the Government, and their deposits are thus made availa
ble for the banks. Under these acts the banks of the United
States have had the greatest prosperity in their history and at
the same time have substantially lowered the rates of interest
to American business men.
167473—20345
6
“ What tliil the Democratic Party do?
“ It has passed many acts improving the Public Health Service
for the conservation o f human life.
POPU LA R G O VERN M EN T.
■
“ It has done many things to promote popular government.
It was due to the Democratic Party and tiie Progressives that
the direct election of t nited Stales Senators was put into the
Constitution. This amendment has made the Semite of the
United States more responsive to the opinions of the people,
and will make it still more responsive than it is now.
“ Do the people want to vacate or abandon this right or re
buke the Democracy for demanding greater power for the
people?
“ The Democratic Party democratized the committees of the
United States Senate by giving the committees control o f the
chairmen and of conferees.
“ The Democratic Party established modified cloture in the
Senate so that a few men could not by unlimited debate per
manently defeat the will o f the Senate itself. (1917, vol.
55, p. 19.)
“ It passed an act forbidding briber)/ in elections.
.PEACE T R E A T IE S.
“ It negotiated peace treaties with all the important nations
of the world except Germany, Austria, Bulgaria, and Turkey,
who wanted war—and got it.
IT CONDUCTED T H E WAR TO VICTO RY.
“ /t kept this Nation out of war until it became clear that the
liberties o f America and o f the world were in jeopardy from
the aggressive conduct of the Teutonic allies. When war be
came necessafy for the protection o f the honor, the dignity, the
liberties o f the American people, the Democratic administration
organized the Council of National D efense: organized the Na
tion for war, down to the very crossroads; passed the declara
tion of war and the great war measures; -established the War
Industries Hoard, the War Trade Hoard, and the food and fuel
control; financed the entente allies; passed the war marine in
surance a ct; set up the War Risk Insurance Hnreun: organized
over 30,000 four-minute men; called to the t v /o r s 10.000,000
Americans; raised an army of over 4,000,000 nun : expanded the
Nary and merchant marine; provided the munitions of war;
trained and transported the required forces to Europe; pro
tected them from disease and rice as far as h u m a n ly possible;
broke up the German submarine campaign; crumpled the lines
of the German troops in France; crashed the moral" of the Timtonic forces and compelled their military leaders to beg for an
armistice, in effect an unconditional surrender, th u s saving the,
civilization o f the world from the greatest mititmy menace in
the history of mankind. (39 Stats., 649 ; 38 Stats., 711.)
PRO GR ESSIVE R E P U B L IC A N S.
Mr. Chairman. I wish to express my warm and heartfelt re
spect lor the patriotic Republicans and citizens of other parties
who loyally cooperated from the Atlantic to the Pacific in win
ning this Great War. And I wish to express my deep gratitude
to those progressive Republicans who cooperated with the Dera
i l i n
the great legislative program o f the six vears of
Democratic control.
167473—20545
7
“ What (lid the Democratic Party do?
“ Why, it passed the ‘ s ele ctiv e-d r a ft act,' by which rich man
and poor man; educated man and ignorant man, Protestant and
Catholic, Jew and Gentile, black and white, took their position
side by side on the battle line or in the service o f the country
where each was best fitted to protect the liberties o f their com
mon country. Never was a more democratic act passed. No
man was permitted by law to buy a substitute with money, but
every man’s life and service was put upon a basis o f equality
in(the defense of his country. (40 Stats., 70. May 18, 1017.)
“ What man had the impudence to question the ‘ Americanism ’
of the Democratic Party in all these great accomplishments?
W hat is ‘Americanism ’ if it be not the great policies which the
Democratic Party have put into execution when it stamped out
sedition at home, whipped the Hun abroad, and made America
the commercial, financial, and moral leader o f all the world,
so that all great nations do homage to the United States, and
small nations, when they bend their heads in prayer, pray God to
bless the American people. America has become the beacon
light to all mankind, and no narrow partisan can hide this light
under a bushel or question the glorious Americanism of the
Democratic Party.
“ Under the JFor Risk Insurance Bureau was written insurance
for cur soldiers abroad o f $40,000,000,000, and under our war
marline insurance act American commerce was protected with
out loss to the Government.
“ The Democratic Party passed the War Finance Corporation
act for the protection of our business men under the extraordi
nary interruption and stress o f war.
“ It passed the capital-issues act in order to safeguai'd all
credits o f the country and make them available for war. (40
Stats., 512, Apr. 5, 1918.)
“ It organized the Red Cross movement down to the cross
roads, and in this Great War enterprise the Democratic Party
gladly availed itself o f the patriotism of citizens of all parties.
T W O GREAT A M E N D M E N T S — W O M A N ’ S S U F F R A G E ; CRO H 1BITIO N .
“ Uy the combined efforts of the progressive men in both
parties two great amendments to the Constitution of profound
social and moral significance have been passed— woman’s suf
frage and prohibition. Of still greater importance is the fact
that these great reforms were due to the progressive men and
women in the homes of America.
THE
ELECTIO N
OF 1913.
“ Before the Great War had terminated successfully there
came on the election of 1918, in which the party lost many votes
because men who were aggrieved by the conduct o f the war, by
the selective-draft act, by the operation of the Army and naval
forces; many men injured by the priority orders and the con
duct o f the railroads where the administration had to give the
right o f way for war purposes; many men injured by the Gov
ernment commandeering materials and men; many men hurt
by the sudden raise in prices, due to the Government competing
for men in the shipbuilding yards and In munition plants; many
offended by high taxes and by the extravagance and waste o f
war visited their displeasure on the Democratic Party.
“ Many men of German blood or of German sympathy who
resented the United States going into war.
167473— 20545
“ Many men who opposed war as a principle were either
turned against the Democratic Party or their devotion to the
party was weakened.
“ There was a general disposition to blame somebody, and the
administration was the victim.
“ The Democratic Party, with its leading men intensely occu
pied with the winning o f the war, were in no position to present
the accomplishments of the Democratic Party to the people
o f the country.
" Moreover, in 1918 the United States had the extraordinary
affliction o f ‘ Spanish influenza,' which killed in that year 447,000
o f our people and over 880,000 of them died in the fall of 1918.
Under the advice o f physicians political meetings were for
bidden.
“ Was it any wonder the Democrats lost both Houses? More
over, the result of the war was still unknown. It is now gen
erally conceded that the President’s famous preelection letter
alienated many liberal or progressive Republicans and vitalized
those who were partisans to strenuous activity in resentment
o f what they construed to be an affront and lack o f apprecia
tion of their loyalty in supporting the war activities of the
administration.
“ Mr. Chairman, I wish it might be truly said that none of
our people during the Great War, either Democrat, or Repub
lican, had made any mistakes in the management of the war in
the Army or Navy, or of the railroads, or of the telegraphs or
telephones, or of any o f the Government’s affairs [Republican
and Democratic citizens were almost equally divided in these
activities, but the percentage of errors and wrongs was very
small considering the magnitude of our operations in the w a r ];
but I can truly say that the record of accomplishments in the
last six years of complete executive and legislative control by
the Democratic Party is the most magnificent ever made by any
party in any country.
“ The Democratic Party found the United States in depression
in 1913, threatened with a panic. The New York banks de
clared in tiie summer o f 1913 that they did not expect to be
able to furnish the money to move the crops in the fall, and the
country banks were advised not to expect the customary\redis
count privileges. The Democratic administration thereupon
furnished the money out o f the United States Treasury to move
the crops and repeated the same operation in 1914, and now,
after six years o f Democratic management, the country has
been brought up to-a condition o f the greatest prosperity in its
history. The banks are crowded with money, the jieople are
living better than ever, business is prosperous, everyone desir
ing to labor can find the opportunity, the trains are crowded,
and the hotels are overflowing.
“ Is it possible that the alleged delinquencies o f a few in
dividuals, great or small, shall blot out the legislative and
executive accomplihments o f the Democratic Party?
“ Is it possible that the human lability of a few citizens in
office will be urged as a just reason for reversing and condemn
ing at the polls the ideals and the progressive, constructive
policies of the Democratic Party and rebuking the spirit o f
loyalty and service by which it has been inspired?
“ Mr. Chairman, such a judgment would be ns thoughtless
and as unjust as the condemnation o f our sons who won the
167473—20543
battles of the Argonne because some of them blundered and lost
llieir way In the excitement of battle or came out of the carnage
with muddy shoes and bloody uniforms.
••The Democratic Party was wounded in this Great War. It
was wounded in many ways, but it came nobly through every
trial and brought to the American people the most glorious vic
tory ever recorded in all the annals o f time. It made America
the leader of the world.
“ No party in history ever deserved better o f the people than
(be Democratic Party now deserves of the p eop le o f the United
States.
J'H k
peach
treaty
;
“ Our President, whose leadership and whose sympathies
were behind the record of the last six years, went to Paris
and brought back a glorious peace treaty, establishing
peace among all die nations of the world, by which all the
nations of the world pledged themselves to respect and preserve
the territorial integrity and political independence o f other
nations; to settle all interactional disputes by conciliation,
arbitration, and peaceful adjustment; to end competitive arma
ment; to coerce any outlaw nation again attempting to deluge
the world in blood by a world-wide economic boycott and by
such pressure as should be necessary to restore order.
“ After many months o f study and acrimonious debate the
treaty of peace at last has four-fifths o f the Senate in favor
of it without amendment or with reservations that, after all,
do not seriously change its meaning.
“ Tlie covenant of the League o f Nations ushers in a new
democratic era in which all the great nations have agreed that
all just government is based on the consent of the governed.
“ The monarchies and autocracies are crushed. The democ
racies of earth are completely and overwhelmingly triumphant
throughout the whole world.
“ But to accomplish this magnificent result our people lost a
hundred thousand of our best young men, twenty-six billions of
money, and dislocated all o f our internal affairs.
“ Shall we now lose the reward o f these sacrifices— the great
est opportunity of Service in our history—by refusing to ratify
the treaty and thus fail to assume the moral leadership of
mankind which is tendered our Republic by Hie unanimous
sentiment o f all the free nations? Shall Senators take a small
revenge on the President for his alleged neglect o f the Senate,
reject the treaty, wound all fhe friendly nations/of earth, who
fought to the death in the cause of liberty side by side with us,
and lose our preeminent position with them purchased at such
a sacrifice? Shall the beloved youth o f the world, our own best
beloved, have died in vain?
“ Tf the treaty be not perfect its errors can be corrected with
out tearing down the entire structure. Justice and reason will
prevail in the assembly of the world’s best representatives. The
treaty should be ratified without delay, with such reasonable
reservations as shall put the American people whole-heartedly
behind it.
T H E FUTURE.
“ And now, Mr. Chairman, we are face to face with the immedi
ate future. It is not enough to say what we have done; it is
of the greatest importance to say what we shall do. The spirit
and purpose, the vision and constructive genius which the
107473—20545
Democratic Party has exhibited in the last six years, justifies
the faith that this great party can be better relied on than any
other party to solve the reconstruction problems following the
war.
THE HIGH COST OF LIVING.
“ The greatest problem confronting the country is the high
cost of living, which deeply concerns those o f fixed salaries,
fixed wages, fixed small incomes.
“ Many causes have combined to bring about the high cost of
living and cut down the purchasing power of the dollar. The
principal causes a re :
“ 1. Credit expansion in the form o f United States bonds and
certificates of indebtedness, short-time Treasury notes, exceed
ing $26,000,000,000.
“ Expansion in bank deposits, amounting to nearly $20,000,000,000 from 1013 to 1920.
“ Expansion of Federal reserve notes, made necessary to meet
rising prices and the consequent increased demand for actual
currency.
“ Expansion o f gold sent to America to balance our excess
commodity shipments abroad, amounting to eleven hundred mil
lion dollars.
“ These expansions of credits make dollars much easier to get
and make the exchange or purchasing value of the dollars less
because dollars are easier to get.
“ Similar foreign credit expansion in foreign bonds, bank de
posits, and currency has in like manner reacted on prices abroad
and raised the prices of foreign commodities imported into the
United States.
“ 2. Diminished production. European labor for five years,
and American labor for two years, has been largely withdrawn
from the production o f goods and raw materials required for
normal peace times. In the United States we withdrew from
the factories, fields, mines, forests, and fisheries over 4,000,000
men and put them under arms and in training for war, and we
withdrew probably 10,000,000 laboring people from the activities
o f peace to the activities of war, causing a diminished produc
tion o f goods.
“ 3. Increased consumption. The increased consumption by
war in the destruction of property on land and sea, by the waste
and extravagance o f war, emphasized diminished production.
“ 4. High cost of labor: Because of the urgency o f war and
strenuous competition, extraordinarily high prices were paid for
labor in our factories, in munition plants, in shipbuilding yards,
and other Government and private works engaged in war pur
poses. The withdrawal o f millions of men for war added to the
scarcity of labor and doubled the prices paid.
“ The extraordinarily high pay led many men to work half
time— lowering production. They satisfied their wants with
half-time labor.
“ 5. The extraordinary European demand for the necessaries
of life added greatly to the demand for American goods and
raised prices in America on all the necessaries of life
“ 6. Impairment of transportation: Transportation on land
and sea was subjected to ruinous losses. Millions of tons of
ships were sunk. There was no time to repair or rebuild cars
or locomotives, or to keep the railways in good condition, and
107173— 20545
now transportation is lacking efficiency even where production
is available, thus adding to the cost o f living.
“ 7. The cx cess-pro tits tax and certain war taxes have been
shifted to the price of commodities, and thereby upon the con
sumer, raising the cost of living.
" High taxes of all kinds are in some degree put on the cost of
goods wherever possible.
“ 8. Interstate monopolies, restricting production, restraining
trade, hoarding necessaries of life and raw materials, and exact
ing unfair profits and high prices has added immensely to the
high cost of living.
‘ 9. Profiteering: Many people are taking advantage of un
settled prices and conditions and the absence of a suitable mech
anism to control if, to profiteer on those who are compelled to
buy.
f
10- rlhe unequal distribution o f wealth, exaggerated by war,
has led to extravagance and waste by thousands who have
profited and ^ef a false standard of prices in many lines by
the teckless expenditure of those who need nor measure the cost,
compelling people who can not afford it to pav fictitious and
false prices.
“ 11. Wholesale speculation in stocks, commodities, real estate,
and business has led to excessive interest rates—going up on the
slock exchange to 20 and 30 per cent; a 0 and 7 per cent rate
by (lie federal reserve hanks, and 7, 8, and 9 per cent for com
mercial loans. This is one of the most serious factors in the
lugh cost of living, because as goods pass through various hands
each adds a merchant’s profit to the original high cost. It has
also resulted in depreciating United States Liberty bonds, be
cause they hear a reasonable and moderate r/ite of interest, and
seem a poor investment, beside current rates much higher.
" Speculation in stocks alone was employing on the New York
Stock Exchange within the last few months $1,900,000,000
loaned by banks on call or short terms for speculation. Such
credits tyiould bo preferably used bv the commercial banks for
industry and commerce at legal rates.
KEMKDIKS.
Some of th<' causes of the high cost ol living can be almost
immediately corrected, and stops should be taken o f a concrete
character by which to reduce the cost o f living. Among the
remedies which are obvious is to stop the expansion of credit
for unproductive purposes, such as pure speculation in stocks,
commodities, and real estate.
“ 1*le productive power of tlie people of the United States
amounts to approximately seventy billions per annum, and will
supply all fli<‘ credits required for the most vigorous develop
ment.
“ 2. To stabilize the Federal reserve note issue and keep
the currency at a relatively stable figure.
•‘ The per capita circulation in the United States in 1890 was
$22.82; in 1900, $26.93; in 1910, $34.33; in 1914, $34.35; in 1919,
$54. The expansion In 1919 included $11 gold per capita sent
from abroad in exchange for goods.
“ 3. The taxes should he reduced and the cost of the tear
should he extended over .70 pears, so that the cost of the war
will he distributed over the future and not fall too heavily upon
tin' present generation or compel high taxes in paying the prin
cipal at this time.
107473— 20545
“ 5. The Federal Reserve Board should lower the normal rate
of interest for discounting for member banks to not exceeding
3 or 4 per cent as a normal rate, increasing the rate if banks
seek discounts in excess o f a fair proportion o f the reserves to
which such bank is entitled.
“ 6. The United States Government should be conducted on
a strict budget system, limiting expenditures to a moderate
income by reasonable taxation. Extravagance and waste in
government should be prevented find treated as a serious wrong.
Very great economies are possible in governmental administra
tion and should be vigorously worked out under the most im
proved modern methods.
7. The people of the United States should demand reasonable
interest charges, and usury should be checked. The artificial
usurious rates charged on call loans in the Stock Exchange in
New York should be forbidden by law, and restrained by the
powers o f the Comptroller o f the Currency and the Federal Re
serve Board and by act of Congress if necessary.
“ Call loans on stock exchange collaterals should be converted
in'o t im e loans for the benefit of the stock exchange as a true
market place and as a sound public policy. Time loans can not
command very high usurious rates.
“ It will be impossible for the railroads of the country to get
money on tlieir bonds at decent rates unless the normal interest
rates are brought down. Unless the railroads can be financed
on a fair interest rate for their bonds the public will pay the
bill in higher freight rates and passenger fares. If the interest,
rates are brought down to a reasonable basis, the United States
Government bonds will come back to par.
excess
r u o F iT S .
*•The excess-profits tax should be repealed. and the Govern
ment should go out o f partnership with those who are charging
the American people excess profits. The Federal Trade Commis
sion should hare its powers expanded as an agency by which io
reduce the high cost o f living by restraining unfair practices in
interstate commerce.
R IG ID ECO N OM Y N E C E SSA R Y .
“ During the war it was exceedingly difficult to entirely pre
vent waste and extravagance, but now the Government should
enter upon a policy of rigid economy in the management of its
affairs. Economy is as essential in Government as it is in pri
vate affairs, and if we are to lower taxes it is essential that
every expense should be avoided consistent with the efficient
conduct of government.
MONOPOLIES.
“ The practices of interstate monopolies in limiting production
in order to limit supply and charge extortionate prices should be
stopped by the Government as an unfair practice. Unfair price
fixing and hoarding for speculation should be forbidden. It will
be far better for monopolies to turn out five times ns much at 20
per cent profit than charge 100 per cent profit on one-fifth o f the
output. Even those who profit by monopoly should remember
that they themselves are the victims o f other monopolies, and
that tlieir profits would lie more valuable if their dollars had a
larger purchasing power. The Sherman antitrust law has
failed, because the Supreme Court declared that 'reasonable
restraint o f trade is not obnoxious to the statute,’ and no man
knows what a 4reasonable restraint of trade’ signifies.
m
13
“ Tlie Federal Trade Commission should have power to limit
interstate monopolies to a reasonable percentage o f profit on their
turnover, so that the public interest is preserved while not deny
ing an abundant reward to those who transact the business of the
country. I liis ims been fairly well accomplished in the Cartel
system.
P R O FIT E E R IN G .
• Ibofiteeiiug should be dealt with in the same manner by
Nations , state, and local authorities, andt public opinion should
be moused so as to xnake those guilty o f profiteering feel the disappioval ot t he public, and so that suitable remedies may be pro
vided to abate tins evil without denying the just rewards for ini
tiative and industry in commerce.
PRODUCTION---- LABOR AND CAPITAL.
. . V ]'s V/ extreme importance that production should be stimuomm w i.'V » . " 170l'les niauy faetors- It involves reasonable,
r/r' » ' l ,
1!,o-68 rl: 1
lt involv('s equally die rights o f labor,
’ management, o f capital, and of the public. Labor is both
anil is entitled to the fullest consideration.
he < a my ol labor for several reasons has been seriously im
paired minor is estimated in many lines to be from 30 to 40 per
cent below its productive capacity prior to the war, notwithstand
ing the high prices paid for labor due to the unrest of labor and
the dislocation of labor under war conditions; to die extraordi
nary prices paid during war times; to extraordinary profits
duimg wai >y die employers o f labor; due to trained men being
taken away tom the stations in which they were expert to other
more protit able lines in making war material. Readjustment is
neeued. 1his can be promoted by encouraging frank and free
discussion and arranging peaceful methods by which labor will
paitiupate in what it produces above a bare living wage. The
employee should not he regarded merely as a money-making maclune, but altogether ns a human being, entitled o f right under
dm Constitution to life, liberty, happiness, and a reasonable par
ticipation in he profits arising from labor. This policy is advis
able both for the sake o f the employer and the employee. When
the workman knows that he is working both for himself and his
emplojci in' w ill not indulge in or permit the killing o f time, the
waste of material, ot energy. Labor management and capital
should work together on the principle o f service to all mankind
along lines ol cooperation in a spirit of fellowship, sympathy, and
mutual support. It will not do in a democracy to rely solely on
the physical powers of the Government and brute force to control
human unrest. I hat remedy is a, two-edged sword, dangerous
alike to capital and to labor, and to the stability and peace of the
Government itself. The.doctrine of mere arbitrary force should
not ho seriously entertained by* thinking men who love liberrv
after the lessons o f this war.
“ Neither labor nor capital can be expected to render willing
service unless it receives adjust and satisfactory compensation.
“ To prevent strikes and lockouts, the causes should he found
and removed.
“ Increased productivity should he for the service of all, and
not exclusively or unduly for profit.
D IST R IB U T IO N .
“ Much can be done in promoting improved methods of distri
bution through improved organization, through terminal ware
houses and distributing centers and a central board of informa167473— 20545
tion through which sound advice can be given to those engaged
in the process o f distribution.
“ The improved use of warehouse receipts as a basis ot eieuic
through the expansion of the acceptance system in furnishing
credit for goods in process of actual distribution.
G OOD
ROADS.
“ The building o f hard-surfaced roads and the use of motor
trucks and automobiles is a very important part o f cheapening
the process of distribution and lowering the cost of liwug. i ne
United States should vigorously promote this development in
conjunction with the States.
LAW AND ORDER.
“ The powers o f the Government should not be subjected to
the dictation of organized minorities, whether representing
capital or representing labor or any special group, but the right
of men to organize and petition the Government should not be
'denied. The right of men to organize for collective bargaining
is a just and reasonable right which should not he interfered
with but conflicts arising between organizations of men repre
senting capital and representing labor should be adjusted by
means” provided for conciliation, mutual accommodation, and by
public opinion. In such controversies the public is entitled to a
substantial representation, so that the interests of the public
shall not he disregarded by those who are merely seeking thenown interests. A just settlement o f such disputes can be ar
rived at and is one of the great problems remaining to be solved
in a manner just to the public and to those who serve the public
alike.
SED ITIO N L A W S .
“ The existing statutes are sufficient to punish those guilty
of overt acts against the dignity of the national statutes, and
there is no need for the passage o f extreme laws based on excite
ment and fear o f bolshevism in the United States. The punish
ment of the advocacy and organization o f actual conspiracy t<>
change the forms of our Government by assassination should
he vigorously inflicted, and additional law should be provided to
cover such conspiracies, if it actually prove to he necessary. The
people o f the United States are overwhelmingly honest, loyal,
patriotic, and can be relied upon at all times to protect the
country against sedition and treason.
“ We saw during the war the best evidence of this. The only
danger was that the people themselves might go too far and
act on suspicion in dealing with the ignorant and thoughtless
who exercised the American privilege of occasionally indulging
in foolish speech.
“ It has taken a long time to build up our great Government,
based on its ideals of liberty, -justice, and humanity, and the
people o f the United States will not permit any man or set of
men by violence arid force to tear down constitutional Govern
ment in America. Law and order must lie and will be rigidly
enforced. It can be and should be enforced without extreme
sedition laws which might destroy liberty and break down free
dom o f speech and freedom of the press. Ignorance should be
controlled by education where possible, and force should only
be used where milder remedies fail.
“ Our Constitution provides a peaceful, reasonable way for
its amendment, and tl^pse who by organized Societies are secretly
engaged in advocating the overthrow of our Government and
107473— 2054.’.
social institutions by tire and sword should be treated as guilty
o f criminal conspiracy and sedition.
“ It is my opinion that political prisoners guilty of no overt
criminal act should be released immediately and all others
brought to summary trial and not subjected to indeterminate
imprisonment awaiting trial.
9
CON SE RVATIO N .
“ The great policy of the conservation of our natural re
sources is another means by which the high cost of living can
be abated by increasing production through the use o f these
gioat natuial resources. It should be vigorously maintained
itnd extended to bring into use these values.
UN ITED
ST A T E S
BONDS.
1 lie United States bonds which were sold to the people under
the label ty loan and Victory loan campaigns ought to be brought
, l)a' ’ and this can be done by insisting upon lower rates
of legal interest through the Federal reserve banks and through
the menibei banks and forbidding the high usurious rates on
the stock exchanges— which run up to 30 per cent on call
loans—which have the effect of raising the commercial rates
throughout the United States. Even the reserve banks under
this influence raised rates to 6 and 7 per cent. It logically fol
lows that United States bonds bearing moderate rates are dis
credited and brought below par, when contrasted with very
high commercial rates, and when banks and citizens borrowing
on 4j per cent Government bonds are charged 6 per cent for
credits. I f government bonds plus the credit o f a citizen or
bank are not entitled to credit at the rate o f interest the Government bond hears, it need not surprise (he country if the bonds
sell for a 10 per cent discount.
Bor 50 years before the war the normal rate o f interest in
France and Belgium was 3 per cent. In Great Britain the ac
ceptance rate during the war was only 3* per cent. United
States bonds bearing 2 per cent, with the circulation privilege,
have been selling at par for years.
POPUI*VR
GOVERN M EN T.
1he policy of the Democratic Party in promoting popular
government should be steadily adhered to in order that the
sovereignty vested in the people of the United States may have
a concrete mechanism through which it may exercise the gov
erning power. Tiie popular-government process is o f the great
est importance to accomplish this and to enable the people to so
control the Government that it may function in their interest
and be comparatively free from the organized selfishness that
is continually exerting itself to lay its hands upon the govern
ing powers o f the people in a thousand crafty ways.
CLOTU RE
in
U N ITE D
states
senate
.
“ 10ven now a majority o f the people’s representatives in the
United States Senate can not control the Seriate because o f its
minority serving rules that permits a minority to control its*
acts. Unqualified cloture or ‘ the right to move the previous
question ’ is a reform absolutely necessary to deprive the special
interests of undue power In the people’s Senate. It ought to be
demanded by the people.
IN IT IA T IV E AND REFEREND U M .
“ You have seen in Oklahoma the value of the initiative and
referendum, which has now been adopted bv more than °0
167473—20545
16
States, including such Commonwealths as Massachusetts, Ohio.
California, Mississippi, and Missouri. This law puts the powers
of government into the hands of the people and enables them to
initiate any law they do want and veto any law they do not
want.
“ The primary Jaic, the short ballot, the preferential ballot,
the corrupt practices prevention acts are essential in preventing
organized minorities and plutocratic influences, through ma
chine-rule methods, getting control o f the governing power.
“ The publicity pamphlet issued by the Government to each
citizen giving the argument for and against candidates and pub
lic measures is necessary for the information of tin* citizen that
he may vote intelligently and escape the undue influence of the
press columns too largely controlled by selfish interests.
“ When these processes o f popular government shall have
been perfected and the people are in complete control of their
own Government, the powers o f monopoly and of profiteering
can be effectively controlled and the high cost of living re
duced. When this is accomplished we shall have had an answer
to Lincoln’s great prayer that ‘A Government o f the people,
for the people, and by the people should not perish from the
earth.’
“ To accomplish these great ends the liberal elements of
America should unite.
“ It will surely be conceded by thoughtful and just men that
the Democratic Party is very substantially controlled by the
progressive and liberal elements o f the country, and that the
Republican Party can not hope to make itself the liberal party,
of America. We, therefore, have a just right to appeal to Pro
gressive Republicans and liberal men of other parties to co
operate with the Democratic Party. We have a right to invite
them to join us on terms o f equality in order that the progres
sive elements o f the Nation through the Democratic Party may
control the laws of the country along progressive and liberal
lines. I f this cooperation can be accomplished, the liberal
elements o f America will be able to control the Government
in the election of 1920, and the prosperity which has been
brought about under the liberal and progressive statutes of the
last six years will be continued and improved upon.
“ Those who love democratic and progressive ideals, who love
the common good, who worship liberty, justice, and humanity
should do so ‘ in spirit and in truth,’ and not be diverted by
partisan pride, far less by sordid or selfish motives, from faith
ful service to the great cause.
“ Hundreds of thousands of progressive men affiliated with
the Republican Party in former elections believe in our ideals,
and reluctantly follow the reactionary leaders who are con
tinually protecting or favoring monopoly. These progressive
citizens belong with us. They can be made to know that their
ideals can best be obtained through the Democratic Party.
“ The just solution o f our vital domestic problems require pro
gressive citizens to unite. I appeal to you to lay aside all
partisan bitterness and invite to your support forward-looking
citizens of other parties. Let us work harmoniously together
in promoting social and industrial justice and human happiness.
1G7173— 20315
o
INTEREST RATES.
R E M A R K S
H O N . R O B E R T L. O W E N ,
OF OKLAHO MA ,
AND HIS LETTER TO THE PRESIDENT,
T he S enate
of the
U nited S tates,
February 16, 1920.
Mr. OWEN. Mr. President, before tbe war Belgium for 50
years had a 3 per cent rate of interest per annum. It was a fair
rate. France had a 3 per cent rate, and even small sums were
loaned by the Bank » f France at 3 per cent. United States
bonds with currency privilege, bearing 2 per cent, sold at par
before the war. London during the war has loaned money to
merchants on acceptances at 3^ per cent.
The manufacturers, merchants, and business men of the
United States are entitled to stable, moderate interest rates.
They have this right interfered with by. the violent fluctua
tions authorized and practiced in New York and Boston on
stock-exchange collateral loans. The call-loan rates are arbi
trarily fixed from low rates to 30 per cent, and a bull market
or a bear market follows, o f course, as cause and effect.
The high rate is fixed avowedly to check speculation, but
speculation can be otherwise checked by raising the margins
a n d declining to loan beyond a reasonable proportion o f the
bank’s resources and by limiting the loans of the Federal re
serve bank to banks which persist in this harmful nolicy.
These high rates on call loans on the stock exchange has
seriously affected the interest rates in our vast commercial
business, and even the Federal Reserve Board has raised the
rates of the Federal reserve banks to 6 per cent for member
banks, which means 7 and 8 per cent for the customers o f the
member banks.
Against this destructive policy, which adds to the high cost
of living, I protest. I have written a letter to the President,
which I ask to submit for the R e c o r d without reading.
There being no objection, the letter was ordered to be printed
in the R e c o r d , as follow s:
F ebruary 13, 1920.
Subject: Interest rates.
The President .
The White House.
My D ear M r. P resident : I deem It my duty to call yom
attention and the attention of your administration to the itn
portance of moderate interest rates and stability therein it,
the United States and the important part which the influence otf
the Government can exert in accomplishing these ends through
the Treasury Department, the Comptroller of the Currency*
and the Federal Reserve Board.
Before the Great War Belgium had a fixed, stable rate of 3 per
cent for 50 years, and the rate in France was practically the
104074— 20459
I
same, and United States Government bonds with the circula
tion privilege were sold at and above par when they bore only
i per cent interest.
During the World War London merchants have enjoyed a
per cent rate on acceptances.
Our manufacturers, our merchants, our business men are
entitled to reliable, stable, reasonable rates o f interest
The productive and distributive processes so essential to re
store the equilibrium of the world depend upon such rates in
order to function most efficiently.
I call your attention to the unreasonable manner in which
the interest rates on the stock collateral loans in New York
have been fluctuating from normal to 25 and 30 per cent, with
tlie most unhappy consequences upon interest rates, injuriously
affecting our commercial business throughout the United States.
I he Federal Reserve Board has been induced to raise the
rate of discount of the Federal reserve banks to a high point
as a supposed check on the extraordinary speculation which
has been taking place on the stock exchange.
These artificially unreasonable high rates of interest charged
by the banks in the central cities on stock collateral call loans
ha\e had the effect of drawing to these cities from different
parts of the country funds which ought to be exclusively used
in commerce, and this process went to a point where recently
the amount of stock collateral exchange loans on call or short
time reached a volume in New York City of $1,900,000 000
withdrawing for speculative purposes these credits which
should be used in the industrial and commercial life of the
country.
c
The investing and speculating public has been attracted to the
stock exchange by the policy of narrow margins and low rates
of interest; but after the public has taken on these sr^ulaiiv^
purchases the interest rates are raised to a high point and the
margins are increased from 10 per cent to 20 and 30 per cent
f e “»Ct
ing» ° Ut the people wh°.
the language
oo ff /h
thei day,
can’t hold on.”
6 6
These loans, which were $1,900,000,000 00 days ago have now
been reduced to $1 ,000 ,000 ,000 , and the stock market hms gone
through a very severe depreciation; and this is the second*unheaval o f this kind within two months. I inclose an exhibit
showing the violent fluctuations which have taken place
/
trary to a wise public policy, to the ruin of many w e X 2 5
foolish speculators; but, above all, to the injury of the manufacturers, merchants, and business men who are entitled to have
stable, moderate interest rates.
lo na' e
The manufacturers, merchants, and business men are entitled
o stability. They can not otherwise transact the b u s in g of
the country with safety; and in their name and on their belnlf
I respectfully and very earnestly insist that the Government
shall establish a policy which will give stability to interest
2 t rateseVeUt ***** Vi° lent fluctuations, and lead to lower inter-
toTnsw?re: qUeSti° n be 88ked’ How can
be done?
I venture
Jhe influence o f the Comptroller o f the Currency
and of the Federal Reserve Board be e x e r t e d t o u i r e « l?,nltation upon loans made by member banks o r i w n t
, .
164674— 20459
Danks or banks engaged in
1
3
in t e r s t a t e c o m m e r c e , s o t h a t o n ly a r e a s o n a b le p e r c e n ta g e o f th e
d e p o s its o f s u c h b a n k s s h a ll b e p e r m itte d to b e u s e d f o r th e a c
c o m m o d a tio n
pu rp oses.
of
th o se
w ho
are
b u y in g
sto c k s
fo r
s p e c u la t iv e
Second. That a margin of not less than 25 per cent shall be
required in such transactions.
T h ir d . T h a t an in te r e s t r a t e n o t e x c e e d in g 8 p e r c e n t s h a ll b e
p e r m i t t e d in s u c h t r a n s a c t i o n s .
F o u r t h . T h a t th e r e s e r v e b o a r d s h a ll c h a r g e a s p e c ia l r a t e
o t in te r e s t to th o s e b a n k s w h o a r e u s in g th e a c c o m m o d a tio n s o f
t h e d i s c o u n t p r i v i l e g e s w i t h t h e r e s e r v e b a n k s in e x c e s s o f t h e i r
r ig h t fu l p r o p o r tio n a te p a r t o f s u c h a c c o m m o d a tio n , so t h a t th e
n o r m a l d is c o u n t r a te s o f th e F e d e r a l r e s e r v e b a n k s s h a ll n o t
e x c e e d 4 p e r c e n t, b u t th e s p e c ia l r a t e f o r b a n k s d e s ir in g to u s e
m o re th a n th e ir r ig h tfu l p r o p o r tio n o f th e r e s e r v e s w ith th e
r e s e r v e m in k s s h a l l b e a t a p r o g r e s s i v e l y h i g h e r r a t e .
I n th is
w a y b a n k s th a t p u t u p L ib e r ty b o n d s fo r th e p u rp o se o f g e ttin g
m o ie th a n th e ir p r o p o r tio n a te p a r t a n d te n d in g t h is m o n e y o u t
o n v e r y h i g h r a t e s o f i n t e r e s t w i l l f in d i t l e s s p r o f i t a b l e t o e n
g a g e in s u c h a p o l i c y .
° l th e F e ^ r a l
r e s e r v e b a n k o f R ic h m o n d ,
15 days
and
under.
Member banks:
Secured by United States certificate of debt
Secured by Liberty bonds
Secured by eligible paper ................................
RedSeouiUs:by
Customers’ notes—
^ o Y a t i o n bonds.
E S h y u ;S v S” „ ' r r“ “ t"
TJ
n s s t a s " Pin“ ‘»
Commercial paper.......
Agricultural or live-stock paper.'
i»n*:
16 to 90
days.
91 days
to 6
months.
Per cent.
4i
5*
6
7
Per cent.
Per cent.
4i
51
7
6
6
6
4i
51
7
6
6
6
6
., , . L
ujcse uiswuui rates mat eugiuie
papei unit is, the notes of manufacturers, merchants, and business men engaged in production and distribution—would be com
pelled to pay around 8 per cent if the member bank is permitted
any margin over and above what they themselves have to pay
the reserve bank. This is true even on trade acceptances, which
in London have a rate of 3$ per cent. In other words, our manu
facturers, merchants, and business men engaged in production
and distribution are compelled to pay by this policy twice as
much as they do in London, charging the interest, o f course,
upon the cost of the goods, and thus raising the cost of living.
Against this policy I enter my resolute and solemn protest.
I heartily approve the evident purpose of the Federal Reserve
Board to reduce the excessive speculative loans on the stock
market and divert such credits to the benefit o f commerce; but
this can be accomplished without raising the rate o f interest by
requiring larger collateral margins and by limiting stock col
lateral loans to a reasonable part of the reserves of the member
banks, and all loans to a proportionate part of the reserves with
the Federal reserve banks.
164674— 20459
L IB E R T Y LOAN AND VICTO RY LOAN BONDS.
When the American people were engaged in the war the Treas
ury Department organized Liberty and Victory loan drives, and
every citizen was urged to buy these bonds; if necessary to sell
his property and buv the bonds; to borrow money and buy the
bonds. The bonds were sold at par. It was a patriotic duty to
buy the bonds, but the high rates o f interest which have resulted
from the unrestrained speculation on the stock exchange, and
the high rates of interest which the reserve banks have estab
lished, have had the effect of having these bonds appear as a
poor investment, and these bonds have shrunk so that in the
case of the bonds, which have not the nontaxable feature, have
fallen off in value almost 10 per cent, inducing many persons
who are poor and who borrowed money to carry these bonds to
sell them at a loss, and many more will be induced to sell them
at a loss, contrary to a wise and just public policy.
If the normal discount rate of the Federal reserve banks were
nut at 4 per cent and the banks were discouraged from abusing
the privileges o f the reserve banks for stock-speculative pur
poses in the manner which I have pointed out, these bonds
would come back to par, and they should be brought back to
n^x- The people who bought these bonds ought not to suffer
a loss and the credit of the United States ought to be preserved
by the policy which I have taken the liberty to suggest to you
and to your administration.
. . . .
The result of these speculative stock loans has been such that
the New York Federal reserve bank has had its reserve very
seriously impaired, so that the New York reserve bank has
been borrowing money on a large scale from other reserve
banks who do not suffer from this strain.
There is no adequate reason why the rates of the reserve
banks should not be uniform ; why they ought to be higher in
one part of the country and lower in another part of the
country. The loans are a s reliable in one part of the country
as in another, and every part of the country is entitled to a
uniform rate.
The high cost of living demands for its solution stability in
interest rates in order to encourage production and distribu
tion, and to reduce the high cost of living demands a moderate
rate o f interest.
The Federal reserve banks were not established a s money
making institutions, but for the purpose of gi\ing stability and
a reasonable stable interest to the productive enterprises of
the Nation.
.
.
The Federal reserve banks last year made a profit o f about
100 per cent of their capital, but this in no wpy measures the
added expense on the cost of living, because the high rate of
interest charged bv the Federal reserve banks is reflected upon
loans and discounts of other banks, running into the billions,
since it affects the interest rates in all parts of the country.
I regard this matter as a matter of national importance, and
I would not feel that I had discharged my duty to the country
if I had failed to call your attention to it in these explicit
terms.
Yours, very respectfully,
R o b e r t L. O w e n .
164674— 20459
W A SH IN G T O N : G O VERN M EN T P R IN T IN G O F F IC E I 1*20
LETTER OF
FEDERAL RESERVE BOARD
M A Y 14, 1920
T o low er t h e in te re s t rates as a m e a n s o f h e lp in g t o
RESTORE LIBERTY BONDS TO PAR
U n ite d S ta t e s S e n a t e ,
May lJh 1920.
Hon. W . I*. G. H arding ,
Governor Federal Reserve Board, Washington, D. C.
M y D ear G overnor : I tliank you for your letter o f May 3,
answering my letter of April 27, in which I urged the Federal
Reserve Board to lower the interest rates of the reserve banks
as a means o f helping to restore Liberty bonds to par.
The Secretary o f the Treasury and every agency o f the Gov
ernment, including the reserve banks and the member banks,
cooperated in a strenuous drive to induce the American people
to buy Liberty bonds. The people were told to buy the bonds
until it hurt. They sold their property, they borrowed money,
they mortgaged their homes to buy these bonds on the assur
ance of the Secretary of the Treasury that there was no better
security, and they had a right to believe that these bonds
would be maintained at par. But, my dear Governor, if you
permit these high rates o f interest, of which I have justly
complained, the inevitable consequence will be that these Gov
ernment bonds must go still lower than they are now instead
of reacting to par.
The violent fluctuating high interest rates on the New York
Stock Exchange which go from 8 to 30 per cent, advertised
throughout the country in every important paper in the land,
together with the high interest rates o f the Federal reserve
hanks to member banks at 0 and 7 per cent, and the conse
quent higher commercial rates daily advertised in the public
press of 8, 0, and 10 per cent, not to mention commissions on
the side and discounts, are jointly impairing confidence and
creating an atmosphere of suspicion, distrust, and widespread
talk of pending industrial depression and industrial panic.
I have insisted that the powers of the Government should
he exercised through the office o f the Federal Reserve Board,
the Federal reserve banks, and the Comptroller of the Currency
to remove these causes, which, if persisted in, may cause a
serious industrial depression and make Liberty bonds go still
lower.
The claim o f the New York Stock Exchange that these high
and violently fluctuating interest rates on call loans are neces
sary for the purpose of preventing speculation is indefensible,
because it does not prevent speculation. The professional
operator immediately speculates in a bear market, which in
evitably must follow these artificial high interest rates. The
180810—20855
>
speculator can afford to pay high interest rates, but legitimate
business etna not. Moreover, the employment of bank credits
for speculation can be prevented by harmless methods: First,
by the banks refusing new loans for speculative purposes; sec
ond, by requiring gradual liquidation o f old loans employed in
speculation; and, third, by raising the margin on speculative
loans.
,
...
The remedies I suggest are harmless to the general public.
The remedy employed o f high interest rates on call loans run
ning up to 30 per cent is destructive of public confidence and
threatens industrial depression.
When the Reserve Board raises the rate to G and 7 per cent
it has the effect not of stopping the speculator but of stopping
legitimate business, and putting the brakes on manufacture,
commerce, agriculture, on production, and distribution.
You quite misunderstand the point when you speak of my
contention that the Liberty bond market recently fell because
the Federal Reserve Board raised the rate of interest, which you
think is disproved by the fact that the bonds fell in April, 1919,
to 95 before the Federal Reserve Board raised the rate o f inter
est. My contention is that the high rates of interest on the
stock exchange, and the high rates charged by member banks
on commercial loans based in part on the high rates of the
reserve banks, are all factors producing this result, and when
the Reserve Board recently raised the rate these bonds went
down much lower than they had been before, and they must
go lower still if the board persist in this policy. \\ hat I Con
tend is that the Federal Reserve Board in raising these rates,
and thus adopting the unwise policy of the stock exchange, is
depreciating the market value of all securities, including Gov
ernment bonds.
I understand the reserve hoard desii'es to deflate credit by
raising the rates of interest. Assuredly raising the rates of
interest will deflate credits, even the credits o f the United
States, of which I complain, but I am anxious the reserve
board shall only deflate those credits that require deflation and
not deflate credits o f the Government and o f legitimate pro
ductive business, which ought not to be deflated.
• The United States was compelled to expand its credits* and
issued $2 6 ,000 ,1)00,000 of war bonds. The war resulted in an
increase of $20,000,000,000 of bank deposits, a total increase
o f expanded credits o f $40,000,000,000. No substantial pact
o f these credits should be deflated at this time. The only de
flation ,of credit justified is the deflation o f credits employed in
speculative loans on investment securities, on real estate, and
on commodities for hoarding by profiteers.
My dear governor, it seems to me that there is some serious
misconception existing in the country with regard to what is
inflation and what is not inflation. I am certainly opposed to
inflation, but I am strongly in favor of the extension of busi
ness, increasing production, and improving distribution by ex
tending credits on a stable low-interest rate.
The expansion o f credit for such purposes is justified, hut, of
course, the expansion o f credit beyond the available resources,
even for the most important of purposes, is not justified. The
Bank o f England, conducted by the wisest merchants in the
world, has not hesitated to extend credits for productive pur180819—20855
-
poses even when the gold reserve was thereby seriously dimin
ished. As you very well know, they went to a very low gold
reserve during the war without ever denying credits to their
business men who were engaged in legitimate industry. The
London merchants had 3$ per cent acceptance rates all during
the war, when the British Government paid 5 per cent.
I f the people are frightened by the talk of industrial de
pression, by high interest rates, it has the effect o f preventing
production and putting the brakes on manufacture and on our
entire industrial life.
I do not agree with Secretary Leffingwell that the present
depression in Liberty bonds is due to the owners o f Liberty
bonds spending the bonds recklessly as spendthrifts. People
who bought Liberty bonds do not deserve such a classification,
although, of course, some individuals out o f a very great number
are spendthrifts. But the spendthrift quickly parts with his
bonds to other people. The spendthrift theory does not explain
the terrible depreciation.
If money was cheap and credits were available at low rates,
It is perfectly obvious that these bonds would go to par, and just
in degree that the banks of the country raise the rates to very
high artificial figures to that degree the Liberty bonds and
Victory bonds will assuredly fall in market value.
You advise me that the Liberty bonds “ can not be brought
back to par by artificial methods.” They can be depressed by
universal high rates of interest artificially fixed by the banks,
and that is precisely what has happened and to which I
earnestly object.
I do not say that the Federal reserve banks can restore these
bonds to par by lending a part of their resources on these bonds
at a low figure. What I do say is that the value of these bonds
is depressed by the action of the Government in countenancing
the scandalous interest rates on the New York Stock Exchange,
the unreasonable interest rates by the member banks of the
country, and the unfair interest rates by the reserve banks to
the member banks.
You very justly say, my dear governor:
“ There is a world-wide demand for capital, and the demand
for bank credit in this country in agricultural, commercial, and
industrial purposes is heavier than lias ever been known before;
investment demands for new construction, for the maintenance
and equipment of railroads, and for the financing of our foreign
trade are very great.”
Are these just demands to be met by denying the credits, or
are they to be repressed by raising the rates to prohibitive
points, and thus retard enterprise and production, the employ
ment of labor and capital in creating commodities?
You sny the reserve banks would have been “ overwhelmed
with applications for loans ” on Government securities if the
reserve banks liad continued to offer a low discount rate on
paper secured by Government obligation.
I am not advocating the reserve banks lending beyond their
resources at any rates or on any securities. I am protesting
against the reserve banks, setting a bad example to the country
by raising the rates o f interest on legitimate business engaged
in production and distribution. I am objecting, my dear gov
ernor, to the Reserve Board taking advantage of this condition
180819— 20855
:!l
and raising these rates merely because the demand is urgent,
when the proper function o f the Federal reserve bank is to
stabilize the interest rate, keep it at a reasonably low figure,
and set a wise and just example to the member banks.
The member banks pay from 2 to 4 per cent for deposits and
normally let their money out at from 5 to 7 p ercen t, with a
margin of about 3 per cent. The reserve banks pay no interest
on deposits, and 3 per cent is a rate high enough to enable them
to make all the money they are entitled to make out of the
public. On a 4 per cent rate the Federal Reserve Bank o f New
York last year made 110 per cent, and I suppose on a 6 and 7
per cent rate they will make this year about 160 per cent.
This is precisely what I am objecting to. The Federal reserve
banks should not be put in the attitude o f profiteering or of
setting the example o f profiteering to member banks. The
powers o f the Government are not being properly exerted to
stop the scandalous rates of interest on the New York Stock
Exchange.
I was advised that six months ago the New York banks had
nineteen hundred million dollars loaned on investment securi
ties and the commerce o f the country was suffering for credit.
I believe with the board, that these credits on investment securi
ties and speculative loans should be diverted, as far as practi
cable, to productive purposes, but to raise the rates to G and 7
per cent upon all banks alike does not accomplish this end. It
merely penalizes all business of every kind and character,
regardless o f whether they are using their credits for specula
tive or productive purposes.
What I earnestly desire to call to the attention o f the board
is that credits ought to be extended at a low rate to the extent
o f the capacity o f the reserve banks for productive purposes;
that member banks should be urged to do the same thing, and
that the powers o f the Government should be exerted against
the excessive, violently fluctuating rates on the New York Stock
Exchange.
Hoping that the suggestions which I have the honor to make
may be of some service to the deliberations of the board and to
the country, I remain,
Very respectfully, yours,
R oot. L. O w en .
180819— 20855
WASHINGTON : GOVERNMENT PRINTING OFTIC1 : 1920
SPEECH
OF
HON. R O B E R T L. OWEN
OF O K L A H O M A
ON THE STABILIZATION OF CREDIT; THE
RESTORATION OF INDUSTRIAL ACTIVITY
IN EUROPE AND IN THE UNITED STATES;
THE REHABILITATION OF INTERNATIONAL
COMMERCE AND THE REESTABLISHMENT
OF THE FOREIGN TRADE OF
THE UNITED STATES
IN TH E
SENATE OF THE UNITED STATES
J A N U A R Y 4, 1922
W ASHINGTON
GOVERNMENT PRINTING OFFICE
1922
83330— 22109
SPEECH
OF
HON.
ROBERT
L.
O WE N .
G O LD A N D C O M M O D I T Y S E C U R E D C U R R E N C Y .
Mr. OWEN. Mr. President and gentlemen of the Senate, I
introduced this meaning a bill proposing to establish a gold
and commodity secured currency for use with a view to stabiliz
ing the industrial activities o f Europe and with a view to pro
tecting the foreign commerce o f the United States. I particu
larly desire to have the serious attention of the Senate, because
while I do not intend to press the bill, I uo offer it to the
majority party as a means of helping to overcome the present
industrial depression in the United States, with a view to re
habilitating our foreign commerce, and with a view, as a means
to that end, o f restoring industrial activities in Europe.
I believe the suggestions I am about to submit will be of great
value to the United States and to the world if it shall meet
your approval and support.
I am encouraged to hope that Senators will be disposed to give
attention to the proposals which I submit, because I have had
unusual opportunity to study the principles o f banking. Thirtytwo years ago I established the first national bank organized
in Indian Territory, now Oklahoma, and was president o f it
for 10 years. On the 20th of February, 1908, immediately after
I entered the Senate, I outlined and advocated before the Senate
every principle o f importance that afterwards was written
into the Federal reserve act, and had the honor o f repre
senting the Senate as its chairman of the Committee on Bank
ing and Currency at the time the Federal reserve act was
written.
Our foreign export trade has been ruined and has fallen off
during this past year to the extent o f over three billions of
dollars, for the very simple reason that Europe can not ade
quately buy and has so little to sell. I do not consent that any
part of the money ‘ due us shall be remitted to Europe. Our
charities to Europe I gladly commend, but their covenanted
debts to the people of the United States must be paid. They
are not bankrupt.
The lulls of Europe are still covered with vineyards and
orchards and the fertile fields are as productive as ever. The
natural resources o f Europe, the mines, the woodlands, the
water powers, the transportation facilities, remain, and the
facilities for manufacturing have been greatly increased since
1914 through the gigantic energies of five years of war which
created more machinery than it destroyed. The man power and
the woman power of Euroi>e are capable of as great an output
now as before the war. Before the war the people of Euroi>e
had loaned to us many billions of dollars, a large part of which
2
83330—22109
3
we have repaid with interest, and we have extended credits to
Europe during this World War through our Government ten
billions of dollars, and since the war through our citizens more
than five billions in addition, ^ h e European people as people
are not bankrupt and they are not dishonorable. They are able
to pay the United States and they will pay the United States
in due time, principal and interest, but they can not at the
present time Pa^ either principal or interest because their
industrial life has been disorganized through the demoralization
following the war. lhey have neither gold nor sufficient com
modities with which to make payment to the United States.
1 he one gieat outstanding factor breaking down confidence
and destioying^ the validity and desirability of contracts in
Europe is the violent inflation of currency through the printing
press. In some of the countries of Europe people have been
compelled to abandon the making of contracts in terms of cur
rency and have lesorted to the hopelessly clumsy system o f bar
ter— so many bushels of potatoes for so rnanv bushels of corn
or coal.
Neither the buyer nor the seller can afford to make a con
tract in a currency which, like the German mark, may shrink
or expand 33 per cent within a month.
In Russia the ruble which sold two for a dollar before the
war is now selling 50,000 rubles for a dollar. In Poland
and Austria it is almost as bad, and in Germany the mark, for
merly worth 23.8 cents, is now worth one-half a cent and a fqw
weeks ago was worth one-third of a cent. The Italian lire
worth 19-3 cents before the war, is now worth less than 5 cents’
and the I reneh franc is now worth only 8 cents, and even the
ond f? r t h a Sci W° f th before the war $4.86, is now worth only
, . sm]Ple reason that even the pound sterling is not
redeemable in gold and its exchange value is worth almost pre
cisely what the pound sterling will buy in terms of gold bullion
in the London market. The same thing is true, of course, as to
the Iien ch franc, the German mark, and the Italian lire. If
you buy bullion gold with these currencies in their own country
von will lind that what we call the exchange value o f the franc,
lire, ot mark is measured by the purchasing power in gold of
these currencies in their own country. And this, o f course, is
a necessary truism for the reason that the shipping of gold
tiom these countries would immediately balance any exchange
transaction and establish exchange at gold par. But they
have little gold to spare and can not ship gold. They must sell
their paper currency for gold or its equivalent in dollar exchange
when paying us.
England in putting out the John Bradbury notes, which are
English treasury notes used as currency, did so with a small
gold reserve o f between 12 and 13 per cent to maintain the
credit of the Bradbury notes; but neither the Bradbury notes
nor the Bank of England notes are subject to actual redemption
in gold, and therefore they are at a discount measured in terms
of gold.
In the same way the French franc under an issue of
38,000,00b,000 francs, issued by the Bank of France (a private
corporation but under Government control), has been diluted
to a point where the Bank of France dared not redeem it in
gold, and therefore the French franc has undergone a deprecia
tion of 60 per cent. It is still worse with the Italian lira,
83330— 22109
and in the case of the German mark the mark went down to
about 2 per cent of its original value.
How can manufacturers contract goods for future delivery in
terms of marks when the mark at the time of future payment
threatens a very high percentage of loss? How can merchants
buy and sell with safety in terms of marks when the mark
stretches from one value to another without notice?
In spite of this handicap the German people under the stimu
lation of their Government are nevertheless busily engaged in
manufacturing, but under this very great disadvantage.
The one gigantic outstanding fact which retards rapid restora
tion o f European industry and commerce is the lack of a stable
gold-secured currency measurable in terms of gold. Even gold
liuctuates in value, but at last it has been found by the nations
o f the world to be the most stable and acceptable measure of
value ever established for monetary purposes.
The United States is able to provide a means for furnishing
currency secured by gold and redeemable in gold and secured at
the same time b y staple merchantable commodities and under
written by sound bankers’ credits. I have submitted this
bill which contains these fundamental principles, and which,
if adopted, would establish a Federal reserve foreign bank
owned by the Federal reserve banks of America, to function as
their servant. Such a bank, with a primary capital of five hundred
millions of gold taken from the Federal reserve banks, would
not weaken the banking system of the United States for the
reason that we have far in excess of the amount of gold re
quired to keep our Federal reserve notes at par.
We have set apart 35 per cent of the reserve deposits in gold
and legal tender. That 35 per cent is idle gold, unproductive
and of no practical value, for the reason that the deposits are
not capable of being withdrawn under the law. During the last
12 months, in spite of a withdrawal of deposits from national
banks of over $2,000,000,000 and from State banks of over
$1,000,000,000 the deposits in reserve banks have increased
$13,000,000. Thirty-five per cent of $1,784,000,000, the present
deposits in reserve banks, would make nearly $600,000,000 of
idle gold and legal tender, and 25 per cent (the amount to
which reserve against deposits is diminished) would make
$446,000,000.
One billion seven hundred and eighty-four million dollars is
the present deposit of reserves in the reserve banks. Thirty-five
per cent o f that is nearly $600,000,000 of gold and legal tender
that is lying there, serving no useful purpose. That gold can
be employed, though still owned by the reserve banks, through
the Federal reserve foreign bank, and used as a basis o f 20
per cent reserve would provide reserve notes amounting to
$2,500,000,000, or five times the amount o f such reserve gold.
Under the bill I propose there would be 100 per cent of com
modities behind each reserve bank note and 100 per cent of
short-time bankers’ bills. If the emission of these notes should
go up to $2,500,000,000, there would be behind the bank notes
100 per cent of bankers’ credits ($2*500,000.000), 100 per cent
o f ^commodity credits ($2,500,000,000), and 20 per cent o f gold
($500,000,000), and we would in that way manufacture, if I
may use such a term, a sound gold and commodity secured cur
rency abundant to restore the European countries to a sound
currency foundation.
83330— 22109
5
At present they do not know what the value is of a mark lire
thTfast 30 d ^ s
to half a cent*
Mr. SMOOT.
? ? mar? ba* fluctuatod ^ per cent in’
down t0 one-third of a cent and back
Mr. President------
Doe^the^Senator*^
( -Mr. R obinson in the chair).
Utah?™ Se,mt01 f 10111 Oklahoma yield to the Senator from
Mr. OWEN.
Certainly.
show'howf i? rJis nn°e mthe Senator exPect 111 bis statement to
cents?
Possible to make the German mark worth 24
worth °'4 cents 1 i r ? ” 0-1 conce.llietl in making the German mark
Mr. SMOOT * Thorl impossll)le
make it worth 24 cents,
standing.
c aie over 100,000,000,000 marks now outingIr t ?hisEm n e YeS; ther® are ^.OOO.OOO.OOO marks outstandMr OWF\T * v p " d fr ° re are eing issued every day.
billion a week
Hre poi.\rin« tllem 011t at the rate of a
kT
SMo S t ^ T I tbei^ Coa^
that 1 am compelled ^
"I'*' 1
mittee m e e tin g I w iS f m Z t
because I am *mvini.«\ i
n?*
s
t ., ui k i i ; r m , ^ , lr x
taf2 ™ i % ? eS r t a u Pe0Ple t0
luteri*upted the Senator was
1°
t 0 ,an im? ortaut 00111la' e to leave the Chamber,
t r tl,i%sf ,m,tor
t
1
to
plan or whether thoro n i i
'
be had worked out any
set aside the present r
been evolved 111 his mind a plan to
a gold basis6 I t h i l n k X Senator61'
a“ d begin anew lipo11
for [the°\inerican Gov"0t <‘OIU*erue<i with that- Jt is impossible
ere with
e lr d
' 11 01* the American people to intertries Thev h ive lho: CUrren^ J affairs of the European couneven'for
them
' °*Vn
dlfficultiesis not
t ui
UK in of
of mm*1
putting
the German
mark^ back
to a
narquestion
It is
mark backto pa^thp1‘ qUestion‘ If the-v do put the German
that have beln^’i „ bf y,n,USt.pay ,)01lds ia « old pai’ 111 2>3.8 cents
n ic e and t lin n f f a" ainst, tlle murk worth a half cent
biikto’m easum f i« Pf y a? the bo? ,lholder- wll° bought those
worth -4
04 cents aniec? 1^ 8 2yortb ,laIf a cent aP5ece» in marks
woitn
cents apiece; in other words, the bondholder receivimr
forty-eight times what he loaned to the Government of Germ an?
?ea?satoV
o n fXinS1P
r nblem’
andeventually
one that may
some
years
to worke
work out,
and will
result
in a take
necessary
compromise between the debtor and creditor classes affecting
gigantic sums.
auu»
So I am not concerned with that difficult problem. What I
am concerned with is that there shall be furnished to Europe a
cun oi icy measured in grains of gold, a currency sufficient in
volume to meet their industrial requirements. Under mv plan
the bank would earn 15 per cent on the $500,000,000 invested ■
assuming that $2,500,000,000 of notes would be loaned, it would
brinq a
of approximately 3 per cent. It would earn
about •, to,000,000 a year, and setting apart 5 per cent on the
capital for the benefit o f the reserve banks they would take
irom that $ to,000,000 the $25,000,000 of earnings per annum
where they now get nothing at all. They complain that they
83330— 22109
*
put their deposits in the reserve banks and get no interest on
the deposits, but under my proposal they would get $25,000,000
o f earnings out of the idle gold which is tied up as a useless
reserve behind the deposits.
But there is a far greater and more important reason for
furnishing Europe with this gold-secured currency, and that is
that Europe owes us $15,000,000,000 and she has neither gold
nor commodities with which to pay us. However, she has the
man power, she has the natural resources, she has the in
genuity and the brain and the brawn, and we are in a position,
and we are the only nation in the world in a position, to fur
nish Europe with a gold-secured currency that will be adequate
for them to base their contracts on and give stability to credits
in their industrial and commercial life.
I am presenting this matter to the majority party and to the
country. I do not expect to press the bill, because it is impos
sible for a minority Member successfully to press a bill of this
magnitude and character. I know that. I concede that to start
with. I offer this bill to the majority party because our com
mon country could be served magnificently by this plan.
In connection with that we must also, I think, take into ac
count the conditions in Europe with regard to the payment of
principal interest on the sum they owe us and our nationals.
I do not at all approve of the proposal made by various of our
good citizens that we should remit this debt to Europe. It is
not true that Europe is bankrupt. Europe is no more bankrupt
than the United States is bankrupt. It has got the same fertile
fields, the same vineyards, the same orchards; it has the same
productive power; it has a greater productive power in ma
chinery and in invention than it had before the war. It is
true that the foreign indebtedness of Europe has grown to a
gigantic sum, as in Germany, for instance; but it is also true
that those Government liabilities are individual, personal assets
of their own nationals who own the bonds, and they are neither
better nor worse off as a people than they were before they
issued those obligations.
Mr. HITCHCOCK. Mr. President-----The PRESIDING OFFICER. Does the Senator from Okla
homa yield to the Senator from Nebraska?
Mr. OWEN. I yield.
Mr. HITCHCOCK. I am very sympathetically interested in
what the Senator is saying, because, as he knows, I have intro
duced a bill which is along lines in some re se cts similar to
those of his bill and has similar purposes. I do not fully under
stand, however, the details o f the Senator’s proposal. As I
caught it, it is that the Federal reserve banks of the United
States shall establish another bank?
Mr. OWEN. That they shall own the stock of a Federal
reserve foreign bank.
Mr. HITCHCOCK. And that the stock issue should amount
to $500,000,000 ?
Mr. OWEN. Yes; payable in gold.
Mr. HITCHCOCK. Payable in gold, and that that bank
should issue its currency against a gold reserve?
Mr. OWEN. That it should issue its bank notes as currency
against bankers’ bills, with short-time maturities, not exceeding
90 days, and against commodities that are staple, merchantable,
insured, and covered by documents.
83330— 22109
7
Mr. HITCHCOCK. Not against a gold reserve?
Mr. OWEN. The 20 per cent gold reserve would be included.
Mr. HITCHCOCK. Does the Senator propose to limit the
issue of currency to a percentage o f the gold reserve?
Mr. OWEN. To 20 per cent.
Mr. HITCHCOCK. What amount of currency does the Sen
ator figure that would enable the bank to issue?
Mr. OWEN. It would enable the bank to issue twenty-five
hundred million dollars.
Mr. HITCHCOCK. That would require, then, a gold reserve
of $500,000,000 on a 20 per cent basis?
Mr. OWEN. Yes.
Mr. HITCHCOCK. The Senator, in that respect, is making
the gold reserve very much less than the gold reserve required
of the Federal reserve banks against the issue o f currency?
Mr. OWEN. For the reason that when, we deal with com
modities that are worth the gold value o f the notes and we
have, in addition to that, 100 per cent of bankers’ bills behind
the notes, we need not fear about a 20 per cent reserve or
getting the gold for redemption, because the commodities them
selves are worth the gold, and in addition we have the bankers’
short-time promise to pay.
Mr. HITCHCOCK. Of course, that is also true in the case
of the Federal reserve banks.
Mr. OWEN. I am only justifying this proposal now ; I am
not criticizing the Federal reserve banks, although in their
case I think we made the ratio of reserve much higher than
was or is necessary.
/ Y
'VCK- * a£ree with the Senator in that respect.
Mr. OWEN. I lie Bank of England, I will say to the Senator,
had a reserve as low as 8 per cent, without disturbing public
opinion in England.
Mr. HITCHCOCK. Now, will the Senator trace briefly the
methods by which this gold and commodity-secured currency
issued by the proposed bank would get into the financial chan
nels of Europe?
Mr. OWEN. Yes. Here is a German potash manufacturer
who wants to send $100,000 worth of potash to the United
States lor sale; he has a market for it, hut he needs the ac
commodation of immediate credit when he handles the matter,
lie takes his potash and draws against it a bill which is in
dorsed by some member bank, we will say, the Reiehsbank.
•It is a short-time obligation; he draws it payable in 60 days or
90 days. Then lie gets $100,000 worth o f Federal reserve for
eign bank notes against that shipment o f potash. The title to
the potash passes into the hands of the Federal reserve bank
or its agents.
If the obligation is not paid when it is due to be paid, first,
the potash would pay for it, if sold by the agents of the bank;
if it did not produce enough, then the banker who indorsed the
bills would meet the difference; and if that did not meet it,
still there would be the credit o f the potash manufacturer and
the shipper behind it. Those bank notes then would pass from
hand to hand among tile people and the banks. They would
afford a form o f currency that would enable people to deal with
each other through this currency as a medium of exchange.
They would not then have to exchange a bushel of potatoes for
83330—22109
a bushel of corn or a bushel of coal nor deal in fluctuating
marks or rubles. In eastern Europe the people are now using
the principle of barter. What I am proposing is that we shall
furnish them with bank notes that are the equivalent of gold,
so many grains fine.
Mr. HITCHCOCK. Now, let me ask the Senator another
question. In that process, the potash producer in Germany
has to get possession of $100,000 worth of the notes of the pro
posed bank?
Mr. OWEN. Yes.
Mr. HITCHCOCK. The potash comes to the United States,
and with it a draft for payment within 60 davs.
Mr. OWEN. Yes.
Mr. HITCHCOCK. The potash importer in the United States,
at the end of 60 days, pays that draft?
Mr. OWEN. Yes.
Mr. HITCHCOCK. What becomes of the $100,000 o f cur
rency which has been advanced to the German shipper?
Mr. OWEN. It circulates in Berlin.
Mr. HITCHCOCK. And the bank in this country has re
ceived $100,000 in payment for the potash?
Mr. OWEN. Yes.
Mr. HITCHCOCK. Has the Senator considered the fact that
the United States exports annually approximately $3,000,000,000
worth of products more than it imports?
Mr. OWEN. Yes.
Mr. HITCHCOCK. How is it going to continue paying cur
rency to Europe under those circumstances when upwards of
$3,000,000,000 must be paid here in order to make up the ex
cess of exports over imports?
Mr. OWEN. The Senator will agree with me that as a
mathematical principle the whole true balance of trade is equal
to the sum of its several parts; and we may deal, therefore,
with one transaction and inferentially determine what will be
the result of a number o f such transactions. Every single
shipment, whatever it is, is balanced at the time it is made.
There are certain invisible factors that enter into what we call
the “ balance of exchange.” The “ balance of exchange ” really
is a term which is often misleading, because the balance o f
exchange means a balance produced by adding up the figures
of the imports and exports on the manifests of vessels arriving
at and departing from the ports o f a given country. We add
those figures up, but we do not take into account the shipment
of currency, the shipment of bonds, the shipment of stocks, the
rendering o f services through marine insurance, the rendering
o f services through trade on the ocean, the rendering of services
by foreign countries to Americans who go into foreign countries
and live there at the hotels and carry with them letters o f
credit, thus transmitting from this country abroad various
credits.
Mr. HITCHCOCK. I appreciate what the Senator says, but
I think the present experience is that we are not only buying
much less of Europe than we are selling to Europe, but the tide
o f investment is from this country into Europe at the present
time rather than into the United States.
Mr- OWEN. I think that is true, and ought to be so to correct
the differences in commodity exports.
8:S3.‘5 0 — 2 2 1 0 9
9
Mr. HITCHCOCK. So that the -actors of which the Senator
speaks are comparatively negligible. The fact is, after we have
summed the whole thing up we find that Europe must pay us
about $3,000,000,000 every year more than we pay Europe for
what is bought.
Mr. OWEN. I will say to the Senator again that that is a
fiction; it is not really true, and the reason it is not true is
found in the factors entering the so-called “ balance o f trade,”
which are invisible and do not appear on the face of the record.
When Europe buys $3,000,000,000 in excess of our commodities
they pay in stocks, bonds, services, real estate, hotel bills, and
so forth.
Mr. HITCHCOCK. My judgment is that those factors are
more greatly in favor of the United States than against the
United States. Our bankers are lending great sums of money
practically to all foreign countries—to Brazil, to France, to
Great Britain, to Norway, and to Sweden; to the cities and
towns— and foreign nations are not lending anything over here
at all.
Mr. OWEN. That temporarily offsets the “ balance of trade ”
in our favor.
Mr. HITCHCOCK. The tide has now reversed, and we are
actually lending a great deal more money to the remainder of
the world than we are borrowing from other countries of the
world. Therefore, the factors the Senator speaks of do not
exist. The ultimate result is that there is a balance o f
$3,000,000,000 a year that we should receive from Europe above
what we are paying to Europe. How can the Senator make
that up? That is a difficulty that I have encountered in con
nection with my bill providing for a bank of nations. How
can that great balance be overcome?
Mr. 0\V EN. I do not think the Senator followed clearly
the observations made by me in regard to the balance o f trade.
The “ balance of trade ” relates to certain commodities only on
the manifests of ships and is not a true balance of the financial
and commercial exchanges; it never was and never will be at
any time to come, for the reason that the balance o f trade
merely registers certain commodities on the ships’ manifest
and nothing more. It is only a commodity balance and nothing
more.
Mr. HITCHCOCK. I agree with the Senator that formerly
it was not a true register— that is to say, that we were buying
in Europe two or three thousand million dollars a year less
than we were selling in Europe, and yet we were also paying
to Europe great sums of interest— but we are not paying such
interest n ow ; that tide has been reversed; so that the conclu
sion the Senator reaches, while it would have been accurate
before the war, it seems to me, does not apply now. Those
factors of which he speaks have changed their course.
Mr. OWEN. Mr. President, the “ balance of trade,” accord
ing to the figures of our statisticians, always has been and
always will be the balance as shown on the ship manifests.
It does not take into account the $10,000,000,000 that we loaned
to Europe during the World War. Since the war we have
loaned them $5,000,000,000 more, and that $5.4)00,000,000 is
partly an offset to the so-called balance of trade.
Mr. HITCHCOCK. N o ; I think the Senator is in error there;
it makes the matter worse. Not only are we selling to Europe
8 3 3 3 0 — 2 2 1 0 9 ---------- 2
I ip<
a great deal more than we buy from Europe, but we are lending
to Europe, on top of that, a great amount of money, and they
are not only obliged to pay us three thousand million dollars a
year as the balance of trade, but they have got to pay us a
thousand million dollars a year in interest.
Mr. OWEN. The amount that we lend to Europe does not
appear in the “ balance of trade,” and we lend them part of the
money required to balance the commodity “ balance o f trade ” •
that is a complete answer to the Senator. Every transaction
balances itself at the time it is made. Of course, if I send
100 bales o f cotton to Europe I get its equivalent in some form ;
1 get it either in cash or in credit or in property on the other
side of the water, but each transaction balances itself a of the
day when made, and a million such transactions balance them
selves.
The so-called “ balance o f trade” is never a balance but in
dicates the lack o f balance of imports and exports and always
represents an excess o f exports or imports of goods.
Mr. NORRIS. Mr. President, may I interrupt the Senator
there ?
The PRESIDING OFFICER. Does the Senator from Okla
homa yield to the Senator from Nebraska?
Mr. OWEN. I yield.
Mr. NORRIS. Every transaction must balance itself or
eventually difficulty would ensue, o f course; but I want to ask
the Senator now whether he proposes in his bill to redeem the
notes that are to be issued by the proposed bank?
Mr. OWEN. Those notes will be taken up when the obliga
tion is liquidated.
Mr NORRIS. In the transaction to which the Senator re
ferred in connection with potash-----Mr. OWEN. When the loan is paid back to the bank the
bank would get its notes or the equivalent in gold.
Mr. NORRIS. When the potash is sold here the bank of
course, gets the money in this country for it; but what process
is gone through in order to redeem the notes that were orig
inally issued in Europe for the potash?
Mr. OWEN. It would probably result in a credit where the
transaction resulted in shipping over; but when you reverse
that and an American ships into Berlin cotton of an equivalent
amount, the cotton has to be paid for with these very notes
and the notes will come in to pay the bank the amount due to
the bank for a New York credit extended the cotton shipper.
Mr. NORRIS. The foreign reserve bank, when it got the
money for the potash on this side o f the water, would not dare
pay out that money. It would have to retain that money until
it got possession of the original issue, and retired that • oth er
wise there would be inflation.
Mr. OWEN. That would be a credit in New York and that
W^Uld be USe^ as a means of finaQcing cotton shipped
back to Germany. In other words, one hand would wash the
other, and we would be furnishing a medium by which these
transactions could be cleared; and that is the verv purpose of
this proposal. It is to furnish a convenient means o f giving a
stable medium of exchange to the European manufacturer and
merchant, in order that they may create the commodities with
which to pay America the amount that is due to America. They
83330— 22109
J
I
11
can not otherwise rapidly discharge their obligations; and I
think- in no event can we expect an immediate payment of the
principal and interest of those amounts due to our Government,
because of the demoralized condition o f European industries.
„ I do not at all approve the idea of remitting to these European
Governments their indebtedness to this country. It is not neces
sary to do it. They are not bankrupt. They are just as well
abl to pay their debts as we are able to pay our debts; and if we
remit the indebtedness it would be exactly the same thing as
taxing the wealth of America and presenting it as a gift to the
wealth of Europe.
In order to adjust ourselves to the conditions in Europe, I
v-tV- W*i
to agree that the interest charges on the ten
billions due to this Government should be postponed and merged
into the principal for a period of time, say, 5 or 10 years. I
think, moreover, that instead of charging Europe a very high
intei ost, we ought to agree that the rate of interest
shall be what it was before the great World War—that is, 3
per cent. I say “ 3 per cent ” because 3 per cent was the normal
rate of interest in France and throughout western Europe before
the war. I lie Bank of Netherlands, for instance, which is a
great State bank, had a 3 per cent rate on loans for 50 years
without a single break in that rate. The Bank o f France would
lend as small a sum as 5 francs for one year at a 3 per cent
rate, and the rate of interest in the United States on a wellsecured loan, such as a Government bond, was 3 per cent. Our
3 per cent bonds were at a premium before the war. The
bankers do not average a rate o f interest to their depositors
exceeding 3 per cent. They have some running at 2 per cent
and some at 4 per cent, but they do not average as high as 3 per
cent interest on the deposits made with them; and, on the other
hand, when a bank lends out its deposits it is content with less
than 3 per cent as a margin of profit on its loans.
Mr. EDGE. Mr. President-----Mr. OWEN. I yield to the Senator.
Mr. EDGE. Unfortunately, I did not hear the early part of
the Senators explanation of his bill. When we realize and
appreciate, as the Senator has stated, that the balance of trade,
because o f the $10,000,000,000 of loans and the $5,000,000,000
represented mainly by export commodities, operates to bring
about a most unfavorable exchange condition so far as it relates
to purchases from America, which condition wTe well understand
to-day is interfering tremendously with our export business, I
am interested to know, if the Senator can state briefly, how the
operation of such a bank would to any considerable extent af
fect what I think is fundamental and what must be corrected
before we can greatly increase our exports, namely, the condi
tion of exchange to-day as it relates to purchases from America.
Mr. OWEN. I will say to the Senator that what we nowTspeak
of as the rate of exchange really measures the selling price of a
mark, franc, lira, kroner, or ruble in terms o f gold. It all comes
down at last to the gold value of those currencies. When you
talk about exchange, commodity balances have ceased to cut
any important figure in it, for the reason that if they could
command gold and ship gold the rate of exchange would bal
ance itself within two or three points, or what is called in
normal times “ the gold shipping point ” ; but they can not get
83330— 22109
12
gold with this depreciated currency, and they have not the
commodities now to take the place of gold or to command gold.
Mr. EDGE. Mr. President-----Mr. OWEN. I yield to the Senator.
Mr. EDGE. Is it not a matter of ordinary business realiza
tion that when you bid for anything— in other words, when
there is a scarcity of any commodity or of money—the price
is naturally higher? The existing condition of the balance of
trade makes it necessary for the Frenchman or the Englishman
or the representative of any other country, when he is com
pelled to pay for a bill of goods exported from this side, to bid
all the higher simply because of that condition. It seems to
me that that has its effect on exchange as much as any other
possible thing.
Mr. OWEN. I f you will take the present exchange rate of
$4.20 on the pound sterling, which normally is $4.86, and take
the present market value of gold in London, you will find that
the exchange is fixed precisely by the purchasing power of gold
bs. the paper money of England— the Bradbury notes. Gold is
at a premium in London, and that premium measures the dif
ference in the cost of the pound sterling.
Mr. EDGE. How does the Senator account for the very sud
den fluctuations in British exchange and, in fact, in all other
currency, ranging in the last six weeks from in the neighbor
hood of $3.75 or $3.80, as I recollect now, to $4.20, as the Sen
ator states, on the pound sterling? I do not think there is any
business condition to warrant it. I am wondering myself if
the Senator has any answer beyond that of speculation.
Mr. OWEN. I think speculation does cut quite an important
figure in i t ; and I think one of the important reasons for the
passage o f the bill I have introduced here is that by having a
Federal reserve foreign bank you would have a natural stabil
ization o f exchange on the basis of a reasonable commission
and percentage for the services rendered; and in that way you
would have a greater stability of exchange than if you had
men who were buying and selling the pound sterling for profit.
Mr. EDGE. I am inclined to agree with the Senator that
some type o f an international bank—perhaps a combination of
his ideas and the ideas expressed by the Senator from Ne
braska— is absolutely essential and necessary to-day to have its
influence on foreign trade and currency and exchange. I am
free to admit, however, that I have not yet, as far as my little
study of the situation permitted, found a way that I thought
would greatly influence it. I think it will help, but not as
much as an effort on the part o f importers and exporters to
equalize the balance of trade in a natural manner.
I agree that I do not like the idea o f wiping out the
$15,000,000,000 indebtedness. I never have. I hope it will not
be necessary to bring about that condition. I do not believe it
will be.
Mr. OWEN. The Senator may rest assured that five billions
o f it, at least, held by our private citizens will never be wiped
out. and the statesman insane enough to try to tax America
ten billions as a gift to the wealth o f Europe will himself be
wiped out.
Mr. EDGE. I have not a moment’s hesitation in saying, how
ever, that I believe that if the $15,000,000,000 of indebtedness
83330— 22109
13
were wiped out to-day there would be practically no difference
in the rate of exchange between the countries.
Mr. OWEN. It would make no difference whatever at this
time. It is the depreciated mark that measures the balance
of exchange in Germany, the depreciated lira in Italy, and so
forth.
Mr. EDGE. I am not prepared, however, to indorse that
plan for one moment.
Mr. OWEN. It would not greatly serve the exchange at this
time-----Mr. EDGE. I am not so sure of that.
Mr. OWEN. Because in reality, when you take the German
mark, which before the war had an issue of two billions and now
has an iss*ue of one hundred and three billions, it is a question
of the quantity of those marks, the facility of getting them, the
fact that it is known now that they can not be redeemed in gold.
It is just the quantitative theory over again. They have gone
down from par to 2 per cent because the output has been multi
plied fifty times.
Mr. EDGE. There is the answer, or one o f the answers. If
the Senator can evolve a plan, in connection with the organiza
tion of an international bank, whereby the directors of that
bank will have a certain influence or control of the spread of
currency, you might say, the issues of various countries that
are to-day practically bankrupt, then I can see how such a
bank would very rapidly and permanently rectify present con
ditions ; but I am afraid that is almost impossible. That is prac
tically the Ter Meulen plan, which we hear something about,
and which has merit in it.
Mr. OWEN. The Ter Meulen plan is a different thing. It is
a means by which to put a fixed income of a State expressed
in bonds behind certain particular credits for the nationals of
any particular country. It has its merits and the Ter Meulen
bonds could be used as a basis of credit in any banks anywhere
engaged in international banking.
Mr. EDGE. Such a bank, in my judgment, must have some
control of the budgets of nations in order that their income and
their outgo shall balance. It is necessary to balance the budget,
as the term is usually used, and such a bank must also be able
to control the printing press in the issue o f currency, or no in
ternational hank, in my judgment, can ever have a great in
fluence on exchange conditions, which in themselves influence
trade.
Mr. OWEN. Of course the European Governments will have
to balance their budgets. They will have also to quit using
the printing press for the purpose of manufacturing unlimited
paper currency. If they do not, their currency will become
more and more depreciated, until it will not be worth more than
the paper upon which it is printed. That, of course, is true;
but in order to strengthen the revenues o f the Euroi>ean coun
tries it is of supreme importance that the people of those coun
tries shall be employed in profitable industry. I am proposing
a plan that will enable them to make contracts that have a
stable value under them. At present they have a fluctuating
currency. I am proposing a currency which will not fluctuate
more than the value o f gold fluctuates, and therefore if ..iy plan
Is adopted these European countries will be in a position to in83330— 22109
14
,, ,v
crease their revenues and to balance their budgets. They will
be in a position to employ their people profitably in peaceful
industry. That is the very purpose of the proposal that I am
making. It will help them to balance their budgets. It will
teach them the folly of using the printing press to turn out
paper money, because this currency I propose will be sufficient
for the people. It will be sound and clean and based on gold
and commodities worth gold. Therefore it will give them a
sound currency. If I may say so, the currency blood o f their
commerce will be clean, will be worth gold ; and America is the
only country in the world that can furnish it.
I think we ought to fix a 3 per cent rate on these European
loans. I think we ought to allow the interest to merge into the
principal for 5 or 10 years; and I think at the same time in the
United States we ought to determine upon the policy of post
poning the payment of our own war debt for a longer period of
time. That at the same time we are relieving Europe of pay
ing the present interest on these debts we ought to relieve the
American people of the sinking fund against the war debt for
a like period, because it can all be made up when Europe is back
again on its feet and in a productive position.
As I said in the beginning, I am presenting this plan for the
consideration of Senators, especially of the majority party. It
is a very important suggestion. It is based on the principles
of the Federal reserve act. The principles are absolutely
sound; they have been demonstrated to be sound.
Senators, you have it in your power to adopt a plan that will
restore the industrial life of the world, and I am presenting it,
\\ith such earnestness as I may, in the hope that patriotism
and public spirit will induce Senators to study this proposal I
have made, and I trust jou will take so much o f merit as vou
may find in it and make it available for the service o f mankind
Mr. FLETCHER. Mr. President, as I understood, the limR
of the issuance of circulating notes under that system would be
about two billion five hundred million?
Mr. OWEN. It would.
Mr. FLETCHER.. Does the Senator think that would be suf
ficient to accomplish what he aims at?
Mr. OWEN. It is abundant. The total issue o f currency
now in Germany, with 80,000,000 people, is only wocth 8500 000 000
gold, and that is an amount five times as great.
Mr. KING. A hundred billion marks then would be worth
only about $500,000,000 in gold?
Mr. OWEN. That is true at half cent a mark.
Mr. FLETCHER. What the Senator suggests might do for
Germany, but how about the whole o f Europe?
Mr. OWEN. Germany has 80,000,000 people, in round num
bers, and five times 80,000,000 is 400.000,000, and then* -ire onlv
300,000,000 in Europe. If $500,000,000 is enough for the Ger
man people, $2,500,000,000 is enough for Europe. I have cov
ered that sufficiently. It will furnish an abundance. I think
there ought to be authority for the European nations to take
over this bank or its branches at the proper time, when they
aie in position to do it. The Lnited States reserve banks need
not want to carry on these banks if the other countries will take
them over.
Mr. FLETCHER. I was wondering also what had been
accomplished under what is known as the Edge Act which au83330— 22109
I
15
thorized national banks to get together and establish banks in
foreign countries.
Mr. OWEN. The trouble is that commerce is languishing.
Commodities are not being manufactured in sufficient quantity.
Commerce is impaired by the demoralization caused by the
World War, and I am proposing a plan now by which to re
store the industrial activity of Europe.
Mr. POMERENE. Mr. President-----The PRESIDING OFFICER. Does the Senator yield to the
Senator from Ohio?
Mr. OWEN. I yield.
Mr. POMERENE. I was called from the Chamber, and pos
sibly the question I have in mind has been explained; but if so,
I did not hear what the Senator said about it. Does the
Senator’s plan contemplate some action by the several European
Governments whereby they would aid in availing themselves of
tliis system?
Mr. OWEN. It contemplates no action on the part of any
European Government at all.
Mr. POMERENE. I believe that under what is known as
the Gresham law cheaper money always drives dearer money
out of circulation.
Mr. OWEN. I thank the Senator for making that suggestion,
because it is in point. That would be true if you had gold cir
culating side by side with paper money, where the people might
pay their debts in either one or the other. They would pay
their debts in the cheaper money, and the gold would go into
hiding; but in this case there would be no competition between
the Federal reserve foreign bank notes and the mark, for in
stance, for the reason that these bank notes would be the
equivalent of gold, and they could not go into hiding for the
.reason that behind every note is a hundred per cent of com
modities worth the gold face value o f the notes, and bankers’
credits of 100 per cent more behind these notes worth the face
value of the notes. Therefore they could not go into hoarding.
Mr. POMERENE. I am not questioning the security of the
bank planned.
Mr. OWEN. That would be the point o f the suggestion o f the
Gresham law.
Mr. POMERENE. My thought was that perhaps the prin
ciple of the Gresham law might apply, and if so, there would
be a temptation to hoard the Federal reserve bank notes, and
If that were done, then a given amount of bank notes would
not give the same assistance to the commerce of these foreign
countries. That was the thought I had in mind. In other
words, if they should be retired, you could not get the same
service from that kind of a circulation that you would get if
they were kept in circulation.
Mr. OWEN. That is true, and if the Gresham law did
apply, what the Senator says is absolutely true, that it would
render nugatory the service proposed to be rendered by these
n otes; it would nullify the proposal; but they can not be with
drawn, because they are actually covered by 100 per cent of com
modities, and they are covered by 100 per cent o f bankers’
- credits besides, and it is a short-time note that is behind these
. reserve bank notes.
88330—22109
16
Mr. POMERENE. It may be true that it is a short-time
note that is back of the reserve notes, but I am trying to trace
these reserve notes themselves to see what is going to happen to
them.
Mr. OWEN. The reserve notes would be called for to liqui
date the indebtedness incurred.
Mr. POMERENE. These reserve notes might not be in the
hands o f the debtor.
Mr. OWEN. The banker gets these reserve bank notes. He
owes the exact amount of the reserve bank notes. He has to
pay it in 60 days, we will say.
Mr. POMERENE. Yes; but if a manufacturer over there gets
his reserve notes, and in the conduct of his commercial affairs
turns part o f them over to me and part to some one else, it being
a better class of currency, I might be disposed to hoard them.
Mr. OWEN. The bank would have to pay them in gold if they
should be hoarded.
Mr. HITCHCOCK. I rather agree with what the Senator
from Ohio has said, and I want to call the attention of the Sen
ator from Oklahoma to an answer which he made to me. He
instanced a case in which a potash producer in Germany re
ceived for his shipment o f potash $100,000 in the notes o f this
bank, and he said that when the potash was shipped to this
country the potash user in this country would, after 60 days,
say, pay in American money for the potash which he purchased.
Mr. OWEN. You may say gold.
Mr. HITCHCOCK. Whatever you please. Meanwhile the
$300,000 of the notes o f the bank are in Germany; they are cur
rency.
.Mr. OWEN. Yes; the corresponding gold would be in New York.
Mr. HITCHCOCK. It seems to me there would be some like
lihood, as the Senator from Ohio has suggested, that one of the
difficulties of the situation would be that the holders of those
notes would be apt to hang on to them and hoard them, just as
at the present time they are hoarding American money. It is
notorious, as has been said by German writers, that while cer
tain people in the United States have been buying German cur
rency and German credits with the idea that they will advance,
many Germans have been buying American currency in order to
make themselves secure, and it seems to me that there would be a
likelihood of a good deal of that currency going out of circulation.
Mr. OWEN. It would go into circulation. It would be in the
pockets o f people and passing around for their common use
Take the potash example, for instance. One hundred thousand
dollars of those notes would go right into the hands of the
people.
Mr. HITCHCOCK. Let us assume that the potash manu
facturer in Germany has deposited his full $100,000 of currency
o f this bank in his own bank in Germany. In his own domestic
transactions he can use the German money just as well as he
can use that money, and there is no reason why that German
bank, if it wants to keep a reserve, should send it over here for
redemption. It can keep the notes there just as well
It is
just as much of a reserve for that bank to keep. It seems to me
it would be the tendency of that superior class of currency to go
into hiding.
Mr. OWEN. It would not be in hiding; it would be in actual
use, and that is exactly what I wanted to say, because under
83330— 22109
those circumstances the banker or the potash manufacturer
could say, “ I want to make a contract with you to buy $100,<X)0
worth of additional potash, and I have the gold or its equiva
lent available in my bank. I have it here ready to use now. I
have shipped $100,000 worth of potash, and I have $100,000 of
gold or the equivalent of gold, and 1 want to use that to buy
some more potash, or buy some more labor, or whatever goes
into the production of it.”
Mr. HITCHCOCK. He would naturally use German money.
Mr. OWEN. He might use some of these notes to buy Ger
man money if he wanted to.
Mr. HITCHCOCK. If he did, the people who received those
would naturally save them, because they would know they
would be as good as gold, and they would float the German
marks in their place. I believe that is a possibility.
Mr. ( )WEN. At the last, the banker who got the accommodation
owes this money, and lie has to pay it in gold or in the equiva
lent of gold, and these notes are the equivalent o f gold, and
it would make certain a demand on his part to get the gold.
But, of course, I am assuming that this bank would expand
and that there would be twenty-five hundred million of these dol
lars in circulation in a great variety of ways, infinitely various,
so that no human mind can trace them, but that at last this
bank always has the bank credits o f 100 per cent behind these
notes, and it always has commodities of gold value to the extent
of 100 per cent, and it has always 20 per cent in actual gold
in its own vaults. That security is enough. It is 220 per cent
against every note at the bank, arid it would be only a bank
note at last.
Mr. HITCHCOCK. I am not disposed to dispute the Sena
tor’s statement that the security is ample. I want to call his
attention to another matter. He has instanced the case of a
European exporter being paid through this bank for the prod
ucts which he exports to the United States. ' There is no dif
ficulty about that at the present time. The man in Germany
has no difficulty in getting credit for what he exports to the
United States; there is no difficulty about that at the present
time. The man in Germany has no difficulty in getting paid for
wliat lie exports to the United States, the man in France has
no difficulty, and the man in Great Britain has no difficulty.
The real difficulty is when the American undertakes to export
to Europe; then there is a difficulty in getting payment. Will
the Senator reverse his process and illustrate how the bank
which he proposes would pay the American for the shipments
which he makes to Europe when the European is in no position
to make payments?
Mr. OWEN. Yes; take this hundred thousand dollars which
the Federal reserve foreign bank has in New York against the
shipment of a hundred thousand dollars’ worth o f potash. A
man comes up and says, “ I want to ship a hundred thousand
dollars’ worth of cotton to Berlin.” The banker or the Federal
reserve foreign bank says: “ .All right; put your cotton on
board. Draw your bill against Berlin. Have it underwritten
by the Equitable Trust Co. o f New York, and I have a hundred
thousand dollars against the shipment of this potash which I
will turn over to you.” In due course of time it will come over
to Berlin and be paid by the German people, and the German
8:1330— 22109
people will then have this hundred thousand dollars of currency
now available to pay it with.
Mr. HITCHCOCK. Let me stop the Senator right there.
How are the banks in Germany to make the pavment for this
shipment?
Mr. OWEN. By using these very bank notes.
Mr. HITCHCOCK. They have gone into circulation; you do
not know that the banks have them. They may be hoarded.
Mr. OWEN. I never heard of anything in the shape of
money in circulation the banks did not get their hands on
eventually.
Mr. HITCHCOCK. Assuming that the theory is correct that
the identical hundred thousand dollars in notes which have
been sent to Germany will pay for this shipment o f cotton,
that will be all right, providing our shipments to Germany are
no greater than Germany’s shipments to the United States.
But assume the case where shipments from Germany to the
United States are much less than the shipments from the
United States to Germany. Then what would be done?
Mr. OWEN. The Senator is asking me to finance an im
possible case. If the German people can not ship enough com
modities to the United States to pay for the commodities
shipped from the United States to Germany and have no other
means of paying, they must stop shipping from the United
States, and that is precisely what has happened to our foreign
commerce. They have quit buying in such quantities.
But, as I said to the Senator before, each individual case will
adjust itself. W hen I ship to Germany I say to them that they
are going to be paid, and I have good security. When a German
snips to the United States he does the same thing, and these
i.i ances of trade you speak of need not worry us, because each
transaction will take care o f itself; but it is true at last that
jou will have trade languish unless the people of one country
aie aple to manufacture and export commodities o f equal
\<i ue to their imports. They must have their exports and their
imports at last practically balance. I think that is undoubtedly
tiue, and I think that is the idea the Senator is desiring to
im p re ^ I do not think there is any question about that.
Mr. HITCHCOCK. I agree with the Senator. I have run up
eXaCt.I?L \he
difflculty w^h my bill that I think he
encounters with his bill, the difficulty of making payment where
the country which makes the payment has not been able and is
not able to export sufficient manufactured goods or products of
one sort or another for that purpose.
Mr. OWEN. I am proposing to extend them a financial ac
commodation in a gold-secured currency to the extent that thev
2 ™
“ or(ler 1 °. enable them to restore their industries and
manufactories and increase their commodities for export.
in plm.nCa?'f°nIy pTay their debts in the Products of their labor,
In na h ? ? , 1 !®8- J am Pr°P°sinS to help them pay their debts
« cl!m 5 helping them restore their industries through the use of
a stable and gold-secured currency.
• Mr' HITCHCOCK. That is exactly what I am trying to do
to h S r bth eS Ut \ find C? n.sid.erabif difficulty, and I am anxious
to hear the Senator explain it as fully as possible
Mr. OWEN. To recapitulate, or, perhaps, to repeat in some
it:
i
t:
d
?
8 3 3 -0 -2 2 lo T y t mt by thG laSt reP° rt the Federal reserve
1
i
m
I
19
banks had two million nine hundred and ninety-three millions
of gold and legal tender, making approximately two billions
nine hundred and fifty millions net gold.
Taking away five hundred million of this gold and putting it
subject to the redemption o f the bank notes of the Federal re
serve foreign bank would give, with a 20 per cent gold reserve
against such rates, a gold-secured currency available for Europe
of twenty-five hundred millions, which would be enough to serve
their commerce and industry, and make a profit to the banks of
the United States until Europe should be restored to a normal
condition. Germany, for example, measuring its present mark
currency of one hundred and three billions at a half a cent per
mark would have a gross currency value o f about five hun
dred million dollars, which would be enough if it had a stable
value. The bank I propose could supply this amount of goldsecured currency which would suffice to supply the manufac
turers and merchants with an amount adequate for their needs,
and twenty-five hundred million dollars would be an abundance
to provide Europe with all the gold-secured currency impera
tively necessary for the restoration of its industries.
Withdrawing five hundred millions from the present American
gold reserve would still leave twenty-four hundred millions of
gold and legal tender behind Federal reserve notes of two
billion four hundred ami forty-seven million in actual circula
tion which at present happens to be about 100 per cent.
The Federal reserve system provided for a 35 per cent re
serve in gold or lawful money against the reserve deposits of
the member banks, and these deposits, amounting to seventeen
hundred millions, require a gold deposit of over five hundred
millions in gold, notwithstanding these deposits are fixed by
statute law, can not be withdrawn, and do not fluctuate substan
tially. A year ago the deposits of the twelve reserve banks,
December 23, 1920, amounted to $1,771,000,000. On December 21 ’
1921, these deposits amounted to $1,784,01X1,000, an increase of
$13,000,000, although the loans and discounts, including openmarket purchases and acceptances, had decreased $1,621,630,000.
It is an absolute waste of five hundred millions of gold to
keep it tied up as a reserve against the reserve deposits. The
principle of keeping a reserve against a deposit which is subject
to withdrawal from a member bank is totally different from a
reserve held against reserve bank deposits, because a member
bank may have all of its deposits withdrawn and a member bank
has no means of making payment with Federal reserve notes
obtained from the Government as with the Federal reserve
banks. But even a member bank which is carefully managed
should be able to go through a complete liquidation within a
reasonably short time under our reserve system, and it would
be impossible to embarrass the reserve banks by the failure of
one or more member banks.
So that without diminishing the amount of gold behind the
Federal reserve notes, the United States could establish the
Federal reserve foreign bank with five hundred millions of
free gold, and, therefore, furnish Europe with twenty-five hun
dred millions of gold secured currency.
The Federal reserve foreign bank under the plan proposed
would not issue Federal reserve notes, but would issue Federal
reserve bank notes, based on a minimum of 20 per cent actual
83330—22109
I
polfl and 100 per cent of short-time Qualified commercial bills
based on actual staple merchantable commodities, such bills
bemg secured by documents and underwritten by member banks.
Any bank authorized to do business with the Federal reserve
foreign bank would be designated for this purpose a member
Dunk.
t, Ir^ E^r?pe tlie peop,e are accustomed to bank notes. The
l.ank of England note is a bank note and, although the note o f
a private corporation, is made legal tender by law. The notes
ot tlie Bank of France and o f the Reichbank o f Germany are
legal-tender notes, although bank notes, and comprise the
volume of the currency of France and Germany, respectively.
lh e franc and the mark being legal tender, the people who
transact business with each other promise to pay in francs and
marks, and when the franc and mark go down from par those
who belong to the creditor class suffer and those who belong
to the debtor class gain. A man who at the beginning of the
war owed 100,000 marks worth at that time gold par could
liquidate the debt now for one-fiftieth part of the same value in
gold.
This is ruinous to the bond-holding class whose bonds are
payable in marks. It accounts for the tremendous fluctuation
m the price of stocks which represent part ownership in certain
properties, because the properties having actual gold value increuse in terms of marks as the marks go down in gold value.
Mr. I resident, I do not think it desirable that I should
comment upon the wisdom or unwisdom o f the German Governs S i e n t etXP1r1K-lirf g tl*e *narks t0 such a gigantic volume. It is
to the L h n f i * * ° Ut ,t le fact of this filiation, its interruption
on
C«MMtS' and its eventUfll depressing influence
“
t al - \fe' S U e 0U a rising market there may be for a
a risen? m n rbS actlvity.f0 manufacture and sell goods against
fllusimf i ml thl’ ! I , ? Ua y tlie discovery is made that it is an
• 1
the collapse must come. We have already experi
enced our depression, have reached the bottom in n L r h all
lines ot commodities, and are now reacting from it
It is obviously impossible that the German people the Poles
the Austrians, or Russians will ever pay in gold the debts con
tracted in paper money. Some compromise must be effected be
tween the debtor and creditor class at which the mark the
kronen, the lei, and the ruble shall have a lixed goW value for
purposes o f adjustment, unless, indeed, with the ruble the whole
bad business is repudiated. But with a depreciated and fluctu
ating currency business men are almost paralyzed The dis
tress and disorganization of business will not end until * L in d
currency is made available.
Unt11 a 5500,111
Mr President, it is not enough to provide a means by which
Europe can get a gold currency for the use of their manu
facturers and merchants. Under the present disorganize?enn
dition of Europe they can not at this t?me pay back t , tTe
United States the principal or interest o f the debts due our
Government and our nationals in gold or in commodities
£ ^ « r h T m t ^ d g°hd ,thn(1 ^ m a n u f a c t u r e of commodities
is gieatly hampered by the conditions which I have described
Quite a few o f our citizens in distinguished positions have « ,
keenly realized the disorganization o f i : u r o l T / t Z e x trem e
classes tlmt ,hey have ,>evn h-> ' » » £ b S s
and have advocated that the people of the United States should
forgive the debt due by the people of Europe. It is a generous
impulse. I sympathize with the high motive that actuates those
who make the suggestion. They believe it would attach the
people of Europe to the people of the United States and that
it would have a future moral and financial consequence that
would fully justify the cancellation of the debt.
I do not agree to this for the very simple- reason that while
it is true that the poverty of the poorer classes in Europe is
very great, it is also true that the wealth o f the wealthy classes
of Europe is very great and I am not willing to tax the wealth
o f the United States and of our people with the effect of con
veying that amount o f property to the wealthy classes of
Europe.
As I have heretofore stated, the material resources o f Europe
remain; the productive power of the people of Europe is greater
now than it was in 1913, provided only their industries were
properly organized and in full motion.
The very great bond issues put out by the European Gov
ernments are held by their own people, and these Government
debts are private assets and neither add to nor take from the
power of the European people, as such, to pay the amount which
they borrowed from us. Their Governments borrowed from us
ten billions and our country expended in the war over forty
billions. The war cost us thirty billions net outside of what
we advanced to Europe, and this war was brought on through
the acts, through the sins of omission and the sins of commis
sion of the European statesmen. We were finally besought to
come to the protection of the more democratic European people
who were about to be overthrown and subjugated by the evil
forces which they had permitted to grow up in their midst.
While I do not agree that we should remit this debt or the
interest upon it, I do think that we ought to make the most
important concessions. We ought to agree to withhold for 5
or 10 years a demand for the present payment of interest on
the amount due the United States by the foreign Governments
and let it be added to the principal. We ought to lower the rate
of interest on this indebtedness to 3 per cent because 3 per cent
is a fair rate of interest on a secured debt. I say it is a fair
rate because 3 per cent was the unbroken rule o f interest
charged by the Bank of Netherlands for 50 years without
an exception previous to the World W ar; because France had a
3 per cent rate of interest with very few exceptions for decades
before the war, and because our 3 per cent bonds before the
war were at a premium, and because the American bankers
pay their depositors less than an average of 3 per cent, and the
American bankers are content to make less than 3 per cent on
the average of their deposits in lending the deposits out and
taking the responsibility of the loans.
Even during the World War London merchants got money
on acceptances at 31 per cent, and call money now in London
is under 3 per cent, and because call money in normal times,
as in February, 1908, to December, 1908, averaged between 11
per cent and 3 per cent, as it did in 1909. It averaged under 3
per cent during 1910 and 1911, and before the World War, in
1914, from January to July it averaged under 2 per cent, and
even during 1915 and 191G it was very low, until we got into
the war.
8 3 3 :1 0 — 2 2 1 0 9
2 2
The European people are not bankrupt either financially or
morally. They will pay their debts honorably and in due time,
but America ought to go as far as reason and justice requires
in lowering the rate of interest, in giving time, and in extend
ing financial cooperation and credit to enable Europe to make
effective its man -power and material resources.
I have said that the European people were not bankrupt for
the simple reason that their material resources and man power,
their brain and brawn, remain unimpaired, and while it is true
that the Governments o f Europe have permitted the currency
to be impaired in purchasing power by emission of paper cur
rency in excess of what could be redeemed in gold, nevertheless
whatever this currency is and whatever the bonded indebted
ness may be already issued by the European Governments, the
European people hold as individual assets almost every dollar
of these Government liabilities, and in appraising the wealth
and the wealth-producing power of Europe it must be remem
bered that these national liabilities are individual assets.
I am not willing, Mr. President, to have the wealth of
America taxed in the interest of contributing to the wealth of
Europe, and Europe must recognize its obligation to tax its
own wealth just as we have taxed our wealth in this country
to meet its national obligations.
All Europe must acknowledge the rights of private property
and provide the means of giving private property prompt, sure
protection.
The European nations must balance their budgets, and will
undoubtedly do so as soon as the world reaches an understand
ing with regard to the limitation of armaments on sea and
land, and as soon as the nations have an understanding, whether
express or implied, that they will use their combined energies
to protect the territorial integrity o f unoffending nations against
the invasion or aggression of outlaw nations.
With the destruction of the military dynasties the world has
but little reason to anticipate in future wicked wars o f aggres
sion.
The European nations must stop the unlimited issue o f paper
money and bring their currency back to gold par. This is a
problem o f gigantic importance and of the most serious diffi
culties dealing with the bonded indebtedness of these nations
measured in terms o f a depreciated currency. It can only be
done by the most resolute and clear-cut purpose and will involve
compromises between the debtor and creditor classes involving
amounts that are gigantic. We need not wait for this com
promise to be effected, for other remedies are available.
Mr. President, in the event that the United States does post
pone the payment o f the interest on the European debt for the
next 5 or 10 years, and if we extend the time of the payment
o f the principal of the European debt for 50 years, we ought
at the same time to postpone the payment of the bonded in
debtedness of the United States for at least a like period and
waive the collection of a sinking fund for the next 5 or 10
years in order to relieve the American people o f some part o f
the gigantic burden of taxes imposed by this World War.
In conclusion, Mr. President, the suggestions which I wish
to make are as follow s:
83330— 22109
First. That we should postpone the final payment of the
World War debt in the United States by extending the payment
over 50 years; that we should not for 10 years collect any
amount for a sinking fund.
Second. That in arranging the payment of Europe’s debt to
the United States we should extend time to Europe necessary
to enable them to readjust their affairs and regain their pro
ductive power, and that we should not for 10 years demand of
them the payment of the interest due, but allow it to merge into
the principal.
Third. That we should put the interest rate at 3 per cent on
the European debt to the United States.
Fourth. That we should establish a Federal reserve foreign
bank through which might be emitted twenty-five hundred mil
lion dollars o f gold-secured Federal reserve foreign bank notes
having 100 per cent commodity bills and banking credits behind
such notes; such notes subject to redemption in gold at New
York, London, and Paris only, and then only to member banks.
The Gresham law could not apply to these reserve bank notes,
for the very sound reason that every one of these notes would
have behind it 100 per cent of commodity bills worth the gold
on the market, and moreover would have sound bankers’ credit
worth the amount of such notes in the market, and moreover
would have 20 per cent o f actual gold, so that anybody able to
buy gold at all could buy it with these commodities and bankers’
credits and need not cash the reserve bank notes as a means
of getting gold. It would not be the same as putting gold in
circulation side by side with depreciated paper money, because
to get these notes you have got to pay the full value in gold in
terms of commodities and bankers’ credit, and it would be just
as easy to buy gold under these circumstances as to buy and
redeem the bank notes.
The value of the proposed note is that it furnishes in the most
convenient possible form a currency redeemable in gold and
worth gold, and, therefore, becomes a medium of exchange with
which the European people, the manufacturers and merchants
and business men, can measure their contracts and know what
they are doing when they enter into a contract.
I have drawn this bill in the hope that some of the Senators
of the party in power would approve its principles and take it
and perfect it by putting it under the microscope and use its
sound principles in order that the people of Europe who owe us
fifteen thousand millions of dollars may be put in a position
where they can repay what they owe us. Our industrial and
commercial prosperity is most intimately bound up with the
happiness and prosperity o f the European people. If they can
not buy our goods we suffer; if we can not buy their goods
they suffer. If their industrial life is disorganized so that
they can not buy from us our foreign commerce languishes.
We have already seen our foreign commerce fall off over
three thousand million dollars this year. We find goods piling
up in excess, and men burning corn in the West, while the Rus
sian people die for the lack o f corn.
The world is entering into a new era. The great military
dynasties have been overthrown. The Hohenzollerns, the Hapsburgs, the Romanoffs have followed the Bourbons. The
83330— 22109
24
world enters a new democratic era. The Conference at Wash
ington on the Limitation of Armaments has already had a pro
found effect on the world. It will not only cut down the gigantic
taxes which would have ensued from the rivalry among the
nations m building warships, but it will lead to a 'limitation of
land armaments. The increasing intelligence of the people of
the world will no longer permit statesmen to be led by vanity
and ambition into the slaughter of the peoples of the earth.
A new eia has been born, an era o f peace, o f industrial life
o f neur industrial activity, of new powers of production, and
the great war debts m 25 years from now will be liquidated
tcii inoie easily than they are now, not only because of the in
creasing power o f man to harness the forces of nature and create
values, but because men have learned how to create credits and
to make money available to those who are entitled to it. We
h<i\G
demonstrated this in the Federal reserve act* in the
farm loan a c t; in the War Finance Corporation; in the Liberty
ioan drives, where we turned over to Uncle Sam forty billions
o f dollars of credits in a few short months.
Under the Federal reserve act since 1913 there has been a
very large expansion o f credits, notwithstanding the contraction
which has taken place under the pressure of the last vear and a
half.
The paj ment of the war debt will be much easier on the people
by postponing it a few* years, because their productive power
is increasing year by year. I therefore pray, Mr. President,
that the members o f the majority party who are charged with
the administration of government shall consider the suggestions
which I have had the honor to make, and if there be credit
arising from the principles and plan I propose, let the party
in power take the full credit. I shall be more than content if
\_iat I have proposed may be of service to the country and the
an! aSSis! the part-v in power t0 meet ^ie reasonable
hopes and expectations of the American people
8 :5 3 3 0 — 2 2 1 0 9
o
SIXTY-SEVEN TH CONGEESS, SECOND SESSION.
The need of Europe for a stable gold-secured currency as
a means of measuring contracts in manufacturing, buying
and selling, increasing production, and restoring the pur
chasing power of Europe— Senate b ill 2915.
REMARKS
or
HON.
IiOBEET
OF
L.
OWEN,
OKLAHOMA,
I n t h e S e n a t e of t h e U n ited S t a t e s ,
Friday, January 20, 1922.
PROPOSED FEDERAL
RESERVE FOREIGN
BANK.
Mr. OWEN. Mr. President and gentlemen of the Senate, I
again call the attention o f my colleagues, and especially of my
Republican colleagues, and appeal to them to consider the pro
posal I submitted January 4, Senate bill 2915. Action on this
subject promptly is of vital importance to our foreign commerce.
It offers an important means to restore the value of our agricul
tural and manufactured commodities, to relieve our industrial
depression, to engage our unemployed labor, to stimulate the
industrial activities of Europe, to enable Europe to buy our com
modities, to assist Europe to repay us the loans we made to Eng
land, France, Italy, Rumania, Belgium, and Russia.
The bill proposes to give Europe the wonderful benefits which
we receive and enjoy from the wise and sound principles of
the Federal reserve act and the enormous gold supply we have
built up under that system; that there shall be established
a Federal reserve foreign bank for European operations, w ith
$500,000,000 gold capital, owned by our 12 Federal reserve banks,
with power to issue $2,500,000,000 in bank notes—denomina
tions, $1, $5, $10, $20, $50, $100, $1,000, and $10,000— to be
issued against 100 per cent sound short-tdrm bankers’ bills,
secured by 100 per cent of staple, merchantable, insured com
modities. title covered by documents, with a 20 per cent gold
reserve for redemption purposes, redeemable in gold at London,
Paris, and Berlin by member banks on ly ; that such bank should
lend such currency notes against such bankers’ bills, and thus
furnish the people for till money and pocket money, and to the
banks of Europe $2,500,000,<X)0 of gold bank notes as a currency
with which to measure business contracts and afford a stable
measure of value in buying, selling, and contracting for the
manufacture and delivery of commodities.
The most vital financial need of Europe is a dependable, stable
international currency as a medium of exchange. America
alone at this time is able to furnish such a currency, as Amer
ica alone has the gold. We alone have the available gold.
We have 35 per cent gold reserves, against $1,784,000,000 of
deposits of member banks, equal to $634,400,000, which is idle,
useless, and unproductive, because the deposits can not, except
in case of an occasional bankruptcy, be withdrawn under the
statute, and could be paid in reserve notes even if the deposits
of an insolvent bank were withdrawn. We can use $500,000,000
of this unproductive gold and still leave the Federal reserve
notes with 100 per cent of gold for redemption purposes.
The Bank of England during the Great War, although the bul
wark of Givat Britain's financial structure, got down to 8 per
cent reserve without creating any financial disturbance.
It will be very profitable. These loans of $2,500,000,000 of
bank notes would approximately pay 3 per cent, or $75,000,000.
gold annually, and expand the service to the extent of European
requirements.
The one great overwhelming need of Europe is a money equal
in value to gold, and as stable as gold, in the pockets o f the
people, in the tills of the merchants, manufacturers, business
men. a)id bankers.
Buyers and sellers with a fluctuating currency are terribly
handicapped. The buyer finds the mark buys less in commodi
ties as the mark falls in value, so that his money is losing
value all the time. The seller finds his commodities bring
marks of less gold value as the mark falls. When he tries to
86294— 22183
save himself by raising the price in terms of marks it is to his
disadvantage in selling. When he receives the marks for his
goods, before he can buy new commodities the mark has again
fallen in gold value. He suffers both ways. Measuring con
tracts by a fluctuating currency is like measuring silk cloth
with a rubber yardstick; like selling oil by the can without
defining the size of the can; buying coal by the bucket without
knowing the size o f the bucket.
It is chaos, hopeless confusion. Under such conditions the
manufacturer, merchant, and business man is almost paralyzed.
Productive activities and profitable commerce are well-nigh
impossible. The greatest duty of statesmen is to promote the
profitable employment of the people, to furnish them facilities
in sound currency and credits, to remove obstructions to com
merce and production, make raw materials accessible, promote
transportation.
European business men would rejoice to have the use of this
gold currency.
It would tend to immediately stabilize contracts and credits,
stimulate production and employment.
It would tend to stabilize exchange.
It would greatly assist Germany to meet its reparation bills
in gold payments, and thus help France, Belgium, Great Britain,
and Italy.
It -would help to make the gold dollar the standard measure
of international contracts.
It would make the United States the greatest and most useful
servant of mankind, and entitle America to the increased respect
of the whole world.
It will enable Europe to create the commodities needed to pay
America $1,500,000,000 of debts and interest thereon.
It will preserve the gold standard and prevent Europe going
permanently to a paper-money basis.
It will increase the demand for gold for monetary use in
Europe, where such demand has largely ceased to the disad
vantage of our excess hoarded gold and its purchasing power.
It will be profitable and earn a minimum of $75,000,000 per
annum.
It will stimulate our foreign commerce or exports and im
ports.
It will tend to raise the prices of our export products, to in
crease the employment and the wages of labor in the United
States, and relieve our present industrial depression.
Foreign nations alone can place their currencies on a gold par
basis. If they conclude to do that, they must balance their
budgets, be economical, by taxes take up their surplus cur
rency, and arrange a plan by which debtors will pay their debts
or bonds on the gold basis of value, so that the debtor, whether
a citizen or a nation, shall only pay the gold value originally
advanced by the creditor. On this basis Governments would
only tax their people to the extent of what the Government
got in terms of gold when they sold their bonds. There must
be some equitable adjustment between the debtors and creditors
in Europe, between the bondholders and the taxpayers of
Europe. It can be done, but it is a matter exclusively in the
hands of the statesmen of the several countries involved.
We can nevertheless furnish them with a gold-secured cur
rency and with credits, and this assistance to Europe I urge
upon you.
We should agree to merge the interest on the European na
tional debts to our Government into the principal of the debt
for the next 5 or 10 years.
We should put the interest at the prewar rate, 3 per cent.
We should extend the time for paying the principal for from
30 to 50 years.
We should help them with our gold and give them a goldcommodity secured currency and the credits that would be
easily afforded through the proposed Federal reserve foreign
bank.
When we extend the payment of the European War debts to
30 or 50 years now we should do the same thing in the United
States and exlend the payment of the United States war bonds
for a like period.
W ASH IN GTON - : GO VERN M EN T P R IN T IN G O FF ICE : 1922
SOLDIERS’ ADJUSTED COMPENSATION.
SPEECH
OF
HON .
EOBEET
OF
L.
OWEN,
O K L A H O M A ,
I n t h e S e n a t e of t h e U n ited S t a te s ,
August 31, 1922.
The Senate had under consideration the bill (H . R. 10874) .to provide
adjusted compensation for veterans of the W orld W ar, and for other
purposes.
Mr. OWEN. Mr. President, I am not able, as I had hoped,
to vote for this bill in the final form as presented by the ma
jority party of the Senate with no means therein provided for
payment. I should feel justified in voting for imposing taxes
for the benefit of our young men to the extent required to cure
or relieve them of injuries, to support them where disabled or
incapable of self-support or in distress, to instruct them in selfsupport by vocational instruction, and to assist them in develop
ing a home on the public domain. But to tax the American
people by from $4,000,000,000 to $7,000,000,000 by the certifi
cate plan, without any discrimination whatever, as set forth in
the bill, and pay out huge sums for those not in want, not un
employed, and in fine health, does not seem to me wise or defen
sible. We should be provident with the family purse and use its
resources for those in need and not spend our resources for
those not in need, lest we then may be compelled to deny those
in great need.
1 do not feel justified as a temporary trustee of the people’s
legislative power to put this unnecessary tax on my countrymen
without a mandate or instructions from them. My sympathies
are with all of our young men desiring the bonus, and I should
be glad to support their wishes if the people o f Oklahoma
through the legislature should express the wish of the State to
that effect, but I can not consent to tax our impoverished and
troubled people any more without knowing that they wish me
to vote this unnecessary tax upon them. The organization of
our veterans committed to this plan is said to consist o f 25 per
cent of our soldiers enlisted and to represent approximately 5
per cent of our people. The members o f the Legion are divided
in opinion as to its wisdom, and they have advised me both for
and against the bill.
The leaders of the party in power have determined to pass
the bill, and the passage of the bill is absolutely sure. My vote
is not needed to pass it. The Republican Party has the man
date of the country. That party will take the credit for the
act, and I prefer that the Republican Party shall take the
undivided responsibility for the added taxes which will be re
quired to pay the full liability assumed by the act.
9891— 23121
WASHINGTON ; GOVERNMENT PRINTING OFFICE : 192*
STATEMENT
OF
HON. ROBERT L. OWEN
UNITED STATES SENATOR FROM OKLAHOMA
W IT H REGARD TO
THE CAUSES OF THE RECENT AND EXISTING INDUSTRIAL
DEPRESSION— REPUBLICAN PARTY LARGELY RESPON
SIBLE FOR DEFLATION OF CREDIT AND CUR
RENCY AND THE SEVERITY OF THE
INDUSTRIAL DEPRESSION
IN THE
SENATE OF THE UNITED STATES
SE PTEM B E R 22, 1922
W A SH IN G T O N
1922
12G11— 23227
STATEMENT
OK
HON.
U
ROBERT
L.
OWEN,
Senator
from
O k l a h o m a , w it h
R egard
to
the
C auses of th e
R e c e n t a n d E x is t in g
I n d u s t r ia l D e p r e s s io n —
R e p u b l ic a n P a r t y L a r g e l y R e s p o n s ib l e f o r D e f l a t io n o f C r e d it
and C urrency
and th e
S e v e r it y o f t h e I n d u s t r ia l D e p r e s s io n .
n it e d
Sta te s
The Federal reserve act was intended to give stability to
credits, industry, and commerce and to prevent unwarranted
inflation or unwarranted deflation. As chairman of the Com
mittee on Banking and Currency of .the United States Senate,
which framed and passed this act, I am justified in this state
ment.
When tile United States entered the war in 1917, and pur
chasing agents with unlimited money were turned loose to buy
war materials without limit on cost, it caused commodity prices
to rise in an unprecedented manner, these prices going up two
and three hundred per cent.
When the war ceased and the purchasing agents were dis
charged and the surplus war materials put on the market by
forced sales and the nations of the world went hack to peace
ful processes, millions of men again became productive, the vol
ume of commodities increased, and the urgency o f the demand
diminished, and therefore there took place, of necessity, a great
fall in commodity prices, causing heavy losses through inven
tories which had to he rewritten. This had a natural tendency
to bring about an industrial reaction.
But it was a process which was accomplished somewhat
slowly and only began to make itself felt In the fall of 1919.
No man and no party should he held responsible for this
natural reaction from the high prices o f war; but if the powers
of the Federal reserve act had been wisely employed, an indus
trial depression could have been largely avoided and its effects
mitigated.
In tin' election of 1918 the tremendous discontents due to our
war activities were successfully employed by the Republican
Party leaders, and they elected a majority of Republicans to
the House of Representatives, and by a gigantic effort, and
obtained through the lavish use of money in many States, and
especially in Michigan, were able, by Senator N k w h e r r y ’ s vote,
a single vote, to organize the United States Senate. They there
fore organized and controlled the Sixty-sixth Congress, which
met May 19, 1919.
Immediately the influence o f the Republican control of tlie
two Houses of Congress made itself felt on the Federal Reserve
Board, whose membership, nominated by Secretary W. G.
McAdoo, with a single exception, was reactionary and ultra
conservative.
G ov . W . 1\ G . Harding, under tins Republican influence, and
r e p r e se n tin g the Federal Reserve Board, thereupon determined
12G11— 21227
3
4
,
upon a policy of deflation. About the 1st of July, 1919, as
governor of the reserve board, he went to New York City, called
the leading bankers together, and notified them that they would
have to cut down their loans on stocks and bonds, which at that
time amounted to about nineteen hundred millions of dollars.
With this Government support and this Government demand,
the New York banks promptly began a policy of deflation, which
they made effective by raising interest rates, charging more and
more for money and credit. The call rate, which had been at a
very reasonable point, began to rise to 5, 7, 10, 15, 20, and as
high as 30 per cent by November, 1919, with the apparent ap
proval of the Federal Reserve Board, who did nothing effective
to stop it, in spite of a demand that they should do so. The
running up o f the rates to 30 per cent on call In New York
shocked the confidence of the country, drew money violently
from various industrial centers to New York, and broke the
stock market, resulting in losses eventually running into thou
sands of millions in the value o f stocks and bonds.
Along in December, 1919, the Reserve Board, under the Re
publican influences to which I have referred, began to con
sider raising the rates of the Federal reserve banks and, over
my vigorous personal protest made in person to the members of
the Federal Reserve Board and then by writing, they did raise
the rates of interest. Then on the floor o f the United States
Senate I protested against the ruinous deflation policy.
In the meantime the Kansas City Title & Trust Co. tied up
all the loans of the Federal farm loan banks by a suit intended
to test the constitutionality of the farm loan act. (Smith r.
Kansas City Title & Trust Co., 255 U. S. Sup. Ct., p. 180.) The
banks of the country followed the bad example of the Federal
reserve banks in contracting, credits.
In the spring of 1920 the Republican Congress passed an
amendment to the Federal reserve banking law empowering the
Federal Reserve Board to increase the rediscount rates with
out limit, and under this act the board permitted the Federal
reserve banks to run the rates up in a manner to violently
affect the stability of credits in the United States, in one
egregious case the rate going over 80 per cent per annum and
in many cases going up to 12, 15, and 20 per cent.
Unable to influence the Federal Reserve Board in favor of
lower interest rates, I wrote a letter to the President on Feb
ruary 13, 1920, but his unfortunate illness made it impossible
for him to consider it.
On February 16. 1920, I raised my voice on the floor of the
Senate against this destructive policy and put in the C o n
gressio n al R ecord my letter to the President explaining how
speculation and hoarding could be prevented and controlled
without these excessive interest rates and without deflation
of credit. ( C ong ressional R ecord, 2937. Exhibit A .)
Again, on March 8, 1920, on the floor of the Senate (C o n
gressional R ecord. 4001), I raised my voice against this de
structive policy and high interest rates, but the protest was
unavailing with the Republican leaders of the Congress.
Again, on April 21 Senator M cC u m b e r . now chairman of the
Finance Committee o f the United States Senate, urged that the
Federal reserve act should be modified so as to comjiel contrac
tion (C ong ressional R ecord, 5936) of the currency ami he
12G 11— 2 3 2 2 7
5
complained about the greatly inflated currency and attributed
tbe high prices of war to an “ inflated ” currency. He urged a
contraction of the currency.
The Federal Reserve Board, under these Republican influ
ences. put great pressure to bear on the banks to compel them
to sell Government bonds which, under high interest rates, had
fallen severely in market price, and again I protested against
the high interest rates on April 30.1920 (C ongressional R ecokd,
0337) and showed how speculation and hoarding could be con
trolled without raising the rates of interest and without deflation
of credit or currency, and I put in the R ecord on that day a let
ter which I had written to the governor of the Federal Reserve
Board, April 27, 1920, protesting against raising the interest
rates, and I said to him ( C ong ressional R ecord, 6337. Ex
hibit B) :
“ The Federal Reserve Board can not permit itself to he held
responsible for the consequence that trill ensue if it persists in
this policy of raising the interest rates as a remedy for specu
lation.” •
The hoard asserted they were raising the rates and deflating
credits to check speculation.
I explained to him in this letter how speculation could be
controlled without raising the interest rates, and I urged the
hoard to pursue a policy that would give stability to credit and
avoid the dangers that would ensue if the powers of the board
were used to break down confidence and credit in the United
States. Unhappily the Federal Reserve Board, under the in
fluence o f the Republican leaders, refused to listen to my
pleading.
In the interest of those icho had dollars they seemed de
termined to make the dollars buy more by a policy o f indis
criminate deflation and currency contraction.
I urged that the dolars could he made more valuable by in
creasing the volume o f commodities through industry and pros
perity rather than to make the dollars more valuable under in
dustrial depression by the hammer of the auctioneer and re
ducing the cost of commodities below the cost of production.
On May 3d. 1920, the governor of the reserve board replied
to my appeals, .but did not change the policy of the board. He
said, however (C on g ression al R ecord. 6556), that:
“ During the year 1919 the board tested the policy of attempt
ing to control the credit situation by admonition and learnings
n it ho at raising rates.”
The board did far more than use admonitions and warnings
to bring about deflation and “ control the credit situation.” It
issued its bulletins and gave its counsel and advice and issued
rules and regulations, all of which went to carry out the policy
of indiscriminate deflation, all of which had the purpose to
limit credits throughout the United States and to reduce the
volume of currency required and had the effect to break values
ruinously and to create a terrible industrial depression and ruin
tens of thousands.
On May 14. 1920 (C ong ressional R ecord. 7039), I replied to
Governor Harding’s letter, insisting that the Federal reserve
system was intended to give stability to credit, that it was not
a money-making institution, and 1 pointed out:
12611— 23227
6
“ The Federal Reserve Board is thinking much these days of
deflating credit. The idea has been much exploited recently
that it is a good thing to deflate credit.’'
And against this policy I entered my vigorous protest, fully
set forth in the R ecord, and I put in the R ecord a letter dated
May 14. 1920, to Governor Harding (Exhibit C ), so that there
might be no doubt that my appeal to the Federal Reserve Board
for liberality in treatment for the country was made and was
unavailing. (C ong ressional R ecord, 7042.)
The Reserve Board declared automobiles and various com
modities nonessentials and advised the banks to refuse credits
on automobiles and on many other things, including commodities
in storage.
The answer which the Reserve Board gave me in answer to
my letter was Senate Resolution 303, submitted by Mr. M cC or
m i c k , leading Republican Senator from Illinois, to the following
effect:
“ Resolved. That the Federal Reserve Board be directed to
advise the Senate what steps it purposes to take or to recom
mend to the member banks of the Federal reserve system to
meet the existing inflation of currency and credits and conse
quent high prices,” and so forth.
.
The Republican Senate passed this resolution, which was
expressly intended to lie a notice to the Federal Reserve Board
by the Republican Party that they were expected to deflate
“ the existing inflation of currency and credits and consequent
high prices,” attributing to inflation the high prices instead of
to the results of the war.
On May 18, 1920 (C ong ressional R ecord. 71993). I again ad
dressed the Senate on this question and protested against the
resolution of the Senator from Illinois and I warned the Fed
eral Reserve Board and I warned the country that an industrial
depression would result from the policy of forced deflation (C o n
gressional R ecord, p. 7200).
I pointed out that the earnings
o f the Federal reserve banks were running up to nearly 200
per cent per annum. I charged the Republican Party then and
there with being responsible for the attitude of the Federal
Reserve Board. Mr. M c L e a n , who was then chairman of the
Banking and Currency Committee of the Senate, defended the
high discount rates (May 18, 1920).
But, Mr. President, the responsibility of the Republican
Party for the policy of indiscriminate deflation was fully as
sumed by the leaders o f that party at the Chicago convention
in June, 1920, in the following plank :
“ The prime cause of the high cost of living has been first
anti foremost a 50 per cent depreciation in the purchasing power
of the dollar, due to a gross expansion of our currency and
credit. We condemn the unsound fiscal i>olicies of the Demo
cratic administration. As the political party that throughout
its history iias stood for honest money and sound finance we
pledge oursqives to earnest and consistent attack upon the high
cost of living by rigorous avoidance of further inflation in our
Government borrowing and by courageous and intelligent de
flation of our overexpanded credit and currency.”
They deliberately declared in favor of a deflation of credit
and currency and brazenly called it courageous and intelligent
»
12011— 23227
1
n
i
They could only do it through the Federal Reserve Board as
they had already been doing it by the Federal Reserve Board.
On July 22,' 1920, Mr. Harding, Republican nominee for
President, in his speech of acceptance, said :
'‘ dross expansion of currency and credit have depreciated
the dollar. * * * Deflation on the one hand and restora
tion of the 100-cent dollar on the other ought to have begun
on the day after the armistice. * * * We pledge that
earnest and consistent attack which the party platform cov
enants. We will attempt intelligent and courageous deflation.
and strike at Government borrowing, which enlarges the evil.”
And there is not the slightest doubt, therefore, about the Re
publican responsibility for the drastic deflation which took
place in their determined policy to deflate credit and currency.
Its terrible effects upon the country are well known.
I was not alone in my efforts to prevent this drastic defla
tion policy pursued by the Republican leaders, acting through
the Reserve Board and Governor Harding, of the Reserve
Board, because Hon. John Skelton Williams, then Comptroller
of the Currency— the best the Nation ever had—also vigorously
protested against the high rates of interest, as will appear
from his statement made September 11. 1920, and printed in
the Report of the Comptroller of the Currency o f 1920. page S2.
On September 11. 1920. the comptroller made public the
following additional statement in regard to interest rates in
New York, which explains itself:
“ S eptember 11. 1920.
“ A lead ng New York paper, in its financial columns to-day.
criticizes the statements made this week by Senator O w e n
relative to the excessive interest rates which have been charged
by certain banks in New York City during the past year, and
says t h a t bankers ‘ point out that when Senator O w e n charges
that $.100,000,000 has been loaned at rates up to 30 per cent he
is speaking without the record.’ Continuing, the press article
says:
,
“ *That high figure obtained on the stock exchange for about
10 minutes one afternoon the middle o f last November, and
probably as much as $1,000,000 was loaned at that rate.
“ That criticism by the unnamed ‘ bankers’ is misleading,
and in justice to Senator O w en it is proper to say that the
Senator’s' public statements on this subject, as printed in the
press dispatches which have been brought to my attention, are
substantially correct, and in view of actual facts are moderate
a n d conservative.
“ During the past year the burdensome and oppressive in
terest rates to which the Senator refers have been exacted,
not in ‘ one or two possible insignificant instances, as one
New York paper expressed it, and not as the ‘ high figure a s
•mother paper expressed it, ‘ for about 10 minutes one after
noon the middle of last November,’ but in thousands of in
stances, at numerous times, and upon call loans aggregating
hundreds of millions of dollars.
*•The information on this subject called for as of August
5 f roni all of the New York City banks has been supplied by
nearly all of them and is now being compiled; but in anticipa12611— 23227
tion of a more complete statement which will he available later,
it may be interesting to the public to know that the amount
of demand loans, upon which two or three of the b a n k s , only
(exclusively of various others which were charging the same
rates), were exacting 20 per cent or more per annum interest
(in some instances as high as 25 and 30 per cent) was—
On November 13, 1919, about____________________ $50,000,000
On November 14, 1919, about____________________
40.000,000
1he new call loans at the rate o f 25 per cent per
annum made by one of these banks at the end of
1919. on December 29. 30, and 31, aggregated
a b o u t ------------------1.-------------------------------- ----------------------------------------
2 0 ,0 0 0 ,0 0 0
On January 2, 1920. these same two or three banks
were lending at 18 per cent, 20 i>er cent, and
25 per cent interest, about_____________ ______ 75,000.000
On January 3, 4, anti 5, at 18 per cent interest
from $60,000,000 to____________________________ 70 , 000 . 000
On February 6 . 1920. at 20 per cent and 25 per
cent interest. over___________ __________________ 40 , 000 , 000
On February 9, 1920, at 20 per cent interest,
abou t------------------------------- ^------------------------------ 40 , 000 . 000
“ As late as the end of .Tune it appears that interest as
high as 14 per cent per annum was being demanded by these
banks on millions of dollars of call loans.
“ These illustrations are from the official records of only
two or three of the thirty-odd national banks in New York
City, but they are sufficient, I think, to show the unfairness
and incorrectness of the criticisms of Senator O w e n ’s just
condemnation of the excessive interest rates which for some
time past have been a d stiuctiy disturbing factor in the
business and financial situation.
I ain pleased to confirm the statement I made some time
ago timt although the aggregate amount upon which unjust
aud oppressive interest rates have at times been exacted bv
sonie banks is very large, a majority of the national banks
m New York City have made a comparative!v small propor
tion of their loans at these indefensible rates.”
1 he comptroller denounces these high interest rates in his
report from pages 79 lo 105.
1he result of this drastic deflation of tin* Republican Party
was that there was a decrease, from September, 1920 to Sep
tember 6 . 1921, of $2,191,104,000 in the deposit of the nat onal
banks; a decrease o f $1.042,1S6.000 in the deposit of tin- State
hanks; a decrease in the loans and discounts of the Federal re
serve banks of $1,621,630,000, and a decrease of Federal reserve
nott s in circulation of $957,371,000; a decrease in Federal re
serve bank notes of $131,085,000; the loans and discounts of the
national banks decreased $1,446,858,000, and other banks' loans
and discounts decreased $481.882,000— a t o t a l contraction of
credits amounting to over five b ilious in the space o f one year.
<Mi May 28, 1920. the outstanding credits of the Federal re
serve hanks were $2,938.031.000 ; . on January 25. 1922. the out^ (o o ! 2 e<lits of the 1 2 Federal reserve banks had fallen to
*PJ_.88l,000 — a total contraction in 20 months of $2,005,149,000.
Besides this gigantic deflation, private individuals from one
end of tlie land to the other were frightened into following the
12611— 23227
same policy and in their relations with each other outside
o f the banks the same cowardly and injurious policy was fol
lowed, creditors pressing debtors for settlement to the ruin of
the debtors.
Of course this resulted in the ruin of hundreds of thousands
of farmers; o f men engaged in cattle raising and in sheep rais
ing and in animal industry. It ruined many merchants, manu
facturers, and business men. and even ruined very many bank
ers. Of course it brought wages down and was intended to bring
wages down.
Of course it paralyzed business until the process was com
pleted. It caused the great strikes of the country.
The prices of the things, however, that the farmer and wage
earner and great consuming classes have to buy, being controlled
by the trusts and monopolists and by profiteers, still remain at
a figure much too high.
To prevent the possibility of foreign competition with do
mestic extortion, the Republican Congress has now enacted the
highest rarift! protection bill in the history of the country.
The responsibility of the Republican Party for the great in
dustrial depression we have suffered is thoroughly well estab
lished and must be acceded by every man with an open and a
just mind who loves the truth first and party success second.
A few great bankers who think alone in terms of dollars and
the purchasing power of dollars demanded the deflation of
currency and of credits to increase the purchasing power of
their dollars.
The Republican Party accepted the advice and carried out the
policy. God save the American people. Torn and misled by a
million grievances arising against the Democratic Party because
of the autocracy and abuses of war, the people voted for a
change. They got a change from wonderful prosperity in 1918
to a terrible depression in 1921. It is time for another change.
The Republican leadership is controlled by reaction. The
country is truly progressive and liberal, and to this spirit the
Democracy must appeal.
E x h ib it A.
F
ebruary
13, 1920.
Subject: Interest rates.
T h e P resident ,
'The White House.
deem it my duty to call your
attention and the attention of your administration to the im
portance of moderate interest rates and stability therein in
the United States and the important part which the influence of
the Government can exert in accomplishing these ends through
the Treasury Department, the Comptroller of the Currency,
and tile Federal Reserve Board.
Before the Great War Belgium had a fixed, stable rate of 3
per cent for 50 years and the rate in France was practically
the sam e, and United States Government bonds with the circu
lation privilege were sold at and above par when they bore
only 2 per cent interest.
During the World War London merchants have enjoyed a
3A per cent rate on acceptances.
M y D ear M r. P r e s id e n t : T
12611— 23227------ 2
Our manufacturers, our merchants, our business men are
entitled to reliable, stable, reasonable rates of interest.
The productive and distributive processes so essential to re
store the equilibrium of the world dej>end upon such rates in
order to function most efficiently.
I call your attention to the unreasonable manner in which
the interest rates on the stock collateral loans in New York
have been fluctuating from normal to 2o and 30 per cent, with
the most unhappy consequences upon interest rates, injuriously
affecting our commercial business throughout the United States.
The Federal Reserve Hoard has been induced to raise the
rate of discount of the Federal reserve banks to a high point
as a supposed check on the extraordinary speculation which
has been taking place on the stock exchange.
These artificially unreasonable high rates o f interest charged
by the banks in the central cities on stock collateral call loans
have had the effect of drawing to these cities from different
parts of the country funds which ought to he exclusively used
in commerce, and Ibis process went to a ixnnt where recently
the amount of stock collateral exchange loans on call or short
time readied a volume in New York City of $1,900,000,000.
withdrawing for speculative purposes tliese credits which
should be used in the industrial and commercial life of the
country.
The investing and speculating public lias been attracted to the
stock exchange by the policy of narrow margins and low rates
of interest; but after the public has taken on these speculative
purchases the interest rates are raised to a high point and the
margins are increased from 10 per cent to 20 and 30 j>er cent,
with the effect of squeezing out the [>eople who, in the language
of the day, “ can’t hold on.”
Tliese loans, which were $1,900,000,000. 00 days ago have now
been reduced to $1,000,000,000. and the stock market has gone
through a very severe depreciation; and this is the second up
heaval of this kind within two months. I inclose an exhibit
showing tlie violent fluctuations which have taken place con
trary to a wise public policy, to the ruin of many weak and
foolisli speculators; but. above ail. to the injury o f the manufac
turers, merchants, and business men who are entitled to have
stable, moderate interest rates.
The manufacturers, merchants, and business men are entitled
to stability. They can not otherwise transact the business o f
the country witli safety; and in their name and on their behalf
I respectfully and very earnestly insist that the Government
shall establish a policy which will give stability to interest
rates, prevent these violent fluctuations, and lead to lower inter
est rates.
Will the question be asked, How can it l>e done? I venture
to answer:
First. That the influence of the Comptroller of the Currency
and o f the Federal Reserve Board be exerted to require a lim
itation upon loans made by member banks or banks engaged in
interstate commerce, so that ouly a reasonable percentage o f the
deposits of such hunks shall be i>ermitted to he used for the
accommodation of those who are buying stocks for si>eculative
purposes.
12611— 23227
Second. That a margin of not less than 25 per'cent shall be
required in such transactions.
Third. That an interest rate not exceeding 8 per cent shall be
permitted in such transactions.
Fourth. That the reserve board shall charge a special rate
of interest to those banks who are using the accommodations of
the discount privileges with the reserve banks in excess of their
rightful proportionate part of such accommodation, so that the
normal discount rates of the Federal reserve banks shall not
exceed 4 per cent, but the special rate for banks desiring to use
more than their rightful proportion of the reserves with the
reserve banks shall he at a progressively higher rate. In this
way banks that put up Liberty bonds for the purpose of getting
more than their proportionate part and lending this money out
on very high rates of interest will find it less profitable to
engage in such a policy.
The discount rates of the Federal Reserve Bank of Richmond,
for example, effective January 23, 1920, included the following:
15 days
and
under.
Member banks;
Secured by United States certificate of debt.......
Per cent.
*i
5*
6
7
Secured by War Finance Corporation bonds.......
Rediscounts:
Customers’ notes—
Secured by United States certificates of debt.
R
Secured by Liberty bonds.................................
5*
Secured by War Finance Corporation bonds.
Trade acceptances...........
6
Commercial paper___
6
6
Agricultural or live-stock paper..............................
16 to 90
days.
91 days
to 6
months.
Per cent.
Per cent.
4»
54
6
6
6
0
You will observe from these discount rates that eligible
paper—that is. the notes of manufacturers, merchants, and busi
ness men engaged in production and distribution—would be
compelled to pay around 8 per cent if the member bank is per
mitted any margin over and above what they themselves have
to pay the reserve bank. This is true even on trade acceptances,
which in London have a rate of 31 per cent. In other words,
our manufacturers, merchants, and business men engaged in
production and distribution are compelled to pay by this policy
twice as much as they do in London, charging the interest, o
course, upon the cost of the goods, and thus raising the cost
of living. Against this policy I enter my resolute and solemn
protest.
I heartily approve the evident purpose of the Federal Re
serve Board to reduce the excessive speculative loans on the
stock market and divert such credits to the benefit of
merce; hut this can be accomplished without raising the rate >f
interest by requiring larger collateral margins and by limiting
stock collateral loans to a reasonable part of the rese es
the member banks, and all loans to a proportionate pa
reserves with the Federal reserve banks.
12 6 11— 23227
12
L IB E R T Y
LOAN AND VICTO RY LOAN B O N D S .
When the American people were engaged in the war the Treas
ury Department organized Liberty and Victory loan drives, and
every citizen was urged to buy these bonds: if necessary, to sell
his property and buy the bonds; to borrow money and buy the
bonds. The bonds were sold at par. It was a patriotic duty to
buy the bonds, but the high rates of interest which have re
sulted from tlie unrestrained speculation on the stock exchange,
and the high rates o f interest which the reserve banks have
established, have had the effect of having these bonds appear
as a poor investment, and these bonds have shrunk so that in
the case o f the bonds which have not the nontaxable feature
they have fallen oif in value almost 10 per (vnt. inducing many
persons who are poor and who borrowed money to carry these
bonds to sell them at a loss, and many more will be induced
to sell them at a loss, contrary to a wise and just public policy.
If the normal discount rate of the Federal reserve banks were
put at 4 per cent and the banks were discouraged from abusing
the privileges of the reserve banks for stock-speculative pur
poses in the manner which I have pointed out. these bonds
would come back to par. and they should be brought back to
par. The people who bought these I*«nds ought not to suffer
a loss, and the credit of the United States ought to tie preserved
by the policy which I have taken the liberty to suggest to you
and to your administration.
The result of these speculative stock loans has been such that
the New York Federal reserve bank has had its reserve very
seriously impaired, so that the New York reserve bank has
been borrowing money on a large scale from other reserve
banks who do not suffer from this strain.
There is no adequate reason why the rates o f the reserve
banks should not be uniform ; why they ought to be higher in
one part of the country and lower in another part of the
country. The loans are as reliable in one part of the country
as in another, and every part of the country is entitled to a
uniform rate.
The high cost of living demands for its solution stability in
interest rates in order to encourage production and distribu
tion, and to reduce the high cost of living demands a moderate
rate of interest.
The Federal reserve banks were not established as money
making institutions, but for the purpose of giving stability and
a reasonable stable interest to the productive enterprises of the
Nation.
The Federal reserve hanks last year made a profit of about
100 per cent of their capital; but this in no way measures the
added expense on the cost of living, because the high rate of
interest charged by the Federal reserve banks is reflected upon
loans and discounts o f other banks running into the billions,
since it affects the interest rates in all parts of the country.
I regard this matter as a matter of national importance, and
I would not feel that I had discharged my duty to the country
if I had failed to call your attention to it in these explicit
te rm s.
Yours very respectfully,
R obert L. O w e n .
12 6 11— 23227
<£2*
E x h ib it B .
U
n it k d
S tates Sen ate,
April 27, 1920'.
Hon. W . P. G . H a r d in g ,
Governor Federal Reserve Board. Washington, D. C.
M y D e a r G o v e r n o r : I have been intending to call to see you
and beg of you and of the Federal Reserve Board to consider
the injurious effects of raising the interest rates in America
in its relation to adding to the high cost of living and in its
relation to bearing down the market value of Government bonds.
I have just received a telegram from the president of an
important national bank. He explained to me that bis bank
bad bought and underwritten a much larger volume of Govern
ment-bonds than they would have done normally because of
important Government works put up in bis city. Thousands
of employees who were compelled to buy Government bonds
unloaded them on the bank when the war suddenly ended,
and be lias been unable to sell these bonds on a falling market,
and the market is falling because the reserve board lias raised
the rate of interest and set the example to the banks of the
1 nited States and justified them to their own conscience and
to tlieir customers in raising the rate approximately 2 per cent
throughout the Union. For your consideration I quote the
telegram:
Can nothing lie Gone to give Liberty bonds some standing?
The
Federal reserve baiik is pressing us unmercifully to sell what we have,
and has served notice that they will rediscount no commercial paper
until we do so, and as you know this can only be done in the New York
Exchange at panic prices, it makes a serious and very embarrassing
situation which might be very far-reaching.
The reserve banks should be cautioned in pressing the banks
too far to sell these bonds on a falling market. This particular
bank, I invite you to observe, would receive a great injury, and
you will be unable to repair it afterwards.
The Federal Reserve Board can not permit itself to be held
responsible for the consequences that will ensue if it persists
in this policy of raising the interest rates as a remedy for
speculation. This remedy is worse than the disease.
This remedy is not necessary because there are other avail
able remedies whose consequences will be harmless. 1 venture
to suggest several:
First. That the banks be advised to require loans for specu
lative purposes to be gradually reduced;
Second. That the banks be required to demand Increased
margins on such loans;
Third. That the banks be invited to raise the rate on such
speculative loans, and not raise the rates on loans upon which
the manufacturer, the commercial, and industrial life of the
Nation depend; and
Fourth. That the banks be invited and required to refuse new
speculative loans on investment securities.
My dear Governor, the bondholders of the United States have
already suffered a loss in the market value of their bonds of
over $2,000,000,000. Bonds which they bought as a patriotic
duty; bonds which they bought on borrowed money; bonds
which they bought at a sacrifice.
The Government should not through its own agencies destroy
the value of these securities by pursuing a policy of raising the
12011— 23227
interest rates, and I beg you. and I beg the board through you,
to change this policy.
Moreover, my dear Governor. I call your attention to the
unpardonable and scandalous practice of the usurious charges
current in New York City, where on call loans, the stockexchange collateral, the rates have been running as high as 30
per cent. I enter my solemn protest against this, and on behalf
of the people of my State and the people of the United States
I call upon the Federal Reserve Board to put an end to this
nefarious practice which sets a false standard to the people
of the United States in the matter of interest rates, and which
has been used to justify the Federal Reserve Board to raise
the rates on the whole country for the avowed purpose o f stop
ping speculation when no such remedy was necessary.
Yours, very respectfully,
R obkrt L. O w e s .
E x h ib it C.
U nited S tates S en ate ,
May /',, 1920.
Hon. W. P. G. H arding .
Governor Federal Reserve Board, M'ashinffton, T). C.
My D ear G o vern o r : I thank you for your letter o f May 3,
answering my letter rtf April 21. in which I urged the Federal
Reserve Board to lower the interest rates of the reserve banks
as a means of helping to restore Liberty bonds to par.
The Secretary o f the Treasury and every agency of the Gov
ernment, including the reserve banks and the member banks,
cooperated in a strenuous drive to induce the American j»eople
to buy Liberty bonds. The people were told to buy the bonds
until it hurt. They sold their property, they borrowed money,
they mortgaged their homes to buy these bonds on the assur
ance o f the Secretary of the Treasury that there was no better
security, and they had a right to believe that these bonds
would be maintained at par. But, my dear Governor, if you
permit these high rates of interest, of which I have justly
complained, the inevitable consequence will be that these Gov
ernment bonds must go still lower than they are now instead
of reacting to par.
The violent fluctuating high interest rates on the New York
Stock Exchange which go from 8 to 30 per cent, advertised
throughout the country in every Important paper in the land,
together with the high interest rates of the Federal reserve
banks to member banks at 0 and 7 per cent, and the conse
quent higher commercial rates daily advertised in the pubi c
press of 8, 9, and 10 per cent, not to mention commissions on
the side and discounts, are jointly impairing confidence and
creating an atmosphere o f suspicion, distrust, and widespread
talk of pending industrial depression and industrial panic.
I have insisted that the powers of the Government should
be exercised through the office of the Federal Reserve Board,
the Federal reserve banks, and the Comptroller of the Currency
to remove these causes, which, if persisted in, may cause a
serious industrial depression and make Liberty bonds go still
lower.
15
The claim of the New York Stock Exchange that these high
ami violently fluctuating interest rates on call loans are neces
sary for the purpose of preventing speculation is indefensible,
because they do not prevent speculation. The professional
operator immediately speculates in a bear market, which in
evitable must follow these artificial high interest rates. The
speculator can afford to pay high interest rates, but legitimate
business can not. Moreover, the employment of bank credits
for speculation can be prevented by harmless methods: First,
by the banks refusing new loans for speculative purposes; sec
ond. by requiring gradual liquidation of old loans employed in
speculation; and, third, by raising the margin on speculative
loans.
The remedies I suggest are harmless to the genei'al public.
The remedy employed of high interest rates on call loans run
ning up to 30 per cent is destructive of public confidence and
threatens industrial depression.
When the Reserve Board raises the rate to 6 and 7 per cent
it has the effect not of stopping the speculator but of stopping
legitimate business, and putting the brakes on manufacture,
commerce, agriculture,* on production and distribution.
You quite misunderstand the point when you speak o f my
contention that the Liberty bond market recently fell because
the Federal Reserve Board raised the rate of interest, which
you think is disproved by the fact that the bonds fell in April,
1919, to 9o before the Federal Reserve Board raised the rate of
interest. My contention is that the high rates of interest on the
stock exchange and the high rates charged by member banks
on commercial loans based in part on the high rates of the
reserve banks, are all factors producing this result, and when
the Reserve Board recently raised the rate these bonds went
down much lower than they had been before, and they must
go lower still if the board persist in this policy. What I con
tend is that the Federal Reserve Board in raising these rates,
and thus adopting the unwise policy of the stock exchange, is
depreciating the market value o f all securities, including Gov
ernment bonds.
I understand the Reserve Board desires to deflate credit by
raising the rates of interest. Assuredly raising the rates of
interest will deflate credits, even the credits of the United
States, of which 1 complain, but I am anxious the Reserve
Board shall only deflate those credits that require deflation and
not deflate credits o f the Government and of legitimate pro
ductive business, whicl) ought not to be deflated.
The United States was compelled to expand its credits, and
issued $26,000,000,000 of war bonds. The war resulted in an
increase o f $20,000,000,000 o f bank deposits, a total increase
of expanded credits of $46 000,000,000. No substantial part of
these credits should be deflated at this time. The only defla
tion of credit .justified is the deflation of credits employed in
speculative loans on investment securities, on real estate, and
on commodit'es for hoarding by profiteers.
My dear governor, it seems to me that there is some serious
misconception existing in the country with regard to what is
inflation and what is not inflation. I am certainly opposed to
inflation, but T am strongly in favor of the extension of busi12011— 23227
ness, increasing production, and improving distribution by ex
tending credits on a stable low-interest rate.
The expansion o f credit for such purposes is justified, but, of
course, the expansion of credit beyond the available resources,
even for the most important of purposes, is not justified. The
Bank of England, conducted bj* the wisest merchants in the
world, has not hesitated to extend credits for productive pur
poses even when the gold reserve was thereby seriously dimin
ished. As you very well know, they went to a very low gold
reserve during the war without ever denying credits to their
business men who were engaged in legitimate industry. The
London merchants had 3J per cent acceptance rates all during
the war, when the British Government paid 5 per cent.
If the people are frightened by the talk of industrial depres
sion, by high interest rates, it has the effect of preventing pro
duction and putting the brakes on manufacture and on our en
tire industrial life.
I do not agree with Secretary Leftiugwell that the present
depression in Liberty bonds is due to the owners of Liberty
bonds spending the bonds recklessly as spendthrifts. People
who bought Liberty bonds do not deserve such a classification,
although, of course, some individuals out of a very great num
ber are spendthrifts. But the spendthrift quickly parts with
his bonds to other people. The spendthrift theory does not
explain the terrible depreciation.
If money was cheap and credits were available at low rates,
it is perfectly obvious that these bonds would go to par. and just
in degree that the banks o f the country raise the rates to very
high artificial figures to that degree the Liberty bonds and
Victory bonds will assuredly fall in market value.
You advise me that the Liberty bonds “ can not be brought
back to par by artificial methods.” They can lie depressed by
universal high rates of interest artificially fixed by the banks,
and that is precisely what has happened and to which I earn
estly object.
I do not say that the Federal reserve banks can restore these
bonds to par by lending a part of their resources on these bonds
at a low figure. What I do say is that the value of these bonds
is depressed by the action of the Government in countenancing
the scandalous interest rates on the New York Stock Exchange,
the unreasonable interest rates by the member banks o f the
country, and the unfair interest rates by the reserve banks to
the member banks.
You very justly say. my dear governor:
“ There is a world-wide demand for capital, and the demand
for bank credit in this country in agricultural, commercial, and
industrial purposes is heavier than has ever been known before;
investment demand# for new construction, for the maintenance
and equipment of railroads, and for the financing of our foreign
trade are very great.”
Are these just demands to be met by denying the credits, or
are they to be repressed by raising the rates to prohibitive
points, and thus retard enterprise and production, the employ
ment of labor and capital in creating commodities?
^ ou say the reserve banks would have been “ overwhelmed
with applications for loans” on Government securities if the
12611—23227
17
r
reserve banks had continued to offer a low discount rate on
paper secured by Government obligation.
I am not advocating the reserve banks lending beyond their
resources at any rates or on any securities. I am protesting
against the reserve banks setting a bad example to the country
by raising the rates of interest on legitimate business engaged
in production and distribution. I am objecting, my dear gov
ernor, to the reserve board taking advantage of this condition
and raising these rates merely because the demand is urgent
when the proper function of the Federal reserve bank is to
stabilize the interest rate, keep it at a reasonably low figure,
and set a wise and just example to the member banks.
I lie member banks pay from 2 to 4 per cent for deposits and
normally let their money out at from 5 to 7 per cent, with a
margin of about 3 per cent. The reserve banks pay no interest
on deposits, and 3 per cent is a rate high enough to enable them
to make all the money they are entitled to maHce out of the
■public. On a 4 per cent rate the Federal Reserve Bank of New
York last year made 110 per cent, and I suppose on a 0 and 7
per cent late they will make this year about 160 per cent.
■ 1 1S precisely what I am objecting to. The Federal reserve
banks should not be put in the attitude of profiteering or of
setting the example of profiteering to member banks. The
powers ot the Government are not being properlv exerted to
stop the scandalous rates of interest on the New York Stock
Exchange.
I was advised that six months ago the New Y’ ork banks had
nineteen bundled million dollars loaned on investment securi
ties and the commerce of the country was suffering for credit.
I believe, with the board, that these credits on investment
seem dies and speculative loans should be diverted, as far as
practicable, to productive purposes, but to raise the rates to 6
and 7 per cent upon all banks alike does not accomplish this end.
It merely penalizes all business of every kind and character,
regardless ot whether they are using their credits for specula
tive or productive purposes.
t\ hat I earnestly desire to call to the attention of the board
is that credits ought to be extended at a low rate to the extent
of the capacity of the reserve banks for productive purposes;
that member banks should be urged to do the same thing, and
that the powers of the Government should he exerted against
the excessive, violently fluctuating rates on the New York Stock
Exchange.
Hoping that the suggestions which I have the honor to make
may be of some service to the deliberations of the board and to
the country, I remain,
•
Very respectfully, y o u r s ,
R o u t . L. O w e n .
12G 11— 2 3 2 2 7
o
CLEMENCEAU AND FRENCH POUCY
*
SPEECH
OF
HON. ROBERT L. OWEN
OF O K L A H O M A
IN
THE
SENATE OF THE UNITED STATES
NOVEM BER
27, 1922
W A S H IN G T O N
G O VER N M EN T
P R IN T IN G O F F IC E
1029
21508— 23341
I
-
.............. i
m
i
SPEECH
OP
HON.
ROBERT
L.
OWEN.
1
9
CLEM ENCEAU
AND
FRENCH
P O L IC Y .
Mr. OWEN. Mr. President, M. Clemeneeau is a greatly hon
ored former Premier o f France. He comes evidently with the
approval o f the French Government and with world-wide pub
licity announcing his coming. He has arrived in New York and
been received with great cordiality by citizens of the United
States on a mission of importance.
He comes making an appeal to America. He thinks we left
Europe without sufficient cause and that we left too soon. He
desires the American Government, with the backing of the
American people, to take part in restoring distracted Europe,
and says that he does not know what he wants us to do, but
he wants our help, and he wants it at once, and lie thinks we
may have an armchair at Lausanne if we ask for a seat at that
conference.
It seems worth while to submit an observation upon this visit
of M. Clemeneeau and to call his attention and the attention of
the French people and o f the people o f Europe to what I believe
to be the principal causes of the present disturbed condition of
Europe and the only practical remedies by which their pros
perity can be promptly restored.
The visit of M. Clemeneeau may be of great value if it shall
lead to the discussion of these matters frankly, honestly, and
fearlessly.
We keenly and deeply sympathize with the French people, with
their great sufferings. We have deplored the wanton invasion of
France by the German military dynasty in 1871 and the more
cruel invasion by the same forces in 1914.
We know how cruelly they have suffered from the German
invasion. We have walked over many places in the devastated
areas. We have seen the ruined cities and villages and are very
sympathetic with them in promoting their future security,
peace, and prosperity, and if mistakes in judgment are made
by leaders of French opinion it should be remembered that
similar mistakes are made by other leaders of all the nations
of the earth and that such mistakes should be considered with
patience and moderation. The French people, like the people
of other nations, should not be made responsible for the error
of their leadership if there be error, as we think there has
been, and Clemenceau’s visit will help to clear the atmosphere
because now we can discuss these questions more serenely than
when the differences occurred.
21508— 2334J
3
*
(
4
We make a wide distinction between the German people and
the military dynasty which governed the German people regard
less o f the consent of the governed. We do not mean by this that
there was any open revolt of the German people against this
overwhelming, dominating governing power, because there was
little or none, but we can not help but think of the utterly help
less attitude of the young men of Germany when they were
called to the colors by the order of mobilization of Wilhelm II.
A young German had his option of responding to this call
promptly, efficiently, faithfully, or facing a German court-mar
tial and a firing squad. A German boy had no option except to
come, and when he came he had his choice of coming singing
or weeping. He chose to sing and to come and do his utmost
to win a victory under the German flag which he had been
taught to love and to revere as the badge o f a happy, honorable
fatherland. He answered the voice o f patriotism; he followed
the only leadership he knew, and with infinite pathos went to
his young death. Seven millions of the German youth fell in
battle, and the Imperial Government finally met with a crush
ing defeat at the hands of those who loved justice and liberty
throughout the world.
With the young soldiers o f other lands—o f France, o f Britain,
of Italy— it was the same. The Fatherland called; they came,
they fought, they died for what they believed to be their duty
to Fatherland.
Clemenceau senses correctly that American opinion has been
slowly growing to be unsympathetic with the leadership of
France. There is a profound cause for it which ought to be
explained to the French people. For this reason these observa
tions are submitted to the public records in order that French
leaders may realize why the United States has withdrawn from
Europe and does not wish to return until the European leaders
exhibit a heartfelt respect for the opinions of America.
The American opinion was expressed in the address o f the
President o f the United States of April 2. 1917, when he advised
the Congress o f the United States that the time had arrived
to enter the
orld War. This address to the Congress of the
United States was the culmination of German aggression and
of conferences which had taken place between the representa
tives of the Entente Allies and the authorities of the United
States and the principles for whichwe entered this war were
then acquiesced in and applauded by the leaders
of the Entente
Allies and they are bound morally anil ethically and under the
principle of right to support these doctrines upon which we
entered the war in cooperation with them, they declaring at
the same time that they were moved by the same principles.
What were these principles, Mr. President? Woodrow Wil
son stated them in his message o f April 2, 1917, when he said
( C o n g r e s s i o n a l R ecord , vol. 5 5 , p. 103) :
Our object now, as then, is to vindicate the principles of neace and
justice in the life of the world as against seldshnc's and autocratic
power and o set up amongst the really free and "eirgovern in g pJople
of the world such a concert of purpose and of action a s willh o n c t f o r t h
assure the o b se rv a n t of these principle.,
•* .
henctforth
We are at the beginning of an age in which it will be insisted that
sh«nSaJ°e standards of conduct and of responsibility for wrong done
shall be observed among nations and their governments that are
observed among the individual citizens of several states
21508— 23341
o
We have no quarrel with the German people.
We have no feelin®
toward them but one of sympathy and friendship.
It was not upon
their impulse that their Government acted in entering this war.
It
was not with their previous knowledge or approval.
It was a war
determined upon as wars used to be determined upon in the old, un
happy days when peoples were nowhere considered by their rulers’ and
wars were provoked and waged in the interest of dynasties or of little
g oups of ambitious men who were accustomed to use their fellow men
as piw ns and tools.
Woodrow Wilson pointed out the impossibility o f friendship
with the Prussian autocracy, its secret methods, its spies, its
intrigues, its ambitious and greedy purposes, and he said •
i
W e are accepting this challenge of hostile purpose because we know
that in such a Government, following such methods, we can never
have a friend ; and that in the presence of its organized power, alwavs
lying in wait to accomplish we know not what purpose, there can be
no assured security for the democratic governments of the world
We
are now about to accept gauge of battle with this natural foe to
liberty and shall, if necessary, spend the whole force of the Nation to
check and nullify its pretensions and its power. W e are glad now that
we see the tacts with no veil of false pretense about them, to fight
thus for the ultimate peace of the world and for the liberation of its
peoples, the German peoples included ; for the rights of nations, great
and small, and the privilege of men everywhere to choose their wav of
life and of obedience.
The world must be made safe for democracv
Its peace must be planted upon the tested foundations of political
liberty.
W e have no selfish ends to serve.
W e desire no conquests
no dominion. We seek no indemnities for ourselves, no material com
pensation for the sacrifices we shall freely make.
W e are but one of
the champions of the rights of mankind. W e shall be satisfied when
those rights have been made as secure as the faith and the freedom, of
nations can make them.
We spent $40,000,000,000 and we asked no indemnities what
ever. A\ e asked no territory. We lost tens of thousands of
our best beloved youth to establish these principles, and we
only asked justice for all peoples, Germans as well as French,
Turks as well as British. We have been disappointed.
We are not content to see them disregarded by the Entente
Allies in any respect. We had a right and we have a right
now to expect and to demand recognition of these broad prin
ciples of justice as a condition of the further cooperation which
Clemeneeau now desires.
There should never be forgotten the conditions upon which
the armistice of November 11, 191S, was sought and obtained.
These conditions represented the views of the Government of
the United States, voiced by the President of the United States,
not only with the approval of the American people and of Con
gress but approved by the British Government and the French
Government and the Entente Allies. These conditions were
transmitted to the German Government and the German people
through the Swiss minister by Robert Lansing, the Secretary
of State of the United States, on the 5th of November, 1918,
which I ask to have printed in the R ecord in 8-point type.
There being no objection, the matter was ordered to be
printed in the R ecord in 8-point type, as follow s:
“ Sir : I have the honor to request you to transmit the follow
ing communication to the German Government :
“ In my note of October 23, 1918, I advised you that the
President had transmitted his correspondence with the German
authorities to the Governments with which the Government of
the United States is associated as a belligerent, with the sug
gestion that, if those Governments were disposed to effect peace
2 1 5 0 8 — 2:5341
*
upon the terms and principles indicated, their military advisers
and the military advisers of the United States be asked to
submit to the Governments associated against Germany the
necessary terms of such armistice as would fully protect the
interests of the peoples involved and insure to the associated
Governments the unrestricted powTer to safeguard and enforce
the details of the peace to which the German Government had
agreed, provided they deemed sueh an armistice possible from
the military point of view.
“ The President is now in receipt of a memorandum of ob
servations by the allied Governments on this correspondence,
which is as follow s:
“ ‘ The allied Governments have given careful consideration
to the correspondence which has passed between the President
of the United States and the German Government. Subject to
the qualifications which follow, they declare their willingness to
make peace with the Government of Germany on the terms
of peace laid down in the President’s address to Congress of
January, 1918, and the principles of settlement enunciated in
his subsequent addresses. They must point out, however, that
clause 2, relating to what is usually described as the freedom
of the seas, is open to various interpretations, some of which
they could not accept. They must, therefore, reserve to them
selves complete freedom on this subject when they enter the
peace conference.
“ ‘ Further, in the conditions of peace laid down in his ad
dress to Congress of January 8, 1918, the President declared
that invaded territories must be restored as well as evacuated
and freed, and the allied Governments feel that no doubt ought
to be allowed to exist as to what this provision implies. By
it they understand that compensation will be made by Germany
for all damage done to the civilian population o f the Allies
and their property by the aggression of Germany by land, by
sea, and from the air.’ ”
Mr. OWEN, The allied governments gave careful consider
ation to this correspondence between the President and the
German Government, and they declared to the President of the
United States that they were willing to make peace with the
Government o f Germany on the terms of the peace laid down
in the President’s address to Congress o f January 8, 1918. and
the principles of settlement enunciated in his subsequent ad
dresses. Some of the 14 points and principles they did carry
out, but in many instances and in details they failed to carry
them out and pursued a contrary policy, a policy calculated to
injure the German peop
@FedFRASER