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NELSON ALDRICH




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1 671 7
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)A14-4:11At.1 41114e- Bedding :at ional

ic

ank, Bedding, Call4eirwila: 7
Mill2a411
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161111.441 .11"1211111"Wern'
1

Believe that the percentare should be different for different
localities to take care of the business of the rrrticl:lrr secti
on in
which the bank is located.

osed find re list of que tions
4
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swe

me

ked rekOrl

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witl.:' a'.ro nf.

//
I have had conEiderbble experience ns first Lerinten
dent of Brliks
under the recently enacted Californin Bank Act which permi
ts departmental
banking, I would say that the plan in practical and actua
l operation, is
to my m'nd entirely successful ad I can, without resril
vation, recommend
It for the national system.

In fact, I hope that it will be rut into

effect.
If thore is

any




on o
urs

- srecia

-t I

comman
q y 1 4 lowentrvr...
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.•'

16717
e Bank of California

r.

A., San Francisco, Caltgerrls.

,/
2.4 We would favor an amendment to the national Laws, making it possible
,
for banks ul- der national surervision to do all kinds of legitimate
banking business (commercial, trust and savings) to the end that there
might be but one uniform system of banking and that under nntionsl
laws.

The savings and trust departments could n:ke the real estate

loans - the commercial departments should be kept liquid.

We get

"lock-uTs" without hunting fcr them.

,##*#********************

Strte banks and State Ervings banks and Trust Companies are now competing with national banks for commercial business.
National banks now
have ;650,000,000 savings deposits.
National banks now doing trust and
savings business through State institutions - next door or darfii- stairs, by
stock ownership tied up in such a way as to make the two banks virtually
one - except that only one is under national sup(!rvision i- nntional bank
)
laws not fitted to banks outside bf cities of say 50,000 - ideal bank in
smalier cities and country one that can do commf.rcial, savings, trust and
safe ieposit business, in fnct banks in larger cities'find it necessary
to do all these classes of business.
We lose our commercial customers when we have to send them to our rivals,
ial business tl
One.
because we cannot do the particular
rm&i
dim- z
customer, when he
We lose the nirny years spent\in b
st Compa
who from that time on
die's, as his Will is}found lo
at a
has his heirs as clients.
Departments should be kept separate 7 cash separate r statements should
be published showing condition cf all departments and combined totals. The
national system would double in a few years if this were done, it should be
done, the business is legitimate and we shruld be able to give our clients
financial aids of all kinds and chrracter - in t7ne instituti-n under one set
of laws instend of having to beat the devil around the sturT and form several
\ \, institutions under several laws.
-,,




t I. B. Anderson,,
14sident)




16717

19

rSitir First National Bank ofAtuburn::
r:

East Luburn, Cstmnts.:1

jefr-

Ceptmr--1-&rTTrr7

ling to the apclosed circulnr,
n t quie
f

shciithe/reil 90+4
fdrethins
t/
4 on
f,tg 0 weiod6lirt su
ur, rea od
l
,
/
L
f
il expi4tiorf may Ve of 8(rv1ce.
n

r

/

,

.hen the iFirst National opened for business we had a savings
department, but there was very small demand for commercial loans
and a large demand for real estate loans.

The savings accounts

grew faster than the commercial, two to one.

They grew so fast

that on account of the big demand for real estate lonns we were
forcod to put in an entirely separate bank to handle that branch
as nationals were forbidden to loan on real estate.

At the pre-

sent writing after three ,,ears of business in a clItry bank, our
commercial deposits are ,e5,o,-)o and the deposits of the savings
bank are .n 163,000.

The commercial loans are ,;40,000 as against

/
0.60,000/ in the savings bank, all of which are real estate loans,
made in accordnnce with the present strict law of tl-As state.

Had

the liati(-nal law permitted the lorininr of savings deposits on real
estate, It would have been unnecessary to have orranized the savings
bank and we could have helped our community more.
Yoi.1a.'
G. W. Brundage,
Opshier.

cAk\,•\\
1 671 7

20

•




[First National Benk- - 13oulder, Cologria4o3
,

2 ke

I 4....

This would allow national banks tc accommodate
first a borrower who is their ustoner or otherwise upon a basis of 33 or 5
of a conservative
valuation, secondly accommodate your customers or
otherwise who seeks an investment by selling the
same to him.
In troublous times they would be
better, in my opinion, than bonds, for the reason
that a timid customer would more likely accept a
good real estate loan on local property for his
derosits than he would a bond.
Real-estate molt, ages are in demand her':, while
bonds are hard to sell, becEuse of low rate of
interest, and running for n long time.
The investor can immediately acquaint himself with the
security behind a loan, while it is hard to satisfy
him on the bond.

170 5, I would keep the savings deposits separate and in other
.
books, and not be restricted in investments, as are
the mutual savings banks of certain states.
Y.ake these loans of the greatest use ',o the community
where located, and sub:ect only to conditions local/ I think if we keep our money close at home, we do
the country more Food than to put it elsewhere, and
when conditions are disturbed tc further aggravate
the situation by withdrawing the funds, where they
have been counted upon for use, and probabl:" where they
are most needed.

Ches. H. Cheney,
Cashier.

-

.----- i

1 671 7

1 901d
(
',Alit Torrington :Tational Beeick

Torrington, Conne444•4-eet_ 3
t

("bobUaa.alaet911.

I herewi

ml tt :d

pleasure in enclosing
savings department.

sub-

's department was established soon after the orcrnization of the bank
over Cla)yeers ago and has proved very satisfactory.
It has helped the town
in encouraging people to open savings accounts end has made a bank, which
otherwise might have had hard work to earn dividends, pay good returns to its
stockholders. ;;hkle we have a provision in the deposit book tt the directors mf.y demandZidays notice upon the withdrawal of any sum less than .500./
,
and 9 da.:- s notice on any s,m exceeding 500..e0, it has never been _lecessar;
to ehforce this conaition, all deposits having been paid upon demand and check
or deposit signed by the depositor or payee of depositor's ordr with deposit
book attached.
7ith nearly half of the national banks of the country already having established savings departments without any legal objection having been discovered
against it, it would seem peculiar to me, at this late dnte, to enact a law
authorizing such departments.
As it seeraR to me, a national bank with a savings
department, required as it is to carry 15 /or more reserve agrinst these savings
4
deposits which can be, in case of panic, put upon time, is much safer than a bank
whose entire deposits are subject to check.
Lf....1-awit-06e---fri.-ettty -6-0-rmrtc,--47rErrx2
•*
Lai:F.4zQ1a
-torat an-la-gragard...t o 0ur, aau Lags- dopiertrrnt, r en all—bb'
very 41rm4.
4

1
1

me
to
formar




ike,vry
get a list of the banks which have snvilgs •epartA,T4
1 'In
Mid&
and if'ii
ask
:it
4111,con °tie
I-hr
lc
st
me and any e penses attending i
I wi
be p eased to pay.

Hoser
Cashii)r,

16717

Doubic Lead
(

(Jo

22

dP

North Georgia Natio

. Bank, Blue Ridge, G;;;;082
:
21
Jilasal.44,...1.913........m....
,
Ula

/I(
t
i
i

Referring to enclosed inquiry and answer thereto beg to say we would favor a
law authorizing national banks to loan a certain per centage - say fif
/
605 to twAdd
of their deposits on real estate security.
They should however be restricted to
short time loans, making regular commercial loans you might say with real estate
liens as ultimate security.
If national banks should maintain savings departments they should be separate
and should provide for notice of withdrawal and such notice should be enforced. Then
they might be allowed to loan the bigger per centage of such deposits on real estate
security, but such national banks should not be allowed to loan any part of their
regular commercial deposits on real estate security.
National banks in our opinioni should be allowed to make a conservative amount
/
of real estate loans on short time, but they should not enter too much into the
savingsi-bank field with the attendant long time real estate loans.
Natic,ncl banks
should be comrercial banks pure and simple, but should be allowed a little latitude
on real estate loans to enable them to take care of the legitimate business of the
community that can hardly be handled outside of real estate security.
4,110

k




j

ta.rirswPaigall.146

/
/

F. E. Corilez-,

--..
C

Vice liresident,




1 6717

23

qtad

Ayers Nationaltank of .'acsonville, Illinale.
il
2

It is of vital i=ortance that xationel banks situated in arricultural districts be rornitted to mrke real estate loans, otherwise thAv tre
unable to comrloto with

tate /7
3anks and 7'
ivatq/Banks in the commurlity.

For illustration we will srT trt a customer of a. national bank calls for
r loan.

7e is a f-rner

160 acres of f700(' land.
,

,:roininc him on

one side is an 80-acre farm for srle which he wishes to bur.

In order

to do so he will hve to borrow the money and srys that it will take about
three years f- r him to ray it back.

He offers real estate as security,

rutting in tile mertcra-() tho 160 acres which he already owns aTy7
acres 1-lo 7:1shes to

thoreby securinr the loan by 'AO acres

rrfectly satisfactory.

it

The loan is refused on the rround that it is n

yrial 7pnk rnd not permitteC by the r-o7, )rnme:It to mre real estate loans.
.
The customer is F-.1rrrised,

indiunant.

o 7oes to a rtrte or Private

!ink and is immeC.irtely accomodated, te national bank losinr a very desiraj19 customer.

1 671
/,
(First :ationnl '-'nak of -amil on, Hamilton, Il1ineks.:1

224
k

7'ov-

of October 9th, stating
Eerewith I am pleased to return your circu
.1owing inL nal banks to invest a part
1
our opinion of the proposition of :
In my opinion federal superin farm mortga7e securities.
their funds
vision of national bz.nk investments should eal primril:- with ..tate---things:
First - and always, the safety of
the certainty of its final payment.
Second -

444)111
m_afp-V"itt:

which

e i vostnent, and by that I mean

rraperly

ivided into tno heads:

4721ke
)

of •aturity.
) Convert •ility.

'1,/ It can safely be taken for granted that no reasonable person will quesA
tion the final security of a farm -ortFage conservatively taken, and no other
one thing would add more to the conv(Irtibility of this particular security
than their cddssion to the ote file of nationtl banks.
For may years it hrs been the established policy of the government to
encourage and support anricu:ture 7 the farmer 7 and to my way of thinking,
nothing would do the debt burdened farmer more rood than a federal law, or a
rulilg of ;:our department, tiLEt would give the dignity and prestige to his frm
mort ages that the real intrinsic value of his farm mortgage merits, and no
other one thing would more strengthen the position of the rurrl national banks.




v2.EZ-Ixu.1401
I
.
ZIrs

4.4

R. R. Wallace t,i
.(:(
(- &shier,

1 6 71 7
1.4a13'4
\e

!First :at

Ban

2,5

of Kankakee, Kankakee,

.P

'In rich agricultural localities like our own, real estate mortgages are
-

the safest security available.

State banks make such loans, result, loan up

close at all times on gilt-edge home paper, at good interest rate, while national banks when money is plentiful, must hunt for commercial taper from all
/

1

part:i of the country, at low rate of interest or funds ram-in idle.
If any question exists in your mind on this point, note incraase in new

,

state banks in Illinois as compared to national banks.
,

A cnreful invectiu-

tion throughout :111nolF, by your office will sub.ttntir,te el.nry work of thiL
letter.
ywirs jmery—trirratet_ _
,..,-...,.....
,,.........„




•
,,

C. 7,. Taller,
1
()!6ash1er
)

7ALIIIA> ZeA4..ott.,,,..„.t.2) 167 7
Bank, Des roines, Iowa

.,
1:41r.arall.Qx, 3r

tter of November 3rd receive• which is the first letter of
Y. r
the
nd th,t hns tome to my notice, rf. I am pleased indeed t• nswer.
To you question 7o. 1 -- Does y r bank receive savings er.sits A
.,
hay hrd to nswer no, ns we do not „ve any ti
7111, or savings eposits
I have c nnged .he wo d
following' th
nature i our nationnl bnnk
a
partment" to "brnr, and hay
/lowered tbii
lance of t
questiin 'alo
"d
our nn
nal
se lines, as we hr e a savi • s bank in the arn room wi
ondence iff'the neighborho
sar
k and yo will fin corr
of two
lines, inAcct, e advised
t dvise• you along 6
th • as • whe her
would be ble to do
/
Our no 1,1 onal bank
us and rofit
)0,000, and SU
cr-Itni!'of
over
,000. Thi is
lied Arlie Iowa ational B 3,
,
savin
We hpve
7avint. 7rnk, an• •
have a cqp tn1 of
ba' which is calle• he De
0,000, w th near
.10'3,00• • rplus and
ofits
nt bank.
These
• n the same' 0Om,
o b
are locat
on one side; f the
,
.
hope and o.e on Le other s* e o the room,
kept entirely; eparate
with sentra
o7155, and ar accou 'ng to you
rtment for the Tows -ad to the St e author • es her
ti:onal Bank
kur Savings an .
I hav
always give
our ban exIfilners the
vil
'd requested ti
to nrIke
ons they wised of the savi
the time they /ere lookank
Any exand
throu
ur nationa1trban, and they
w,:15 felt free to ake any
,
uirie or any person4 investirrtion
..es amd they ht e tried at
all
t Aes t• get the State Oepnrtment to w k here at the)pame time% th them, an
$ ccee od so o of the time in raking
arrangement ofhis kind
I have eon in the banking bus ess in Iowa for th ,ty year
have paesed
rough two
nica, have had Brie
d experience with ti ,
1 depot&ts, losing a
ry small am 1 of time deposi
under panic conditions. .‘ Ey experience wi
.,mor gages as been fine a ays, and especially dur:ng AR two panics, fi
people who
nted to inv
at those times in first mort-4.es on farms, nl ci
•
rscroult"Intr"TrIT
•
•
1
Yr. . 1drich in his latest addition, in the way of suggestions to the.ii one.
tary lPommittee, under date of October 14, 1911, has advised that national -banks
be allowed. a savings department, in which they shall keep a reserve of 4d:)of
that required of demand deposits in the same locality, and that they shall be
allowed to loan 400off,heir savings deposits upon productive real estate, the
loans not to exceed 50C;Of the actual value of the property.
I thin:: these are two excellent suggestions and will aid the business interests of the United States materially, and is n very safe feature, but my experience would warrant me in increasing the per cent. of savings deposits allowed to be loaned on real estate to GO or 71„:4 because
First, the savinr-s deposits are very seldom and almost never called upon,
the averr.ge deposits for the year running along in the usual way:
Cecond, 300of cash and short time notes would be ample to cover any shrinl
are which it seems to me could possibaz occur:
Third, if my experience of411112rt/ years is of value, farm loan paper in
,
times of trouble one is able to realize on better even than short time demand
paper held by the commercial department .of our banks.
I very much hope the suggestions of Lr. Aldrich on real estate loans, the
savings department in national banks, the reserve requirement, and the thirty
days notice privilege on time and savi s deTosita Ng' be adopted s the' woull
I
be of *trent help.

4







vieB4
1C)
C"
First :Tationnl Dank,

16717

aterloo, Iowr
eijeC13 1 4144 47.4144 "
"
"
"
"......°
1

have

ours of the

.
an8we,113 ,..rr.QP

r turnin
-

in Ttintr-ciretettnror

I did. •not-

me questions and

9th inst.
for

e reason that I did
.te

no

£'rot st.

-1.

e

"...Nee. •-

- s governing

rrvings
It would not be rn:7 iden to ser-ref-rte more then Pkftr percent of the deposits rnd invest t' em in real estate mortgages.
In other - 7ords I would t ink that'4t per cent should be a suf.
1 If
ficient amount to invest in this way, rind - lie balance invested
\in short time commercial paper.
.1,.411. 16Ct0

•Eighrney2._
)
.
.r
or;

IftelrOwetr
r

1 671 7
. .0-j ).
0 .
First National Bank, Dy reville, Iowc.aett

(

Answering question 2 more fully, will say: Dye;
more d

o.its than -IKny -,thto town of
/

as they arN repysent fAlmers' money
1
and this b i

strictly

follows that the

mar

Its

9-has p

BiZ
0
9" Yowpr.

at leasy4/5 of

a commliArk- of lermaae farmer

t,pgics

The

and know'
that the

posits

e deposits,

it naturally
s

no bettor se

curity than a first
tgage farm loan.
Up
1 two years ag :ers0
ville had no t›Olde nal ban
o
when this ba started, the
k was and
got gene5p2 that we could not
and

an on r al estate (no

4 furthered from our coup
eg

tors), had t ,

ans outside commercial paper, which

er

ubt orizinating.

vest and t

on as

in the Airigs of 01W far(

1...012r de os

htve t.11,415.been

and are now handicapped in not being able to loan on first farm mortgages, and feel and know that we always will be and will not be able
to
get and command our share of deposits and insure and bring confidence
to i)ur people unless we are allowed to loan at least a certain percentage of our deposits on real estate.

While we are surely anxious to

have the nntional banking law amended as to the above, we know it is
\\




important tht this is done and earnestly hone that goo', results
are
forthcoming and will thank y, u for your efforts in this wry.
)

H. B. ';;illenborg,
"-- ushier
k
)

4 6717

First 7ntional Bank

29

eld on, Io.7rE

/OA).C4)1l-

')/Litrrh7

I think it is a great injustice to' national
banks in farming communities
that they sre una,le to talK3I

mtgs; on farm lEnds at least.
)
The buil,ness of the Io-a banks is almost eritirely with
farmers and there is no better parer offered any place than the Ior
, farmers notes.

I know several

State and private banks in this locality that
carry a lot of real estate
mortgages and when close times come, they
have placed new loans with the
insurance companies, and paid the bank up.

These banks have had paper

that was more avvilable than a let of the
comercirl loans that were floated
during 1907.

---- There are a good many country bank
s that have hard time getting all the
good loans they need, and they would be
glad to take a certain amount of
real
estEte paper on their customers.

Many times they have to sell off the
7o. 1

real estate secured paper and then look
for paper away from home which they
don't
like nearly as well, and which they have
to take on recommend of some other
bank.
I think in sore instances the assets of the
banks would be better.
A farmer may
owe the 'tink a good sized note that the bank
er wolild really prefer to get secu
red
on the ferm but it seems to be contrary
to law, so he keeps the note without
the
security or takes mortgage and fails
to show it to the examiner.
The country
bank ought to have privilege of taki
ng the loans without regard to savi
ngs doposits as say:nes acPounts are small
in rural communities.




1)o\l'ole

Lead

AWFirst National Bank

1 6717

30

Marengo,

Icalerp-a4T-4-6Yrn
,
We enclose herein information requested in your
favor of 9th instant; nd
..•
for further explanat n, we
advise that ie have The Iowa County Loan c Sayings I;ank, in conne ion with o
national bank and the same being con..cted in
the national banki
room.
savings bnnk is a corporation with
capital
of ,15,000 and thr stock is held ntirely inderenden
t of that of o
national
bank, however it is conducted by
e same office force, but under
different
directory.
Our say gs bank carries deposi
sented by
me certificates issued f
gating ne ly :300.00 and we have a
sA0,000
savings accounts.
This
counts.
The combined deposits of
r
the

e deposits of our savings ba
•ans being secured by first mo

of ner,rly .,340,000,
same being reprethree months or ion r periods, aggrecial savings depar ent with nenrly
gs department
presents nearly 350 acb..ks will run
om 525,000 to E.00,000.

are i ested
gage on
nds

stly in farm mortgages,
thin our awn state.

;t is our Opinion that if there could be some
amendment to the rational
lank.law permitting national banks to loan
a portion of their deposits on real
estate that it wolAld broaden the field of the
nationel banks and thereby discourage the operating or organization of savin
gs banks in connection with national banks.
From our own experience we find that the natio
nal bank business is
stimulated and made more profitable where it
is in a position to handle farm
loans conveniently and with the law as it is,
our national banks in this section
of the country are more or less handicapped
unless they possess the facility of
a savings bank, such as we have in our
building.




rEttrra-4nil ,

'NG=

Frank Cook,)
'‘
?resident.%

1L)u.e Le.0

3'

Second National 73tink, DubuqueF, I
-Da4-0 1
-4 -19
te7—
It i my recollection that
rocommendrtion wns made to Congress, by you
or ::our p edecosepr, regardin
e investment in frrrl or real estate loans, of
a portio4 of the Oavinee deposit
national banks. \,gy interest in the propositionlpro
impts
exprtss
ws .nd I trust you will pardon the libert:T
I take i1 presenting them t&--59-0u.
Whatever may have been the objection to real estate loans
, as a means of investment of the fulds of national banks, in the minds
of the original framers of
the ;rational 4a "ct, it is certain that conditions have
changed so radically
in the pastenty ,yetrs, as to wvrrant a reconsideration
of the subject. There
has been a large-investment of funds in :estern lands
, creatin# in some localities
a basis of credit rest.ing upon real estate security only.
National banks operating in such localities must either evade or viola
te the law prohibiting real
estate loans, or else must loan upon open credit, witho
ut security. In either oae
the credit is based upon the ownership of real prope
rty, but in one case security
is absolute by transfer of title, and in the other
case the payment of the debt is
subject to interventions and hazards over which the
bank has no control. An: these
conditions do not 7-revail in strictly agricultural
communities alone, but effect
banking operations in the small cities to which such
communities are tributary.
To meet the situation, national banks which desire
to conform strictly to the
law tnd ;et supply the requirements of those to whom
they look for business support, have found it necessary to organize institutio
ns under state lvws, such as
Savings
n'r,-s nnd o rustotompani.)s, to operate in connection
w,th the national bank
under the same management and control, thereby Provi
ding a channel for the investment in farm loans of funds which would otherwise
be force;1 into more hazardous
lines.
It seems clear that the efficiency of the national
bank suffers by this
division of its deposits in separtte organizations,
and thit the business could be
handled more safely, more profitably, and more adv.n
tageously in the one institution.
Under the provision of the' tional" n14rAct permitting
,
savings lerartments in
national banks, a way is opened for uniting in one
institution the privileges
granted both tn a national and a State charter, which
would largely increase the
value and efficiency of the national banking, syste
'
m.
It would seem to
a reason
able and safe proposition that a national banks shoul
d be permitted to loan upon
real estate security (uT,on the usual basis of one-h
alf of the appraised value)
one-half of its savings deposits, and that the remai
ning (outside of the required
cash reserve, might be invested in listed bonds or
securities approved by the Comptroller of the ,Currency or other officers of the
Tress
Department.
Should a
law be enacted embodying these provisions, it would
result in the coalition of
banks now Practically operating under two charters,
would materially increase the
deposits under national bank control, would enlar
ge the scope Pnd efficiency of
the national banking system, would provide more
substentirl security for bank assets, and would furnish a more liquid form of inves
tment for savings deposits.
Furthermore, it would do sway with a restriction
which is openly violated or
evaded by many national banks at the expense of
their more conscientious competitors.

te ust,ti*t. o
iou,*tp
ba




va the

UriS ,tetit 440,13/FAtpA
,
se
:
t
and approuil
-a largt WeittY/bi

w11 .1
11

attfit'44,`

;stli144-

Double Lead

1 671 7

--- Union Stock Yards National Bank, Wichita, YanEht.

32
4

,a

Ref rring to
tached. I beg_ tr
ise thtt tlw answers are the
.
perscm opinion f th writer
th6 ltt
hits novEio4 d scussed with
i
the ot or offi ,rs an' directors,
; /
//
/
e
/
e I
i
,e hav receive prsct ally
e
irigiry fro
ther sources and
it s(ems
ere is
ntte ,t beir made
he'r statlftics of this kind
e
an
derstEnd t t
ere is
plan dn
ot to have the National Bankin
t amended so
o perm;t nritini_ anks to make real estate loans.
This is a proposition to which I cm emphatictlly opposed as I believe
that national banks should be commercial banks in the stricted sense of
the word.
Their loans should be commercial loans in the real meaning of
the term and all forms of capital investment, underilritinr, bonds, stocks,
and such investments, as representing fixed, as opposed to Uoid, should be
prohibited.
In other words, we have prorerly three fiylds Dr banking institutions.
First; State and savings tanks; second, Trust Cormanies and
third, national banks. Each has it's se, trrte and distinct field of
usefulness rnd should be organized and equipped to handle it's own particular line
of business and should not be permitted to encroach upon the functions of
either of the others.
national banks should be prohibited from rayinr int(Jrest on any form
cf
deposits whatsoever, especially on the balances of other bans. While
we are
offenders in this sense, as we accept time certificates of deposits, savings
accounts, and pay interest on bank balances, it is because of conTetition and
not through any desire on our part.




. T. Ransom, 24;)
:
/resident
•

4'\

cad.

12)0u"'"
'Citizens

16717

33

National Bk of Monticello, 1on4m0y.
--

/2 .R1(20)per cent.

I think this safe and conservative.

In country banks

we lose, not on:: desirable and advrntageious loans
beczuse not allowed
to loan on mortgages on real estate, but as a conse
quence of this inability, lose also some good deposits.

Depositors go where they can get

loans when needed.

1

If question 4 means that loans on real estate
mortrages are to be restricted to the savings department, and that
such loans cannot be made with
other deposits, I say, no; but if it means thzt such
leans by the savings
department aro to be limitod in am-,unt, as
is the case with other deposits,
say:yes.
I think it will be very helpful to country national
banks to be allowed
\

,to lend on real estate mortgages, say to 20 per cent.
of their deposits.




J. F.
Cashirr

Lea,O,

1 671 7

34
••••••.-

National Sho4- & Leather Bank o

2h (411 Not exceeding 1

Auburn, Migait.

1/.

•

Experience has shown that banks should

have the privilege of accepting a mortgage on real estate.

44) If restricted to deposits in savings departments, national banks
not operating savinrs departments are at disadvantage.

5.

By so doing it will seriously interfere with the abillty of a na-

k
U'r au)

tional bnnk to accommodate its customers as

ow doing.

A savings department

would lose much of its value and to make it rrofitable would necessitate a
larger investmeAt in bonds with less resources with which to care for commercial customers.

No. 5 is favored by bond lealers.

a more liquid asset than bonds.




Why loc

Commercial paper is

p assets in nontliquid securities.

C. L. Smith,
Cashier:

Doab'
e

1,4J5,d

1 671 7

City Nrtic)nal I4a)of Belfast, m
„..„;

..1?
!.
(1
7 CtObegroafirssaPeallior

I wil

•

1

•

.

In Onnectton with your,%_:cular in
n
tovkaderin ivlation to q e

•

3c

of

4

ewith attached,

There should be no segregation of savings deposits from commercial deposits other than a separate system of bookkeeping which is already
universally practiced. There certainly should be no distinction made in the
loaning or
investing.
The savings dollar is no more sacred than the commercial dollar;
both Are sacred, equally so, and should stand on the same footing.
The present national banking laws ns applied to the handling of deposi
ts
of the national banks, in our opinion, cannot be irproved upon.
The moment
you begin to hedge about the investing possibilities of banks with
abstract,
unnatural and inflexible laws, that mo ent you begin to weaken the
banking situation.
The safety of every bpnk depends principally on the judgment,
ability
and integrity of the management thereof.
To our minds, the weakest points
of our strictly savings institutions today, rre the laws by which
they are supposed to be safeguarded; their s:feguards re their weaknesses.
The/
de
an

si*Ors
9,her

finiAesim.0.4ercoAage/
4

fa •
es of n
snl banks and losses to
e fa. re and
in's
ate,le'stitftions,verifies the abo e statement.

rlofr/ascooloat34/*itt

AA_Auswist."4-4B-10~-4.5r, we believe that national banks
should be
permitted to loan a pro-oer percenta
of their capital and surplus on real
estate security.
We further believe that the reserve required on derosits
can be safely reduced to the extent of one-half of the preent reserve on the
amount of savings accounts, that the require reserve should be so reduce
d.




-14271-1171777''''
C. W. Westcott,
•

b.

••••
.1

I

.

C ash'or
l

( 11AL
24141.

,
I

:.:erchants

16717
Baltimore, Mpariond.

dIMITIffirmr7T7Trr"""mftw
Ackn44(led
,
the receirt of your circular letter of October 9th,
which we/re rptirriingv ,
441X -,n tilg thereon -A -al ect replmto its
several/inci4rVes, I eg to siler. 6st
Lew of th IppOitr,nce of the
.
subjefewhich It 1s xvr5rence and
nattre..4.4' the questions, it is
g
hardtrpossible in 7,- , eqt to give such direct
u
ort answer and
03 u.s.Ficlna...L.L.Ita.„,pix.6044i—it.ci—iffirie.4fr.-+wissirciAir-.-t4/e
,
The answer
"no" to your first question relieves us of the necessity of making comment
upon Its sulivisions. To yottsecond question my answer would be "yes",
but here it is necessary to make qualifications.
In pnctice and notwithstanding the law to the contrary, many natienr1 links, particularly those
located away from the cell
, have in the:r assets a very mvteripl yass of
loans, !wily times with mortgages attached but possibly more commonly holding
C)
only a prIncipal note, the mortgage security being held in escrow and out of
the bank.
In other words the country bank is almost obliged to loan some of
money on the security afforded in the ownership c' the land.
its
In their
situation there is no good reason why they should be denied the privilege of
protecting themselves in such transactions by accepting security of record
if for no other reason than to permit them to the limit of prudence to
0
compete with State chartered institutions. I, therefore, feel that the banks
in communities numbering less tt say a population of 1- 0,000 people should
,
by law be permitted to invest 25' of their assets in mcrtgsge loans on
,
pro) perty within a radius of an agreed number of miles of such
town and further
provided. that the aiggrecmte amount of such mortgage loan should in no case
exceed the sum of the capital stock and surplus of the bank in
question.
In cities having a population of 100,000 or more, by which I particul
arly
mean the reserve cities of both classes, I think it would be most unwise
to
permit national banks to accept or hold mortcr:.e loans excert as now provided
by law. While conditions in the country banks are apt to be more
or less fixed
in their nature, the prime duty of a reserve city bank should be to have as
great a proportion of its assets in liquid form as is possible and we cll know
that even without the presence of mortage loans it is extremely difficul
t to
avoid the accumulation of paper secured or otherwise perfectly good at bottom
but upon which it will be next 4 o imossible to realize promptly enough to
serve any practical purpose.
While arproving of an amendment to the law
specifically authorizing national banks to establish savings departments, I
feel that in their regulation the same general Principles should apply as
those above suggested.
In a city large enough to awn 100,000 inhabitiJits
or more there can always be found savings banks, building associations, etc.,
which can comfortably care for all mortfr,pe loans offered.
A national bank in such a city in its savings department should
if carefully managed prefer to have its savings assets invested in
"quick" directions,
although I recognize the fact that many very handsomely engraved bonds are more
unsaleable and less secure than wry mortgages on land payable five years after
any given date.




6717

37

-2-

cA

().‘°

Answering question 5, T possibly am disposed tr' trice whnt may be the
unpopular view and suggest that it would be unwise to attempt segregation
.of savings deposits.
Mile I think the law should require thrt all national banks in investilp their funds whether current or from their savings
derartmeat should be made to closely adhere to the rules . t
1 ,id down in the
law of certain Stftes governing the conduct of mutual savings banks, it
might be unwise to attempt to differentiate too widely between the two classes
of institutions both under the same roof and management.
The opportunity
and temptation to juggle bookkeeping would be great.
There is no reason in
my mind why a savings depositor in a particular bank should have afforded him
better security than a current depositor in the same institution but they both
alike should on equal terms be given the security afforded by the bank's capital, surplus and the personnel of its management.
Then all is said sucli a savings department is merelytintemied to be a
feeder for the main body of the bank's business, and while T think the law
should recognize the propriety of owning such a feeder it should not make it
easy for the management of any bank at 'their pleasure to discriminate between
them as far as security is concerned.




-CrereiTre7:.

1 671 7

Idet
4
Do‘
).

(First :Tational Bank of ret skey, Peto
skey, =Ch1
mp/M:3

Reiorring lo the information asked f r
1
in yoor .ircular r
/
/
''
/
"Efavini714posilp"
cal eltr.rti loans
ton1 bfinks'', would say that
1,, .,,,
,
L
wp vre very much into e
0:1 in this.
We strongly feel that national banl(s,
particularly outside of the large
cities, must be allowed to take real
estate loss: safely gi;rrded as to values and total amounts, if they are to
compete with the :7tate banks.
,,
hips Iithink it is regarded that w9
haye good.c:tate-ttnr-TVW gild
,..-I d no
tinatic,)ael batk, *ere tbe---cretition
m
is strong, can coptrete
%-....--- .
.
/
to i::,(
Thol
ur volume of business aga.).nst he -tat
e 7
;tnk, with iti equir/
meit to do business.
1'
Some way and some h

the

national

security that can bind, whi

bank mutt be allowed to/tal“) the best

Aa reel estat

mortgape.
Law pa

1;Krticularly urge 1

partment to assist

NN.
ur e)56minors mukt 2eN4(nly
.
•
ver the colittrl-, ber)ring
ub ec
The ierorts from

v




y su
"
Chalmers Curtis,
Vice f'resident,
,
,....

they can alonr- this

cond,11401,-; nil

16717

39

vo‘
,
First National

Yeeriend3,-c
0
e-------\

In reply to your question 2 1M-would call your attention to the fact

,
1

1

amk, Hancock,

that the country banks at present are as a rule unable to loan their money
in their awn locality but must buy railroad bonds and commercial paper, the
value of which they have no definite knowledge and from which the community
from which the money is drawn derives no direct benefit, the banks receiv
ing
in most ccses a low rate of interest.
e city
than a m.
if

nka are per

gage

ey so, desire

nd r

'_ted to 0

these bon

sa

which are n

cCOWb

load the c

try banks

wi

ks a

ing m

•
are

und. ;irable sec

itie

Should the country banks be allowed to loan on mortgage they could
invest their monez at home where it would be helpful to them and the
community,
they would be entirelyndependent of any city bank, which is clearl
y the intent of theational"anking

aws and in time of panic or depression would have

something which they could readily dispoii of in their own locality,
.
when the
best foreign security they might have must be sold at a sacrifice.




44errePettettrf'"
(

R. J. McCandlish,-;
c leas hier




1

•
,•!
,.•

ortititi

...1.1ri:,;!!1.17."
,
.
.i.t

,41,:iivemilfr.“,gt

eyOfl
el

•*'•
,

A44400
'
•

•

,•

All Iracticl

olitical economists being agreed on an asset

bank note currency, the question for us to consider is the instru
mentality for carrying it into effect.
by ONE PANK 07 ISUE

Or

That ma7 be done in two ways:

by MANY 7ANK5 OP ISSUE.

Under the MANY bank

plan we wo.11d mave the old statT, 7pankinv system under
Federal supervision, and conseent17 no system.

The ONE BANK OF ISSUE ylan is

ONE BANK OF ISPUE-A

the only one which will

SYSTEM, MANY 3ANKS

ing businery.1 and effect its thorough reforL
. This

OP P3sUE- NO SYSTEM.

ONE BANK OF ISS1P

J.‘re system to our bank-

an -1- ).ay be ,,ccomIdished in two
..

ways, ONE bank fo- the whole country, or SEVERAL DISTRI
f
CT BANKS for
the different sections.

ONE flAYK OF ISSUE ;or a country
doing 25/J
(

' the world wold be too large.

of the

Therefore

e con
-

ti tt the only lo:lcal solution would be SEVERAL DISTRICT PANKS
OF ISS13.
in

GrRnting the correct:less of this - osition the only
l
remain
-

questions are, the CAPITAL required and MAY= of their COVTRO
L,

but on these t:o

.tions there is plenty of food for economic

thought.
No people shou), have had less trouble on finances than we
1
(but few have had less), for the froxlers of our Constitution made it
oo

lain that the blind could see.

Those delegates knew that one of

the predisposing causes of the Revolu
tionary war was t':e insistence
by the Colonies for the riat to issue
exerciled by the British Government 11

aper money,- a ric:ht never
to that time.

So when they

PINANCIAL POLICY WHICH

assembled in Philadelhia in 1788 to bei7ill their

THE FRAMERS 0.TP OUR CON-

great work there was well nich a unanimous :Jenti-

STITUTION CONTEMPLAT7.D.

1:.ent for the distrlActio.: of the colonial financi:
-

al policy of paternalism and fiat 11- oney an
I
mother country, for the people were

rAdoI,tion of that of the

ck ,An'.1 tired of what they had,

eleato'l from :faryland being detained at

three weeks

on account of the :inancial conditions then exilti

in tt Colony.

the

To accomplish that they empowered Congre




onl-,

"To COIN money, regulate the value t
foreigi. COIN".

rcof, and of

They did not 3to-o Tith fsuch ltiitation on the power of Con7reos, but
added this !irohibition aainot the Sttes:
"No State shall
COIN money, init bills of
credit, (or) make anything but
COIN a 1()7a1 tender in the payment of debts".
The committee on detail added a provision empo-rering Congress "to
:It bills on the credit of the United States".

A lotion to strike

out th_clt rrovision carried by the votes of nine states m.gainst Ne7
Jersey and Maryland.

James Wilson, the great lawyer of the Convent-

ion, speaking on that motion said:
"If you clothe Congress with t1- t power it will
i
be exercied during the first great war in which we
engage, and the government's resources for borrowing
money will be destroyed".
f
Exactly That hap- ,ened in 3262 when we issued the first batch of
greenbacks.

Our financial advisers having been tau7ht that value

crnAld not be created by fiat of law, though at Vie enormous eroonse
to the

and private credit, many other expedients were resort-

ed to, notably our National 3anking system, the principal object of
which was to CREATEa :!ARK2T for government securities.
THE FINANCIAL ADVICE OF OUR We have paid dearly for the violation of the natFATHERS VERIFIED SOOn AFTER ural law of sound finance, but We are not alone
BY COSTLY FOLLIES IN EUROPE in that.

In

1797 the 7ritish government

7rW

in

dire financial distress and forced the Bank of England to loan it
05,000,000 gold.

In order to compensate the Bank for that forced

loan the Pitt ministry had Parliament make the bank of England's unprotected notes a legal tender in the payment of debts.

As a result

of that act its notes went below par and rerv.ined below pr during
the rapoleonic wars which we ccrilotcld on a raper basis.
ternalistic aid

was

Such pa-

tendered the Scotch ]Janks but declined, and their

notes remained at par with gold during the whole period.

Tois pate-

nalistic act of the Pritish Parliament was not repealed until lg25,
liring a greater portion of which :eriod the Rank of England's notes
were at a Jiscount.

That act caused the discGntent which c7ll'inted

1
In the celebrated Bari.: Ac 4 of 1C 14 making that great institntion a
mere store house for 7old.

Dut such is the penalty imposed for

violating a natural lflw.




-3-

Still another case we might cite is the history of France for the
same period.

In

1793, all French bank notes were prohibiter'? and the

government began issuing the celebrated WIGNAT.

-rere enaetad

fixing the maximum values for all comodities payable in A.SIGNATS
with severe penalties for with1ioldin7 them from the larhet.

Frocio

exportations were prohibited and it was a crime to diogredit an
ASSIGNAT in rrivate conversation.

At the end of the third year a

t10 ASIGNAT raAJ worth but let in specie.

In August 1796 the French

government saw the folly of such la7u and repealed them, thus enabling the people to transact business according to the dictates of
their individual consciences.
France.

Immediately gold began to flow into

Ranks were organized and their notes began circulatirv

throughout the country and the whole of Napoleon's wars 7e-e conducted on a specie basib.
This brings us to a consideration of the financial policy
of the mother country at the time of the adoption of our Constitution.

As we have said before, up to t at time the British govern-

ment was content with COINING money, all CUR:iENT CREDITS (currency)
being Issued by banks, principally DISTRICT BANKS, especially chartered, for the several sections.
MANNER OF CONTROL OF
THE BANK OF ENGLAND.

The Bank of England was the largest,

though Scotland, for• nearly a century before, had
had her independent banking system.

In the first

place the Bank of England is a monopoly, but such
monopoly extends only sixty-five .iles from London.

It is controll-

ed by a governor, deputy Governor and twenty-four Directors, elected
annually by the Bank's ELECTOIIS.

All are required to be subjects of

England and make affidavit they own, in good faith and for their own
use and benefit, the Bank's stock in the follo- ing sums, respective,
ly:
The Governor
Each Director

f20,000
10,000

The deputy Governor .15,000.
Each EL2CTOR
2,!
700.

Each ELECTOR is entitled to but ONE vote, whether he owns A2,500 or
t25,000,000 of the stock.

Foreigners and corporations may own that

stock and draw dividends thereon, but they can never ube it to con-




trol that rex-at riblic service corroration.
BLE RESID7rT flITI77t1 su2 :1-e qqalifie

Tbus we 'save a !:*r'e-POITF7I-

in two ways, viz: (1)

the ownershil) of enough stock to mean a pers
onal FINANCIAL 1')

to

each ELECTOR in case of bad management, ther
el7 preventing the
DUMUYISM and ITTCAPACITY lo frequent under soci
alistic and paternalistic control. (2)

By CITT -777SHIP to make each generally inte'Jaest
ed

in the clean and efficient SERVICE to be
renderer]. by the corporation,
but of the two his CITI7,EYSHIP interest out

ei118 his FINANCIAL

Interest.

We shall now corrya37e the Rank of :?.nglandl
s control 11th
one of the modern "TRUSTS".

Lets first define a "TRUST".

Recent

writers on corporation law clai. the word, as
now meant, derived its
name from the practice of Mr. ROCK Tfeller in
proc-ring Ntr1.1st cartificat.71" from the owners of fioc- of corporat
.K
ions aboorberl by the
Stanlard Oil Corpany, thereby enabling him to
vote the stock carried
by such certificates in the election of the i.ire
ctorat ) who control
the Standard. We nay derine a "TRUST" to
be,
DEFINITION
OF A "TRUST"

A mass of corporate wealth CONTROL= BY 077
MAN (or a very few men) whose interests are OPPOSED to these wl o furnish it PAT-07AG.7.
,

A "TRUST" may be just as ef:Pctaal by maki
ng the VOTING UNITS infinitesinally small as by making them abnor
r.ally lar 'e.
life insurance oomix1.7 il a case in
point.
AMn COMPANY ila:4 1,D00 )00 :)olicy

The "mutual"

The ITLW YORK LIFE IYSUR-

scattered all over the

world, etch entj.tled to one vote for
the iir:?ctorate which controls
more than half a billion of wealth.
The numerical value of each UNIT
is 1/1,000,000 of 1, 6ut when
con:11:12:o tl'at few of the.. caro little about their policies each is so
Ll tat it lc a waste of postage to attempt to recoalq the
Hence t%'e ele(ttion: .so
;
b7 (1.efa.ilt, there beinr but 62 votes cant
at the election on Airil
12th 100g. But the vim" ii CONTROL
make them most valuable trough
their well orr-anized and highly y,aiJ
ai.ency force. Here is an exafAple of SOCIALISM, pure and simple.




5

011111

We shall no7 a% ly the forefroin

definition

a

NTRUT"

to t:le CONTROL of the STANDARD OIL COMPANY and BANK OF LINGLAYD.

In

"ind thirteen inrlividuals o-ning R .c rrity of
the first place -o 4
,4
the,7tHndPrdis stoLT, their Personal consumption of ref1n:7 cil
arruntin .Y to nothin7, thus
HIGHEST

i1n

than al
,,r-ys interested in the

r10 for th,.,t Product, '7rhi13 their PATRONS are al rays in,

terested in the LOTST.

Hence the D011110'11 conflict between the

aes-ho contribute anl the ‘')7
..-Jnt8 of that corporation

!tr) the reci;i-

0,000,000 of annual profits.

Tn the

first '1‘tc.3 th3 VC7ING UNITS are far ,lore nuuerous 'ith the 7ank
of Enr;land ti -n -1th th3

tandard Oil Company and comriJe the res-

ident :erc'!:nts and b..nkers of England. ,, ho are more interested in
r
the

SERVIC7

of that in:3tittion than the dividends on

their individual stock.

If the question ;Ihoilld arise as to whethe2

the Pank of En-lanl should ray an <7'; or EV dividend and it Ter°
questionable

hether the finfIncirll

it ions 7ould jutif7 the lar

then the smaller amount ,,rould be decDired, for the clifference,21.,
would rean but $5o to the average EL7CtOR.

Rut suppose it -fere a

ANTI-TRUST

l.tock controllei inctitution and tmro individuals

PRINCIPLE

owned :i2,000,000 each, then 2;. would mean an in-

ILLUSTRATED

come of 0500,000 to each.

In that case GREED

would control instead of RELF-INT7RFST (selfishness) as at present.
The 'ir)ctorG of a corporation ry''a, business roliticinns rho nay be
relied o

to :xecut, the -ill of tho;e electing* them to o -Tice.
)

The

ANTI-TRUST principle oT the charter of the 7ank of Errland is the
death knell to CZARISM of CONTROL of t,lat great public service corporation.
temIt to

No

et of capitalists has ever been so daring tw to atcontrol by fraud, for that would req Jiro the outlay

of too lauch capital in the first place and the chance of io:An- it
In such a fraudulent scheme has been n bar to any such atte:r)t.




Am al:t illugtration of the ANTI-TRUST principle in cororate control is the rACTORY MUTUAL FIRE INSURA/TrIF, COMPANY of 7onton
,
or-anized by the late Edzard Atkinson, a most - ractical and sound
political economist.

That company has reduced the cost of fire in-

Turaece to its patrons 90c431:

Such feat has been accomplishe(1 by

virtually eliminating the "fire waste" of property insured by it
and
reducing the expense of manaelent to a minimum.
ited to its own membership.

Its risics are Un-

No new member is admitted unlcs its

i'fictory is equipped according to plans and specfications
furnished
by the ofAc)rs of the FACTORY MUTUAL; and no old one can obtain
insurance unless -precaution is exercised to prevent fir s and its oficers see to it that such precaution is actually exercised, for
they
believe in the motto that, "An once of p2ovontion is :orth a 7)ound
of cures.

This is a marvelous record when we consider that the
COMMON SENSE SELFISHNESS "fire warlte"
in America is (2.80 per capita, as
vs.
against only 46 ctn for ?3uro6e. Add to our "fire
SENTIMENTAL SOCIALISM
waste" 1..39 per capita, the expense rate of conducting our fire insurance business and 're have a total waste
of
Yet but 6O

of our "fire waste" is insured.

but ours colld stand each a terriTle drain.
3cntrollo

No country

The FACTORY MUTUAL is

by responsible residents INT',RSTED

SOLELYin the

SERVICE. Instead of wasting its members funds inamad sarat.
ble for new business wise exenditures are :ade in preventing fires.
A potent factor in that s-:Iccess is that thole in CONTROL enjoy the
unbounded confidence of the patrons they serve lo well.

In the be-

ginning some there were who refused to incur the expense of equip-1ng
1
their plants to meet the views of its lanae*ement, but when the management demonstrated, by actual experience, that such expencUtures
were necessary and would mean large savings to them in the couree of
time, they, too, came to their terms.

Had there been rany such col-J

fanies, each fightiw: the other in bitter and unfair competition for
business, such refor
HEADTEM .




A

would never have been acmomplished.

SYSTEM;

MANY

HEADS-

NO

SY

0 N

In contrast with the marvelous record of the rACTCRY MUTUAL we
h ve narrated we refer to that of a SOCIALIrTIC TRUST.
,

A-n,in 7e

.Ve the N77 YORK LIr7 INSURANCE °UPPITY, the largest of the ii:ratualsu.
Durin7 the yoRr 1902 it .1a(i.e the follo71n7 1nr-itnt5:
1.At1-ontic Coast Line Company (HollnY' Cr'.)
T/C'05,000,000
L-1/22.Interrtional Navition 7ond Syndic
3,20C,000
TiC
Sc Ry (vMonon Rollte")
N 3.L
2,535,000
Ccll
4-.No Pac- Gt 7.Th -c , P & Q
12,00,000
Total
'27,035,000
All those securities were the orations and 12roperty of the rromot1n7
firi of J. Pierpont Morgan and company, and new flotations when nold
to the life company.

In those transactions one man, Mr. Perkins,

.ian of the finance commitactod as both buyer and seller, being c'nnin.
tae c7 the life company and co-partner of the promoting firm, in
actin

for the former he represented a million persons widely scatter-

.
ed rho locked to him al0n , 3 to protect their inter

ts, whereas the

ILLUSTRATION SHO'7ING

.170.1ot1ng firm had able financi'irs present to see

SOCIALISM PRACTICED

to it that their interests mere

RESULTS IN GRaFD

they

rotected, and

rere well protected, for the life company

,
paid right at par for s3curitles which private investors accured at a
discount of one-third, a difference amounting to nearly

;',000,000,

a profit nearly twice that paid tl.).at year to its policy holders 7ho
contributed more than ',16.5,000,000 in premiums.

The loss to that one

life company's policy holders was not all the barn done by tboF:;e four
transactions, for they were the means of enabling the prorlotin7 fir:1
to secure control of several important transportation lines without
incurring nny risk themselves, placing that on the life companies
and loading down the rnilroads -ith large additional inclebtednesseB.
The most pernicious TRUST in the country is the railroad HOLDING COZPANY, controlled by Vc)(3 INTEREST= SOLELY in the HIGH7ST transportation rate commerce 7111 bear, when the PATRONS seek the LOVEST.
Hence the conflict, resulting in hostile legisl(frttion which is 7-rmful
to every class of business.

REF7DY;

Rid the life companies

of SOCIALISM by providing for their CONTRCL by ItS9ONSIBLE and INTERESTED RESIDENT




who furnish them with prel:ams.

We shall cite an instance of the evils of PATERNALISM.

It has

long been the policy of Nr York for the Ler71s1ature to designate
the identical securities in
all be invested.

Then

7

ich the funds of their savings banks

E.H.Harriman was a dominant political

factor the Chicago & Alton's bonds rere, by such decree,
ted.

Mr.Roosovelt,

sage 46.5,000,0GO,

as

i-ovarnor, anroving the act.

o designa-

After its

as-

and 3-1 2 , flew bonds of that roar3_ 7re i6bued
/

and sold to the savings banks and life insurance companies right at
ppr.

Since then they have been quoted at prices which meant a
loss

to the original investors of more than

20,000,000.

In rely to a

criticism of his act ap.sroving that bill, Mr. Roosevelt has said
he
did not know

T.D. Harriman '"as interested in that railroae, at the
time.

'
The public of-, icials on whom such grave rr3u-oonoibi1ity rests are not
bond exr,3rts and are forced to seek advice second hand.

The ablest

export could not 7ive a reliable opinion -rithost bein7 in possession
ILLUSTRATION

of all the fcts.

OF THE EVIL OF

future status and value of s bond he must know

PATERNALISM

the maximum amount of possible future issues, an

If tJ- e pr)inion relates to the

important fact not considered in that instance.

Rut reliable finan-

cial advice costs sonifthin, rJO even when it is for sale the state
is not always ready to -ay the - rice.

Therefore the representatives

must resort to guess work and seek advice from rholl they can, frequently from the willing members of the "Third House" in disguise.
This principle of ilixin7 busin,Ju'.; and politics is alto7other wron,
and if :resisted in will cause universal distrust in representative
governLaent.

Because of the unbounded public confid'Jnce in the int;)7-

rity of the executi7e who approved that act the harm extended only
to t,ice (lir.ectly in interest, but the same thin7 is iia- 13 to 'appe',
.
0
to an absolutely honest executive -rho Jor3s not enjoy public confidence to that degree when the trouble will come.

If the :lost irmor-

ant :lan hsc sense enou7h to make and sn.ve money! 1.. select the bank
-1
in which to deposit it, certainly his FINANCIAL REPRESENTATIVTS
should be relied on in preference to his LEGISLATIVE REPR:PENTATIVES
to perform that duty, for if they err their FINANCIAL REPUTATIINS
must suffer.




The true secret of the success of the Bank. of Enr- land as well
;
as the Bank of France is largely due to these five important facts:
THE TRUE SECRET OF TT11

(1) CONTROL by RESPONSILE RESIDENTS
.
(2) CONFIDENCE in ACCURACY of statements.
SUCCESS OF THE WORLD'S (3) PERMANENT del)osit of PUBLIC FUNDS.
(4) AMPLE, but not excessive, CA-PITAL.
(q) And the fact they are moroP
GREATEST BANKS OF ISSUE

We have heretofore discussed the MAITNER OF CONTROL of the RANK
OF ENGLAND and shall therefore confine our remarks to the other four
-orobositions.

The BANK OF

YGLAND issues a weekly statement w11..;:h is verified

by CHART P.ED ACCOUNTANTS of estabiis''e 1.
ular employ.

Concealment

e:catations not in its reg-

y them m1,7ht nean their ruin, for they

live by the work they receive from the business institlitions of that
locality, while publicity of the truth would enhance their revataMETHOD OF THE BANK 07

tions.

ENGLAND IN SECURING

countants in the regultul employ of such an insti-

ACCURATE STATIENTS

tion to whose head they are responsible for their

In t171e they differ materially 2,rol ac-

positions, for no one is free to criticise the acts of a
ing him meat and broad.

The Scotch banks, by erroloyin

an furnisha similar

self imposed inspection, have rendered obsolete te ins1;oction :previded by Parliament.

7apoleon looked on this practice of the banks

of England anrl Scotland with such favor that be made it a ..)-17t of
the or7anic la

of the RANK OF PRANCE, its charter providing for the

election of three CENSORS by its ELPCTORS.

The BANK OP ENGLAND in the sole .31)os1tory for the BritiTh

gov-

ernment and aient for keeping those funds activa, :.or without it
they wollld he irlle at certain seasons.

Those ft_Ms rane from
-

45,000,000 to $25,000,000, a small amount compared to the deposits
'uelonrin

to the state, county and l'7Li1ciral

THE BANK OF ENGLAND 'E
governments or the United States which are now
GOVERNMENT DEPOSITS
without fiscal u:ents.

The phrase, "capital is

timid', is so familiar that we :reard it as axicr=tic, but one
notable excel tion is 'oublic funrl.n.




-9-

T ere Rre twc objects of bank CAPITAL, first to afford security to its creditors pnr.1 oecond to _furnish a reserve.
two cl..3b of CAPITAL required by a BANK

or

Put there are

ISSUE, PERMANENT 711(4
4.

TEMPORARY, or the CAPITAL rroper and DEPOSITS, til.e object of the latter being to afford

E C 0 N 0 M Y.

If the PERMANENT CAPITAL be

excesive it !leans a 7aste to the bosiness inCAPITAL CLAFFIFIED;
terests of the territory for which the particuOBJECT OF FACH CLAF:
lar RANK OP ISSUE is created to serve.
ITAL of the world'

great BANKS OF IS7U7 is

flki

follo7s:

the BANK OF ENGLAND $of''5,0C ,',000, DANK 07 FRANCE
of the DANK OF GL:It..ArY until recently only
ond UNIT:D STATES BANK had
ital is excesive in

Vi'37

.
35,C:00,000.

The CAP-

That of

) 200,000 ,,nd that

37,50C,000.

The uec-

The BA7K OF ENGLAND'S cpp-

of the igstrition;.; inued by the 7tink

act of 1g44.
To da.Tonstrite our prorosition, THAT BANK NOT2S ';liOULD BE ISSU:ID BY A iAONOOLY, 7e have 'out to refer to the Iracticeu of the Europeon RATKP OF IUE.
cn

For instance, 7rJlen gold 1

too cheap and ex-

rum; a:TAnst London the BANK OF ENGLAND step :3 into the market

as 7urcaser, and vice versa when that convodity is too hig, in
7Plich

that f1nriciF11 balance wheel keeps fairly stable thAr
IrlASURIT OF VALUE-

GOLD.

3
If t-er, 7Jre

WHY A BANK OF ISSUE
many of such banks there, each in bitter cooSHOULD BE A MONOPOLY
tition -ith the others for business, then no one
of them could afford to buy or sell .Y.old at
lose, but enjoy1n7 a MONOPOLY it cq.1-1 afford to lose by such transactions for a jay or so, for such loses -ill be equalized by s all
pro2,:1ts extending over mRny months.

Unless one bank be :iven a

MONOPOLY :or a certain district there can be no SYSTEM to the bank
note credits therein, nor syst3

in the bankinp, business there.

A7a1n, -*Here there are innumerable BANKS OF ISSUE for the Emma
)
territory, good, bad and indiff, rent, tho failure of one
distruHt among the note holc7.ors of all.




-10-

ill brirv7

THE BANK OF FRANCE'S CONTROL is modele0 after that of the RANK
OF TTGLA7D, as it was in 1803, when Napoleon drafted the chartor,
with this exccrotion, viz:

That the Governor is selected by the

French govermiont fror French citi7iens owning $20,000
H.UD is vested with a VETC power only; the 1„owor to INITIATI/ or incur
a liabLlity 13 vested in the DIRECTORS; an. the 'power to INSPECT is
vsted In the CENSORS elected by the ELECTVS.

Here we have

seprzate powers in control, ear!'n inder,endent of the others, the
dutieo of no two conflicting.

While the Frinclpal factor: con-titut-

ing triis ARRANGEF,NT of power were taken from the charters and
praotices of the ENGLISH and SCOTCH banks, yet the credit for thus
kliRANGIYG and makinf; them a part and - arcel of the organic law of the
corporate body, so as not to be abroi terl or annulled by a by-law,
due to the wonderful confltructive ingenuity of Napoleon.
is neither SOCIALISM nor PAI9MTALISM in it.

There

The State is granted

the .1rivileze of 3lect1n7 the W,
ITO I.ower, not
I.:ANNV,R OF THE ;;ONTROL
so muoh for lack of con21once in t e capiTHE ./11TK OF FRANCE
talists but a51 a matter of RIGHT to f;ive rel)resentation in control to the TEMPOKARY CAPITAL, but to 1,rovr)nt
durcrr risra and incapacity so frequertin soclalistic and paternalistic
o
control the State's selection is lirated to those citizens owning
20,000 stock.

As the TEMPORARY CAPITAL is protected by the PERI1AY-

ENT CA- ITAL the latter is give:: the sole
2

DOTOT

to incur a liability.

The MINORITY in interest but not in control of P7RANENT CAPITAL is
reprelented by the INSP7OTION- CENSORS.
both harmless and so,Illess.

A corporation,

All harm reF.I'llt,1 fro

1L211
.

se, is

those in control.

The statesmen of Prance *A.th one accord contend that the fact t'
-at
their BANK OF BANKS has been madea

PRIVATE

has ben the 'Inavation of the State.

And that is the truth, for

LI ONOPOLY

when the Germans hail posnession of the Caital that great *',11blic
service corporation negoti!,ted a :Loa, for '250,000,000 and freed the
government of her enerw.




-11-

THE FRENCH AND AMERICAN FINANCIAL SYST
EM COMPARED.
FRENCH.

A!:FRICAN.

ONE B,VTIC OF ISSUE. ON HEAD- A
SYSTEM; MANY HT7ADS- NO SYST714.

ANY NUIPER OF BAIM OF ISSUE.
NY H7ADS- NO SYSTEM.

RESERVES.
RESERVE reseonsihility placed on
CENTRAL 11ANK,and in ens° of financial flurry all banks 00M3 to its
rescue -rith de-t)osits. It is merely
required to
ANNMC -1
the
stntus of its reserves, 7ich vary
from day to day to meet the v rying
,
laws of teade,es well a: the fitful
demands of caprice.

BANK

Each bank requireA to maintain its
own reserve, and in panics each
fights all others. The statute law
FIXES reserve AS TEST OF SOLVENCY.
Such politieal edict in reducing to
an actual science that which is golferned by a law as variable as the
wind, is a monstrocity unknown to
any country but our own. To n_eet
the natural laws the statute laws
are vilatol pith impunity, nnd
that with the consent of higt
officers sworn to enforce them.

NOTES

:i.aximum amount of notes virtually
unlielited,- 41,450,000,000. Each
note is secured by BANK'S assets and
issued immediately to eleet the demands of trade.

MANNER

OF

Each Anote secured by bond worth
but 7op as dividend rayer; linited
to each bank's capital and issued
without referetle to the demands of
trade but only on the assumption
that there will be a profit on each
bond purchase.

PROCURING

All charters t7ranted.by
0 N F
government under a special act
of
Parliament, only to persons of
F;ood
character where a neeessity exis
t;
for additional banking
facilities.
If the political power Should
err
in granting charter to bad
cieracters, their power to harm the 12:11b
,
lb c lely be destroyed by the refu
sal
of the BANK OF BANKS to Jo iusiness
with them.
CONTROL
The po-er of CONTROL vegeted in
three SEPARATE classes; INIATIV7
(Directors); VETO (Governor) and
INSPECTION (Censors). Eac.,i class
being independent of the others,
Titn clearly defined duties to
,-eform which do not conflict
with those imposed on the othr
t To.




CHARTERS.

Charters granted under the gener6.1
laws of 50 governments, two in each
state. Each class is subject to
laws and regulations of different
governments.
any persons procure
charters from both, so they may do
business under one 7hich iP prohi,ited by government crating the other class, and vice v r9.

OF

E A C H .

No attem.,t at SYS2FM in CONTROL.
Freqnently ONE MAY owns majority of
the stock and elects himself an pres
ident and director and his friends
as co-directors. If the ONE MAN be
honest, as is usually the n-se, and
he be a safe and experienced, banker
all goes well; if not, and scandal
ensues, peblin distrust extends to
all financial institutions because
the public is tau7ht to rely on the
law and, :):overn:.^.ent supQrvt,7ion.
-12-

COMPARISON OF FRENCH AND AMERICAN FINANCIAL SYSTEMS (continued).
(FRENCH)

H F A D .

The HEAD (Governor) is selected
from limited number of R?SPONSIBLE
,
and INT1 RES':7D r(sident owning
7
20,000 of stock by the Minister
of Finance, not so selected AS .m311
for distrust in capitalists as a
right to c:overnment, the BANKS'
largest defr2ositor. The H"ADIS
SOLE duty is the PANZ'S affairs.
INSPFC

(AMERICAN).

The HEAD (Secv of Treasury) is
required to •eisess neither experience nor capitl in bank- ing or any
other businesc. His time is occupied with momentous affairs of State;
hedged about with law; respensibilitic:s out of all proportion to the
quthority vested in him and is a con
;‘i'Jant target for political attack.
0 R

The CENSORS are PUBLIC EXPERT accountants, selected by the BANK'S
ELITTORS- Minority in interest out
of CONTROL. Changed frequently to
prevent poqqtbility of collusion.
They accept the position more to
aid their profession THEN apllied
than the salary it pays, but their
re utation3are enhanced most by
strict attetion to duty THERE inPosed. Hence the INCENTIVE is not
to conceal but give publicity to
errors and "businesq politics"
1.ivered by thou.

EXAMINERS are not required to possess any knowledge of the science of
accounting, and are frequently plilected solely by reason of their
"political pulls"
Their ABITIOIT
is either a continuance in _ublic
servile (invariably in a line entirely different from luties THEN
engagint them) or graduate into a
lucrative bank office, to accomplth
either the INC7NTI .7 is to conceal
important facts. That fla7rant
violations of plain stritlIte lar
Is frequently concealed is too well
known for comment.

THE LESSONS TAUGHT BY EACH SYSTEM.
The French system teacnes the
- mblic the TRUTH,- that a RANK
note 19 a CREDIT to be destroyed
when the necessity for its is,
-111nice ceascs to exist and not remain in nirculation to play thief
in roblAng labor of its reT'ar(1.

Tne American system tches the
public a FALLACY,- that a BANK NOTE
Is MON7
7. Therefore it remains in
ciroul-tion until it wears out, thuu
inflatim'; o,Tolt and creating panic.

CONFIDENCE OF THOSE GOVERNMENTS IN THEIR RESPECTIVE CREATIONS.
The French governnent de t oits
.111 its runis with its "BANK OF
BANKS" on sole security of ita
capital Hotting an example
to the public of its crrn confidence in its financial creation.

Our government sets ensnrin::: trap
baited "legal reserve","govern. iont
supervision", etc. to entice the
public to deposit their funds but
exacts alvle collateral security
for its own.

THE BASIC PRINCIPLE OF EACH SYSTEM.
That RESPO7SIPIL7 AND INTERESTED
Under our free banir.ing system the
residents, operating under a charpolitical power has atte:Tted to
ter clenrly safe guarding the riplits appease every
class by allowing n11
or the MINORITY IN INT177TT OUT OF
to engage in the businesn, but in
CONTROL (a class always interested
puttinir it in execution distrust is
In clean and efficient corporate
manifested everywhere, for all are
manageilent) may be trusted to .lanhedrAd about -ith law from start
ufacture CURRENT 027DITS necessary
to finish.
to expedite the business of the
count-y and portect all inter:1sta,STATE, INDIVIDUAL and CORPORATE.




—13—

The rt-i- rter of the first UNIT:D STA
TES BANK mflected no
- it on it ietelli-ent author. It pro
vided that the stock
should be divided into 25,000 shares of '40
0 each, of wA.cli 18,000
were owned b:r foreigners. Eacll shareholder
was entitled to vote
for the directors, in person and by pro
xy, one vote for the first
share, one vote for next two shares, and
so on, no one oeilv entitled to more than thirty votes. Poreirmers
were entitled to vote on
the same basis as residents in person only.
No provision yias iade
for the inspection by - ublic expert accountan
e
t: elected by the 21INORITY IN INTERST OUT CP CONTROL, and the
secretary of the TiTIASURY
was expressly denied the :4i,;ht to inelcct
its _,rivate accounts,
though the government was the largest
sLarelleL-Ter and deposited
three-fcurths of its funds with the ban
k on the sole security of
its calAtal. A more ideal TRUST would be
difficult to frame. Not
only did the UNITS vary in value, thirty
to one,- thus mekiw; it
stock controlled instead of employinv the
itoc*:r. to cia:ify the
SOME OF THE WORST
RESPONSIBLE MAN,- but all the UNITS
were re
FAULTS OF THE FIRST
quired to vote for the ame candid
ates, instead
UNITED STATES aNK
of 'ividing
e into districte. Fven now
the best bankers of one state are
not acelealeted with the eame
clas in an adjoining state, but wit
h these of their own ctate
it is otlerred.:3e, for there is a
oankors association in ench tate.
The nero ownership of bank stock car
ries with it no ecqeli_tan,eship of - ersons fit for such a ];oeit
ion. Hence the HEAT) 07
7ICEOLIZUL CONTROL of that hank. D1rector..1
'Jere elected in a annner
unknown to the "provincials",
to the "out of town" directors of the large life insurance
companies at present who are given
a few crumbs for the use of their nam
es. The leading statesmen
of the day churn7ed it with practicin
r favoritism and its control
being dominated be' foreigners. Thi
s •7as denied by its defenders
l'iointed to the charter permitting
then to vote only in person,
but every experienced an knows tha
t where one ;0e13esees the i.ower
to do a thing it is not necessary
to actually exorcise the same
in
to enjoy the fruits of its force. Pas
s word down the line
that 3qch and sqch must be done and
it in usually done.




-14-

cb rt r 0 the lecond UMPTYD rTATES BAN
K was drafted in
1S1G and contained all the imperfections of
the first, except that
it izohibited foreiillean :rcr. votin and lid not
deny she right of
the Secretary of the Trrnsux7, t3 inspect its
business. It contained
no provision for the electic,n of PUBLIn 7X17 RT
3
ACIOUNTANTS, the lack
of which nenrly caused it ruin oefoile it ra3.
' en in basiness three
,
D
years, it then being involvont, owing ot it
lax
retliods
and practices of l'avoritis, and wo7ad have :one
illto the hands of
a receiver had it not 13 - n for the 'T,O0C,000 of
i_overmqent delAntits.
It also got into politic. All it-1
ctors resided in six states,
all bordering the North Atlantic ocean, yet
the west and south contributed largely towards its sup!'ort. Busine
ss politicians who refa3ed to do business on business principles
r:ssorted to 'politicn for
cavors they were not entitled to on their
m.erit. Ito not cur -FurSOME OF THE -ORST
pose to discuss the great political **
BANK war"
FAULTS OF SECOND
which paralysed business in this countr
y for a
UNITED STATES BANK
decade, its enoll
to la- r that the bqnk engaged
In the iresidential camvai
gn of 1L_3
ith all its wealth and influence and lost out, President
Jackson being re-elected b7 a lari
'e
I.Ijority. Feeling that the
people hal vinclicated his act I
v:itoin;
the bill :oenewing the ban
k's chartr, the President nex
t had the
government's deposits rerioved
-prove the undoing of that financial institution. After
such rerfloval the bank continued sev
eral
years under its Federal cha
rter and when it expired it operat
ed under
a State chrtrter, but the act of
c. .oving the'ovF. rnment doi.osits
,
so
destroyed public confidence in it
at it never afterJards ropsered and had to liquidate at a great
los-1 to its shareholders. Her
e
wo have two valuable lessons:
FIRST, the I7FLUTME OF PUBLIC
DEPOSITS;
SECOND, Tilat a FEDERAL chart 2,
per se, thoucl
I! 0




OPOLY

Is

bettor

+1, r
1

-15,

STATE charter.

?. a
ant;

The faults of our 01(.1. sTAT13 SYsT= ar3 too numerous to
if that epoch in ArriricP,n fInuicil hiBtory Ilay be referred to
S1TTE.

as

HoTever, 7e shall direut at+.ention to three of the

rtrincirrl faults.

FIRST:

The fault of faults -ras in its lack of

H7AD or directinr; force.
business, and each bank

Every one, so to speak, Tas in the bank—
'"as

issuing CURREITT CREDITS.

If a

pJrson of doubtful finnncial ability failed to secure notes from a
.A37r)ns1ble and conservatively managed bank, he could secure acomno—
dptions frci:.

cat" concern.

So the failure of the

rild cats'

to redeem their notes in [.:old brought discredit on the uound institu—
F1'ECOND:

tions.

The next fault ,,
ra

that most of them had insuffi—

cient caritql, and the notes of the weak ones drove froll circulation
those of the best banks, thus iliustrRtinr the force of NGresham's
laws.

THIRD:

The next greatest fault was that a large majority of

SOME OF THE WORST

them issued notes altogethr on corcial and

FAULTS OF OUR OLD

individual depouits as reservee.

STATE PANK SYSTEM

are entirely too timid to form the solp basis of

a bank note circulation.

Such le7)osits

The individual deposits his money 7ith a

bank confidently believing he can

it it any moment on dennnd, and

he is not going to wait until ictral darer arises before making
demand, for if t'ere be a sl17ht ru,Aor that he may not get it on
demand he is go1n;7 tc crUl for it.

7,ut 7ith PUBLIC DEPOSInthi:2 is

not the case, for their custon(4 ans will investi7ate rumors, (ild in
1
doing so are not crazy like individup.1 depositors, and finJing the
bank to be solvent they

are

contented.

rurthrraore, PUBLIC DEPOSITS

such as state, county and :amici-nal taxes, are usually collected
for ten to trel7e 1:tonth'3 in advance to run those governments for that
reriod,

tTlat one rany calculatJ with

their stage r:t all seasons.

a

:
de( r; or certainty
,

The bulk of such taxe

to

in the farming

sections are collected at the season the Ilrinciral croT, is

7ar"pceted,

tat season when the bank's rerves should be lp,rest and. its most
di21cult to mnintain them.




-16

TIe
olai

rvo.,tes of our present NATICMAL

ANiING rYSTEM

o no

tat it woald 7(,)-orm our currency or ban?- inp: b13iness.

only object

in

a L-ost devasting

Their

to f'.1rnish a market forovernment bowls durin
The bank notes have been :a(1 e les
.

War.

secure by

ench amendment to the original act, bo:inning with a 90c/J1iue of
5) bonds it is now a 100:1) issue of 210 bonds, and the only reason the
(
latter are at 1:ax is because they may be converted into CURE7 3NT
2
CR7P,IT.

Let us enrage in a great wax or ]:eet with a few years ha7:.

tims, thus necessitating a billion dollar bond issue and tose bonds
would fall to a dividend bearing basis and entail a t:'emendous loss
to the .bans and create a lanic wTiichwold r77.1n the country,

The

7,cope of this *paper will not permit of a full discussion of the many
defects of our present financial system wich 13 almost identical
with that of the Colonies 1ften the Constitution was ado:vted.

71e shall

confine our criticism to two of the most iml)ortant defects:
(1) To the LACK OF ELASTICITY (71.7 On 7ANK NOTTS, and
(2) TO t7cle I7P1,7in7ILITY OF OUR 7ArK 7 SRVES.
(1)
PRINCIPAL FAULTS 07 OUR

NATIONAL BANKING SYSTEM

This LACK OF ELASTICITY is due to the fact

that our bank notes are bond secured, the banks

Issuing and 2'etirin::: them being actuated solely
by the stage of the band market instead of the rleand for curren
t
credits.

Hence they rerform every office of fiat money by remaining

in circulation until they wear out.
use as resorv. noney.

They inflate credit by their

Some of the states have no reserve laws and

those that have ma17.e distinction between bank notes
and real monpv.
iLi.

Fowler, former chairman of the House corinAtee oh
Banking

and 0.1rrency publicly declared, in December 1907, that no less than
200,000,000 of bank notes were then used as reserve money.

Its much

easier to criticise than sugest a remedy, but we can see but
two
ways of curing this defect,

First, Either by annihilating the

state banks and trust companies and :lacing government inspectorfl in
each National bank. (An impossible remedy because Congress lacks
such power, and if it
expensive)

ossessed the power the remedy would be too

Second, Or by oranizing ONE CENTRAL YANK OF ISSUE or

SEVERAL DISTRICT BANKS clotl od with exclusive reserve responsibilities.




To demonst:oate the disastorous effect of the INFLEXIBILIT
Y
OUR BANK RESERVE LA?, we give below the status of the
reeerves and
:reserve deficit of the Nov. York Houle banks the 1:11:-st
nine
weeks of the 1007 panic:
Week endilv;:

Reserve (leficit:

October 26
Novenber 2
V
9
it
10
,17
II
....
a
30
Decer.lber 7
n
14
If
21

,1,233,300
38,838,825
51,924,625
53,666,950
54,103,600
52,989,425
46,210,350
40,101,17r
,
31,751,000

24.685
21.30-)
11
20.20if
,?
20.274
19.98
20.116
13
20.70c/0
21.2A/)
(

The relort of the Comptroller's report
of tho:
--3e New York :.)r_taks were only 5
the banks of one city were 2O0

Peqerve per cent.

8i101T:1

that rfelle, the reserves

below the legal test, those of

above,above, and those of :leveral cities

ranged from 30!.; to 100V0 above the test.

Yet those New Yo;: banks

AN APT ILLUSTRATION OF THE were exerting every effort within their power to
DISASTEROUS EFFECT OF on secure cold, succeeding finally in getting - 100,
FIXED-INFLEXIBLE RESERVES 000,000 frol.:t the Bank of England.
were fri:htened out of their wits.

The i:eople

So were the :lanks throughout the
-

country, and as the law inlYoseo_ an individual responsibility on the;',
each looked after its individual intomrs.st.

It was a "hold tight to

every thing you get" policy all the way round to the detriment
of
each and the public as well.

The ‘istakc. was in allowing gole_ ex)
-

portations during the summer of 1907 amounting to
llistake can not be laid to the door of any
on
any one city.

)145,000,000. Such
t,

bank or the br-u-a:s of

It 1:r3.0 the duty of all and, "what's
everybody's busi-

ness is nobody's".

It was unquestionably r;ood ban:f-linr for those

bank e to suspend specie pay2ients while the publi
c was so fri:V,tenocl,
but it was barlyirisr. to co1.1- )01 the3 to do so after
1
the fifth weak,
and nothing but our monstrous reserve law forced then
to do so.

The

brea.Kinr; (Towil of our bank reserves disarranged our whole
cralit sYotera, paralyzed business in every branch, closed our
factories and
depressed the Liarkets for our crops to a frightfal extent.

No other

country has such a le.:•7,1 bu.Taboo to frighten the public into a
panic.




-18-

Lets

.noth7:r illu-;tration of that
RI_JRVF, LA".

the reserves of ten National banks loc
ated in the

Say that

tate oiL Kanss

are "1,000,000.

If they care for their own
reserves then the law
wold reqire then to hold in their
own vaults lnwful money amo
unting to :.1,000,000. But the law 1;rov1
des that they lAay send 3/5
(600,000) to oi.e authorized ban
k. in a RESERVE CITY. Suppon
e that
Lank be lonated in Kansas City. The law
_rovides it ilast ainta1.:
a
:rve of 25,), of wA.ch 1/2 mtvA be
in its own vaults and tie ,;:lance it may kee in a CTINTRAL RESERVE
CITY. Suplpose it sends all
of
that (.7.eo7,it -perEitted by lw (525,000)
to a bank in New York Cit
y.
The latte2 would be required to k1.:0- ) in
/ 1
4
Lmful money 25 of tllat
ae10:Tit, or $131,250, in its own
vallts. By t'As device
the orirlmal
41,000,000 of de- ositf; of the ten
p
Kansas banks have been exp
anded
112io (;600,000 in Kansas City ana 525
,000 in New York City) rma
the
1=fal Is)ney behind them has been rei
ced nearly 40c/0 ($400,000
in
the Kansas banks; 75,000 in the Kan
:las City bank and i:131,250
in the New York City bank).
Henry Dunning McLeod, in his
HISTOY 07 ECONO:JCS, page 400,
says,
INFLATION OF CREDIT BY BANK

"A surT:len increase of deosit
s is, tT'erePore, nothing more than
inflation of credit, exDEPOSITS IS FAR
DANGER-aotly similar to a
sudden increase of bank notes.
Deposits are nothing but
ban?: notes in ais7ine".
011:- THAN THROUGH BANK NOTES
The YE7 YORK EVTNING PVT,
in a well considered article on this
subject, says:
sInfltion throull excessive
expansion of do. oA.ts is Zar
:ore danLerous in ito Lil
:diate results than inflation 1 :rou,e),7h
,
ecessive expansioL of bank not
es; because bank notes will inevitably be widely aiTtributed,
so that it will take ti]ao to Etcumulato them for a run by the
ubl1c, whereas a run of depositors may begin on an ho- 12
, , notice".
As credit 1-, LIfl:Ited by bank deo
gits it is centt:y1 by
their withdrawal. The ifJ.-tion
ber;inLiw; at the beginning of the
dull season and
at the end thereof when the revers
e action
takes pllce. Of coarse, this is
due to a large extent because
the
banks of the reserve cities riyfrom 2 to 40 for bank deposi
ts. Then
how can any well informed person doubt
that we NEED
B A N K
01/h
MOLE THAN
CURRENCY
REFORM?




-19-

The SUFFOLK BANKPJP, SYSTEM of No-- Pngland wae
the nearost a-i',proach - to a sound '17-1 -t
tie, country Tha ever had. The SU77,
?0IJK BANK
of Bostom was orcani7ed in 1818 and operated
until 1863, when annihilated by our National syste. :rhen it bega
n the seven etrong banks
of BoGton had 50* of New nland banking capi
tal, though but itc;
of tie bank note circulation. The reason
for such disarity was that
notes of the weak country banks had put "Gre
samss La7" in o-1)eration
Allah drove those of the 3trong ones out,
for thoae 'Inr.lound banks
- rere discounting commercial paper right in
73oston and other comeretai centers of New England. So it will be
seen that the SUTIFOLK
reformed the CURRENCY as well as the BANKING
BnINEso of New England. Of this Horace White, in his CURRENCY
and BANKING, says:
NEAREST APPROACH TO
"Under such circlInstances the SU7FOLK
t7lok
upon it - elf the office of a comptroller
of the
CONSTITUTIONAL SYSTEM
currency. It did not adrAt a new bank to
the
membership of the system merely because
it had
IN OUR WHOLE HITORY
procured Q charter, perhaps by favoritisl:.
, perhaps by fraud. It first satisfied itse
lf the
shareholders were men of good character and that
the institution had been started in good fait
h. Of course, the
SUT7OLK could not prevent the newcomer from issu
ing notes, but it
could
thhold its passport and thus prevent it from gettinz an extensive eircultion. The precautions which it took in admittin
g newcomers were taken for the credit and good name of New England
bankin,7".
The object of the SIPFOLK was to enable the New England banks
to redeem their notes in specie.

At the start it had lilited cap-

ital and it:3 officers and dicto:73 were without financial prestige,
and had ti:o oposition of all the Boston bank
s who Jater on when they
saw it was for their benefit, ofite to
its resque with all the caIltal
nemossary to nake it the gromt smeorm
it was. Here we i,ave another
illustration c)- the
:
DISTRICT gYSTEU
directed by
ONE HEAD. Had quoh attempt been
made ror the whole country
it would have failed, just as did the two UNIT
ED STATES BANKS, f(D.
it would have incurred the ennity of the ubilsine
ss
would have played on the

::)eiilices of Vle people in the country

districts, by telling that the SU770LK wao an attempt
of the "blo -ted bond holder of State street" to Ilake them "financi
al serfs". such
attep.its were tried and it was callry3 the "even tail
ed Bashawu etc.,
but they failed,'s those men were personally acquaint
ed throughout
New England and known to be real human beiirs.




-20-

T7) CAYAPTAN ivrnk note OUR:1NCY is sound
cur-ency, 'but the instrumentalitieD

tx-vi ii.erl, bin;' a
1-T7e thirty-four otron7

conservati7ely inao1. 1:anks, Ftnd no ne7r one can orrtn17e -Tith
131;s than!00,000 cRpital.
)
-

It Toilld be disastarous to us to ongraft

t'neir CURRENCY PRINCIPLE on our weak .)ral. ing system, wher:: the banks
K
number :ore than 25,000 and new ones organizing daily by r7 0 differ,
ent 7ovarnments.

While the CANADIAN RAnING SYSTEM is Th

tronger

th-n ours it is not an ideal one by any means and not at all suitd
to the conditions of our country.
ciPally in the commercal curiter

Their bank capital i3

prin-

of CANADA, Enland nil Scotland

9nd a 1ar7e .m.'aority of the businss of those banks is done by bTInch
es managed by clerks 7hooe authority is limited in a Aannr simil-r
to the local railroad agents in America, arents rho can't put in
one hundrfed feet of 6ide track wlthout goin7 through a lot o• rd
tape.

Urri,r our banking system the capital is o-rned locally and
those in control possess absolute authority to

THE CANADIAN AND AMERICAN
grant creit

consultin

critside parties.

7ANKING SYSTEM COMPARED
This is

as it should. be and our 7onde7ful

progress is more attributable to that than 2ny other orci fact.

No

one is in a bettJr position to :7r ant credit to 'mother than the very
person ''rho Kno75 all the con1tiorn3
for that credit.

nd factors forilim7 the basis

Therefo7e ciote hi

ith authority to act, and

that can best be done by lettirr him bach his judgment "71th his individual capital.

Therefore the conscientious practical politionl

economist 7111 attempt to

REFORM

our banking system rather than
CANADIAN 7ANKING SYSTEM i
ritory.

nd

T

ANNIHILATE

N
it.

TIEN
Th.:

the Scotch system rlfInted in a 1!-Ir7, ter3

The area of ScotlinJ is less than one-ei:7hth of just one of

the American states and their financirs are kno7n personally by a
large Taority of the *.-.3ople of that country, -rile-r'eas a :la:i,ority
of the peo:
Evloinin

of a county here do not knor the finnnoi.irs of the

county.

Therefore to CANADIANI7:our77ANING SYsT:",:. -ill

never do.




-71-

The
four

i

REMEDY

for CONGRES

t7. 31vie the country into

BANKING DISTRICTS, by amenJing the

INTER -STATE

act of J1y 13, 1806,

10-:J .t,* on all bank rote circulation

-J
i
exce- A those of National Kank! , aai
nctes of thole INTER-STATE BANKS.

1i

iuc1u

uc1i exceltion the

Let the aended act

efine an

INTER-STATE RANK by requiring that the charter of each 311911
grantod by some one of the states comprisinE the DISTRICT in
its notes are to circulate free fron such tax and

aDvide that such

charters clntain these express provisions:
(1) That each bank shall .1)030.9S AMPLE CAPITAL.
(2) Be Controlled by RESPONSIBLE HESIDENTS.
(3) Elect CENSORS by RESPONSIPLE MINORITY.
(4) Elect RESPONSIME HEAD with VETO -power.
(5) Let states nake thel:1 fiscal aP-ents.

REMEDY:
INTERSTATE
BANKING FIYFITEM.
Lots take u
(1)

those five 1,s7r•equisite, in the order stated above.

CAPITAL.

Let the CAPITAL Of each be 05,000,000 of which

000,000 should be re- esented by its 8/, preferred stock and
,
j
ft0,000,000 by its 10:: common stock.
,
2
. 0110:!9,

Let the treferred be paid as

r,5,000,000 each and 1!1,000,0U annually

CLATAL SHOULD BE AMuntil the whole of the preferred is paid.

CTe.

PLE,- NOT EXCESSIVE.
ate the common out of the profits and issue it
vozlen all the preferred is paid.

Let the 'ro.j2its after defraying ex-

panses, payment of authorized divldenTh and croating co]n:...on ltock
the states comprisiw,: each BANKING DIFTRICT in

be olvided aon

proportion to their

e:osits, less any taxes ir&osed on the bank or

its circulation.
(2)

CONTROL BY RESPONRIT
1SID-A7NTS.
4LEXL

Provide that the power to INITIATE
in the BOARD OP DIRECTOR
COLON SENSE METHOD

r

Lot the charter

an obli ):ation) be vested

the :members of v.r ich
-

elected

the ELECTORS of their resectivo St tea.
of 77n1ands.3

07 CONTROL NECESSARY

Define an MECTOR, as does the Ban

POP GOOD MANAGEMENT.

charter, a resident citi:
-Ien owning in good

faith 1 2,500 of the bank's stock.




-22-

Give each DIRECTOR a REPIT,SENTATION

-ned in his state and
on the Board in izoportion to the STOCK o7.
PUBLIC DEPOSITS furnished by his state and its subsidiary ,',overnmentsi
thus giving the TEMPORARY CAPITAL

REPRES

-1 TA

TCN

with the PERMANFNT CAT'ITAL IF CONTROL.
(3)

CENSORS.

Designate each city of 50,000 in

1it9.nt5.3 in

each 7:MIXING DISTRICT as a separate CENSOR'S DISTRICT and provide
for the el.-yction of one CENSOR every four 1:.ionth3 by the ballots of
TTORS residing in the CENSOR'S DISTRICT in which such electtilo7L,
ion is held.

Let there be three CENSORS, serving the BANK one year

each, eleet'.)(1. four _lonths froart, so there will be two old 01'103 in
service when the new one takes office.

Define a CEkrOR to be a pu7.-

LIC EXPERT ACCOUNTANT residing in the C.T7SORI S DISTRI CT fro'l
he is elected.

ich

Let the charter erloower the CENSORS to a.1.1.orvise, all

EXPERT CENSORS SELECTED BY

elections, verify the stata:ents, audit the ac-

MINORITY BACKERS ARE PAR

counts and inspect the transactions and proper-

SUPERIOR TO BANK EXAMINERS

ties of the BANK.

Let no two of them serving

the BANK at one time be residents of the 5“.--4,::e state.
officer or director .,•::Yo

Prohibit any

voting for or using his influence for or

against the election of a candidate for CENSOR.

The science of

accounting is a sim13 one, and in our 1 . rge, olties rclay be found ^,
.3
CO

.1.otent ones as there are in London or Paris.

is to

All 7‘-e have to do

sirniae and 1.:ractical method for their election by

the RESPONSI13LE MINORITY OUT 07 CONTROL.

Such CENSORS would not

be rushed for time as are our 7overn. ent examins,

Coming fro.. the

cities all over the BAITi:ING DISTRICT they would advance to
th7! officers the latest and best methods of checks.

They would prevent

the forLiation of cliques on the *inside" and destroy ' siness poli,bu
ties" in its control.

Three would leave the BANK annually going

into leparate sections of the 7ANKING DISTRICT acquainting the
public as to the actual manner in which the BANK'S affairs 7ere being
conducted, and in that .my nain for it the confidonc,Ye of the public.
-




-23-

(4)

TIP fEAD SHOULD

A VT.TO PO'7,R, the qame ail the Gov-

:y.nor of the PANK OF FRANCE.
-

Req;ire 1:1:

to o.:1-1

20,000 stclk, as

reclizi.id by the Governors of the banks of France an

England.

Let

hi:. be elected by the RANK COnITIONRS of the states comprising
the BANKING DISTRICT, to coesponi with the election of the HEAD
RES.PONSIT-3LE

HEA D

of the .:3ANK OP PRANCE.
-

There will be little or

ELECTED LIKE GOVERNOR

no )0l1t.,1 cs in t 13 selection, for the reon

OF THE BANK OF FRANCE

that there will be, on an average, twelve TANK

CO.i :IE; -IIJNERS for e:-Ich BANKING DISTRI7T, thus ne,cessitating
.
eleven
to vote for a cancUdate 1iv1n

entirely beyond his cyrn

7one.
(5)

THAT FITA77S MAY LAKE THEM THEIR ITISCAL AGENTS

for

our local govermients in 13311111g and 2.ark2t1n[' their bon's,
a 130 to
become responsible for the ftinds bclonginF to these local gover
n
THESE INTERSTATE BANKS

rents by designatin, the local ltinks to collect
-

WOULD GIVE SMTE GOVERN-

and care for them, the loul bank acting as the

MENTS

agent of the BANK OF BANKS.

FISCAL AGENTS

Insteqd of 11aving

29,003 banks now in a political scramble for the sone :-:400,000,0
00
funds belonging to our state and subsidiary itate r;overruf.'Ent
s, as at
present, those local banks would seek such deposits from the CENTRAL
BANK on their ind1vid1.1.9.1 merit.

Of course, the CENTRAL PANK wc

have no earthly use for them in its w...rn vaults but wc1.11. Ilr.ve them
in the local *banks or channels of trade, except when its reserveq
nr-sd reidlenishin: it could Lake delan.nd for such an amollnt
as the occasion demands.
It will be observed, therefore, t,- at each BANK OP ''ANKS will
be

CONTROL as well as in OPERATION.

It would be in-

iir•Ictical to expect the best bankers of Texas to vote intelligen
tly
for residents of Florida, for there is little business intercourse
between the bank,.rs of those two states.

Therefore, the L.17CTORS

of each state should vote only cor the DIRECTOR of that state.

As

the busints of the states will differ in amount •:J.ve each DIREC
TOR




-24-

e vote on the BOARD in idro l
,ortion to the stock oned in and de-oosite
furnished by

is state, end as some DIRECTORS will reside
further

J:rT7 the executive office than oth rs each should
be requied to
retain his 'esidence in the state from which he
is elected.
INTERSTATE IN CONTROL

S

In this

way the CORPORATE (oepreme) power will eceli
cle

WELL AS IN THEIR OPERATION

in the several states foredng the BA7KING
DIS—

WITH EQUAL REPRESNTTATION

TRICT, lust reversirv the -i?resent orJer of
such

corporation control in this country.

As the DIRECTORATE of a corpor—

ation is its legislative body it could, by by—l
aw, cm ate a BOARD OF
CONTROL to remain at the executive office and
perform euch duties as
the by—laws impose. The BOARD OP CONTROL would be
the afeents of the
DIRECTORS. With four such banks operatin in
t le country and an
act of Congress providing for the retirereent of
our present bond
secured bank note currency, it woe.ld be but a
short time until that
would be replaced by a sound scientific
currency which would expand
and contract to meet the demands of trad
e. Such BANK OP .NKS would
reform the banking business of its dThtric,t ',ear
Tore effectually
than all the laws which Congress and the Legi
slatures Ilight enact
In e century.
Lets see the economy and sirplicity with which
this system
could be operated.

The CENTRAL BANK of each district woald form

CLEARING HOUSS in each city with . 1,000,00
0 banking capital and
eurrlus eendine: them its CURRENCY to be
countersigned by them and
circulated as the demands of trade required
, just as is being done
at present by the fire insurance companie
s. Actinga s the agent
SIMPLICITY, EC(Y' :CY AND

for the CENTRAL BANK the (..LARING HOUSE
would

SECURITY OF THIS SYSTEM

discount paper for the banks of that CLEARING
HOUSE DISTRICT.

The C7TTRAL TANK would keep

accountants at each CLEARING HOUSE to report
to it daily as to the
status of the business and that Its in'ItrIction
s
earried
out. This would be far less expensive than
for the CENTaAL :!ANK
to have branches, as that would be a reduplic
ation of the work done
-ey the local banks by mere clerks and an unne
cessary expense in




—25—

equiplirr and rqintaining bankin.7 houses, and it 7111 be 7:a:r
beter for the

uhl1c Interest, as the capital of the tanks formi
ng

the CLEARING HOUSES would be additional security behind its
note
issues.

In other words, the CENTRAL PIJTK would 1)-7 farrinv out
to

the CLEARING HOUSES its monol)olistic :
1 rivileio to issue currency
and r!,ontrol Of public depcit3.
hands of specultors

If a local bank should fall in the

the local CLAIITG HOURE wou10, refuse to

do business with it, thus so linitinf: its .i)siness opera
tion as
to )ake businso umiroJltable.
The

arq 'jr

Qi1

INTMUSTATZ
(1)

W1y then° CENTRAL 3ArKS 11
-

rathor than

PI D7!

AL

111 be

r1,07-.tions:

Because the states would not nake them their fisca
l

unless they possess the sole 1)o:7(n' of tl.rAr supervision,
..nd until
WHY AN INTERSTATE avTKING

the

SYSTEM IS PREFRABLE TO A

our state ;rid s-lbsidi'lry state ['overniJents

NATIONAL OP STATE SYSTEM

controlled by ONE C-1NT:J.AL 'ArK for each district

400,000,000 of 'public funds belorvim- to

it is out of the question to thoroughly reform our banking business
and take our twent-r-f'ive thousand banks out of politics.
(2) Because it i.- o, 2.t of the question to hope to reform our
.
banking businosl Fv.) Ion,

ro legilltive bodies possess concur-

ANOTHER REASON

rent authority to enact laws on ppocisely the

IN TAVOR 07 THIS

same subject nattor, in the same territory, and

.3,A.N.ING SYSTEM

at Vile 'lame time, us i3 the ease at present.

As

it would bo !.nconstitutional for Congress to anniA.1,
1te the :Ante
bankinv system or l':::.cvont those governments creatik, iJanks
, the only
way out of the dilenim

is

for Congress to conlitionally surrender

to the states the authority which rightfully belonged to
them under
the Constitution, but usuryed by it to meet the exigencies
of a
terrible war.




-26-

(3)
the

T3ecausc

1.
-:1an the public call t)

better t!aught

TRUTH 2- THATABANK NOTT ISACtiEDIT AYD UOT MON7Y
2- and

that it is no

the Juty of the government,
-Federal or State,

to issue or ieco;).

;.erion7lible for CURRENT CREDIT than any other

species of credit, 7rhether it be evidenced by a bill of exch ive, a
check, or a 1:ronis3ory note.

We can also under tills plan better

teach the public that inasmuch as a cor oration is the cretture of
ANOTHER REASON

tl7e state, that its control Inay be just what

IN ';'AVOR OF THIS

It

'RANKING SYSTEM

duties imosed upon their CORPORATE P2PRESENTA-

creator3 will, and that sliecial business

TIVES may be done in a manner far rnre satisfactory to the public
interest than by their GOVERNMENT REPRESENTATIVES whose ';uties are
far more ralltifarious and who are frevently elected withcrnt rcrAr
d
for their 8-; acia1 fitness for such businoss, und that by divorcing
.
)
the government from this business 1:re ra..ove the temptation of the
evil minded to corrupt our

bile officials.

(4) Becau7,e t_L.s (INTERSTATE) :lan is the Con,
:titutional 1..ethod, being in pcfect harmony with our - yste: of
;

ov.717nment, which

means that the states shall do for thoEselves everythilv within their
1.
:ower, with a Federal government holAng them in check.

Congress

can apjay this corrective indirectly by amending, from time to time,
Its definition of an INTSTATE BANK when it becoos convinced that
the public interest Teviires it, for unless the carters be amend
ed
ANOTHER REASON

to meet the req,Are:. ents of 10 Coni:xessional

IN FAVOR OF THIS

definition tie Peeral tax 13D1Ald rlake it iMr4110.u-

PANKING SYSTEM

tical fox silch banks to operate and employ the

amount of ca:
!Hital reui-od.

The c*.-latT:r is to a coryoration just

what the constitittion is to a state, and for such a

service

corporation orvinp; several 7Aillions of peo-ole widely seatt
e,.d, the
same care should be exero1e-1 in its drafting is that of a great
governont.




-27-

Pt'

(5) Because under the INTERSTATE ayster. we could more eileect—
ually eliminate politics from the banking business than under either
a r"D7RAL of qr"ATI-J sy3tem.

There are but four politicql zones in

1 country,- 7- tional, State, County and Municipal.

As

we i'ixrD

t"re would be about twelve states in each banking rlictrict,
thus

ivinç 1.7:-1 twelve VOTING UNITS in each for the election of the

HEAD.

If it -ere a PFIDERAL PANK then tharbe would be a calice for

THE PINAL REASON

the political tower selecting the HEAD to reward

IN FAVOR 07 THIS

some politician who ailed him in getting his own

AKING SYSTEM

- osition.
p

The same thing would be true if it

were a STArIT 7ANK, but bein, an INTERSTATE corm ration el large
7
majority of the BANK COM_ ISSIONIP S would have to vote for
resiling entirely be-ond their 1)olitical zones.

rsons

It in certain

that it would not have as much politics in it as exists to .1 ay in
-.
either our Federal or Stte systen.
EITDORSEL71T OF Pr_UDIMS.
1, the undersigned, have read the foregoing prosp
ectus for an
INTERSTATE BANK OP ISSUE, but have not had the time
to ,
1.'ve it the
careful connideration the subject deserves, yet on
the whole it
apenrs to be the best solution for our
perplexing financial problem
to which it attention has been
directed.
Respectfully signed,




!TAME.

ADDRESS.

077ICE OR )i CATION.




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.1

ugh
the

,8.

...nsions throw
:or the guarangovernment or
)ined. It is not
.mous advantage
tve conferred on
one serious obi ended in their
in the New York
• the distrust of
rs in their banks.
)een guaranteed
the "chain bankhave been in the
their personal
noney.

1,
.ificates,
chat ti
goan certificates
..g Clearing
balances in New _
has now been t.
ilL
doned.
,..;() risk c
Loan certificates have been in actual ser- is the m o
.
vice on this occasion for fourteen weeks, of the far
though it is altogether probable the actual •the leading
life of the certificates this season may, number being
owing to the insolvency of the four banks ly facilitated.
referred to, before taking up such issues,
I should like
be prolonged beyond the eighteen -week
limit, observed during the panic of 1893. however, that it
The issues of this and previous years, w ith that such consolid.
the duration and maximum amount, have
should LI any way
been as follows:
or monopoly of th,
When
When
Total
Maximum
issued. cancelled.
issue
there should be a
Issue.
1907.. Oct. 26 'Jan. 28 $100.000,000 $84.000,000 centre in New "
1893.. June 21 Nov. 1 41.490.000 38,280,000
the present r
1890.. Nov. 12 Feb. 7 16.645,000 15,205,000
it is consid(
1884.. May 15 June 6 24.915,000 21,885,000
solidation
1673.. Sept. 22 Jan. 14 26,50:000 22.410.000
1864.. Feb. 29 June 13 17,728.000 16.418,000
the numbel
1863.. Sept. 15 Feb. 1
11.471.000
9.608.000
tutions goir
1861.. Sept. 16 April 28 22.585,000 21,960,000
thought that
1860.. Nov. 23 Mar. 9
7,375,000
6.860,000 ject to be s*
45,520,000 certificates taken out by failed banks
ing into do
still outstanding.
banks and
t

,

1)91-)kA.,

4.40
4

1 671 7

g

I6

_
.

1 6ep
r-411 First 7ationa1 Bank $f Oxnard, Oxnrrd, Calfforula

conditions would warrant the loaning of 2
of deposits on real
car
estate mortgages
would aid very materially in our giving credit. Our
savings bnnk
ot take care of all good mortr7age offerings and we would
be better protected if loans could be made on real estate.
of savings de(
. # .41 Would prefer that national banks be allowed to invest 8
of commercial deposits, if condiposits In real estate loans and say 2
locally, warranted it.
tion,

1
Heyor 0 ur
nc

tmen

Apawers-recarainr

onalibqnk wild/ VIE) ‘1_
rr6pkivni. p,mgairdilu*ItAD 9ie
f ,'. ;/ !/
: .•
1
10
a ,
'
,
J
e
nal banks to loan €n aeal distate i6rt
AS.
4

king Lew. rerm

.

W4Q14 say ths

we have ,in .ecrffrintfrciirl;rtrilirs
—littrik
rance9

i

N

tO

earttr

1/,/

ff

IA:

/
..t11
7 4:9,

mo
'7E, consider a savings department or the amendment of the Yatirnal Bank lx,ws permitting loans on real
estate a very important and necessary matter for country banks, whore the refustl
of t! loan on real eatate would drive a good customer for the present as well
for the future to another institution.

We consider real estate cur best secur-

ity and heartily favor tho amendment, loans to be linited of course to 54 or
6




of conservative actual market valutation.
rro+rar
ivoirrami
l
"
e-eetne•mitriluste,
,4ereityPer."'

t e Lead

1 ,
71:.
/tArm

,

,

et,ic.__,11

16717

Third National Bank, Dothan, Alaboire]

•

2.
,

olepoLi)s, rius
sbothe requir
tors' (Ps a whel
06
accumulating

specially
unt of surpl
entir
i.ed the
pre nt lew;
the
r
ote)
out di enti
se.
for suc

QD,

1F
eccy of

receiNt of your favor cf the 9th, and answer herewith
be to ackno led
/T
he enclosed
Judging frf
as flossible.
and 1111
ar
y)4r qtie4tios as
t, ut we did not
half
orm-,ani
Ai
Vet)01-tq 'ty_at,' scine fath 1 .tc
f
, , and tVeyefore
If
•
a as des
ng s
in
tter
re ;1 l
oks of the 14th, please
to our
elatifor
;
ulki havq. een fiot'
t •4
4ne s thtt we may comT y with your recluest.
f •ear us i

NJ
,
t.
3
.
,2.
Tlk

laws,
We are deeply interested in the questions asked, and hope that the
the requirements
through the influence of the.;omrission, may be amended to meet
and varied conditions.
r
of a cre:t, growinc country,euch as is ours, with wonde -ul
"u abo t the advisability of handling real estate promiscu"j
vie
W are somet
a national or commercial bank, except under prorer condilous1:: as,etcuri
are best conserved
tions;--Taut are equally firm in our belief that local conditions
sound end conservaby -local management as nearly 98 possible, when consistent with
tive methods.

more
_e doubt th(a advisabilit, however, of allowinr national banks to loan
e in any community, agrIcultural,
than lOof their corTercial deposits on real estat
.
uld not appear PC444c
or otherwise. But on savings deposits, the limit of 310wo
We favor at the same time allowing a national bank to accumlfte
/4
40 sive possibly.
enb and if the local board of direca surplus account, over and above the require
- meet and agree to allow
tors - who ought to be familiz-r . ith local conditions
, we believe the law should
the finance comm'ttee)loan that fund on realty securities
allow it so handled. I'Go
financial economy,
Poss11:2y these opinions are of no value in the greet field of
There is no use calling s
but they are based on experience and local conditions.
nal banking law at present
sptde something else to make it sound good, and the natio
se the banks, we believe, as a
is not meeting the re:uirements of the times, becau
or indirectly, and doing sc
whole are nor/ either violating the realty law openly
Some sections
their territory.
because they feel that they must meet conditions in
some banks make small loans, and
seem to call theirs realty bonds, and buy them;
money, are forced to take realty
later by reasu of the demands of customers for more
"pdditionl security" to reasonable
to permit thertleep at nights; others cell it
and white, and take their
amount of personality; while some put them down in black
administer it. At any rate, the
".'ncking up" as often as the department sees fit to
the efforts made to enforce it. :70 law
law seems to be evEded or violfted in spite of
nearly every community, and it seems
is a good one that meets with such -ensures in
t
depositors and the banks (n, to mento us that it would be far better both for the
due and reasonable provisicns, and
tion the Banking 7)errtment) to amend the law with
who go beyond the bounds of conservawith penalties or fines sufficient to check those
tism.



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,Pg C.' a A-444.1

9r;

-la
ria.- 4 et;

_t ion

Aw

624-4
4

411,,,„
a_ALA eLa4LL..

,
Tell City, Alaba mm:

c_gA,
V.icact

- Do
kiiY;i4eteteetped.retAate•ofiejfrana.44,
011

: —me prohibition against such loans was written in the act, over a
-1 7yL
Atf
4
1
/
1
large area of the nation real estate was largely specultAive in value and
/therefore loans upon same were either hazardous or noni-liquid in character.
Conditions since then larive changed.

Real esttAo, except in spots

easily avoided, has every element that goes to make up first class security
and in many instrAlc(!s loans up n it can be collected with greater ease than
mercantile or mtnuf-,cturing parer rnd at the same time the calling of such
loans is not marked by the business disturbances incident to the two latter
classes of paper, when called.
limit to real estate loans with national banks which does not exceed
capital or say 20\10f total depmsits would vastly benefit national banks now
organized and would ultimately result in the conversion into nationals of the
great majority of state institutions save those with trust comr,vny features.
:von here m div . sion of the business into two concerns, a national bank with
separate trust company, would be freuently witnessed.
In my judgment this privilege must be extendec: national banks if order is
to be brought out of existing chaos due to the dual system and before the problem of currency reform can be tackled with any sLow of success.




m.i!airm444...4*--Arrr-


Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102