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NELSON ALDRICH kiwietayirkriewit tea 01 MISCELLANY BANKS OF ISSUE. In the fcllowin tablos found a ! eneral summafy, to-oth'2r with the names and authorised iises of all the Engl ish, Scotch, and Irish Bunks. General Summury. The following figures are taken froL the latJst vaiiab1e returns:-.. England-- hank of England Private Banks 17 Joint Stcdck Banks Scotlund- 10 Joint Stock Bunks Ireland-- 6 Joint Stock Bun.ls 18,450,000* 482,744 1,084,836 2,676,350 6,354,494 29,048,.124 •••••••••••••• Note.--Tha number of PrivatJ Bunks uuthorised to issue their own notos in England by the Act of 1844 was at that date Diminished in numbur by z:.4.Lia1guLuition Lai)sed ISUU3S 207 5 190 1111111)3r furnaining 195 12 The numbJe of Juint Stock Banks (in additj-n the Bank of England) aut:lueised to issuu their own notes 1.-c! the EILIMO Act was at th:,1- datu , Lapsed Issues 72 55 number remaining 17 The number of Bunks authorised to issue their own notes Scotland by th Act of 1845 was aLlinished in numbor by amalgamation Lased Issues ii 19 6 3 9 =Maw. 10 * Autli.)rised cote -issue be:7u d a-unt covered 1,7 bU1li611 Lute sec a tho Bank. ENGLISH Par/.V.:E Nu, Le of Punk. 1 Authorised Ho -to-Issue. Banbury Bank 43,457 2 Badford sank 34,218 3 Bicost,3r ad Oxfordsdire Punk 4 Kingt (i and Ra,dnoraliirs Bank 5 27,090 26,050 Leeds Old Bank 130,757 L1ando7Jry Bank and Llaadilo Bank 7 Oxfordshire, Witney Bank 8 Plyuth, l!aval Bank 9 Rou.ding Bank 10 11 12 SdLInds & co. ) Bank York add EL4st Kidifv, Bank 11,832 27,321 Sleaford and !!evturk Bank re 32,945 Total 37,519 51,615 6,523 53,392 432,744 ENGLISH JOINT nom BANKS. of 13iik Auti- Jrised "ot.) IBB110 " 1 Bunk 'f Vrlitehavor., Limited 32,681 2 Srci.dford Bunking Comi:any, Limited 49,292 Cu.rliele and Cumberland 25,610 Banking Ciany, L:1; Li-tod 4 Halifax and Hudd3rsfie1d Union Bunking Company, Limited +4,137 5 Halifax 13,733 6 Halifax J:,:int Stock Bunking CoLli .,any, Limited . 18,334 7 La::c:.1.st 64,311 Convaercial Bankin_s Co7:- pany, " B.;nking Co.any, Linitod 8 Line .1n and Lindsey BLt.nking, Co::"„uny, Limited North and South Wales 51,620 Li:dtad 63,951 10 Nottingha7:1 and 11 Shef fi216 L.‘d 114.;.11a4.1s:iire Bankinr:, Cc:4m.y . 23,324 12 Sheffi1 52,4L6 13 Stamford, 14 St:a ckay's Banking Company, Eafilited 15 Whitehaven. Joint Bunking Com. iJany, L. it od 31,915 13 Wilts .2,11c1. Dor3•,t; }1.nking Cwapany, Limited 76,162 17 1L.rk City ottinghtuasiiiro Banking Company, and Rothcir}.....%i Joint Stock Bankinir, Company, L. .„.i.ted , Sc1ding County id Boetcin Banki.T Cny, Limited 'bunking Coriparly, 1,ited Total 4 2, 477 55,721 356,Y'6 94,69 5 1,084,836 gzi=c-s—a.z a irmr-ar SCOTCH BANKS. Authorised Noto-Issue beyond a, unt covorA by gold and silvsr coin at head offices. Nino of Bt-).nk 1 'hulk of Scotland :343,418 2 British Linen Bank 438,024 3 Culedonian BL.nking fIc.,1111 ,any , 53,434 4 Clydosd-13 Bunking CoILI,Lny 274,321 Consa_rcial Bunk o 374,880 Sc otland Bunk of Scotland 297,024 7 North of Scutland 11L-nk 134,319 8 Royal B .ak of Scotland 216,451 TV.v71 10 ar..(1 County BL..nk, (....rdeon Union Bank of Scotland Total (Scotch Banks) 70,133 454,346 12,676,350 LUSH 13A:IKS Authorised Note-IstrJe be7md mount covered 1)7 -:old and silver head officeo. Nama of Bank 1 ELmk Irolud 3,738,428 2 F—afust 281,611 852,269 •:!ci-L.orn Bunk 246,44.0 5 Pr,vinciul Buak ;J: Ireland 927,667 6 Ulst:r Bunk • 311,079 owoomems Total (Iris Banks) 6,354,494 (51rou "Tho Stock uxchuive of:icial intolliLmce for 1907" puce 466, London, 1907) TIMIra"JCY CIT/CULATION. - There has been lonsiderable dieounsion of late relative The writer was a delegate to a revision of tin Currency Laws. from tile Cincinnati Chariber of Commerce to A 1071VOrtion of the National Poard of Trade which cenvened at Wasin ton in January, 1002, and an a nenber of the Finance Oprnittne called upon gecretary of the Treasury Gaze to discuss the various finaneial questions that had been presented for our lorslAerasecretary Gage outlined in Jetail his viewe relative tien• to a national bank eirculation, partly secured by A deposit or 7.reenbacks, the balance to be secured by a prior lien upon the assets of the bank of issue. UnrIfir normal conditions there is without doubt ample mrrency for the needs of Commeroe, and the plan of lecretary Gage neri!!! to the Triter simply to provide an inflation of currency when it is not needed, And not one that would be responsive to the varying • lemands of commerce. An inflation of currency in times of easy money rynlourages reckless speculation and when confidence is shattered, all classes suffer alike in the panio that must reeonearily follow . As an alternative, the writer Presented the following plan: The President of the United States, rleoretary 0-f' the Treasury and the Comptroller of the Currency be :riven Jincretionary power to isque an miergency eiroul.ttion to national banke in times of financial distress; this ..,I.T. - xlatioTt to be in -t'orm the saFie as the present national bank hills; the notes to be eecured Ly a prior lien upon the assets the bank of issue, bank's capital. and to beTliAted in 3nount to of 54 of the To insure the roiirement of the Arculation, the business distlism, is over, a tax to be \ : 1.ev1.ed on the outrtandin erorr1 'irlati.on or say just as soon as 4 ! The Commission have not overlooked the necessity of a careful study of the banking experience of our own country; and wioex. pect at an early day to publish a series of si44e- miefttir—orthe best authorities covering this subject fully. Banking events in the United States prior to the Civil War, however interesting from a historical standpoint, have very little, if any, practical value for us, save as warnings. Ln—aawlme that we were not yet able to adopt a definite plan for the United States, I did not intend to be understood as committing the Commission to a policy of hesitancy or de- lay. As soon as the preliminary studies and conferences to which I have allude( can be had, the Commission will at once enter upon the work of preparing a plan and rei,ort. It is therefore evident that we shall rot be able to present a plan at the coming session; but I have every reason to be- lieve that we may be able to make a report at the beginning - 19 - The Commission have /Int overlooked the necessity of a careful tv-4study of the banking experience of esir own country, and expect at a_ 4 411077 '1 t p,c,„ r, ta,;(, / this subject. /`-e„ an early day to publish ivelits It 0 prior to the Civil , :111 4,4" interesting from a historical staniW / dtst point, have very little, if any, iracticptl value /l ave as -arninr,s. When I say that we are not yet able to adopt a definite plan Lk for the United States, rt must nobt be understood as a committal of I the Commi:3sion to a 1.olic:2 of hesitancy or delay . 4 As soon as the preliminary studies and conferences to which I have alluded can be had, the Commisuion will at once enter upon the work of preparing a plan and report. tt is e-idcnt that vre sri.17, not be able •to present a plan at the omminc session, but I have every reason to T)e1ic7e that we may be able to make a report at the beginninP of the last session of ,11e present Conress. Wilmal-Qc„.64.4.uatr (ATr CO 7 A a vt * W"s"'N'w-AW% g....o f i t .T.T:ipTr*"rlip gt4;;;L-okum :jee.1!)).1.jections will come . A011011 r0 s of 1aC-- onew_ose kto. . 4 sanity is uncilzetioned but who have committed themselves to attract-C cc One of the difficulties we will have to contend with will be the rivalries between great cities as to where the center of our future financial system shall be located. But the representatives of all these cities should remember that all centers are interested first in national success, and that our currency and credit organizations should be established on broad and firv. lines. It is of the first importance to all that the world's financial center should be located in the United States, where, by virtue of its preponderating resources and capital, it shoilld logically be established. I realize fully that this cannot be achieved without a severe struggle and without the use of the agencies and methods which the world's experience has shown to be indispensable in a competition of this kind. If we show the wisdom and the vigor of which we as a people are capable, (b) in thc no-distan ri :N%rre to have hi11:i draJn Ch:lcao accold by the norchants and banks of thi (s) va,lu ireat in currency in the world's narkets equal to sterlin:: hilL1 dri.4,wri on London. . 2 of the last session of te riresent Conu,ress. come honest and intelil OflE Vfr shal wei- criticisfa of our corst:ucive , wor, as it is on1L. tLrollch criticism of this nature, c.nd tie co-operation of 'oughtful men, that we c..n hope to rec,i a satifactor COTICllU3iOn. We aL expec er sort from two classes of objccrs criticisra of anoth- .r; e s: (; on• 1:; unquestioned, bpt who have committed the :selves fo atractive but i..actcul schemes; and another of sensation- al agitators, wose oole mna stock in ti ,-ue consists of up- •Yeals to class and sectonal 1•.re1udice3 ;,21(i passions. Crit- icis.1 in all important matters is :inch easier and simpler than construction. realize the necess*t o2 action consisten% with thoroull prearation. the earliest :Ioment Vic ml: lit be able to ro on in a halting wa_ for anoLher decade vrits! conditions re:laininu as they are; but a grave responJibility will rest u - on both th Commisllon and Con -ess if an:, considerahle de, lay in permiteri. r.reater fan Our coun r ot:ler; but its Ylor4L.I. growth and develop- its industries and it ed recurr .inc periods of d lid_ .tr.(1 not Tt =,_a; nat-rui ad-Tanta/es nrvantable intcr:aY cinal trade, are retard- ress5on and monetil,r;, crises our obsolete bankinr liethodo. 1 4 fficult for ui to relize tiJe rapidity of tile pro- rres:; whicl_ ha:3 been ;I-tde in States ulthin t]la last ter ,rear. Inn an a sin-ie illust-atlon: to Uni%3d tie -ro,:th of bank- -10- e a gt -v-e-n- plan-. I arr-n-alt - If • for the g_ a tluivt— purpose of dwakeninc the laiterest of t/tTV. business-men, . /1 oIre bankers, andx( -the 1 ,eole rzenerally, in the ch‘ix; iltrYliwt1 4 r) /. acter and importance of theste creat questions. L.iga e xifir : etrmrt; for I am confident that thi5 question can and will never be settled except with the consensus of opinion of the intelligent people of the United States, of the men who have made this country so great and so prosperous. With this 1)reli.tlinary stateinent I shall call your attention directly to the chi-...ractar or the f_144i44oial orp;anizations in 7, 7,1nd and in _irance and in rrermany, especially with reference to the nchinery and the methods which they use to prevel crises. A You are of course awre that this subject has two important br4ncaes. It has marv others; but perhaps the two most important ones are those with reference to noteissue, and with reference to the organization of banking, or the organization of credif. Personally, I have no doubt that the latter ques ion is much more important than the former. I shal for this opinion. give you, later, my reasons , In considerinE the experience and the methods of other countries, our task is simplified olV the fact e-q that there is almost entire um444-r4m445r of opinion A 44-41 among the bankers, business-men, and political economists (in fact, on the part of the entire people) as to cru. , •€ the methods n.re hest acloptad—t.4--trite--Gefiel . to-oo*er7 reason: Ionn CarrItm71-o.n-4.e-41.y4fig I say "almost entire uni There is one part of the has a system in regard to banki rmity", for this ritish Empire that and in regard to the issuins of notes which is quit, different from any of the others; and that is Scotland. In the opinion of most eco °mists, students, and practical men who have given the Scotch system is essent lought to the subject, lly a provincial one. It consists of eight banks, w th eleven hundred branches. These banks are managed • Edinboro' and Glasgow a little group of men in ho control substantially all -12- banks and their branches the bankingoperations of the/ by a "gentlemen's agreementnior central organization i not known to the law, but w#ich is as effective in the manageent of all their affairs as would be the direc(r tors of a central institu/ion. The Scotch system of no rather peculiar. is, 4s you know, The banks }-1,ve a riFht/to issue notes that are uncovered, or covered only by securities of various kinds, to the amount of their iissues in 1845, v:hen the Scotch bank-act was passed. That issue amounts to two million seven hundred thousand pounds, or somethin.. over two dollars per capita of the Scotland &ople of not a large or importalit sum as applied to us, in view of our thirty-three !,c) thirty-five / dollars per capita of outstanding ioirculation. All the other issues of the banks of Scotand are required to he covered by specie. But they h ve rather a peculiar way of ascertaininE how much specie is necessary. The Scotch banks make/statements at recurring periods, and those statemOnts are taken as conclusive evidence of the amount o The statements are mad specie they have on hand. ,tt the end of quarters, or at -12the bankin operations of banks and their branches tnei( by a "gentlemen's agreement"lor central organization not known to the law, but wiicil is as effective in the , manageent of all their affairs as would be the directors of a central 1nstit4ion. The Scotch system of note-issu e is, &s you know, rather 1.ecul1ar. The banks have a right to issue notes that are uncovered, or covered only by Oecurities of various kinds, to the amount of their *sues in 1845, .'then the Scotch bank-act was pas sed. that issue amounts to t4o million seven hundred tho usand :pounds, or somethin over two dothrs per capita of ithe )eo ; ple of Scotland not a lam or importa sum as applied to us, in view of our thirty -three/to thirty-five dollars ,er capita of outstanding irculation. All the other issues of the banks of Scotliand are required to he covered by specie. Put they h ve rather a i.eculiar 17fy of ascertaining how much spe cie is necessary. The Scotch banks make!statements at recurring periods; and those statements are taken as conclusive evidence of the amount specie they have on hand. The statements are madei at the of end of quarters, or at This principle was first recognize d in a broad way in tl.e Fnrlish bank net of 1844. of issile in 184. The Rank of :rallee was given sole ri .e 7dariLic of Belgium was organized in 1850 ad given the exclusive right of iss ue. Men ti- e financial system of Of course you realize as well as I do that this question is a vast one; that in its collateral issues it covers all the world; and that I cannot hope (as I certainly do not expect) to cover more than a very small portion of the field, and that only in a very fragm entary and incomplete way. But I wish tonight to briefly call your attention, first, to the machinery and the metho ds which are adopted by the great financial nations of Europe especially the Bank of England, the Bank of Prance, and the Reichsbank --- to prevent or palliate or cure financial difriculties of the class to which I have alluded. I wish also, if I have the necessary time, to the end of semi-annual periods; !and the amount of the specie which the banks have at that time governs the period which is covered. I may say here that the Scotch bankers are among the most thrifty and intelligent bankers in the world. If I were to pick out the men who, v from the standpoint of the personal equation, best control and manage their institutions for their own benefit, I think I should select th5i Scotch bankers. (Laurfhter). They have a way, just befqre this statement-day comes, of sending down to London, op- elsewhere in the Kingdom, and having specie sent to them. It is an indisputable fact that it is very often sent in packages -- what might be called original packageS (laughter) . 0 0 MD and goes into i the statement of the S otch banks; and the next day it is returned to London.1 (Great laughter.) In other words -- and I am not finding any special fault about this -- the banks of Scotland are as absolutely dependent upon the Rat* of England as are any of the banks of England. Por thl,t reason I have grave doubt in my own mind as to wlether there is anything in the Scotch experience that s of special value to us. With that one exception there is, as I say, an ab- fr -18- Great; and part of its profi been put back into the bank. have from time to time It is, of course, a bank of the State, in titat the Cta e controls Jt; but so far L..s its organization is con rned it is responsible to no one, The systems of ;bk./ these three ;:a.14.14:**otti9Aps or7 ganized ugh a.0—4.14444.:, -4- up to the central institutons; 41.4A,t _p,m1 the These central institutions in each case hold A the ent±re reserves of all the banks of their respective it counries. P—tirilirC14 --rrilm.r4 7-i-f-4 4 4--417-ottd. In making statements of their condition ( hich is done sometimes once a month, sonetimes once in six months, but I think very rarely oftener than once a month), the banks of each of these countries report he amount of their " cash in hand and at the bank", ad that sum is considera) / ed the bank's reserve. Except in one case (London Smith's bank) the cash in han is never stated separate- ly; and no amount of persuas on that the members of the Comlnission were able to exe cise upon any of these banks would induce them to state separately how much money they had in their ults End how much money they had at the central ban;. I think there is no exception -19- to that rule, unless it be Sir Fe i: Schuster's bank , London Smith's. That instJtutio makes a statement at the end of the quarter, and not on the basis of the average amount held. As a matter of fact, all f'these banks hold only what we would call "till money". Thd - is, not over , three or four per-cent of the amount of the liab ilities of any of the banks, great or small, located in any part of the several countries, is held in specie in w,ults of the bank. the The remainder is held in the form of a balance at the central hank. these institutions believe The men who manage and of course there is some force in their contention, as it think you wili discover as I go on -- that a credit at the cent ral bank is better and safer than a c rresponding amount of money in their own Vaults.' On the Credit Lyonnais said to u U/at the of the managers of simply make an estimate on one day of how much ilioney they will pay out over their counter on the follow]ng day in the ordinary transactions of the bank; and in the morning one of their men goes to the Bank of Prance and gets the requisite amount of money. Sometihes they have too much, and -20- sometimes too litLle, of course; but they step to the Dank of France whenever they o replenish their cash, or depoit any excess, as le case may be. That idea runs through the whole system; and it is an important thing for you to keep in your minds that the reserve system of these countries is entirely unlike ours. It is in universal use abroad, however; and whether it is wisc or un-Jise is of course a matt er that we shall have to consider later on. Pers I should say, in passing, that the amount of cash in hand and at the bank averages about fourteen or fifteen percent of the current liabilities of the London clea ringhouse banks, which make their r- ports once . month. The joinock banks, however, do have a secondar:y reserve. For instance, in the case of the London banks, they have money "at call and at short noti ce." So far as the London banks are concerned, this money is largely loaned to discount houses, the banks taking as co]la-heral bankable bills of /-The character whic h I shall explain to L,iou later. It is also loaned on other clases of secur'ties --- those which are held by the merchants of London. (What we call "private bankers" -21. in the United States are always called "merchants" in These men borrow these amounts from the banks London.) on foreign bills, or on any collateral they have; and the banks hold about fifteen, twenty, or twenty-five per-cent of their liabilities in this secondary reserve. The English banks also hold government securities (and this arldies only to the English banks the foreign banks do not do it) to the extent of their capital and surplus. I think there is no exception in this regard In London. reserve. That furniv.ihes, also, a certain amount of The London banks intend to hold about thirty- three or thirty-five per-cent of their liabilities either in cash in hand or in the bank, or in money at call and at short notice. But all of these banks have what to them is a more important reserve than either of those I have descVibed; and that is a certain amount of what we would call "commercial paper", but which they call "bills." The nomen- clature of their operations is entirely different from ours. There are no such things in any of those coun- tries (or at all events only to a very limited extent, covering transactions where contracts are made) as what we in this courtry call promissory notes. When a whole- saler selAs goods to a retailer, or a retailer to a customer, upon credit or time, the seller makes a draft upon the 1,urchaser at some time that is agreed upon (usually thirty, sixty, or ninety days), and the purchaser accepts it. as a domestic bill. That draft and acceptance is known Of course drafts upon foreign houses, or drawn by foreign houses upon London, are called foreiu,n bills; but they are all called bills. There are trade bills, coverirc ordinary commercial transactions; finance bins, covering accommodaticn transactions; and foreicn bills, co7erirr international transactions; but they are all bills. The bil3s to which I am now alird:in, however, are domestic bins. In Prance very small bills are in common use. The manager of the Comptoir d'Escompte showed me a part of their portfolio of bills that were taken in tit their di.ferent branches in the City of Paris. They ran from ftwe francs upward; and the average of the bilAs A UNI ISM ,e4r--40%. 1it / 1 2 francs, or to011oaw dollars. P=preet.ifle-41,46. 6P-z-tA, 74r--5 / -- kJ-3r ...bankers of :4044.us.in aa—pe4, see maxi/ bills of that kind. 1 XL -23- (Lem€44te.r.) a--eL Of course m A s. • But bil:uy. of this class are considered by all these banks as their most efficient reserve; and they properly consider them so for the reason which I am about to state: These hills can be taken to the central banks of the respective countries and discounted. There is no ob- ligation on the part of the central institution to rediscount paper of this kind; but that is a part of the unwritten law of their existence. Most of the functions of the great central inst2tutions are function s that have grown up in recent years. For example, in all practical respects the bank of England of today is as unlike the Bank of Engl and of 1844 as can be imagined. One resembles the other as little as a mule-team resembles an automobile. The principal functom; of all the creL -L, banks are functions which have grown out of modern conditiono, and have become necessary to sustain the credit of the people and of the countries in which the banks are located. All of the minor banks which have commercial paper of the character I have mentioned (for T will use that -24- term interchangeably with "bills" can take it to the central bank at any time and hav? it rediscounted at the bank rate. These bills differ z i newat in character In each of the three countries, th ugh they ha.ve man: , , r ualitles in common. In Rnr1a4d they must bear two names, of which one, a Britis1 subject, must be the acceDtor. In 2rance they must /bear three names (althoujh colateral can be substitut d in pli,.ce of ore), and must not run for more than n rety days. In Germany they must bear two solvent names, ad have a like limit of time. The average Curatdon of tie bills which each of these great banks has :In its portfolJo is somewhere from thirty to forty days. It is the universal belief abroad, first, that these bi3As furnif311 the very ect kind of securty for a bank to ihOld (for of course they are constantly being paid), second, that they are absolutely necessary in the system as the most important part of the reserve. EaLch.cf_1113,P.-4,..t.e,Lentri4..1.-L4.nlit4-1lald foT. tho - eiiTrAvv. - the rezervt;:s For example, if we iaft7 incllzde a reasonable allowance for the three acres of land owned b; the 7ank of England in the very heart of London which / -25- is not carred upon its bool'.s as an asset, that bank has one hundred million dollLtrs of capital. Why does it have such a large amount? I have frequently been asked that very question: Why should the Bank of England -- which serves a community United rot nerely in territor, but in a im4ts broad way in its co=ercial operatfcns have that amount of capital? I think the answer is obvious: Not only does te Bank of England hold the reserves and sustain the cedit of England, -f---14i-1-44-4-r-.4.. of the United Kingdom 4.1U1 1.( : 4 CA 7 . saatlaala.ami-Irealmt44-e00.441a), t.k bwt, it holds the reserves and sustains the credit of the entire British Empire, with its four hundred minions of population, aftel—w4th L:fillaiAti44.7-ncircling the world. England is so,lethin narrowest sense. So that the Bank of more than a Bank of England in the The- fr4itH4b-of--4-s-B 111" EntrraZitt - say- - an(1...3...itiozet.izea.4•144-246—triter—stty--44--vektiT—triith TYQ that not only does the :Rank of England sustain the credit of the British Empire, but it is the great financial center of the world. Of course the British gold market is always an open ' 0 7 **) I must say a word about the experience of four other "1. countries, and I shall try to be very brief about it. I realize, better than any of you can, how uninteresting to a popular audience a subject so intricate and compl ex as this must be. I am assuming, however, that the men who are listeninc to me are either bankers, or merchants, or people who are giving thoughtful attention to this subject. I am quite sure that no other 1A41, 0,1a would come 4 here to listJn to me. Coming now to the four other countri,:s that have had recent experiences in this regard --- experiences which are very interesting to me, and I am sure will be to you when you coma to examine them -- let us take, for instance, the cdsa of Japan: You know what an inTairing and in- vestigating character th:: Japanese people have. In 1870 they sent ov4-r-.114.re a commission of which Prince Ito, who was-rv.c.ely killed., was an important member; and after an investigation they decided to adopt the American systam of national banks. It did not work. Recently they had a re-examination, under the leadership of -- one of the creat- Llatsukata l who is-a Wat financiers of the world, I think, so far as intelligence and knowledge are concerned. As a result of the second inquiry they adopted a system based upon that of the-lftrMIlf Belgium --- a -sy4sAvent---o.f central daspom confined entirely to the Bank of Japan. In Switzerland there was for twenty or thirty years an agitation for a reorganization of the banking and monetary system. The Swiss people had a plurality of issues an_d_a . plurality of functions of-a-cantral institution, which was not satisfactory. They appointed a commission to investigate the subject; and the commission recommended a central organization. The question was then submitted to referendum by the Federal Diet; and the people of Switzerland adopted the central organization. Their -37- deci si on was not acted upon for a number of years, ever, for tlro reasons: with the cantons. Tilrst, there was difficulty There wa-m. in Gwitzerl„md a syster! of cantonal banks, institutions own..d in part by the various cantons, clId the revenue of which went to the support of the cantons. culty: z Then they 11, al another diffi- There was , great-i,.Ld i bitter dispute s to where the head office of the bank should be located. The principal CAsrutants were Berne and Zurich -- the former being the capital of the country, and the latter the great central business city of Switzerland. , To make the story 0A short am-L-4.an, I will state that all these differences were finally compromised by providing that Berne should 'he tht head office of the b_Lnk for note-issue, and that Zurich should he the head office of the bunk for business purposes. The cantonal difficulties vure settled by requiring the Bank of Switzerland, before any dividends were paid to its shareholders, to pay to the cantons out of its earnings an aruount equal to the revenue which thu 0,-.ntons had foruerly received from their cantonal banks. Sweden has had a very singular experience. The Bank -38- of Sweden is twenty-five years older than the Bank of England. It is the oldest State bank in Europe. I need not say to you that the people of Sweden are a people of great intelligence and of great gcod judgment upon everything that pertains to their local affairs. There has been go-kr-s-on in Sweden for Aamat.444trg like twenty years or more an agitation for a reorganization of their system. They found that it did not respond properly in cases of difficulty; and Sweden has from time to time had financial difficulties, such as we have had, and such as every country has had that has not some means of preventing them. or some time, therefore, there has been an effort to secure a reorganization of the banking system of Sweden. The great difficulty there was with a number of imi,ortant Swedish banks that had the right of note-issue. There were twenty-three or twenty-four of these institutions, known as Enskilda banks, in existence at the time of the final legislation of 1901, which changed their system. A reorganization could not be completed before that time for the reason that the Enskilda banks were not willing to surrender to the fliksbark their right of issue. In that case a compromise was reached which to my mind is extremely interesting. The Swedish government required the central bank, the Riksbark, to discount for the Enskilda banks for a limited number of years limited amounts of commercial paper or bills at two per-cent less than the market rate, with a minimum rate of two per-cent. They expected that in time the Enskilda banks would give up their right of issue, and that they would then have a homogeneous central system so far as those functions were concerned. The actual result was that in 1901 Sweden had twenty-four banks of issue, and in 1902 she had one! The suggestion, the promise of these ; increased profits (1---w+-11--pi•e4---efry-Jstrr+be-u- - that-would- be -o a pretIy„lusxsk.ww:d_.,:t..a...use. f:suppose) led all these joint- stock banks to surrender their right of issue practically at once; and Sweden has today an organization of credit and of banks which is along the line of that of every civilized country in the world outside of Scotland and a similar experiment upon the other side of our line, In Canada. The Canadian system is, of course, sub- stantially based upon the Scotch system. Thera are I realize better tnan any of you the great difficulties we shall have to encounter in adopting any change. 4... I know the inertia that suTrounels people who within a narrow circle have been successful with methods already in existencu. I know that of the ninety millions of people of the United States (involving as that popu lation does twenty-two million heads of families), a large proportion think they already have some plan that -44- will act as a panacea for our existing ills. I know that we shall be met by men whose sanity, while not unquestioned, is reasonably established upon other subjects (laughter) men who have spent their days and nights thinking about this subject until it is in men who are never able to express their own a Opinions clearly, and are never able to make anybody understand what they are after. obstacle. These men will be an (Laughter.) Wc shall be met by another class by dema- gogues and fakirE, who hang about the outskirts of every great public discussion, intruding their views upon an unwilling public for self-exploitation. We shall be met by honest criticism; and we shall welcome that, • because no great problem is ever solved except as the result of intelligent criticism. I am taking up the consideration of this question, as are the other members of the Commission, with an open mind. Eighteen months ago I thought I knew something about the subject. For thirty years, more or less, I have been a student of these subjects. But when the National Monetary Commission was appointed, I made up my mind that if I had any preconceived notions about the -45- subject they should be sent to the rear, and should not find any place in my mind until the whole question had been presented to me not through an examina- tion of foreign systems alone, but through an exariiina.. tion of tbg_latker...cart-sYm, and of the conditions that exist in the United States; and, above everything else, not until I could get the advice and the counsel of the men who, after all, should have the final decision of this question. I have supreme confidence in the inherent intelligence, wisdom and patriotism of the American people. I know full well that whun we can once bring this subject to their attention, and get them to investigate it calmly and quietly, we shall wt a re- sult which, while it may not be everything that I want, or everything that any, man wialtre l will represent the wisdom of all. Another thing that we shall have to meet is the political question. of that. Already you can see the signs Some men are disturbed about the First and Second Banks of the United States. No man in his -46- senses would think of adopting any plan base upon d the First or Second Bank of the United States. We could not adopt such a plan if we wanted to; and no man would 'chink of doing it. There are banks in every community that are more important in every respect than either of those banks. If you went back to that period you would have to give up your telegraphs, your telephones, your automobiles, your wireless telegraphy; you woul d have to put y.ou.visave s back ak,A,./14:yDiars, per) -laps, in civilizaticn. You do not intend to do that; and you can be perfectly certain that this Commission will not ask you to do it. But I will say this, gentlemen: Whenever the time comes for us to adopt a system for the United States we shall not be deterred by political fakirs calling our attention to the ghost of Andrew Jackson. Andrew Jackson was a great man; but he died many years ago. (Great laughter and applause.) It is possible, gentlemen, to have monetary institutions that are not controlled by politics . take the Bank of France as an illustration: Let us At no time in its history has any political influence been exercised over that great institution. When it was •• t ON, fr" - , • itt_d_44 .270 12 The injurious results of this class of defects ha)5Cusual1y been felt only in times of anticipated or real trouble. 41A Zbe other-44 -a-s4 ot-defects tv - -whtz5n -T ct z_e aski it Vie e>td -Jai Pitx ALP (or _ " / k crrat-tmot-t.y nery-t-Imes unnecessary burdens upon business and production and e hinders the natural development of sections. Thiti result is felt in n(14: and tindeveloped communities by farmers and others engaged in useful production, who are obliged to pay high rates on their P loans snd tx suffer from inadequate bankine facilities, and-thrTT r)- r / e/ , -1 ,--ek ( 1a1e, 41,wo no means in- exple-ne-e-wirtutr, c-a-m-be nrite--ErrnTrrilre----i A A ilurg- an equalization oreevr-. of rates or a broader market for their loans. 444 t f t '2 tt The methods‘ by_whIsh the enormous sums 1i caoh=lam,ax4 .44t nee 1L,0 -1 for the production, movement, and rnarketinG of cur agricultural and other products, are crude and unneces:3ari- ly expensive to producers. In all sections, notes and bills of as‘e #7 L ,e C 14 -7 e 4t a 4*#' O'Y - GO ;a f- ›t_e at f i / 4t 7 C-61/1 tz- \i` g iv:t e.,/dc;c3 4Y-I•e-/ rt 42 ; 43 4/ x 0 -Lr-A--P---7 7 tLJ at-e et, ejtj-z,v /el.ey42L1J4')1 d 1-47 \ ' ) c 41- /1-z 4 - 4 fri,(9,€ LA COvc , 4 W-(9)4(' oCrii! 1 1 7 dtt_D ot-ere 41 a _ eitr-, .-f4L / 1,1W-V e•o ‘ - Z61 )- 1,-ry14-1-d 7i ) tr tc 11( • ilia -ft O -) k/cf-J' t (164;(71 • ih t i 7 / y 1 IL organized by the first Napoleon, there was put into Its charter a provision that the Ivernor of the Bank should be appointed by the Chief of State -- not by the Emperor, not by the President, not by the XAng, but by the Chief of State. That charter has remained unchanged to the present time. Under every government -- under the first Napoleon, under Louis Php.ippe, under -Lb.e.. f' governatentri ,,k-, 0-TO`t- • Y ( A " -4, 44 under 6 .1 the Commune, and under the Republic -- the Bank of France has gone on performing its high duty of preserving the credit and maintaining the honor of the people of France, without reference to who should be the Chief of State. In the time of the Commune the premium on gold as compared with the notes of the Bank of France was less than the premium paid for currency in the United States in 1907. No question has ever been raised as to the ability of the Bank of France to protect the interests of that great country. son of on Last year, in Paris, the grand- of Napoleon's great marshals, who had been Investigating the history of the Bank of France, told me tnat he hk.d in his poseession a dispatch from the -48- field of Austerlitz, writ,ten(1?y Napoleon immediately after the battle, saying to 410...marlihal, as the represcntative of the Bank of France (which was just then being organized) that he wanted to remind him that the permanence and success of the Bank of France was of more importance to the French people than the victories which Napoleon was achieving upon the field of battle. The opeother great banks have never been influenced by political considerations. At no time in their history has there been a suspicion that any political influence was governing their action. No party in power, no ministry, in either of those countries, would dare for a moment to interfere with or to ignore the unwritten law which governs those institutions' and their operations. So I have no doubt that when the calm judTrient of the American people is exercised upon this question we shall be enabled to do what wg—mamt—ta-do, and what we reelwe must do, without reference to political or <4,Wi s r,1 ot.lumes. considerations. I have great faith in the people. faith without good works, however. I do not mean The great admira- tion I nave for the people of this community, and for -49- the people I have been talking to up and down the Mississippi Valley and the Missouri Valley, is -7'.ased upon the fact that they do things. No other character- istic has so much that appeals to me as the capacity to I have sometimes been accused of doing too do things. many things, I think. -aaTrpTargB. V+re-trtr---I-titkkgittrtft—trrrct s L But when, nas consensus of opinion is reached,, when this ---A work of examinaticn and education has been concluded; and when the American people nuke up their minds on t-ne sub J cot tc)--4;a1-..-. .) zottr . „.• ...'S ; .a r. .. -''''''' .tgo t rigsa-44u.ibliaza„,ancLsaal.,14.a.ala* _ (Gz4erto—am41-.10;424...c.aatrisimiiii...apiearibu.se.) ,.......! . ' .)1, t '..-....4; '-1,,r:1 t 2 4 • / . 41 * .' /‘ cA , f 7' t f, r 7/ aP Ah:4- . ". 4- t Ar. e/ , ., * \,.....C. ‘,"** /*;C , 4 - . It is important iwthe interests of the public service 4 that a radical change in the procedure with reference to appropriations sho1d be made,and the Senate is pledged to im• riediate reform in this rerrd. It should be the function of the Committee on Public ..1xpenditures recently created to take into consideration,lonr before the appropriation bills ;s received from the 1Touse of Representatives, the estimates and needs of the various Departments, and report their recommendations to the Senate, in order that responsibilit,/ for (..„; „ extravagancies aitell be clearly fixed. From an investiga- tion more or less superficial l I am myself satisfied that the appropriations made last year could h,ve been reduced at least 0 1 U30,000 without impairin7 the efficiency of the public service. There are periods in the life of a nation '0," • when the spirit of extravagance pervades the atmosphere, and the p':blic money is scattered right and lef', often %.ithout reference to the results to be secure, I hope and expect to see a radical reform in this Cirection. We have within the past few years created many unnecessary burealm and multiplied employees beyond the possibility of ef-icient7,o rk. It is )1)-t pair to t:ay that when the appropyiations for the year 1908 were made, the country had not been overtaken by the . panic of 1907, and it is quite natural, perhaps, that appropriations should have been madD upon the theory that the great propperity of 1907, with its surplus revenues of 1:i1,000,000, was to continue indefinitely. But a different condition existed when the appropria- s tions for the year 1910 were made. It is true that the bills paed without making these appropriations were necessaril k careful consideration and without a general knowledge of r lreasury conditions. The fact that the appropriations were less than the estimates does not relieve Conr7ress from responsibilit.; for their unprecedented e.xtravap:ance. No excuse P \t whatever can be found for similar legislation hierettrtrr. A.- / The conditions under which appropriations are usu411y Tride by 0onr7ress are, perhaps, in part responsible for the wilful wasle of public money. Jach pepartment prac cal] makes its own recommendations independently of all the , theriumL 4, IOW an'd without reference to the total amov.ntOf revenues which can be safely appropriated. vaAbus appro.' I The committecs in charge of theo . ,„ • ation bills apilal-0-41o4444.4pear-Onl -t e needs ;401) •••+, in / 1ir , t of the respetive Departments witlloutre ference A to the total mount of none, availal'ae. unt il after tunit n oppor - h:ts been afforded for t'ne most careful and exhaus tive study of all tne conditions tt surrcund able to L:ive to . ile public 4, problem. WC expect to be a comparative1.7 short time tile fullest inforation wi Lh reference to !ihe experience al,d practical In6;it ods of other countries and of ta.,:a---44444-14-±-etta--- our own. i÷jA, te eateeet ..1.11-44.0ce /hi s Invest,f.:•at ion A most, coijreiensie e1 - t ie s Lvvv—e- ht-gLcA4— subjects t hat h s e 1,& I L facto / r been und ‘'r take clidz;t -4- without color or bias, tfl t o, e da.1- 110 42 fa-XJ- R-42-43 ceees. the -1-1 44—€1-t-t t toolow—it444,-4;;.-1 1.4) , `tte, 10 - 37.- &Z VAA714 4 1 , 1 P4,04 piorie.eeo -,.6.446 . 111 enable ('kt-to give thearious elemets surroundin ils who are interested te problem thorough . 49.9(!rrAtElFW -4 -10g- e a- t 411.‘4ation. tne c rent—mun 4.3ma c% 9 j accept: :/(,)ur thy t.at ion I iI-u4 in mind the opportunity ooe 9hrytip A5-711A2AAL a4 _aiiciagur an‘apeal to tie representative men of this , reat, ; 70q4 section to 4Pc deV to give to the Comi3sion tne advantace of .1.4.st cooperation in securinrY tine ie adoption of a satis- AL,t factory remedial C6 4 Jan of a character 4 44-Cd-tAL ‘24-4,1_4_ n fft s-ettle vo-ert!t:-= L44,4? 2hAeA4. people of this rreat country. r( • • ftrl 1.—.4ftt I -,itr-e-tt--r/--t-4,-t---44' 414A-ea' 31k-To t.n.e men wiluse enterprise, ability and foresight have c ontri 11.1ced to the upbuilding of A creat and prosperous ittikintkalril*T /K -4 ( ' e ir-d/t-e, 4t 4\. Th;c f"4, / At4A—r4)--e&-. 4V4 otze..P..--t-nr—vrtrst 4"--4,11' now the centre of our Yte -4,k) emp ire rt--wnat ein , r74 1-4- t a-aairv " ountrJ, aru.L—of which y4ettor- city metropolis, 1141:GU-4ii pyop-le have more at stake, perhaps, than any equvl number in t..tic 04.4 entire country, I pledr,e the best efforts and judcment of the -44 1_9_ 6c (- - .112-01 , ronetary Commission t*---tp4e adoption of tile wisest and best mone- tary system the world has seen. o express the nope that you Trgib j But in this connection I venture he led IQ feel your own respon- sihility, individually and colltively, for tic satisfactory outcome of our work. FIFTY-EIGHTH CONGRESS. NELSON W ALDRICH. CHAIRMAN. WILLIAM B ALLISON, JOHN W DANIEL. ORVILLE I-1 PLATT HENRY M TELLER, JULIUS C BURROWS. HERNANDO D MONEY. THOMAS C. PLATT. JOSEPH W BAILEY. H C.HANSBROUGH. ARTHUR P GORMAN. JOHN C SPOONER. BOIES 2Cniteb-‹%iates Senate, PENROSE . ARTHUR B SHELTON. CLERK COMMITTEE ON urn ATI-gm n vurt r jrat rT Aerie toz. 4%. cit., • : 110 ivy 'Tv ,T id 1 ou 4'0 : ckriuri:k• UrA e3L 1r. 06!3° 4-Pr ucroirl"' , c arrnittre.:or.,:\ I.C‘4 TL 1•.%1.1 T. 7 kJ 4‘ ,• couuccrycu T 1. ;VG *1 BON; b 'Jr? 44 .." • pdiii (4; OLLOL:11 ELg 1^YfeltAkir aT. cirr‘. T. 6UT 7Lo T u Attest r ore ouo /V •:7,e; ICri orsoLg • bet.tirbto :mut kle7 31. irtriter ro 1 I b709CG r F.NANCE rur mist odis. 1..rn L W r.?c, vetr7v/ rmq Ta 1701A rtc ccizrx.• t Yt itopIT Toque at u (t_Iterr ruo Tiitnn'h 'taut VALI 161/61111 our filtit.7 Re op',7 e\ Iv.; tot.corr.:yr: 19 40- 7" 1- . The list of the proposed publiwations of tne Commission will indicate ta you the thoroughness of the work which we have entered 94, - When this record ive 004*' 6 upon in this connection. submitted to—rola , :40_4 6(-4-45 p44—y-eill—ham-ecardi time to analyze it "efully, we shall take occa- sion to ask your opinion as to what, if any, portion of it y-ou /‘ ;.? deem pertinent and valuable in the formulation of a plan for the United States, and we shall ask you to assist as in making a practical application of qw/i1-- thods or principle 1e to our situation. - ji _ cf---u.-1 7g..6 FIFTY-EIGHTH CONGRESS. NELSON W ALDRICH.CHAIRMAN, WILLIAM B ALLISON. JOHN W.DANIEL. ORVILLE H PLATT, HENRY M TELLER. %JULIUS C BURROWS. THOMAS C. PLATT. H C.HANSBROUGH. JOHN C SPOONER. BOIES HERNANDO D MONEY. JOSEPH W BAILEY. ARTHUR P.GORMAN. :Unita! ..tates -euate, PENROSE . ARTHUR B. SHELTON • CLERK COMMITTEE ON FINANCE ;•T: "T: 1.1,7• t.:*"‘ ccrtroc!, OL bl.T.,' sibl iTcgreTosi 'T. .*:rs 0'42' 1*.;J(1 IP MTV j h."Lj TLCATt : vox Nal 4 ^ tillaT1r "Ta1 "hi avy.To 1 r•triuciut cuff Arriwpio Tu Arc totaljt:Tou t h7rTi' f)t. .• 011 •-• 1. • ,).1. ohgruT . C I frlc ro...74r;c . ;-;.. 4.3 .•.01 ra CO atgvr' tY 1/117 1 tI; 113. ;" sj• " t. otoLonepusaa 11, ;p4 Tar L T tufm Nsoheiesel OLCu nt U • 1! rare brunzairtifwa I • ' JI , a .• ia:7 ; jti e .)r. Pram •• ru•i co: I re 3 0 t)e 31:, re resent the consensus of in- intlAw telliEent oFindon of every sectioli of our c /A great monetary s7stems efion count tve herrn constructed or 4/. 4 Thenever sentially modified • n otner countrirsJ men whose exl.erience and rcsearch their opinion special value :iave been called upon for advic assistance. and Our Commission will 1*14.1 -auuLl;; follow this wise precedent vien te serious vrok c.f construicticn coiainences. ezo -122- Aea That all national banking associations designat ed as regular depositaries of public money sl)ai 1 pay lipisameilt upon all special and additional deposits made by the Secretary of Treasury in such depositaries;s, and all suc , asseci..ticns designated as temporary depositaries of public money shall pay upon all sums of public money deposited in such associations interest at such rate as tl2c- Secre- tary of the Treasury may prescribe, not less, howe ver, thaw one per centum per annun upon the average monthly amount of such deposits: Provided, however, That nothing contained in this Act shall be con- strued to change or modify the obligation of any association or any of its officers for the safe-keeping of public money. i1 C/ 4 'Zce -c L1 , /el o Ark_a_1-01"-• kt,i1 ' lie Zer)q ciPv trffNAL/"- ACQ-01,s 1-tr--1 \-: /1(, , 9 /--e-s 114---1‘24-- ,-kt,,;6:Az, - 1:k-C AL, icz 60L-- Mgr e-:-t ear->ii a eyi -4f , ,t,r_7. a p 11 oy. . j ` efrAr tfirv' 440 1 rft ate, 1-41 ;f1 7r , ( -i t At., cral, 1 1-4 4 eA C /k-u-Attle da4_ 1/724 ‘"`A ! ? , 1)1 0-10Li ts--J f ACL Ly .e-f.c.,1 (7 C * ( )k C C7C- ict -Ck ( tA ) • 4 (>340 Gt. ck.,6 drk,0- 14.. Y\—Qj Q -4:DeNoV (I t 4 t tr-cA.t,t,4.0t4-6_- AZ1 4 4..A71, •• • 're----65:1 liot--- cr- — — -- -i eate [1,!•111 1g) orranization•rthat will be a competitor in sense for ordinary banking business with other institutions. 4 14-zatiet—le an orr-anization limite0 1:owers and clearly defined functions, t 7 exerci3c of. ,7hich will T)e .e helpful to the banks of ,I1c country. I4.-4.uaI serve and not dominate other credit institutions. L ta- / •-• ca it t r -- e Zft I. 1 , -c at 4- AA-40 U--, -.4.42.--td a LA. CtrirO 4.1 4,4 hu.#0 /LA-1P t t C:411. fie t C.e, t.t.\) 0 I ("/ "*. ). 19' 0 4 .-• If rig et.) 4-9-7 c €* F1 4 i fiv-p ereer. 4ce-4,— i5?. ; ) g to- e /I a,dt, ,),/6 ' Et,& 2t,b 41,7 ( ----F- 1 i PAZU-A- C-:I • .1( , 4 k& ' LI+ r C /3A C A_ $442' ••vi dt. 4 _ . p t C.- g4IP 17 L , 4- , Sl a e 44 4,7„c,4-em‘,4•0 4 : / 4.1,etuk 14 • - r 6.. i j* .erir Za L .9 A- 4 4 2 .4 "" ar) Ma g -1 t rIbt AvicMcrir—tiot.t44:04 , , 0.4.4444 ‘e' " I C.A4‘Ae--47 , ,71tcL7 ,tt.A.C'tx-44,4„ X PL-A(it tPc-t4 --- - ( 6z.s• azirtz: eLi e-i-t__Ac . „tkr,„ ci,Li/ , 07 44.4 ikL"'"••••--------"" kjt hZ (NC / NC.*/ I Ic f I / ItCI& 1 441.4.-4-cl , 1' • 0 Li ae--4--c. • t, .gc • t 7,1 ert-4,4 - , They are all important banks from the standpoint of the amount of their capital stock and surplus. The capital of the Bank of England lb S72,765,000, with a surulus of abomt 1.7,000,000; and if we should add the value of three acres of land in the heart of London occupied by the Bank which does not appear upon its books as an asaet, we may say that the capital and surplus of the Bank of England is at least :100,000,000. 1 It is, therefore, as regards its capital, the largest bank in the world. It has often been asked, Why should the Bank of En[-land, which serves a community very limited in tory, and whose diroct business with the public is very 0 small, have one hundred millions of capital? I think the answer is obvious. The Bank of Eng- land is the financial center of Great Britain; but it is much more than that. It is the financial center of the British Empire, with its four hundred millions of people, and with a territory extending around the worl d. The Bank of England is responsible for sustaini ng the credit of this great empire. If we are to,believe what its friends assert so confidently, the Bank of Engl and is the financial center not only of the British Empire, but of the world. It is true, as we all know, that ster- ling bills drawn on London are still the high est form of credit known. Sometimes the banks of Berlin and Paris buy sterling bills at a better rate (and when I say "better", I mean a lower rate) than bills drawn upon Paris or upon Berlin. The high credit which the Bank of England has so long enjoyed is unimpaired. This great central organization extends its ramifications to every part of the civilized world, and exerts its beneficial financial control over a territor y unequaled in extent, and over an amount of business that is excelled only, if at all, by that of the Unit ed States. .11 f4,4-1 A4_414,. / g3 w 0‘.7 A 7 4 -4 7 dr/ , f)tA litt, 4 4 aeC -t.4.41:Cr 1 A tt t"1 I t -t e e ,44-e/teu.. ONTO NER Collection Title e /5o107 Aldrich Series/Volume Shelf/Accession NoIll LC 77-38 (1/70) / 51 4_, , -. ... illa