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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-

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at f
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C-61/1 tz-

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iv:t

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rt

42 ;
43
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at-e

et, ejtj-z,v

/el.ey42L1J4')1
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1-47
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41-

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- 4

fri,(9,€ LA COvc
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4
W-(9)4(' oCrii!
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dtt_D

ot-ere

41
a

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eitr-,

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1,-ry14-1-d

7i

)
tr

tc

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•

ilia
-ft

O

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k/cf-J'
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(164;(71
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ih
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i
7
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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

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6UT 7Lo T u Attest r ore ouo

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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.




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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

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31:, re resent the consensus of in-

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great monetary s7stems

efion count

tve herrn constructed or

4/.
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sentially modified
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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
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precedent vien te serious vrok c.f construicticn coiainences. ezo




-122-

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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.




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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.




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ONTO NER

Collection Title

e /5o107

Aldrich
Series/Volume

Shelf/Accession NoIll
LC 77-38




(1/70)

/

51

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