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NOM ALDRICH ssirtii ta0 . , , 41. 11110 1 , • MISCELLANY A SIMPLE PLAN TO SECURE AN AUTOMATIC ELASTIC ASSET ENIERGEVI (URRENCY To Be Had on Demand and Retired When Not Needed. By LEONARD MA'1"PIIEWS, St. Louis, Mo. Assume an agreement between the United States and the various banks, state or national, and the trust companies members of the various clearing houses of the country can be arranged. To do this the United States must agree to keep on hand and furnish on demand legal 'tender currency to any clearing house in the country, and the various clearing houses collectively must agree to become liable for any losses made by any individual clearing house to the United States. Three steps only are essential to this reformation of the currency: 1st. The United States Treasurer shall be required to loan ally clearing house in the United States, any amount of money demanded to be placed in any city where wanted. 2nd. All clearing houses shall be held liable to the United States for any loan made to any individual clearing house. :ird. Laws and regulations must be made to enable the above to be carried out. This scheme would require no bonds or other tangible assets as security for money loaned, thus saving valuable time and possible loss in selling bonds or other assets when retiring the loans, or perhaps save the failure of a bank at a. critical moment. The clearing house should charge such rates' of interest that would insure a speedy return of the loans, graduating the rate according to the usual rate of interest charged in its section of the country, making it. high enough that the borrower would pay it back as soon as urgent demand ceased, but not later than a fixed time. No doubt in time the interest received on these advances, less a reasonable amount, to be paid the United States for expenses incurred in preparation for the plan, would more than cover the losses likely to accrue, and accumulate a fund with which to form a central national bank, if it. should be deemed wise to do so. In case of loss on any loan by a clearing house, a greater proportion of the loss should be assessed on such clearing house, to make it careful in accepting securities offered. Sometimes cases may arise when it would he important to sustain a failing institution to prevent. undue excitement, even, if the security offered should not be deemed sufficient. In :--uch event, with the approval of a committee, to be appointed, the loss, if any, should be divided, in proper proportion, among all the clearing houses. By the plan proposed legal tender money wiil be obtained current everywhere, in contra distinction to local clearing house certificates, used only with losal banks. Loans will be obtained on demand, without publicity, and returned as soon as possible, and disge•aceful rates of interest being charged as recently seen in the market will not occur again. It would be an absolutely automatic elastic asset emergency currency, issued when wanted, and retired when not needed, and if desirable, the volume of the currenc y now outstanding, could be reduced in vicv the fact it could be so easily increased to meet temporary unusual demands. It may be objected that banks and trust compani es in clearing houses would be unduly favored, but as soon as hey are relieved, they in t urn would loan their money to their customers and thus the whole country would be relieved. This scheme would not prevent panics, but it would reduce their force and frequency, and render it unnecessary to keep up so large a reserve fit ml ;Is twenty-five per cent. Por illustration, suppose a bank or trust company in New York, St. Louis or San Francisco, needed assistance. It would apply to its local clearing house, which, in turn, would, after satisfying itself as to the security offered, wire the Treasurer at Washington to place the amount. to the credit of the party applying for the loan in any city where wanted. This would afford instantaneous relief. No circumlocution in putting up bonds, etc., but instead the combined assets of every bank in the various clearing houses would be liable, beside having the best ability of the whole country to manage it. To do this, there might at first be some difficulty in selecting parties best fitted for the duty, but after a few trials the writer feels sure the right men would be selected to suggest the many details necessary to perfect the plan. It won hl be necessary for the Treasurer to heee bills on hand ready for emergencies, but in denominations of not less than $100,000. If this scheme prevail, state banks and trust companies members of the clearing houses, to obtain the assistance needed, should be required to conform with federal laws governing national banks, as far as this scheme may render it necessary. As the government is constantly deranging trade and finances by its absorption of money through its custom and excise duties, it is only fAir that this plan should have its sanction and support, and it will be an important step toward taking it out of the bunking business. There are many details in perfecting this scheme unnecessary to mention here. • It 'has been said if we did not have n Wall Street, we would have no need of emergency currenc y. This may be so, but the fact remains we have a Wall Street, and many of them. and they will continu e as long as time lasts. A system like the above, governed by the best minds in the naticsa, would have a tendenc y to correct many evils, restrain over-speculation and prevent undue expansion. As to a permanent currency based on asset security and the formation of a great national or international bank (suggested '.)y some), plans have not been formulated, hut either may I e feasible, under similar pro visions, though of questionalile propriety. If the above scheme is adopted, should it be deemed wise to establish such a bank, the government should own one-half ,of it, to be paid out of interest received on loans to banks. The foregoing plan was submitted to our Secreta ry of the Treasury by the writer in January. 1906, and seems to have met with favorable consideration by the special committee of the Chamber of Commerce of New York, which says, on pages 19 and 20 of its report to the Chambe r, under date of October 4th, 1906: "It has been suggested to the committee that a practical method of iiiitting into operation the principle of a bank note credit currency would be to have Congress recc•gnize this principle by authorizing banks, through a voluntary association of I heir own, to make such issues within certain limitations and subject to a joint guaranty by participating banks; the details of such guarant y and the provisions for safety to be devised by the banks themselves, subject to the approval of the Comptroller of the Currency. Your committee see practical difficulty in securing the representative judgment of the bankers to devise the detail.; of such a plan, but we are so clearly convinced of the desirability of the application in some form of the principle of a credit currency that we would heartily endorse this plan if Congress and the banking interest approve it." THE CRISIS AND THE REMEDY. AN OUTLINE OF A PLAN FOR CREATING AN ELASTIC CURRENCY. BY A. E. STILWELL, President of the Kansas City, Mexico & Orient Railway Company. A number of years ago I foresaw that sooner or later the country would inevitably suffer from the financial condition which now exists. The following plan occurred to me as being a feasible way of relieving the situation, and, after taking the matter up with President McKinley, who looked upon it with favor, I sent an outline to a number of prominent bankers, senators and congressmen. They all agreed with me that the plan could be carried out with success, but as there was at that time no disturbance in business, they did not think it necessary to change existing banking methods, and the matter was dropped. I have thought over the plan continuously since that time, and I believe that if the idea embraced herein were put into operation, the banking interests of this country could be placed on a sound basis, so that we would have the best banking system in existence. This would result in restored confidence, and the present stringency would immediately be relieved. THE PLAN. Have congress pass a bill incorporating the United States Bank of Discount, to be a bank of issue, with a capital of three hundred million dollars. The functions of this bank will be: 1. To issue circulation. 2. To discount with its capital the paper of National banks. 3. To insure the deposits in all National banks. Have the National banks subscribe for the stock exclusively, and provide that the stock can be used with the United States government in order to secure circulation, in the same manner that government bonds are now used, every National bank to be required to invest one-fourth of its capital in the stock of this bank; provide that the stock shall draw interest at the rate of three per cent, and that if the interest is not earned (a remote contingency) the government will make up the deficit. The United States Bank of Discount will select one representative from the board of directors of the various National banks. This representative will be a resident of the city in which the bank is located, and it will be his duty to report to the United States Bank of Discount any irregularities which he sees in the management of the bank. The United States Bank of Discount will have the right to examine all National banks, just as the government does now, as this bank insures all of the deposits, and, for this reason must know the risk that it takes. This examination simply adds to the safeguarding of the banking system. The United States Bank of Discount will issue its currency in the following way only: Every National bank will have credit with the United States Bank of Discount for an amount equal to its surplus and capital. This will encourage banks to pay in a large surplus, making an additional safeguard to the entire banking system. This credit may be used as follows: When the crops are to be moved, additional money is required. Suppose, for instance, a bank at Topeka, Kansas, has a capital of a quarter of a million dollars, and this bank wishes to avail itself of the credit which it has with the United States Bank of Discount, the amount being equal to its capital and surplus, $450,000. The Topeka Bank takes to the Kansas City Clearing House, which is the representative of the Bank of Discount in the section, four hundred and fifty thousand dollars of bonds; the clearing house approves the collateral, and gives a certificate to the Topeka bank stating that it is entitled to $450,000 worth of bank notes, to be issued by the United Sates Bank of Discount. The Topeka bank sends this certificate on to the United States Bank of Discount, and receives four hundred and fifty thousand dollars of circulation, paying at the rate of 5 per cent. per annum while out. One half of this issue must be retired in six months and the balance in one year, or the bank must be liquidated if it is unable to retire the issue in that time. When the bank wishes to pay off the $450,000, it sends this amount of National bank notes (not gold or silver certificates) to the United States Bank of Discount, and its collateral is returned by the Kansas City Clearing House, on order of the United States Bank of Discount. This plan immediately creates an elasticity to the currency of the country equal to the capital and surplus of all the National banks in the United States. It will be to the interest of the National banks to build up their surplus, in order that they may have a discount reserve at this bank. Instead of keeping so much money in New York, they will buy high grade bonds, such as the Massachusetts Savings Banks buy, and will keep these for the interest which they earn, knowing that they can be used at any time to secure currency. The United States Bank of Discount would publish each year a list of high grade State, City and Railroad bonds in which all National Banks could invest and hold to secure circulation when needed. This would create a market for a billion or more of high grade bonds that the banks would buy and hold, first, for the interest, and second, as they are the basis for the issue of currency by the United States Bank of Discount. One of the most important features of the United States Bank of Dis- ••••••••••••••11.91 p. passcount will be the insurance of all deposits in National banks. In the be inserted: books issued to depositors in National banks, the following might nt "In case this bank should suspend or fail, the United States Bank of Discou will pay all depositors in full, within ten days." In case of suspension or failure, the United States Bank of Discount will have the following ways of reimbursing itself: 1. The assets of the suspended bank. 2. The double liability of the stockholders. 3. The insurance fund created by collecting from each National bank one-fourth of one per cent of its average balances for the year. At the end diviof every three years the United States Bank of Discount will declare uted to dends equal to one-half of this insurance fund, which will be distrib buted. the National banks in proportion to the amount which each has contri The National banks of each State will elect one director of the bank. have These directors, in turn, will elect an executive committee, which will the entire management of the bank. It should be noted that this plan does not contemplate any change whatsoever in the present National Banking methods or in the relation of the National banks to the Sub-Treasury, but is an auxiliary plan, not calculated to cause the uneasiness which radical changes would be apt to involve. THE RESULTS WHICH THIS BANK WILL ACCOMPLISH. 0 1. An elasticity to the currency, which will enable the banks to take care of the needs of the country during the time of moving crops. 2. A stability to the National banks, as they could at all times call their upon the United States Bank of Discount for currency to the extent of capital and surplus. 3. The insurance of all deposits would result in keeping a large amount of money in the banks which is now kept in safe deposit vaults. This would add largely to the currency in circulation, and at the same time would prevent runs in time of trouble. This insurance of deposits in National banks is as important as fire or life insurance, as safe and proper banking' facilities are a necessary element in the business world. 4. This bank could never become a monopoly, as it does business only to with National banks, and not with the public. Its business will be limited busithe issuing of its notes to the National banks for discount. The only ness which it will carry on will be the making of loans to the government and the insuring of the accounts of National banks. 5. This bank will be located at Washington, and will not be under the al control of any one political party, but will be controlled by all the Nation banks of the United States. 6. It will receive no deposits except those of the government. g 7. The whole country cannot then be made to suffer by the fightin • t• among the men who have been caught in Wall Street. Each bank will know what it can depend upon in time of need. It will not be affected by stock gambling, and will not be dominated by men who have been carrying on their business on a stock-gambling basis. If this bank should be incorporated, I am convinced that it would solve the problem now confronting the country in regard to the banking sys+ em. If at the same time a bill could be passed in congress, making the short selling of stocks, wheat, corn or cotton, punishable by fine and imprisonment, one of the greatest menaces to the business interests of our land would be removed. The people who own the land and grow the crops ought to control the prices, and not the people who speculate for their own profit. We have recently read in the papers that a New York man has made a profit of $5,000,000 by the short selling of stocks. The owners of the stocks did not make these low prices, but men who did not own them forced the owners to sell. When timid people see the stocks which they own rapidly falling in price they are seized with fear, and immediately dump their stocks on the market, thus giving an opportunity to other persons to sell short at a great profit. If it is a crime for one man to sell property which he does not own, but some day hopes to own, why is it not a crime to sell the cotton or corn which he does not own, and thus force prices down, compelling the man who owns the cotton or corn to sell at less than the real value of the commodity? Think of the great harm which can be done in times like these, by rich speculators, who have never done anything to build up the business of the country! The men who, knowing that some concern is struggling to continue its existence, take advantage of this extremity and begin to sell the stock short, are of the greatest harm to the business interests of the land. The stockholders, knowing that the company is having a struggle, begin to fear for the safety of their investment; they see the quotations of the stock going lower day by day, not knowing that the quotations are created by people owning none of the stock, so they immediately begin to dump the stock on the market, thus creating the opportunity which the stock speculator has been looking for. The officers of the struggling corporation have outstanding loans, with the company's stock as collateral, and in order to save their own credit they are compelled to refuse assistance which otherwise, they could give to the company. As a result, the company fails because of the short selling of some unscrupulous speculator, who is only waiting, like a vulture, to devour the unfortunate. The protection of business which would result if such a method were punishable, as it should be, would be of inestimable value to the entire country. A. E. STILWELL. CURRENCY REFORM lit our specific requirements. Our circulation must follow the ways of our development. New X ork city is the financial heart of the nation and all outside banks are the arteries. The New York Clearing House banks are the great central reserve depositories for the banks of the whole country. When financial stringency is greatest, panics begin at the New York heart, and unless An Elastic Currency Preventing stopped they naturally spread over the nation. To prevent panics in New York City Financial Stringency. is the grand achievement, for it saves the nntion financially—and it can be done by Congress in a very easy way, by authorizA Rewritten Suggestion, Pubikhed Dee. 10, 1906. ing the issue of Treasury Certificates. The terrible and disgraceful condition of our finances is certain to continue unless TREASURY CERTIFICATES. there is legislative action. Let Congress authorize the Secretary of Congress, with its record for sound money will not now authorize an unsound currency the Treasury, at his discretion, and all As—there will be no disastrous credit note cur- sistant Treasurers under his control, to receive government and other authorized bonds rency. As a permanent United States bank is im- and securities, as collateral from national possible in our Republic, the only other fi- banks, as the Treasury is doing now, and nancial institution is one we already pos- issue therefor Treasury Certificates, subject sess—the Treasury Department with its to call. equivalent branch banks, the Sub Treasuries The principle is sound; circulation based in the Eastern, Western, Southern and Cen- on government bonds, exactly like national tral States. A United States Bank would banks; the government, in emergencies, to change our whole National Bank system on include other bowls and securities. which rests our national debt. Government Practice creates a system; Postage bonds would then fall like British consols. stamps developed Fractional currency, and The United States could never again bor- l'learing House certificates A‘ ill develop row money at two per cent. Treasury certificates. It is the evolution of the fittest. FINANCIAL STRINGENCY. These Treasury certificates state that the Our financial situation is peculiar. For required government and other bonds and about eight months in a year, the nation securities are deposited with the United has plenty of money, owing to our increas- States Treasurer, and are receivable for ing per capita circulation, so abundant that all the purposes authorized by Congress, we often have one per cent. money, but in who will determine their denominations, the other four months there is always a and interest charges. stringency caused by the extraordinary deAN ELASTIC CURRENCY. mand for money, required by larger Fall business, moving the crops, and great inUnder this Certificate plan the United dustrial expenditures and financial re-ad- States Treasurer and all Assistant Treasurers throughout the nation, most especially justments. foreign bank- at Now York city, will, under the direction All the foregoing shows that ing systems, suitable for foreign nations, do of the Secretary of the Treasury, supply TREASURY CERTIFICATES or up in the Treasury vaults until required to the daily and legitimate demand, issuing supply a new and urgent demand for money. withholding issue, or calling loans, to reguctly CURRENCY REFORM. late the money rate, thus creating perfe ic government money. elast Now, when these certificates are supplied sury becomes a Bank of Issue, to the New York Clearing House banks, The Trea Bank. the chief value of a United States through the New York Clearing House Asd on gold; silver Gold eertifivates are base tion, by a Treasury of unlimited issue, notes socia certificates on silver; national bank confidence is strengthened at that great cennt bonds; Treasury certificates ter at once, all financial requirements and on governme securion government and other bonds and re-adjustments are completed, and panic is ress. ties authorized by Cong nted. bank preve Treasury certificates and national The issue of these sound Treasury cerboth isnotes, both based on securities, and tificates to prevent a panic is vastly suit of national banks, should sued for the benef r to issuing three per cent, certificates and be perio be receivable for identical purposes of indebtedness after a panic. ar in appearance. simil The present unavoidable, (minplicated, ify, faeilitate and quicken the cumbersome, clumsy and unlawful financial To simpl the Clearduties of fhe Assistant Treasurer, methods between the national banks and the arrange and ing House Associations could would be simplified, harmonized, to De- Treasury it the collaterals to conform subm and legalized by Treasury certificates. instructions. In a word, the napartment This, then, is the sound principle of curwould get Treasury certificates rency reform—not to inflate our increasing tional banks Aisociations. through the Clearing House per capita circulation, inching it more unClearing House certhus illustrating how reason of its inelasticity, but, cer- controllable by proates would develop into Treasury tific for periods of financial stringency, to h If this plan becomes a law, any tificates. vide temporary Treasury certificates, whic Treasury certifieates is one can see, as the advantage of security, elasticity he prevented. have money, that money panics will and unlimited issue. The procedure for issue is very easy. The REDEMPTION. officials of the New York Clearing House Treasury Certificate plan the Under the n will confer and arrange with the on the re Associatio redemption is completed at once of the Treasury to supply the Treas- Secretary turn movement. The Secretary of for the New York cer- Treasury certificates will announce a date on which the ury Clearing House banks, which, being Corwill commence to be called as istificates of national banks throughdates of respom tents sued, or otherwise, graduated by country, will afford instant ned securi- out the the loans. Payment for the retur superior to the delay in a United kind of relief—far ties will be in certificates and any . $100,000,- States Bank money conveniently at ham I. Say New York clearing House Association The issued, then 000 of certificates have been is the rock on which to build our refuge returned to *100,000,000 will be promptly from financial storms. Any stray certifithe Treasury as called. The Senate Finance Committee should to . will quickly find their way back cates not forget that action of sonic kind is vital under the g,nidance of the inthe Treasury great dangers ahead—a new war anged RS There are terested national banks, and exch y Treasury and a deluge of r the debt, an empt received, exactly as is now done unde ! the gold greenbacks law in redemptions on account of W. H. CONKLE. ,000 of reserve; and the en tire $100,000 Dec. 2, 1907. locked Treasury certificates will be tightly The Urgent Need of an Expansion Joint in our Monetary System or the Consequences of Doing Business With an Inelastic Currency A Paper Read to the Passaic Board of Trade by Robert D. Kent, President of The Merchants Bank of Passaic, Passaic New Jersey, June, 30th, 1910. My excuse for this paper is a general banking experience of thirty-five years and during the last ten years of that period a somewhat thoughtful consideration of the special questions involved. The expansion joint is a well known device in mechanics. If you should walk over the Brooklyn Bridge you will see a place where steel plates slide over each other in the roadway, and if you should ask the purpose they serve you will be informed that it is an "expansion joint," to allow for the effect of heat and cold in expanding and contracting the metal of which the bridge is built. Your watch has in it a device known as a "balance wheel" which is an expansion joint to enable it to do its work correctly regardless of the expansion by heat or the contraction by cold. Please note that while the name is "expansion joint," the thing really is an expansion and contraction joint. Bear with me for a little and I will endeavor to make use of this idea of the expansion joint in mechanics to illustrate some of the ill effects we experience because we have no expansion joint in connection with our circulation of currency or because in the terms of the old, but I fear not generally understood expression, "our currency lacks elasticity." Last year the value of our principal crops amounted to 4,632 million dollars. Practically all of this is harvested and marketed in the fall: hence we require great amounts of money to "move the crops." We hear that term very frequently but I do not think many of us realize what is implied by it. Several years ago I was . in Nebraska, and with some other men NAV.1c St21 “11g to drive out into the country from a. town. on the r'Ailroc%cl One of our party who lived in the town called our attention to a man driving into the place with several hogs in his wagon. Ile said, "that man will sell his hogs and get twenty-five or thirty dollars for them, and will spend five or six dollars for groceries and supplies, and take the balance of the money back into the country to his home ten or fifteen miles from the railroad. The next week he will repeat the operation. The money he takes back with him each week will go to make up a fund which will last him for his family expenses until the following spring." I then woke up to the fact that several million farmers were doing the same thing all over our broad land, and I had a larger conception of what it meant to fumish money to "move the crops"—the cereal and other products of the West and the Cotton of the South. If the farmer had a bank account and deposited his receipts to his credit with his bank, such money could be used over and over again, and when the active shipping to the East was over the surplus money in the banks of the western and southern towns would in a comparatively short time find its way back to the money centers of the country, and the banks of these centers would send their surplus supply to New York. We can have no accurate statement of the amount of money needed each fall to move the crops, nor just how long it will be before it gets back again to the money centers; but a fair estimate would be that 200 or 300 million dollars is required each fall for this purpose, and that in January, libruary and March nearly all of the crop-moving money will he restored to ordinary circulation. Now it is in order to inquire where the large amount of money needed eacl: year is obtained, and at what cost. To a very limited extent do the banks at the money centers carry much cver their legal reserve from which to contribute. They do, however, have considerable in demand loans wl.ich are called in, to the disturbance of the security market. Next they refuse much needed accommodatioo to merchants and manufacturers to whom they would willingly lend at other seasons of the year. This helps some more. The banks also collect—all maturing time paper which may have been purchased from coaimercial paper dealers from April to July. In other words, financial strain is caused on every hand. If by such efforts in our own country, money enough is not obtained, we aiso disturb the money centers of Europe, as I shall show later. In a short paper such as this must be I can give only outlines of processes. Intelligent bankers and business men can fill in the details. So far I have dealt with the trouble caused by lack of the ability of our currency to expand when special funds are needed. Now for a few words on the r,sults of the inability to contract when money is unduly abundant. In the Spring and early Summer of 1909 when the crop-moving money had all been returned to the I' 2 to 2 per cent. In the money centers, there was a considerable time when call-money was plentiful at f discussing the increased early spring I was in the office of a Stock Exchange House in New York, and supply of money with a member of the firm,.he remarked, "In two or three week., the banks will he crazy with money"—his idea being that almost any rate would get it, and that the banks woold not be severely critical as later than this, the ; to the character of the collateral required. For a period of two or three montl,f a dealers in Commercial paper were going about among the business houses of New York, and. probably elsewhere, offering amounts of from $25,000 to $100,000 or more on the single name paper of the firms at 31 per / 4 cent. It needs but little imagination to see how this condition would lead to. undue inflation of. the prices of securities, to the flotation of unwise ventures, and to the undue use of credit by the commercial and manufacturing community. James B. Forgan, President of the First National Bank of Chicago, in an address says, "In the long run . commerce suffers more from periods of over abundance of money than from those of scarcity. he origin of each recurring period of tight money can be traced to preceding periods.of easy money. Whenever money becomes so overabundant that bankers, in order to keep it earning something, have to force it out at abnormally low rates of interest, the foundations arc laid for a period of stringency in the not far distant future, for then speculation is encouraged, prices are inflated, and all sorts of securities are floated." During one part of the year we are distressed to supply 200 or 300 million dollars extra currency During the other part we do not know in what legitimate way to use a considerable portion of it when its.special service is over. In other words we do a volume of business vastly changing in size with practically a fixed quantity of currency. Does not this show the need of an expansion joint? In support of my statement that in our annual needs we disturb the money centers of in full a special cable dispatch from London to the New York Times published March 19th, Europe, I will quote of this year. It will be found full of instruction for us, and is under the heading—"To Steady the Money Market." "London, March 18.—In connection with the Bank of England's advance in the official week, The Statist will, in to-morrow's issue, draw attention to the action of one of the mostdiscount rate this joint stock banks, which if pursued systematically and on a requisite scale, may have considerpowerful English able influence on the future course of the money market. Last Autumn, when the American demand forced the Bank of France to conic to the assistance of the London money market, the joint stock bank in question sold freely of gold which it previously accumulated, thus diminishing the demand on the Bank of England. "As it did previously when the metal was cheap, the bank this year is again buying gold. The Statist outlines various reasons which may be actuating the Directors, but inclines to the belief that their main object is to steady the rates, instancing the claim of the Bank of France that by not greatly varying the rates it conferred incalculable benefits upon French trade in all its forms." "If the joint stock bank to which we refer," adds The Stalls!, "can succeed in preventin g the extreme oscillations in the rate of discount to which we have long been accustomed, it unquesti onably will perform a great public service." "In conclusion, The Statist urges co-operation among the London banks to secure has a peculiar point at the moment, when there is a wide-spread belief that the Bank this object. The article of able to make its official rate effective, for up to the present the discount rate in the open England will not be market has not responded to the increase in the official rate." The other nations of the world do not have such agricultural crop to handle each year as we do. They 11C ed, for an elastic curreiley. The:A- lev.v.er need, however, this statement I will quote from a recent issue of the I Vail Street Journal in is provided for. In F upport of Question was being considered. It says, "Every country in Europe having a which the Postal Savings Bank ing system which prevents panics and specie suspension, and affords inexhaus Postal Bank has a central bankof note issue and its relation to foreign markets, for meeting unusual demandstible resources through its power ." It is not entirely correct to say that we have no expansion joint in our method of relief is Clearing House Certificates, hut we never use that method currency system. One such until the case is so desperate that a panic is upon us and we face disaster. These certificates have been resorted to but three or four times in forty years, and have averted financial catastrophes. But they fall short of serving us to the best advantage even when issued, because they do not go from city to city, and because they are not issued in small denominations for wages and, small transactions, except as they were so used in a few cities in 1907 in direct violation of law. Clearing Ifouse Certificates as generally used, while not in Niolation of law, are not authorized by it. The present Emergency Currency law is an earnest attempt to furnish us with elasticity, but it is not zidapted to our comparatively moderate extra needs each fall. It is more for the purpose of helping us to recover after we have been seriously hurt. A few changes in the law would, I feel sure, make it extremely useful. During the past two years we have, as a people, made considerable advance principles governing the circulation of currency. Many bankers and economists arein our knowledge of the studying the question, and undoubtedly some adequate form of relief will ultimately be devised. In order that the proper solution of the situati(m may be arrived at it is necessar ness men become Posted on it; that they form clear ideas of the troubles we endure y that bankers and bit;ifrom our present faulty syste, and of what is need ed i n the way of relief. An intelligent public opinion m is necessary in order I lult wise leaders may be followed, and the plans and remedies of unwise leaders avoided. The Monetary Commission has devoted much labor to the question, and while its views have not been made known, it has collected much valuable informati(m. The opinions of banking and currency experts on the question arc instructive. I attention fo a few who have written on the subject and 11 ave, in my judgment, shown will therefore call your a comprehensive grasp of it. Mr. Paul M. Warburg, of Kuhn, Loeb & co., has written ably on the question and plan of central bank. William A. Nash. the President of the Corn Exclmnge Bank of,Nev presents in detail a Y()rk. wrote a vain possibilities of the enlarged use of clearing house certificates able paper on the which was published in tile New York Times of Feb. 14, 1910. Mr. Victor Morowctz has written a hook on "the Banking and Curnlic y proldem of the Lnited States." It contains valuable information, and proposes a plan of relief. Mr. A. J. Frame, of Waukesha, Wisconsin, iii several speeche.: and papers has ably presented some of the important points involved. a In the Banking Law Journal beginning with November, 1909, Mr. Maurice L. Muhleman gives a of a central bank which shall be free from political control on the one hand, and from speculative interests planthe on other. These writers are all thinking in the right direction, and while differing in details, all clearly see the necessity of and aim at an expansion joint. Andrew Carnegie says: "Americans have many advantages upon which we may plume ourselves as being in advance of other nations, but we have at least one humiliation to lessen self-glorification. Our banking system is the worst in the civilized world." Mr. James G. Cannon, vice-president of the Fourth National Bank, of New York, in a paper published by the Monetary Commission, quotes, and apparently with approval, the remark of a prominent banker and economist who says: "The truth is that responsibility for the panic of 1907 lies at the door of our currency system. No other adequate cause can be found. We do business by the modern system of bank credits, but we have failed to supplement this machinery with the means for readily converting bank credit into cash." In an editorial under date of May 10, 1910, the New York Times says: "Only a little time ago we repeatedly called attention to the fact that the volume of our hank notes persisted in increasing unnaturally. The depressed conditions of trade and the money market called for reduction of the volume of credits and currency, yet our bond-secured currency persisted in coming out. The banks held two per cent bonds.on a basis which necessitated making them earn something more than their interest yield, and the notes based on them were forced into circulation under the most unwholesome conditions." In an editorial review by the same paper of Mr. Paul M. Warburg's plan for a Central Reserve Bank, on March 25, the following occurs. "It is now understood that what used to be referred to proudly as the best currency system in the world is not worthy the name of system, and bears no likeness to banking in any civilized country. Americans know no better way of moving the crops than with a permanent supply of currency and credit, maintained at great expense in idle times, only to be inaccessible and inadequate when time of need arrives. It is plain how turning idle resources into the security market inflates them abnormally. It is equally clear how the withdrawal of those resources for use is as disturbing and conspicuous as possible. Not only money market experts watch our security markets, everybody watches them. We are made a nation of security speculators against our wills. We are constanly making and unmaking security bargains to supply ourselves, or our customers if we arc bankers, with cash when we or they want it, and to absorb idle funds. Rarely do foreign banks move more than a fraction of one per cent. Our money rate doubles or triples itself, and sometimes it reaches cent per cent. People used to a staple market cannot reconcile such antics with solvency or sanity." Mr. Warburg in a pamphlet entitled Thc Discount System of Europe says, "Our own system being absolutely inelastic, we have become accustomed to use as a substitute the power of our banking community to borrow in Europe. We thus use Europe as an auxiliary financial machine, but we forget that our weight has become so great as to threaten the safety of the European machinery when we are compelled to use it to its utmost capacity in order to provide for our needs. Europe, in sheer self-defense, refuses under these circumstances to let us borrow, and by the simple means of refusing our finance bills renders our reserve of elasticity useless. Thus instead of securing additional assistance at the most critical moment, we find ourselves -suddenly forced to dispense with a most important part of our machinery upon which we were wont to rely in normal times." Congressman Fowler, of New Jersey, has for some years been an enthusiastic currency reformer, and with persistency and eloquence his impressed his views upon us. He is strong on the expansion side but when he proposes methods of contraction he seems to he at sea and beyond his depth. One very serious result of our present system is, that on the approach of bad business times each individual wisely managed hank begins to accumulate cash and reserve by contracting its loans in order to be prepared for anticipated stringency. Thus when the business community is in special need of accommodation the banks lend less than usual. As a result conditions are made worse. The banks are not to be blamed for such action. Indeed it is necessary for the protection of themselves and their depositors, as they have no central banking system to which they can apply later on for relief when help may be urgently needed. The consequences of an unscientific monetary system are widespread. When undue contraction results from a previous expansion, as shown by Mr. Fargan's statement, merchants with falling sales have to sacrifice stocks to realize funds to meet obligations, and the weaker ones frequently fail. Manufacturers curtail production, and discharge hands. These, unless thrifty and with means to keep them going art reduced to poverty. Their purchasing power is cut off or diminished and in consequence retail merchants, find their business seriously lessened. Many men who have made small payments on the Purchase of a house through failure in business or loss of employment, are forced to relinquish their investments, and lose what had been put into them. in other words, society is so interwoven that all classes suffer when bad financial and business conditions prevail. The writer has a plan to propose, and while it does not cover all the ground, it will go a great way in checking the evils of our over-supply of money at one season of the year, and our shortage at the other, and until we have a Central Bank or some other system to answer the same pnrpnce. will greatly help the situation. Indeed, it will be beneficial even after a more comprehensive plan is put into operation. Something greatly in its favor is its simplicity. It could be put into operation by four or live gentlemen in New York at a fifteen -minute conference; and yet I challenge any banker or writer on economics to prove that it will not be greatly helpful!. The plan is that not lc,: than froir (o- five of the leading New York banks unite to discourage the accumulation of money in New York in on ;Wont March to September, by lowering the rate of interest they will pay for balances from out-of-town 1,anl;: and others to whom they pay interest to the extent of one-half or nue per cent or more if necessary. and that from September to February they encourage the shipment of .-rnt)ney to New York by raising the rate to correspond with its supply and the demand there may be for it. If four or five of the larger banks in New York would adopt the suggested the others would be forced to follow their example. This policy of changing the interest rate as cago and St. Louis, the other Central Reserve Cities, to take similar in turn would compel the banks of Chiaction. The banks in the ordinary Reserve Cities—Philadelphia, Boston, Albany, Pittsburg, Cincinn tion, and would be compelled to govern their methods accordiati, and the rest would feel the force of the acngly. To indicate the wide fluctuations in the rate for call money within the past three or four years, I would state that the average rate for November 1905 was 8 2-3 per cent, in December of that year WA per cent, in November 1906 101 per cent, and in December 151 4 per cent. 4 / / per cent, and December over 12 per cent. As a contrast to this In 1907—October 201 2 per cent, November 16 condition, there was a period of six months or more in the spring and summer of 1908, when the average rate was about 11 2 per cent and for six months / in 1909 the average rate was about two per cent. Under these widely varying conditions in the money market change in the rate of interest which they pay for bank balances. the New York banks practically make no Not having lowered the rate when money was almost a drug in the market, they are not in a position to raise it in order to attract funds when they are greatly needed. How much better for themselves and for different policy were adopted! How different this condition the general business interests of the country if a is from ed regarding the Bank of France, which claims that by not greatly that shown by the statement I have quotvarying its rates it has conferred incalculable benefit upon French trade in all its forms! The estimated per capita circulation for May of for the year, it would seem that $33 per capita would this year was $34.59. If that is about the right average be correct for the Spring and Summer, and that about $36 per capita would serve our purpose in the Fall and Winter. What we need to do with the unnecessary $3 in the Spring and Summer is as far as possible, to put tion of ninety or one hundred millions of people to keepit out of business, or compel each one of our populafor use again in the Fall. But no, its owner must have it in his or her pocket or stocking, and bring it out mately it goes to New York, attracted by the interest, interest on it, and so it goes into his bank, and ultigested blood in the human circulation, leading in one and there becomes congested and breaks out like concase to unhealthy speculations, and in the other to various bodily disorders. I believe that the policy I advocate would pay method, and the interest received by the out-of-town each individual bank in New York better than the present but even if there should be some slight loss in either banks would average about the same as they now receive, by the advantage of doing business on a more stable direction, it would be compensated for many times over basis. If we individually have any money to invest in standar d securities we may investigate the history and operutions, and the ability and honesty of the management of any the conditions connected with it entirely satisfactory, hut after railroad or other large corporation, and !Ind all all this is done our investment becomes largcly a matter of betting on the money market. It is sometimes said that strong financial rency circulation in order that they may make interests desire the continuance of the present system of curlarge Of this 1 have no proof, but I will say this: that profits out of the violent changes in the money market. a basis the present currency laws and the practice if strong financial operators desire to do busintss on such of the New York banks will greatly aid them in accomplishing their purpose. A few years ago we heard much on the subject It cannot look forward to that distinction until our of New York becoming the money center of the world. do business on broad lines and in harmony with the currency laws are perfected, and its banks are prepared to proper share in steadying the money market of the laws of supply and demand, and are willing to do their world. It is imperative for the best results in business that legislation be enacted to eliminate the evils incident to our present rigid supply of currency and credit. Business men who realize the hazard of commercial operations as now conducted should urge the remedy—the Central Bank under strict governmental control. Meanwhile. the interest-regulating coalition such as I have suggested would provide immediate relief and would constitute as well a valuable permanent feature of our machinery of monetary regulation. The Bache Review A SUMMARY OF THE GENERAL FINANCIAL AND BUSINESS SITUATION PUBLISHED EVERY WEEK BY J. S. BACHE & CO., BANKERS Vol. 7 NEW YORK, DECEMBER 2, 1911 No. 22 CURRENCY REFORM PROGRESS. — STRENGTH OF U. S. TREASURY.—IMPORTANCE TO OTHER COUNTRIES OF A SOUND SYSTEM HERE.— FAVORABLE FACTORS IN THE PRESENT SITUATION. — OBSTACLE TO REVIVAL WHICH EXIST.—THE TURN.—THE NI ARK ET. Currency Reform Progress. The Bankers' Convention at New Orleans last week, approved by a practically unanimous vote the National Reserve Association plan. The bankers have never before agreed upon any one remedy. The importance to the country of this approval can hardly be overestimated. Without such co-operation the enactment of legislation could not be effected. It is fair to say that the several thousand bankers present were, at the end of the sessions, convinced of the remarkable adaptation of the system to existing conditions, whereby 20,000 separate banks might unite in and control a Central Institution, and still retain each its own independence. The plan was widely discussed outside of the sessions by individual bankers among themselves, each seeking to ascertain how his particular institution would be affected and benefited. The commendation ,)f the plan by the bankers to their customers throughout the country will have good effect in educating the voters, and eventually the politicians, in favor of legislation. It is a reform which will really benefit the people from high to low more than it will the banks, as far as direct, as well as ultimate, profit is concerned. The prevention of panics alone will save the country thousands of millions of dollars. The liquefaction of credit produced by allowing banks to accept customers' drafts under proper arrangements, instead of discounting their notes, will put life into millions of otherwise dead assets. The acceptances can be turned into cash at central discount markets, where the money of the world will seek them, while under the present system the quick assets of the country in the shape of good business notes to an enormous amount lie a dead weight in bank vaults, awaiting maturity. The United States will be placed upon a modern and sound basis for doing business, and its enormous bankable resources will for the first time be made available to give us the prominent financial position we are entitled to. Strength of the U. S. Treasury. vflie London "Statist" called attention recently to the fact that the accumulation of gold in the United States Treasury exceeded anything ever before seen in any country. The total gold held amounted to more than 1,200 millions and the silver to nearly 500 millions. This is the largest amount of gold held by any institution in the world that does a banking business. The Russian Treasury is the next largest holder of gold, at 690 millions. Next comes the Bank of France, with 615 millions. The holdings of these last two institutions otgether amount to only a little over 88 millions more than the gold in the United States Treasury alone. A very large amount of our gold holdings in the Treasury is, however, idle, as far as any assistance it gives the country's business as a basis for credit. And the correction of this is one of the great benefits which will accrue to the country from the adoption of the National Reserve Association plan. A good portion of the gold holdings of the Government will be deposited in the Reserve Association and will become at once a source of strength to the whole banking system; and will also safely expand the banking facilities of the United States to an enormous degree. Importance to Other Countries of a Sound System Here. This in turn will be of the greatest advantage to all the other commercial nations. One has only to read the standard financial journals of (a her countries to note that our progress and condition is watched with the keenest attention and that great prosperity throughout the world depends upon a favorable situation here. This is no reason for being puffed up, but rather shonld make us ashamed at the enormous waste and danger of our Currency system. Nations are now so close together that for some years our unprotected reserves and the general unsoundness of our banking position in time of stress is as much a source of anxiety to others as to ourselves. Favorable Factors in the Present Situation. The strong position of the Treasury is one of the factors making- for rapid recovery from lagging business progress. We have also in our substantial foreign trade position another elemcnt of encouragement. The balance of trade is heavily .11 our favor and e,,utinnes to grow. The heavy loans which New York has made to 141.1M , tand as a reserve for easy money after the first of the year. ; Two years ago the country switched gradually from extravagance to economy and the latter ii a been prevailing- increasingly ever since. The country as a whole has learned how to get more out of each dollar and each pound of effort. These are lessons which should last. Fortunately they have niq had to bc learned under the privation of hard times. Without prosperity, the country's business has continued, through a comparatively depressed period, in quite large volume. ltusiness for a long time (part (4 the economy lesson) has been conducted on a basis of not carrying an ounce or a yard more of "stuff" than was needed to keep customers gi.ing. The result has been to get stocks of goods down to the basis of conntry-store specifications—just enough to take care of (lay to day 1,tlyers. The effect of all this must be, some time, to start I hings up with a rush. Obstacles to Revival Which Exist. Such a movement cannot take place until wise, conservative business men can see the way ahead clear to pursue their business without danger of happenings which will be liable to obstruct the path and stop progress. The obstacles in view at the present time are few in number. limy formidable they are is worth considering. Those obstacles outside of our own country, are concerned with the question of the Italian-Turkish war, the Chinese revolution and the rt,ction left over from the Morocco settlement. War and revolution are like fires in the underbrush. They may go out very quickly or they may burst into flame. The probabilities in the present cases are for a gradual smudging- out, free from general disaster. The Morocco seL lement has left a sore situation between (iermany and England, with prf)spects of gradual healing. If we had no troubles of our own, it is probable that the incidents enumerated would have more weight. We here, however, are more acutely concerned with two things—the outcome of the Government's Anti -Trust campaign with Congressional accompaniment, and more remotely, the final results in Tariff changes and the Presidential contest. There is little doubt that the former has been the main obstruction to revival of confidence until very recently. The apparently firm resolve of the Administration to complete wide dissolution of trusts and so restore old-fashioned competition with all its dangers, for a time overshadowed all other disturbing factors. It is apparent that a change has come in the acute character of this anxiety. The turning point was the declaration of Mr. Roosevelt, which distinctly discredited the attitude of the Administration in unmistakable terms. The Turn. Here was the Originator of the active Anti-Trust movement, declaring that the policy of his successor was too severe, too sweeping, and altogether unwise. Previous to thic declaration there seemed to be no hope. The highest Governmental power was apparently determined to force combination wide open and to re-establish antiquated and destructive competition. Mr. Roosevelt has a very large following. His trumpet blast has called a halt. Confidence, whether well founded or not, has begun to reassert itself. This is shown in all directions. General business is feeling it. If business once more gets a fair start, its progress will be irresistible. Tariff changes will not stay it, and even the Presidential contest, provided both parties name good candidates, may not affect it. The Market. The broad view of the situation shows a much more confident feeling in all directions than has been manifested for some time. This has extended to the business world and buying movements in Steel and Iron and thorughout the various other trades, are beginning to be of more substantial volume. The course of money after the first of the year, it is expected, will be toward ample supply. The meeting of Congress is looked forward to, as always, with some misgivings and tends to keep sentiment conservative with regard to any new enterprises. There is, however, a feeling that the scares here will be produced mostly by loud sounds, without material injury. If, as is believed, the turn has been made and the worst is over, the trend of the market should be very gradually upward, with irregular reactionary interruptions of longer or shorter duration, produced by political events. J. S. BACHE & CO. J. S. Bache & Co., Bankers Dealers in investment securities, 42 Broadway, New York. Members of the New York Stock Exchange and of other leading exchanges. Private wire connections with important cities in the United States and Canada. Branch offices: Philadelphia, Atlantic City, Albany, Saratoga, Troy, Buffalo, Rochester, and Montreal, Canada. Cable address, Julebache, New York. Lists of securities or suggestions for investment or reserve purposes, forwarded upon request. Corre9ponderce solicitc Quotations furnished for the purchase, sale or exchange of Government, State, Municipal and Corporation Bonds, Guaranteed Stocks and other Investment Securities. Travelets' Letters of Credit iss.ted available in all p,,rts of the world. Foreign Exchange. Cable Transfers. Funds awaiting investment accepted and interest allowed. Commission oniers executed in all markzts. The Review is sent on application to those interested, for a reasonable time without charge. Those desiring to receive it thereafter rtguirrly may subscribe, payidg postage only, namely, 52 cents per annum. It is, however, sent each week, without charge, to customers requesting it. illrleehlp financial 1Review "THE BACHE REVIEW" Vol. 15. NEW YORK, MARCH 11, 1911 No. 32. The Review is sent on application to those interested, for a reasonable time without charge. Those desiring to receive it thereafter regularly, may subscribe, paying postage only, Namely, 52 cents per annum. It is, however, sent each week, without charge, to customers requesting it. J. S. BACHE & CO. BANKERS NEW YORK THE MEXICAN SITUATION.—TARIFF PLAN.—CURRENCY HEARINGS.—FOREIGN REVIEW.—THE OUTLOOK. The Mexican Situation. This swing of thousands of heavily armed soldiers to the Mexican frontier is exciting and picturesque, and naturally stirs the imagination. As far as it is for the purpose of discipline and practice, it should be very effectual. The speed and the precision with which it is being effected is reassuring as to the good quality and condition of this one-quarter of the whole army, and as to the workings of the new methods, which have been introduced since the Spanish- merican War. The official explanation of the movement at first was that this was a mobilization of the troops to test the magnificent machinery that has been built up to respond to just such an emergency, and which has been long in preparation. It may be said that everything is working with the utmost smoothness, eight thousand officers of the State militias have been invited to witness the manoeuvres, and that there is nothing to Conflict with the manoeuvre theory. That the place chosen for the demonstration is the Mexican border is very praiseworthy. This near-war demonstration will have a salutary effect upon the conduct of the Mexican insurrectos and gives them notice that no nonsense will be permitted. It also helps to stop aid and ammunition from crossing from Texas to Mexico. If President Diaz is well and continues to stay so for three or four years, or longer, all the better. If not, and through his death or disability, anything threatens the lives and property of Americans and of other nations in Mexico, the troops will be a first aid. Outside of the manoeuvre proposition the navy is taking a hand by concentrating near the Mexican coast a fleet of warships of some importance. Thus far, all this is police business, and plenty of good police are like an insurance fund. If you are well insured you rarely have a loss. It is part of wisdom to have the police and to have them on the right spot. It is estimated that there are 75,000 American citizens and $1,000,000,000 of property, that they and other American citizens own. A widespread revolution in Mexico would place the citizens and the property in great jeopardy. English, French, and to some extent German interests there are also large. The slow-burning insurrection which has been going on in that country for a year or more, unlike former spasmodic risings of this character, has been increasing instead of being snuffed out as has heretofore been done by the strong hand of Diaz. The real reason why the revolution is not ended is that over the thousand miles of border between the United States and Mexico, there has been a continual flow of arms, ammunition, and men to give constantly renewed inflammation to the running sore. It is time for the United States Government to stop all this and the action now taken will accomplish this promptly. Tariff Plan. If the plans for tariff revision have been arranged as indicated by the Washington dispatches, the outlook is favorable for a reasonable minimum of disturbance. It is reported that the Tariff Board will co-operate with the Ways and Means Committee on the schedules which the latter may decide to take up. Within a few days the Ways and Means leaders and the Board will begin conferences at the offices of the Board and go over the material that is available. This is practical co-operation between the President, who absolutely controls the Board and its information, and the Democrats. This is not politics, but it is common sense. The Board, it is expected, is to form definite ideas as to what the tariff rates should be. These ideas will represent the President, and if approved by the Ways and Means Committee, will be adopted and passed. Bluntly speaking, any other course will court the President's veto. For those schedules demanding action, it is said the Democrats are settling down to three; cotton textiles, wool and woolens and iron and steel. Protection has become so intergrown that changes in one class will affect many others to a degree. Rates are interlaced. It is like an old garden. Cutting out one tree dips the roots of many growing things. But this is inevit:able. The wounds will have to be allowed to heal as best they can and the ultimate results accepted. There is no .other way. To expect an American Congress to revise the whole tariff scientifically is beyond the possibilities. harmony on these three schedules, and dependable agree..ment to limit action to these, would rob the extra session of .much of its power to harm by reason of unsettling discussion as to the whole tariff. Currency Hearings. The Monetary Commission is holding meetings with reference to arranging hearings at which banking bodies and individual bankers may appear, and possibly also representatives of Chambers of Commerce. It is not definitely announced that the Aldrich plan, which is only unofficially before the Committee, will be the subject of the hearings. It would be a mistake not to have this plan the prominent basis of discussion. It is the first concrete business proposition for currency reform on scientific lines, and especially adapted to the needs of the United States, which has ever been presented with high authority, and it possesses the elements on which the Currency and Banking laws may be remodeled with eminent success. It is no argument against this method of procedure that the Commission itself has not officially adopted it. That is really an advantage because, as it is, the Commission is supposed to be advocating no set plan, but is in the attitude of the open-mindedness of a high court. The hope of action eventually depends upon keeping the question out of politics and for that reason, as the proposition of Currency Reform is entirely a business one, the Chambers of ammerce and Boards of Trade of the whole country, if organized, would be especially equipped to exert their influence for the passage of a perfected measure. Foreign Review. The Revue Mensuelle of the Swiss Bankverein is just at hand, covering the month of February. The situation in America is reviewed in the following, which is a liberal translation: "The economic situation expresses itself in improvement and the reaction which set in in the course of the second half year of 1910 seems to have touched bottom ground. Industrial slackening, in conjunction with the good crops of last year, and the large export of agricultural products, has already created a great monetary abundance in New York. Besides, in the course of the last week, American securities have found an outlet more easily on the European market and a number of new issues has already been completed with success, while many other operations are still in preparation. To this we may add that in the leading circles of American economy they do not despair, in spite of all the difficulties of a final understanding with regard to the various problems in suspense (trusts, tariff, freight rates, banking reform, etc.) and that they will probably succeed in finding an equitable formula that may not hurt beyond measure the reasonable interests of the capitalistic world. In consequence thereof, the Wall Street market has been more animated of late and a marked improvement has little by little accentuated itself under the influence of greater purchases by the public. Various new groups have recently come forward and plans of gigantic extension are being studied by certain railroad companies, such as Union Pacific, Pennsylvania. and New York Central. -To a certain degree, the publication of the,clauses of the new commerce treaty, based on the principles of reciprocity submitted for the gratification of Canada and the United States, has likewise stimulated; this agreement tales into account primarily an economic rapprochement between the two great countries of North America; in the meantime introducing preferential duties which will facilitate, above all, the export of agricultural products from Canada to the t inited States and the This import of manufactured Yankee articles to Canada. is, in fact, being animatedly discussed in the parliaagreement ments of Washington and Ottawa, but in spite of the violent opposition made against it, it is probable that after a little it will receive the sanction of the respective assemblies. For the moment it would still be hazardous to attempt to appraise the whole economic import of the treaty, but it remains certain that this convention of reciprocity, if ever ratified, will not fail favorably to influence the development of the external commerce of these two countries, and while these factors may be diametrically opposed to the cherished plans of the apostles of Britannic imperialism, the proposition has nothing astonishing in it, inasmuch as it has now for a long time been notoriously public that Canada would pursue her own ways before she would consider imperialistic interests." The Outlook. The monthly report of the Steel Corporation shows unfilled orders totaling 3,400,543 tons on February 28th against 3,110,919 on January 3ist—an increase of about 290,000 tons for the short month. This indication of the continuance of a satisfactory trend is in line with the developments in general business, although many industries are, like the stock market, in waiting attitude, but expecing better things. The reduction / of the Bank of England's rate from 31 2 to 3 per cent. coincides with the freedom of money all over the world. The total bank clearings for February show a reduction of about 2,200 million dollars from January, but this includes Stock Exchange transactions and taking these into account, the figures are about normal as to general business. Taken in conjunction with the money situation, this proves that we are able to do a normal volume of business and still have large reserves of idle money for financing at the right time, and forecasts most satisfactory financial conditions whenever other matters right themselves. The market holds remarkably well considering the various uncertainties hanging over it and gives indication of a rise ultimately whenever these are cleared away. Speculation is largely invisible and the pending trust cases, combined with the possibilities of extra session disturbance, keep both investment and speculative sentiment conservative. All this is reflected in the quiet of the market. Whether or not the supreme Court decisions will cause much of a break is now a question, but we believe that good stocks bought on any recessions and held, will show good profit. J. S. BACHE & CO. September 30, 1911. THE FINANCIAL AGE. is immediately reflected in the raise of the discount rate, and this will continue until the equilibrium between business and the capital to adequately care for it is re-established. It may be seen from this illustration that credit will expand and contract, and safely do so when properly mobilized for the.necessities of business. Foreign countries have long practiced this custom successfully, while we have relied solely upon the cash represented in our widely scattered reserves, or our ability to assist each other. A CENTRAL INSTITUTION. It has been believed that it would not be possible to devise such a large financial institution which would not be dominated by speculative interests, and it has been feared a central institution would be controlled by politicians. It has been argued also that it would promote inflation, and that such a central institution would prove a serious competitor for existing banks. The objection has also been raised that the plan which would finally be submitted would be one for the benefit and protection alone of the large city institutions, leaving the banks located in the intermediary money centers and in the country dependent entirely upon the benevolence of banks located in the large cities. The latter we have always maintained would bc manifestly unfair. and would defeat the economic principles involved in the subject, and also the passage of such a bill. We find instead that Mr. Aldrich and the commission have met the most progressive thought of the day, and have popularized their plan by tiL,king tlik_ proposed ast•oelation so representative in character as to conform in many particulars to our present form of general government. This will be particularly noticeable in the method of choosing its directors, which not only gives due representation according to capitalized interest, but spreads the representation over all parts of territory, giving to the various commercial and agricultural interests their proper representation It is recognized that the beneficia effect of such a system will be extended into every branch of business in the country, including that of banking—giving a stability and liquidity to our commercial credits, and thereby place the business of the country upon a more economical and substantial basis, enabling us to compete with foreign countries and ultimately occupy a leading place in the financial world that a country of such unbounded resources, ingenuity and (wry should enjoy. PROVISIONS OF THE PLAN. The plan proposed by Mr. Aldrich involves the establishment of the Reserve Association of the United States, chartered for 50 years and capitalized at from $150,000,000 to $300,000,000, of which one-half is to be paid in and the balance suhject to call of the managing board. The amount of capital varies somewhat with the timber of banks who may become stockholders, as such banks are reqnired to sulcribe for an amount equal to 20 per cent. of their capital. A bank cannot sell or transfer such stock, hut if it should go out of business the Central Association is obligated to redeem its stock at its fair valuation; hence, it will be secn that the control of the institution is placed safely beyond any influence of Wall Street or speculative interests. Washington has been named as the proper place for the location of the head office. *lb k 41°6' o. 11 It is provided that the country shall be divided into fifteen districts, with a branch of the Reserve Association located in each, bringing the Central Association within ready access to all of the banks of the country. thereby avoiding delay in the transaction of any business with the association. The plan also provides for local associations in each district, which shall be composed of ten of more banks. The Central Reserve Association, the branch associati,in and the local association are each contr,,lled by their own boards of directors, and the ingenuous method provided for the election of these directors is an effectual safeguard against any possible control of the Central Association by any individual or any class of hanks. In each of the boards two classes of directors are provided for. The first class constituting a majority are voted for without reference to the amount of stock held by the bank in the Central Association, one vote being cast by each bank. The second class, constituting a minority, are voted for by the banks upon the basis of the number of shares of stock held in the Central Association; hence, the larger banks would have a larger voice in the election of the minority members of the board. However, in order that the Reserve Association may have the benefit of the advice of those engaged in other lines of business than banking, it is provided that additional directors shall be elccted to represent the industrial, commercial and agricultural interests of the country, and in We the wide scope of the rrnposed 1,1an, it being intended to serve every intert st in the country on an equal hasi;— still further placing the bank beyond the c‘litrol of designing persons. In the Central Association the governor and two deputy governors, the Secretary of the Treasury, the Secretary of Commerce and Labor and the Controller of the Currency are ex officio directors. However, it is proposed the governor shall be elected by the directors of tbe central Institution for life, unless removed for cause, and this places the bank beyond any possible control of politicians. The deputy governors to be appointed by the President of the United States. The profits of the Central Association are limited to 5 per cent. to member banks, the remaining profits after providing for a surplus go to the Government. It will be seen that the plan is not one which makes profit-making a vital or primary feature, but is more for the general good of the entire public. The organization of banks to conduct business in foreign conntries Is also authorized. The stock of such an institution may be held by. National banks, but the amount of stock so held shall not exceed 20 per cent, of a bank's capital. It is very important that an avenue be opened to permit American banks to finance their vast foreign business instead of continuing the plan of permitting foreign banks to alone enjoy the profits of this business. It is not intended that the Central Institution shall accept deposits except from the Government and such banks as are members of the association ; nor is any interest to be paid hy it upon deposits, though it has been wisely provided that such deposits with the Reserve Association shall count as reserve for depositing banks. 613 There never was any reason why the Gove..nment should take the money out of the cl. arnels of trade and lock it up, nor why hould on the one hand finance itself through the National banks, and on the other refuse to handle its business through them. The country has time and again seen the bad effects resulting from the expansion and contraction resulting therefrom. Instead of the Reserve Association being an active competitor of other banks of the country, it will be able to lend most valuable aid to such banks at all times by the purchase of notes and bills representing commercial transactions. Paper of this character which has only 28 days to run may be rediscounted direct with the Central Association, bearing, of course, the endorsement of the selling bank, and while it may be suggested that the paper held by a country bank usually has a much longer time to run, and hence this provision ‘vould be of no avail to such a bank, yet it must not be overlooked that though the paper may have originally had a longer time to run, the country banker can arrange his maturities exactly the same as the city banker, and have paper with a maturity of not more than 28 days coining in daily, so that should he find it desirable, he can substitute one for the other until such time as lie has been able to make collections and retire his paper at the Central Association. The amount so discounted shall not exceed the capital of the bank, nor any one loan exceed 10 per cent. of a bank's capital and surplus. Commercial paper maturing within four months may also be sold to the Reserve Association by member banks, who roust endorse it, and it must be guaranteed by the local association of which the bank is a member. In times of unusual stress the Central Institution may accept the direct obligation of a depositing bank, gna-anteed by its local association, which shall be properly secured by collateral. But such loan shall ri.)t exceed three-fourths of the value of the collateral. It is provided in the proposed plan that the rate of discount shall be uni form throughout the country; hence, it will be seen that the plan operates with fairness and equality to all, and that every bank in the country would have access to and enjoy equal privileges of the association. It will be noticed that in the plan it is recognized as a proper and necessary function of banking to temporarily, at least, assume liabilities in the ordinary conduct of their business, in opposition to the restricti% e policy now enforced both by law and cestom in :his country, whereby banks are wont to resort to subterfuge rather than rediscount their paper, or Lorrow money, on account of the .possibility of criticism from the department or by the public. I believe it perfectly prpper for a bank to exercise this function, to meet the legitimate requirements cif ;its customers, and the fluctuating condition of its business. The Reserve Association is also authorized in the plan to discount accept ances, issue votes, buy bullion and tran, a foract eign exchange business, and National banks are authorized to accept short time commercial paper drawn upon them. In the authority given to the Reserve Association tu buy acceptances and the power given to National banks to create such paper is one of the most important and necesf;ary changes in our present system. 614 Continuing, Mr. Reynolds enters it to a comprehensive and detailed expositio i of the Aldrich plan, the features of • Mich are, in the main at least, familiar to the readers of TIIE FINANCIAL AGE. Discussing the changes in the methods of conducting business which are likely by the adoption of the plan, he says; Distinction will lie made between commercial and investment enterprises, and the two will no longer be indiscrimnately merged in one evidence of debt as is now the case with promissory notes. It may be difficult in the beginning to break through the cordon of long usage and ancient custom, but the progress of business shows little regard for the antiquities, and a perfection of any new system will naturally introduce innovations. It will also be noticed that it is the purpose of the plan to place the funds of banks in assets which will be liquid in form ; that is, that loans will be male upon existing values which, when turned, will meet such obligations. In other words, it is fundamental in any system which has for its purpose the regulation of the flow of currency in its expansion and contraction to meet the commercial needs of the country, that loans which are to be substituted for such currency shall be made only to borrowers who can pay at maturity, thereby guaranteeing the ultimme retirement of the currency. In the promissory note system, wliich is in vogue in this country, it has been demonstrated time and again that too little thought had been given to the ability of the borrower to meet his obligation at maturity, hence placing the banker in the unfortunate position of being unable to meet the demands made upon him, thereby disturbing public confidence in him and the banking business generally. The banking business in this country has been one of its ,greatest developing forces, not excepting any other element. The bank has accepted deposits and has loaned the funds into all channels of business and development, standing in the breach between the depositor and the risk entailed in extending the credit to the borrower; hence, it is proper and fundamental that all of its loans should be put upon the safest basis possible, with the widest market, in case of need, for rediscount, and that its paper should bear such names as have the reputation of meeting their obligations when due. As a logical and necessary sequence to the establishment of a central association such as is suggested, must follow the maintenance of a discount market, or system for the handling and distribution of the various evidences of indebtedness which it is expected will come into use and displace largely the unliquid form of credit now embodied in the promissory notes. For a complete and convenient method of making such credits available, without awaiting their ultimate payment, the bill of exchange has for a long time, both in the country of its origin and for fordo use, p-oven its adaptability. By its use the banker adds his credit to that of Lis customer's and all previous signer, and a debt which in the first instance was a contract between two parties only, and in that stage tied up and withdrew from activity the amount of capital it represented, now becomes a fluid and quick asset in the hands of the holder. Wh(re formerly the dealer in any line exerted his credit by the use of the promissory note, either through his brol er or directly with his bank, and renewA his THE FINANCIAL AGE. outstanding indebtedness from year to year, thus covering losses and concealing his true condtion, such practices will now decline, as the weeding out process will begin by inspection and scrutiny of bills of exchange offered on the open market. The open sale and certainty of market for such bills will afford an avenue of investment to the country banker in safe and liquid bills available for the purpose of strengthening his reserve without depleting that of his neighbor or city correspondent, and without the discredit to his business that now attaches to rediscounting his paper under our present system. As a corollary, the general financial situation in the entire country will be maintained in a more nearly normal condition at all times, for if the country banker in quiet times in his locality can find safe investment in bills on the open market, his surplus will be so invested instead of accumulated in the hands of his city correspondent at an unprofitable rate of interest to him, while its plethora acts as a temporary expansion in the locality holding it, and gives an abnormal impetus to speculation. A greater advantage from the use of bills of exchange as contemplated will accrue in our foreign commercial relations, even than what we may expect in our domestic transactions. If bankers' bills be legalized, they can be made equally attractive to foreign investors to those now used between European traders in tneir international business. Under existing conditions we have no form of commercial investments to offer the foreigner, and hence can have no rate analagous to other countries; our rate being for promissory notes made by individuals, firms or corporations that may or may not have ratings accessible to foreigners, they cannot with safety handle them. If, now, bank acceptances in the same manner that promissory notes are now used were made legal, the foreign banker and investor would be in a position to accurately determine the desirability of the offerings, and an immediate market for them would appear. Brokers would at once commence to purchase such paper, first for their bank clients, and for private investment, and probably last on foreign orders when rates made it inviting for the foreign banker and investor, or the conditions of exchange warranted the use of cash in that way. No legal enactment or organization will be needed to authorize or empower such a market to do business. The selfish opportunity to make a legitimate profit in commissions will be sufficient to initiate and maintain it, if the Government will liberalize the banking act to the extc-t of permitting banks to accept paper for their customers. This would give to these bills an international character and be a passport for them to the money market of every foreign nation. Such a feature in their use, while not only opening to our commerce the use of foreign capital. will also assist in placing us on a parity with foreign nations in maintaining our gold reserve, a functiol which will be required of the Central Association. That the proponents of the plan had this always and clearly in view is not at all surprising, as it is the vital thing to be accomplished when we seek to so arrange our business relations as to place ourselves Vol. XXIV., No. 14. on a par with other nations in the competition for business. The only international legal tender is gold, because when settlement of balances due from the individuals of one country to those of another is required, that alone is accepted. When, therefore, the commercial interests of the United States, having exported all the surplus grain, cotton or other products that the home market can spare, still finds a balance due the foreign traders or their bankers who have accepted bills for account of Americans, the settlement must be made in gold, unless foreign investment in our stocks and bonds will make up the deficit. If, now, bills of the character described were offered, their rate of discount, owing to the very conditions herein described. would be sufficiently high to attract foreign investments, and our balance would be settled in bills instead of the basic money. The interest, therefore, is the fumiamental factor in the transaction and the discount rate fixes the amount of compensation the investor receives as interest. In answer to the objection that operations under the note-issuing power of the Reserve Association might result in undue ii,;lation, Mr. Reynolds says that the same condition exists at the present time, but in a worse degree than could exist under the iv °posed plan. Circulating notes besides those issued in lieu of the pr.sent National bank notes will be issued by the Central Association only against assets arising from commercial transactions, and their issue will only occur after the commercial transactions which call them forth have takm place, and remain out only as long as the debt which called them into existence will exist. When that is met, the association will receive in its payment either gold which will immediately become an offset against the notes, or its own IlUttS in extinguishment of the debt, in which latter case such notes will be retire,.:. The only inflation which can result is by an increase in the gold reserve. This is a healthy condition of finance and arises normally from conditions of demand and supply in trade and commerce, and is not recognized as currency inflation in any sense of the term. It must be remembered that the same rate of taxation on circulation will remain for that part outstanding which is secured by bonds of the Government. and a tentative plan is proposed by which the Government will tax the further issues when in excess of a certain specified amount and then only in proportion to deficiency in the gold reserve held against the issue. As long as the issues are confined to the needs of actual commercial transactions, they will either retire themselves by completion of the trade and payment of the debts, or return an equal . amount of gold to the reserve. In either case, their use has been for legitimate business, and no tax will be necessary to keep them within proper limits; hence, none should be levied by the Government. In conclusion, Mr. Reynolds said : The plan proposed would enable banks to convert commercial paper into cash at any time, operating through the ordinary channels of trade, the contraction and expansion exactly meeting commercial requirements. Bu‘iness would 1)- handled upon a more comprehensive basis, and the needs of industry, commerce and agriculture would be properly met without dis- 4 1411 ALDRICH'S "CENTRAL BANK" SCHEME DENOUNCED. “Central Bank in Disguise, Says exSecretary—Means Wall St. Control." "SPECIAL TO THE NEW YORK TIMES. " "PHILADELPHIA,Jan. 18 119111—Leslie M.Shaw, ex-Secretary of the Treasury,regards as vicious Senator Aldrich's new bank reform plan. In an interview to-day Mr. Shaw said that the Reserve Association of America, which Mr Aldrich makes the principal feature of his plan of revision, is in fact " the same central bank which Mr. Aldrich and all the interests, Wall Street in the lead, have favored for years." 4 * ' “How the INTERESTS Will Control." "Suppose a bank at Spokane needs help. It will submit its commercial paper to one committee after another until it finally reaches Washington. Here it will be passed upon again, and, if accepted, currency will be shipped. This ought to reach Spokane before the receiver makes his final report !!I, but help need not be expected under thirty days. "The plan is not intended, however, to help Spokane. If Spokane wants help it should ask its New York correspondent, and its New York correspondent may get help from the central institution. "A steel plant is being built in Seattle; it owns large deposits of iron in Nevada and in British Columbia, and very large coal deposits in the vicinity of Seattle and on Graham Island. Does any one doubt that if this company develops into a rival of the United States Steel Corporation its credit will be good and unlimited at every bank in touch %NW) the central institution until it has become somewhat extended, when suddenly, and at a critical and opportune time, its paper will be no better than was the paper of the Tennessee Coal and Iron Company in 1907? History will repeat itself, and another possible competitor will lw absorbed. "Such an institution can fix the price of cotton, wheat, and every other product. It can enCOUrage t lw lmnks to loan 15 vents iwr pound on cotton or Iliscournge their loaning more than 7 cents. It Call 4.14tablitiil or ruin the credit of any indivklnal or corporat kin dependent. upon credit. Such an institution, whatever its name, puts the business of the United States of A merica abmolutely and irretrievably in the hands of Wall Street. "I am personally very fond of the Senator from Rhode Island. I have eaten at his table, slept beneath his roof, and I have planted a tree in his magnificent park. He is a mail of extraordinary ability. His family connections are very distinguished and his business affiliations are of the best. As an adroit legislator, as distinguished Inin) a eonst ructive st at Osman,I think he stands without a peer in the history if the United States. Iiis new currency plan is admirably adapted to CONCEAL its purpose." * * A Notable Proverb from Farther India. II. that knows not and knows not that he knows fool. shun him. not Ile that knows not :111(1 knows that he knows not is ignorant. teach him. He that knows and knows hot that he knows is asleep, wake him. He that knows and knows that he really knows is wise, follow him. "CURRENCY CONFLICT" —Said (;1RP71:7.1) in 1876. The following is a brief excerpt from an exhaustive article (18 pages) entitled "THE CURRENCY CON-. LICT from the pen of PRESIDENT (;ARFIELD.—At" 'antic Monthly, February, 18Th: " * * * Third. A legal-tender note not redeemable, but exchangeable, at the will of the holder, for a bond of the United States bearing 3.65* per cent. interest, which bond shall in turn be exchangeable, at the will of the holder, for legal-tender notes. In order that this currency shall be wholly emancipated from the t yranny and barbarism of gold and silver, most of its advocates insist that the interest on the bonds shall be paid in the proposed paper money. This * * is regarded as THE GREAT discovery of our era. * "Mr. Wallace P. Groom, of New York, has characterized this currency in a paragraph which has been so frequently quoted I hat it may fairly be called their creed. It is in these words: "'In the interchangeability (at the option of the holder)of national paper money with government bonds bearing a fixed rate of interest, there is a subtle principle that will regulate the movements of Finance and Commerce as accurately as the motion of the steamengine is regulated by its 'governor.' Such PAPER MONEY TOKENS would be much nearer perfect measures of value than gold or silver ever have been or ever can be. The use of gold or other merchandise as money is a barbarism unworthy of the age.'" *In 1876 3.65 per cent (equal to 10 cents per day on $1,0(N) was a judicious rate. Interest on such "interchangeable" bonds should NOW (1911) be equal to, say, 4, 5 or 6 cents per day, on $1,000—W. P. G. Food for Serious Reflection. and the interest added to If (INE dollar he in the principal annually not semi-annually, as in Sa vin.fs Banks),the follow ing results, as the accumulat ion of one hundred years: *I, 100 do do do do do do do do 1 per cent. per annum,$ 2X 3 do 19% 66 6 do 3403 44 12 do 84,675 do 21 2,551,799,404 at Creditor vs. Debtor Nations. Crud i tor Nations "grow fat" under false systems of finance which rapidly impoverish DEBTOR nations—unless the latter are large owners of virgin soil, etc.,etc., which may give 'TEMPORARILY ) practically unlimited natural resources. That DEBTOR nations should STIF l'I DIN permit creditor nations to obtain possession so largely of their products w it bout properly reducing their aggregate indebtedness, indicates crass ignorance on the part of tbe former. The fact that the value of exports of the United States, for many years past, have exceeded the value of our import s by hundreds of millions of dollars, annually, and that at the same time our indebtedness to foreigners remains stupendous ( through the payment of usury at excessive rates—the outgrowth of FALSE finance ) is a matter of which a civilized people ought to 1w greatly ashamed.—WALLACE P. Gttoom. The Science of Money BRIEFLY Set Forth. From the N. V. Mercantile Journal, July 3, 184j5. 'In the interchangeability (at the option of the holder) of National Paper Money with Government Bonds bearing a fixed* rate of interest there is a subtile principle that will regulate the movements of Finance and Commerce as accurately as the motion of the steam engine is regulated by its 'governor.' Such Paper Money Tokens would be much nearer perfect measures of value than gold or silver ever have been or ever can be. The use of gold or other merchandise as money is a barbarism unworthy of the age.--WALLAcE P. GROOM. " *Subject to change after due notice." "‘ 4 eee _---0-ce , e , -e--0.-et" /z-ee Z4 -,4 - --d_Z- -e? 77-a-eirt ?2-t--erf ,..-e‹:--',-e41 ).--c*.e., •1 ( 447g-.0X-Ce: r404.e, , _,4 ,i,-,...e- ,4„..a 4 / ,,.. -t , V , 4f.c 0 ep'A77,-Clf— .,,1ei l .,,e-Z/t e cZ.1740 .",--is. le.ce , 4 e.e. 0 1 -r:-(•16-:: OPeeAn . e.4.•€,' -,^_-<7-"-% --4 •,4G C-4 , 1 :G.9 a-'-.C.C/2 !•Z4 ly-*, te .1_,?'. ,4 --e "---EA-Ve-//-/2-L,--42/ 0 , I -f f czy 0 C4:4 -e-1 2.4 -1 erg; C.4.4,0Ze46.4 0 • ed _,,t-,t-6 / -ii--,,,,-,,,z.ecele.:,77, 1z443. ' ' eZe cz Le , t2o-cAe 7 eZ.t • *Ze -1(4-edd , z z __4__)eXe, < CfG:71.ce -7-07 cZ-4-aeff, „e. ( f v 2 Zez-&-e7-2-r,-1 7 ' 17 5O ,6fr7v. : 7 Z-00011 ' ,0 Poverty, with its resultant environment, has been,from time immemorial, the basic cause of greater demoralization, misery and wrong-doing than that chargeable, primarily, to the crime of drunkenness. WALLACE P. GRoom. Some EXCEEDINGLY Important Facts. Since .it is a fact that National Governments (only and singly) have the recognized right to "coin" (i. e., fabricate) Money, it therefore becomes a solemn, an inoperative duty of such governments to use and to safeguard this important function and thus provide necessary Legal Tender for the discharge of monetary obligations throughout the several realms, respectively. Paper has been found, in practice, to be thoroughly-well adapted for use in "coining" (i. e., fabricating) Money. The value of Money "coined" (i. e., fabricated), of paper, will be uniform and as stable as the National Government which coins it, and adequate for the use of all the people properly interested therein. Its volume will exactly and constantly equal the Currency Needs of Commerce in every "nook and corner" of the National domain—provided such Money tokens are made interchangeable in sums of, say, one thousand ($1,000.) dollars, and multiples thereof, at the option of the holder, with bonds of the Government coining it, said bonds bearing an equitable rate of interest. Money tokens of this character will be found, beyond comparison, a sou nd,honest,justice-prom otinglabor-sa ring Currency—in times of peace and in times of war. A National Government should never enter into the banking business. It is wrong for Governments to lend money or credit in any form or in any degree whatsoever to individuals or private corporations while it levies taxes of any description for revenue. An IDEAL Use of Superlatively-Good Money. The United States, coining superlatively-good Money as fully set forth elsewhere, may properly loan to each of the several States, upon requisition therefor, a maximum of, say, ten dollars per capita, receiving for the loan bonds of the States, respectively. Said bonds should bear interests at three (3) per cent, per payannum (or less), payable periodically. The principal may wisely be made say, able at the option of the maker as well as payable on demand of the holder, ed) two years after formal notice. The use of Money thus "coined" (i. e., fabricat to the several States, may be restricted to by the U. S. Government and loaned rate of retiring outstanding bonds of the respective States, which bear a higher works. interest, and for payment for doubly approved public All of the Money thus coined by the National Government, being interchangee rate of able at holder's option with Government bonds, hearing an equitabl available as an ideal "Reserve." interest, would make such bonds Facts--Mathematical— ofGrave Importance. National affairs) of 100 years, can surely "If capital, for a short period(in interest (formerly called usury) added to the principal yearly (less have simple set forth below: frequently than by Savings Banks) it will increase as Per Cent. per Annum Increase No. of Times Times Greater than at 1 Per Cent. 2)4 One 19 Three 124 34034 Six 30,791 84,675 Twelve 927,927,056 2.551,799,101 T wenty-four in the increase at the several rates of interest' "The very great difference worthy of largest consideration in connecnoted above is a marvel of marvels. It is tion with the Currency Question. interest,' when the element of risk "If it be true that an equitable rate of insurance for the return of the principal—not rent (which should be considered as is less than 3 per cent, per annum, for the use of Money) is positively eliminated, and upward on large sums of money in ordinary business payments of 6 per cent., bankruptcies. Hence the very great need of affairs must, as a general rule, lead to nts by the Government which will surely wise and equitable currency adjustme rate of interest to the great benefit of lenders as maintain(not by usury laws) a just by all that to put the latter (the geese well as of the borrowers, for it must be conceded commission is to cause great loss to the Nation. which lay the golden eggs) out of NOTABLY-WORTHY PULPITS. Unle s own ha ve commendable desires and suffi, cient knowledge of mundane a ffa ins, affecting everyday life, to cause them to be fairly-robust and true citizens, they cannot adequately till "Notably-worthy Pulpits." The teachings of men who allow themselves to become so obli SI MIS of important matters, terrestrial,as to lack practical knowledge thereof, will not, in the nature of things, receive much considera Om by intelligent men—regarding ANY subject. Preachers accept the sacred service of teaching and by so doing SOLEMNLY promise to seek WISDOM, and seek diligently, that they may he ABLE to teach (to radiate) truths relative to rational duties of men to the7r fellows--and thus their duty to God. The Master Faith: "Inasmuch as ye did it not to one of the least ol these, ye did it not to me." Those who ought to know and doubtless do know, make exceedingly sorrowful 04410tements to this effect: Of each 1,000 persous who die In New York City, more than 300 die prematurely their lives being shortened many years by over-work and semi-starvation combined, the result of dire 'raven y. More than 100 of each 1,000 ( performing little, if any. USEFUL service) also die prematurely as the result of over-eating and various indulgencies. These unfortunate conditions grow chiefly front exceedingly unjust distribution of the products of labor promoted by FALSE finance which is the natural outcome of injusticebreeding Currency, loosely called Money. Rabbi Stephen S. Wise, doubtless having in mind a LONG line of weary and disconsolate human beings who stand in the street and WA IT at midnighthours, almost regardless of weather, for a dole of bread, recently remarked at a notable public gathering, as follows: "The pitiable thing in New York is not the An-ead line but the dead line- whk-h you cannot see." The preachers, who are thoughtless as to ter= restrial affairs and therefore fail to recognize the very grave significance of these vastly important matters, are GRIEVOUSLY at fault. Important benefits would result if Pulpit-teachers should earnestly ponder the subject and then cooperate, at least to the extent of writing a few words to U.S. Senators and tot heir respective members of the House of Represent at ives,* urging the exceedingly simple, 4•01114NrVIllive and SORELY needed Legislation asked for in a letter written by Mr. Wallace P. Groom, under date of October 3, 1911, to "President , William H. Taft and members of the Congre s of t he United St at is'' addressing them as "Honored cogu ard ians." To facilitate the iii port ant work,copies of this letter are inclosed herewith. THINK ! ACT! It will be noticed, doubtless, that Mr. Groom emphat icany declares, in substance, t hat the in ion of a "Sound, Honest, and in every way Just icepromot ing Currency." so greatly transcends in importance all other Secular matters, which need t he earnest at tent ion of mankind, as to be beyond con:pa rison. With equal emphasis he states that the Legis * And to President Taft, also. lation required to establish a practically'perfect Currency in the United States, under conditions existing at this time,is simple to the last degree. This highly favorable condition is evidently due to earnest and potent work done in the Sixties, Seventies and Eighties of the Nineteenth Century. Some say it is Providential. It is certainly VERY fortunate. In another connection Mr. Groom states that "boys while in their teens ( if fairly-free from blinding prejudices, and simply possessing mediocre brain power) should te able to understand the Currency Question promptly when set forth ( even very briefly) by strictly honest. men of average intelligence." In the letter of which copies are herewith enclosed, as stated above, the metal gold seems to have been ment lotted quite incidentally, if not intentionally ignored. It is fair, however, to assume that the writer thereof is specially gratified that Thomas A. Edison, the Sage and greatest expert in Metallurgy and the uses of metals in the arts and manufactures, declares that gold is almost without intrinsic value and that he has, through the press, also suggested that its appropriate use is the gilding of picture frames. And further that Mr. Edison has called attention to the fact (which should be known by all instructors) that the commercial value of gold is, in very large degree, artificial, the current market price thereof being almost solely due to the laws directing the unlimited purchase of that metal and its Coinage by the United States and Great Britain at figures designated by those laws which most absurdly make gold, when coined, Legal Tender throughout the respective in of the two Governments named. With the foregoing facts in mind little need be said regarding the exceedingly complex, impracticable and grotesque mechanism of the proposed Central,— What-do-you-call-it ?" 1. e., The Aldrich Plan." It will be countenanced only by the thoughtless, out'side of this ex-Senator's U. S. Monetary Commission, its paid emissaries and others who hope to become direct beneficiaries. Promotion of the unholy scheme underlying the work of that Commission has, thus far, cost the United States, directly, MANY thousands of dollars. It is unworthy of commendation in any of its features. Only condemnation of the monst msit y is due. The ends sought by ex-Senator Aldrich (and his partners in this scheme) are not permissibIe in a country of enlightened freemen. It is earnestly hoped that the Preachers, far and near, may recognize it to tle a bounden duty to gi‘e earnest considerat ion to the matter of being robust in true citizenship and that they may consequently render active service in promoting education along lines of practically-applied common sense, and thus honorably till"Notably-worthy Pulpits." It is firmly believed t hat by properly-developed, thoroughly- \ Christ ian, act hit y regarding terrestrial a ffa irs men- N. timed herein, that the hold of the Churches upon the masses would be strengthened. GREATLY. Expressions of opinion by Preachers relative to the matter set forth in this paper or con) is especially desired by the Education Promoters Association— correspondence office, 104 Fort Greene Place, Brooklyn, N. Y. City. One hundred ($100)dollars will he paid by this Association to the first person who •ucceeds in submitting to it a clear demonstration of material error in Mr. Edison's s tement in re the intrinsic value of gold as mentioned above. That the whole truth of le matter should tw widely declared is important to everybody. Will also pay $10 .00 to the person who first delivers, say, an mince of material, it or imported, properly certified to be a TRUE" Stand ard of Value." t , (pro ‘ill, Respectfully submitted, tea c,orpt 4cizza2-6-57? ,0771,0 4,d/ J2 ) 1 alZ0-'saktto-ni Brooklyn, N. V. City, October rd, 1911. President William H. Taft and Members of the Congress of the United States Honored "Co-Guardians": Thanking he President and many Members of the Congress for kind consideration shown, permit the undersigned to address you, collectively, regarding- the Currency Question, yet again. As the inauguration of a stable, justice-promoting Currency is the mos/ in/PO/Ian/ SECULAR matter that can engage the attention of mankind, it should receive the very best attention from legislative Co-guardians—honored by election to service of high degree. Neglect of duty, on your part, as such Co-g-nardians, in the matter of establishing a Currency upon an honest,commonsense basis is a VERY serious matter. Pardon the writer Nu adding the declaration that all ',ally worthy Citizens, of notable intelligence, will naturally seek to know, also to teach, the TRUTH in relation to this subject of PARAMOUNT importance ; corn bating erroneous and injustice-breeding practices in connection therewith, however ancient they may be. Kindly note, with care,par/ of a letter, of comparatively recent date, addressed to the President by the writer or this letter and repeated here, in sul;tance, for convenient reference in connection with further observations, to wit : "The tiovernment should hasten to accord to holders of U. S. Legal Tender Notes, now in circulation, the right of option to exchange such currency at pleasure, in sums of $1,000, and multiples thereof, for U.S. Bonds. (it these Legal Tender Notes, au thoi ized by Act of Congress, March 3, 1863, there are now in use, say, $346,000,000. To promote the best interests of the people the proposed U.S. Bonds should be made payable on demand with accrued interest in U. S. Legal Tender Notes. The interest should be, say, 5 cents per day on each $1,000. The right to change the interest to, say, 6 cents or to 4 cents per day per $1,000, or to any other rate, upon due notice, should be reserved by the Government. Under the simple method. outlined here, an inherent briefly subtle principle will regulate the movements of Finance and Commerce as accurately as the motion of the steam engine is regulated by its 'governor' to the VERY GREAT BENEFIT of mankind. "The Legal Tender Notes thus received by the Government, in exchange for Bonds, iniv:ht he used wisely and justly in paying off, at par, U. S. 2 per cent. bonds (now usable by the National Banks in obtaining notes for circulation) and also in paving Panama Canal claims and other duly recognized obligations of the Government but in no case with added premium. "Inasmuch as it has been conceded to be right and proper, by the Congress, for more than TWO SCORE YEARS,to have more than $300,000,000 of Legal Tender Notes in circulation, there CANNOT HE CONSISTENT Ftli:FI'S.11., by the Congress at this time, to authorize the issue of other notes of similar character to meet any semi-emergency * demands, for Currency, if such de- of Seven Billions, Four pundred ' and mands should be made by holders of Twenty-eight Million'($7,428,000,000) United States Bonds issued in exchange Dollars, in round numbers, as shown for the Legal Tender Notes now outby the official statistics to be the "balstanding. "The right reserved by the Govern- ance" in favor of the United States ment to change the rate of interest on for Exports in ExcEss of Imports the Bonds, as set forth herein, upon during the last 20 yea rs "."1'he imdue notice, gives to Governmental portance of the question looms very management all the control over the large when it is remembered that the outstanding volume of Currency, issued combined indebtedness, public, corin adjusting Government indebtedness, that can be, righteously, desired porate and otherwise, of the United --practical uniformity in debt-paying States to foreign countries continues power (and in purchasing power also) to be stupendous. being maintained AUTOMATICALIs it not a fact that our EXPORTS for LY by interchangeability with U. S. Bonds at holders' option. It is con- the period named were made up as. servative to declare that the blessings theretofore, chiefly of Cotton, Wheat, which would flow from such adjust- Corn, Meats, Butter, Cheese and nument of the Currency would be so merous other products having notably diversified and great as to he beyond INTRINSIC and stable values? And is computation." it not also a noteworthy fact that the For the purpose of g-iving emphasis IMPORTS consisted, in major part, of to the great importance of a Justice- merchandise which LACKED the elepromoting Circulating Medium, let ment of INTRINSIC value, IN LARGE DEthere be brought into juxtaposition ;R E ? What response can be made, with Currenc v-facts some exceedingly honestly as well as intelligently, to valuable statistical information fur- the foregoing queries? Is not the nished by the Government regarding matter of excessive usury (i.e., interest ) the large volume of Imports and Excharges on deferred payments of ports of the United States. Here is monetary obligations and the oft remuch food for thought. It is an alarmpeated, though indirect, renewals ing "condition, not a theory, that is thereof ( in multitudinous ways) a confronting the nation.HIGHLY IMPORTANT factor? By what These statistics show that the EX- means can this SERIOUS BURDEN be reCESS of EXPORTS over IMPORTS moved, never to return ? Is there a for 20 years (1s90 to 1909, inclusive) remedy for this bad economic condireached the Colossal sum of Seven tion? Answer: Yes; and it is very Billions, Four Hundred and Twentyiii EVERY RESPECT JUST, SURE! eight Millions, Two Hundred and Let pertinent suggestions as to Forty-eight Thousand (S7,428,248,1100) causes of the untoward condition be Dollars a sum in tic 11 larger than the n te rj c te d here : Barbarous/I, inity/fiTt value of the entire personal property "Leg-al Tender," with consequent in each of several important States of m perfect Monetary in et In has. our glorious Union. This fact forces from time im me in 01 ial. given creditors important questions upon the atten- very large advantage ovcr debtors tion of all intelligent Nye]1-w sh rs of throughout the world. to the GR T our Country. INJURY not only of careless debtors. W hat beca me of t he INTRINSIC values but, in the FINAL analysis, of A1,1, represented by the remarkably large sum mankind. The way of escape from the toils, the ONLY way, is through the inauguration of a Sound, Honest, Justice-promoting Circulating Medium -ALL LEGAL TENDER. Such Currency, National Governments, SOLELY, are qualified to supply. That co-operation of individuals or corporations, of any sort, in the discharge of the Governmental function of supplying a Circulating Medium is NOT permissible, in any form or degree, either as a matter of equity or APPLIED common sense, is the firm conviction of the writer. Inasmuch as the vast sum of Seven Billions, Four Hundred and Twentyeight Million (S7,428,000,000) Dollars, reported, was absorbed in very la rg-e part, if not entirely, by interest (i. e., usury) payments on Bonds and other indebtedness, together with dividends on Stocks, etc., held in Europe, this fact should cause DEEP concern. As "borrowers are servants of lenders," America has become a "Hewer of Wood and Drawer of Water" for the "money lenders" of England, France, Germany, etc., etc. And since the Ravine, in Monetary matters, into which, as a nation, we have STUPIDLY drifted, is DEEP, it follows that the most expeditious and certain way out of the present, very unfortunate, situation should be adopted and the long, laborious climb begun, without delay. The writer is firmly convinced, as the result of VERY earnest study of the Currency Question, under excellent opportunities, for more than two score years antedating the panic of 1857 that the rig-hteous course for the United States to pursue is plain, the result certain and in every way .11JSTICEpromoting. It ileS EXCLUSIVELY with the National Government. It ALONE has the right to coin(i. e., fabricate ) money a "Circulating Medium," aptly called the "Life Blood of Com- merce." And it is the IMPERATIVE duty of the Government not only to safeguard this important and EXCLUSIVE function, but also to use it to the EXACT EXTENT of the Currency NEEDS --at ALL times—of the people over whom it has jurisdiction. That the important function of coining (i. e., fabricating) money by the National Government is conceded to be EXCLUSIVE is indicated by the fact that the right of the National Government to levy, annually, a tax of TEN (10) per cent. on all circulating notes ( of "State Banks" and upon all other a Circulating M ed Rim possible forms of UNauthorized by the Congress) has NOT been contested —not questioned. A just and wise mode of procedure, under existing conditions, the writer claims is indicated in the foregoing paragraphs of this letter. It is also, incidentally, declared that there n(zer ()nal has been and never rcill be "Illternali MONEY"- i. e., before the Millennium—and further, that there is neither present or prospective need in that di rection Brief reference should be made here to the United States Legal Tender Notes of the Sixties and Seventies. To demonstrate the need of change in the wording of the declarations and promises inscribed upon them, and for another purpose also, the writer, in March, 1873, caused one of these notes (for S100 ) to be protested at the U. S. Sub-Treasury, New York City—the place where it was made payable. This note was again protested March 21, 1873, at the office of the IT. S. Treasurer, Washington, I). C. General F. E. Spinner. Nv ho had then S. Treasurer for about 10 been years, was at first great/y displeased. However, upon further consideration of the object of the protest, as explained in an address by the writer, in 1 a Public Hall,in the evening of the same day and printed in full (5 columns) in a Wasnington, D. C., paper, Treasurer Spinner became a vERY EARNEST advocate of the Currency reform herein urged. lie was a noble co-worker (as were many others) and continued till death a very warm personal friend. One object had in iew was promptly accomplished by the protest. The Secretary of the Treasury withdrew, on behalf of the Government, LARGE ORDERS for wrongful purchases of "U. S. 5-20 Bonds," such as had been made at premiums ranging from 15 to 20 per cent. and increasingly higher figures. Millions of dollars, however, had been thus wrongfully paid, in addition to the principal of the "5-20 -year Bonds," notwithstanding the 5 by the Government, option, reserved had matured. For excellent reasons, the declarations and promises inscribed upon U. S. Legal Tender Notes should be again changed somewhat,as all ground for legal protest, under any circumstances, should be obliterated. The fact should be mentioned, in this connection, that these Legal Tender Notes have been practically held at a premium over gold and all other forms of Circulating Medium during the larger p-trt of the last thirty years. The only exception has been ( and for SPECIAL REASONS) the circulating notes of FAILED "National Banks" of former days. Premium on the circulating- notes of "BROKEN" NATIONAL RANKS of those (lays (for UNIQUE reasons) often reached more than 5 PER CENT.- over COINED gold. Much of the time, during the thirty years as stated. the premium on U. S. Leg-al Tender Notes,publicly recognized, has been chiefly a strong preference in addition to sa% ing in matters of storage and cost of transportation. It i; well kno‘‘ n, of course, in the "Financial World " that in the panic-years, 1893 and 1907,'the demand was so strong , for all classes of "Circulating Medium" authorized by thet. S. Government, excepting only pennies and nickels, that sales thereof were made in large aggregate amount, at premiu ins ranging from two to five per cent. Sellers received therefor checks on National Banks, certified "Good through the Clearing House." That the legalized "CirculatingMediums" of the world are a disgrace to the Nations is apparent. And as related to the United States, especially, has been often so declared, publicly, by members of the U. S. "Monetary Commission," ex-SeLretary of the Treasury, Lyman J. Gage, Andrew Carnegie and many others within the hearing of the writer. The people of the United States of America can be freed from this disgrace and from the SERIOUS burdens which barbarous monetary conditions impose. This freedom may be secured through conservative, thoroughly honest, common sense legislation A LI. in harmony with the foregoing. Large consideration is given, these days, to "Conservation." That genuine Conservation of Timber, Coal, etc., etc., is of large importance, all will admit. However, it should be U nderstood that the highest-grade-andlargest-benefit "Conservation," may he realized by HUMANELY conserving the innate powers of animals—Men and Beasts. This ability for service of men and beasts should NOT be unnecessarily diminished either by overwork, by unemployment, or by underfeeding. To best conserve the rights of ALL, it is necessary that Commerce should be nourished by an adequate, AUTOMATICA l L Yregulated, supply of sound, honest Currency. Therefore, a stable, JUSTICEpromoting Currency is truly, as the claims, the greafrs/ sEcuLAR need of mankind. Respectfully, etc., etc. CONDENSED REPORT OE THE CONDITION OF THE Kentucky State Banks AND Trust Companies OF KENTUCKY At the close of Business December 5, 1911. BEN L. BRUNER, Secretary of State. COMMONWEALTH OF KENTUCKY oFFIcE or • SECRETARY OF STATF, Abgtracts of Reports of Condition of the 473 State Banking Ingtitutions of Kentucky, at the close of business December 5th, 1911. RESOURCES. Loons, discounts. overdrafts Bonds and securitie , flan ki ng house and real estate Furniture and fixtures Ca.,;11 on hd an Due from banks ENclunige for Hearing house 1111(1 . itti1,1•4 10,4 ;..i,(155 - 3 953 1 87 956,234. 4,783. 1:11.•21 1* ,3-18,972:0 ) 1 1 ) I51 ,) ) 1 ou e .‘11 othor resrcs 2! . ) :i4 10 1.9' 1).7f Total 1') LIABILITIES. Capital stock Surplus I 7n(1ivided profits IZeser% ed for Taxes I )(posits Due to hank.4 Bills payable and rediscounted AB other liabilitie.4 Total $20,846,0:1 2 . tr ) ) G.101.121.0', 2.193.4 -10 .(r) 12:;,m1:1 .7i) 6 07s.I 52 .7), , 1,25f;..`i•)2.. I; 3,389,180.5,, 1,728,8f;7. Y) $101,920,7(12 .4(i BEN L. BRUNER, Secretary of State. BANK EXAMINATIONS, STATE AND NATIONAL. WASHINGTON, D. C., December 15, 1911. To the NATIONAL MONETARY COMMISSION, Washington, D. C. GENTLEMEN: We have been asked to consider the question of bank examinations, both national and State, in so far as they may relate to the National Reserve Association, and after a careful consideration of the question, we beg to submit our views. In considering the question in a broad way we have had in mind two points which seem to us very essential. First. To avoid the added expense to the banks of building up the machinery for an entirely separate and additional system of examination. Second. To utilize, in so far as possible and practicable, the existing machinery for bank examinations as established to-day for both national and State banks. It was necessary to carefully consider three important points, as follows: First. It is possible that the examinations as they exist to-day, both State and national, might not meet the requirements of the directors of the National Reserve Association. Second. There are a few States where there is no State supervision of any kind of State banks. Third. There are a few States where there is State supervision of State banks, but the executive officer is not privileged by law to disclose information regarding banks under his supervision. We have considered each of the above points and, in our opinion, the plan we present obviates each difficulty and utilizes, without additional expense to the banks, the present machinery of bank examinations, both State and national. We therefore make the following recommendations: That the National Reserve Association shall for all member banks accept copies of the reports of the nationalbank examiners for national banks and copies of the reports of State bank examiners for State banks and trust companies, where the furnishing of such information is not contrary to law; provided, however, that the standard of such examinations, both national and State, meet the requirements of the directors of the National Reserve Association. That in all cases where the standard of examination, either national or State, is not up to the said requirements, the directors of the National Reserve Association shall make or cause to be made independent examinations. That the Directors of the National Reserve Association have the right to examine or cause to he examined, at any time, any member bank, by its own representatives. That the national and State examiners be allowed such additional compensation, to be paid by the National Reserve Association, for making extra reports to it, as the directors thereof may consider just and equitable. The plan which we recommend will in a large measure avoid the additional expense to the banks of building up another organization for their examination; it will give to the directors of the National Reserve Association, to the branches thereof, and to the local associations the information which is needed, and it reserves to the National Reserve Association the right to make independent examinations whenever the directors thereof desire to do so. The plan is simple, practicable, and workable from the start. In addition to this it will have a tendency to standardize on a higher plane all bank examinations. Very respectfully submitted. J. L. MOHUNDRO, State Bank Examiner for the State of 117ashington. ARTHUR B. CHAPIN, Bank Commissioner for the Conzmonwealth of Massachusetts. F. E. BAXTER, Superintendent of Banks for the State of Ohio. 0. L. GILL, State Commissioner of Insurance and Banking for the State of Texas. GEo. C. VAN TUYL, Jr., Superintendent of Banks for the State of New York. E. F. 1:()REBEcK, National Bank Examiner for the City of New York. GILES L. WILSON, National Bank Examiner for South Carolina and Georgia and formerly State Bank Examiner for South Carolina. 14.kwi:ExcE 0. MURRAY, ( (. imptioiier of the Currency. 0 BANK EXAMINATIONS, STATE AND NATIONAL. WASHINGTON, D. C., December 15, 1911. To the NATIONAL MONETARY COMMISSION, Washington, D. C. GENTLEMEN: We have been asked to consider the question of bank examinations, both national and State, in so far as they may relate to the National Reserve Association, and after a careful consideration of the question, we beg to submit our views. In considering the question in a broad way we have had in mind two points which seem to us very essential. First. To avoid the added expense to the banks of building up the machinery for an entirely separate and additional system of examination. Second. To utilize, in so far as possible and practicable, the existing machinery for bank examinations as established to-day for both national and State banks. It was necessary to carefully consider three important points, as follows: First. It is possible that the examinations as they exist to-day, both State and national, might not meet the requirements of the directors of the National Reserve Association. Second. There are a few States where there is no State supervision of any kind of State banks. Third. There are a few States where there is State supervision of State banks, but the executive officer is not privileged by law to disclose information regarding banks under his supervision. 20351-II 2 We have considered each of the above points and, in our opinion, the plan we present obviates each difficulty and utilizes, without additional expense to the banks, the present machinery of bank examinations, both State and national. We therefore make the following recommendations: That the National Reserve Association shall for all member banks accept copies of the reports of the nationalbank examiners for national banks and copies of the reports of State bank examiners for State banks and trust companies, where the furnishing of such information is not contrary to law; provided, however, that the standard of such examinations, both national and State, meet the requirements of the directors of the National Reserve Association. That in all cases where the standard of examination, either national or State, is not up to the said requirements, the directors of the National Reserve Association shall make or cause to be made independent examitiations. That the Directors of the National Reserve Association have the right to examine or cause to be examined, at any time, any member hank, by its own representatives. That the national and State examiners be allowed such additional compensation, to be paid by the National Reserve Association, for making extra reports to it, as the directors thereof may consider just and equitable. The plan which we recommend will in a large measure avoid the additional expense to the banks of building up another organization for their examination; it will give to the directors of the National Reserve Association, to the branches thereof, and to the local associations the information which is needed, and it reserves to the National Reserve Association the right to make independent examinations whenever the directors thereof desire to do so. The plan is simple, practicable, and workable from the start. 3 In addition to this it will have a tendency to standardize on a higher plane all bank examinations. Very respectfully submitted. J. L. MOHUNDRO, State Bank Examiner for the State of Washington. ARTHUR B. CHAPIN, Bank Commissioner for the Commonwealth of Massachusetts. F. E. BAXTER, Superintendent of Banks for the State of Ohio. 0. L. GILL, State Commissioner of Insurance and Banking for the State of Texas. GEo. C. VAN TuvL, Jr., Superintendent of Banks for the State of New York. E. F. ROREBECK, National Bank Examiner for the City of New York. GILES L. WILSON, National Bank Examiner for South Carolina and Georgia and formerly State Bank Examiner for South Carolina. LAWRENCE 0. MURRAY, Comptroller of the Currency. 0 MANAGING •\-' EDITOR PRESIDENT AND EDITOR-IN-CHIRF FAMILY EDITOR Do you realize that 1912 promises to be the best year in the history of American agriculture? Ample fall rains have put the ground in ideal condition, while demand promises to be better than ever for soil products. You can make more profit with less work during 1912 and get more pleasure out of life if only you operate efficiently. EFFICIENCY IN FARMING — also in the Home, is the vital aid which will be stinP1i.c.flaatZ.YireL 3unlialy Iithót iiiidrcis to iuis Nuts, Mushrooms, Dandelions, Tomatoes, Maple Sweets and others. Closely allied to these will be our , d ep aar rtitr ttte"Fir m f',-Ktia ntires . . and Fertilizers. WHERE TO LIVE will describe the advantages for homes of many sections, north, south, east and west, and help the land hungry to find farms and homes . The department of ORGANIZE AND EDUCAT E will continue to treat of many of the newer probl ems of marketing, social and political matters, rural school s, new ideas and suggestions to make life more livable. THAT RARE QUALITY, LEADERSHIP Form timie tn isttc. ens' editorial page is Its Horne's chara.-tk_i- famous for bold, fearless, able, level-headed, incorruptible championthe good things coming, for they will mean ship of the people. DOLLARS to YOU. Its editorial policy is CONSTRUCTIVE, not "Know-how" farming is scientific, saving destructive. It builds up the right, tears down labor, money, work, worry; increases profits, fun, only the wrong. It shows how to progress, it progress. Every line in Farm and Home will tell leads the way! the HOW of things, how others have done it, so TO UTILIZE RURAL CREDIT is Farm you can do it. That is what helps us, one and and Home's newest campaign. It is the biggest, The Live Stock Departments all—practice, not theory; facts, not fancies. The experience, observations and results have always been given a large space in FARM AND best, most practical, most needed of all reforms. obtained by the leading scientific men, successful IIOME and promise to be of greater interest and value. Land mortgage banks to make farm bonds marfarmers and housewives will make Farm and These will include The Dairy, Marketing Milk and ketable like government bonds; rural credit Cream, Live Stock Home a cyclopedia of farm practice and manage- Swine Keeping, The Problems, Feeds and Feeding, unions to furnish cash and credit! The new sysSheepfold, Horses and Horsemen. tem Farm and Home is fighting for will make ment. Only a few of the fine things in store THE VETERINARY ADVICE by Dr D. McIntosh it easy for farmers to get long-time loans and for 1912 readers can be mentioned: has been of untold value to our readers with sick shorter term "accommodation." animals. Animal Physiology, a new depar tment Special Feature Articles to appear in early numbers will show HOW— they're object lessons in efficiency by men and women who are themselves successfully efficient. Such as "Farm ing in Foreign Lands," by George Cecil; "What Moder n Machinery Means to the Farmer," by Day Allen Willey; "Reclaiming the Desert," by A. R. Kanaga; "A z000Acre Garden," by Wm P. Doyle; "Women Who Manage Big Farms Successfully," by H. Croy; "Mak ing the Marsh Land Pay," by George E. Walsh; "Bird s as Friends of the Farmer," by Orin Edson Crooker; "The Street Front," by E. P. Powell; "The Possibilitie s of Rape on the Farm," by M. F. Greely. A Wealth of Departments will cover all phases of farming, all sides of life and practice on the farm and in the home, east, west, north, south. The old department,"ALL ABOUT THE FARM," will treat of the many and varied farm crops and operations. Special articles by Prof John M. Scott of Florida, Prof G. I. Christie of Indiana, W. M. Kelly of New York; W. H. Underwood of Illinois, George Schoenknecht of Michigan, E. L. Vincent of New York, E. P. Snyder of Ohio and other successful farmers. SPECIAL MONEY CROPS mean much to all farmers and will include Tobacco, Asparagus, Onions, Ginseng, started last year, will contain articles on the cure and prevention of disease and care of animals, by Drs McIntosh, Leslie M. Hurt and Ward Giltner. Mechanics and Buildings IIANDY DEVICES, which save time and labor, will be continued. MODEL FARM BUILDINGS will include: A round barn in Minnesota, An up-to-date Maryland hog house, A model stock and farm barn in Massachusetts, An Oklahoma stone house, A delightful New Mexic o bungalow, and An attractive New York home. THE ORCHARD AND GARDEN are among the most valuable parts of the average farm, while they supply the chief income for many specialists. Leading contributors will be Prof R. L. Watts of Penns ylvania, J. M. Smith of Oklahoma, Roy B. Buchanan of Tennessee, Charles A. iTmo, elle of New Jersey, H. L. Tompson of Massachusetts, Marie Seacord of Illino is, and M. Roberts Conover of New Jersey. A Great Poultry Paper The superb Farm and Home POULTRY ANN UAL February z issue, will be only one of the stron g features of the poultry department for 1912. A few of the contributors will be J. H. Drevensted t of New York, Prof Homer W. Jackson of Pennsylvan ia, T. M. Clematis of Ohio, Joseph Tolman and Charles H. Latham of Massachusetts, Miss Franc es P. Wheeler of New York, H. H. Stoddard of Texas , Dr Otto W. Maurer and Prof T. E. Schreiner of Kansa s and Mrs B. S. Hislop of Illinois. Pigeons and Pet Stock as well as The Apiary will also interest many readers. HOW TO CO-OPERATE—an Inspiring new department, will teach just what to do and how to do it, so as to enable YOU and your neighbors to reform rural finance, improve marketing, buy togeth er and sell together. The time is ripe for the comm on people to unite for uncommon benefits. Farm and Home blazes the way! THE BUSINESS SIDE OF FARMING gives a wide sweep of the business horizon, a keen sense of not only local but world-wide conditions and a careful analysis of the situation when most timely. We have at our disposal the widest possible range of domestic and foreign crop news and advices, hence arriv e at a close approach to true conditions everywhere. Twice a month Farm and Home assembles, assorts, crystallizes, presents. The markets, the record of crop movement, the prospects and conditions are covered so that you may know all the facts exactly as they are. TALKS WITH OUR LAWYER gives our subscribers the best legal advice free of extra cost. CHAT WITH THE EDITOR—pertinent suggestions, answers about personal, family and farm affairs. The Family Features Literary Departments, etc., etc., are described on another page in Farm and Home December 15. Old P. T. Barnum used to say: 1L,Aok41-A 9 JP -ceo ) The people voice the sentiment—they know whether a thing bad or indifferent. They praise it if it's good and condem is right or wrong. They know whether it's good, n it if it's bad. The opinion of the people is worth a hundred times more than the opinion of the man who owns the proposition that's being talked about. An awakening is here. With it has come determination by the farmers and their wives all over the country to make up for lost time. So it comes to pass that farm women are now eagerly searching for the better things that are theirs by right of conquest. There is every indication that they will soon stand abreast with their progressive farmer husbands Farm and Home, the great national semi-monthly published for just this class is edited and of farmers. The people on the farms and in the homes of America subscribe for, pay for and renew their subscriptions to Farm and Home strictly upon its merits. what they want and they know they will get it in Farm and Home—brimful measure and running over They know every issue. Bushels of unsolicited testimonial letters sent by enthusiastic subscr ibers to Farm & Home come to our editorial department every year. We cannot print them received. They express feelings in relation to Farm and Home all, but present herewith a few very recently better than the publisher himself can These letters show that the subscribers to Farm and Home become devoted and enthusiastic over their do it. little semi-monthly. beloved Its Editorials Are Great I have always been interested in your Farm and Home editorials. They put new life into us. I am pleased especially with your great editorial December 1. It is magnificent. Our farmers are ready to follow your leadership and to work together for larger prosperity. Continue to give us all the information you can, especially about co-operative land mortgage banking and rural credit unions. With such banking facilities, farming will go forward wonderfully.—[B. G. Morrison, Cornplanter, Warren County, Pennsylvania, December 4, 1911. The Heart of the Grain It is my honest opinion that Farm and Home, compared to other farm papers, is as tile • . the hull, and for this reason we of our family feel that we cannot afford to be without it.—[Alexander Krueger, Colville, Washington. Helpful and Inspiring Agriculture is too important to be trifled with. We need more and better farmers, and for this reason alone Farm and Home should be in every home. It is a clean, helpful and inspiring paper, with a word of cheer for every member of the family.— [Mrs W. H. Ladd, Route No 4, Sante Fe, Tennessee. How to Get Results Farm and Home tea.ches me how to get the best results from my farm for the least money; it shows me how to manage the live stock, garden and orchard to make money; it helps me in the rearing of my children and in the beautifying of my home—in short. it Only/At m:I Limy tq rmsky.,ttie .pppt of my could afford to be without its helpful advice and inspiration.—[J. \V. Robinson, Dover, Georgia. The Most Important Business Pleasure and Profit Farm and Home is so original, so Interesting, that it stands out prominently among all the other farm journals. To read Farm and Home is to combine pleasure with profit, and that Is why I subscribe for it.—[14% A. Grinnell, Mount Riga, New York. Much for Little I subscribe for Farm and Home because it gives me the very information I want pertaining to the farm and the home. Besides this, it always has a good story and other reading for Sunday, and does not use up space with long and dull articles. To cap the climax, it gives us all this wealth of good reading matter at an exceedingly low price.—[Clifford E. Davis, Pox 12, Route No 2, Cumberland, Maryland. Clean and Breezy Farm and Home is an educational journal, for it supplies information that is invaluable to the veteran farmer as well as the beginner. The fiction is clean and breezy and to tho point, and very restful to the tired mind.—[Clay Davidson, Route No 4, Cameron, Missouri. Farm and Home has shown us that farming is the most important business in America. The stories of Farm and Flume are good, its politics are sound, and, while it preaches better manhood and womanhood, it does not overlook the children. Its veterinary and legal advice alone are worth many times the subscription price.—[William Bacchus, Danbury, Connecticut. A Square Deal As an old subscriber T can testify to the fact that Farm and Home stands for progress and a "square deal" for all. Every article in its pages is of value to some member of the family. Its iiction is good, its poetry inspiring, and its advertisements always reliable.—[Mrs R. II. Hoss, lone, Oregon. The Best Merchandise What I appreciate particularly about Farm and Home is that the best class of merchandise and supplies can be found advertised in its pages, and it stands for a square deal for every reader.—[F. L. Burt, Hazardville, Connecticut. More and Better We seem to get more and better information from Farm and Home than from any other farm paper, and it costs us less. I particularly appreciate the stand its editor took in regard to Sec Wilson and Dr Wiley. The advertisements are not the least interesting part of the paper. I have been a subscriber to Farm and Home for some time and would not care to be without it.—[C. P. McCall, 3 Delta Place, Atlanta, Georgia, It Is Different We like Farm and Home because it is different from all other farm papers. It is progressive, dealing with the Problems of the day and looking for- ward hopefully to the future. It eaters to the real needs of its subscribers, •-• •- - no matter where one may be located, one may learn from its pages something useful that tits his own individual case.—[Henry B. Mitchell, Athens, Georgia. For the Busy Man Farm and Home is the paper for me, because it prints useful information at the time of the year such information is needed, and it is so condensed that a busy man has time to read it. Not the least of its attractions is that it carries a line of practical advertising.—[J. Graham, Pine City, Minn. Sparks from the Anvil As for me, I can truly say Farm and Home fills the bill. Anyone who buys or sells will find its advertising indispensable.—[John columns A. Vincent, Route No 5, Ionia, Michigan. What makes Farm and Home particularly interesting to me is that it is always up to date and gives one a comprehensive idea of progress in farm and home matters.—[Mrs G. W. Chase, Route No 24, Oconomowoc, Wisconsin. We take Farm and Home because it is what its name implies—a paper for the farm and for the home—reliable, clean, and always interesting. [Edgar H. Parkhurst, South Canterbury, Connecticut. THE CHRISTMAS, DECEMBER 15, NUMBER of Farm and Home is a wonder. The features for all the family are even better than usual, including stories and poetry, holiday entertainment, needlework, homemade candies and boxes, Yuletide sermonets, the junior Climber's Club, homemade garments and indoor toys, seasonable recipes for cookery. The Agricultural Departments of December 15 number teem with seasonable hints in the following departments: Field and Farm All About the Farm Horses and Horsemen Organize and Educate Dairy Business Side of Farming Handy rapper The The With the Farmers The Poultry Yard Where to Live Sheep and Swine Editor's Chat Woodlot and Forest Handy Devices Home Butchering Veterinarian The Orchard Stock Feeding Farm Buildings Talks with Our Lawyer Home interests all the family on the farms and in the rural homes of America all the time. That is why its subscribers are so enFarm and thusiastic over the merits of Farm and Home that they are renewing for it even better than previously. And that is why it pays advertisers. THE PHELPS PUBLISHING COMPANY, Myrick Building, Springfield, Mass. 315 Fourth Avenue, New York City 1209 Peoples Gas Building, Chicago, Ill. 601 Oneida Building, Minneapolis, Minn. Aberdeen, South Dakota NEW YORK MAIN CHICAGO ASHLAND BUILDING UF F (.LI SPRINGFIELD PEOPLES GAS BUILDING MYRiC.K MASS BUILDING MINNEAPOLIS 333 PALACE BUILDING ABERDEEN SOUTH DAKOTA Oultione PUBLISHERS PUBLISHERS ,FARI A A NATIONAL HOME FA H.1 HO A NATIONAL SEMI-MONTHLY SEMI-MONTHLY EASTERN& WESTERN EDITIONS EASTERN& WESTERN EDITIONS .44 plamtgAil rf AN OPEN LETTER TO BUSINESS MEN AND ADVERTISERS UPON THE 33d YEAR OF FARM AND HOME Christmas, 1911 New Year's, 1912 Gentlemen: In all the thirty-two years of Farm and Home which conclude with our December 15 number, I have never known the underlying and fundamental natural conditions to be so healthy as they are today. American agriculture is going into the New Year with more promise than ever. Therefore, business should be less adversely affected by politics during 1912 than for several presidential campaigns. Farmers are preparing for the new season with renewed confidence. Taking the country as a whole, farmers will receive more money for their crops of the past year than for the labors of any previous season. Higher prices compensate for reduced total yields where they have occurred. This situation partly explains the unprecedented enthusiasm now existing among farmers over the future of their business. The farmer is waking up to the fact that to supply the consuming demand, the United States must have: Better agriculture, better farm and home buildings and equipment, better homes, better schools, better everything. lo enable farmers to bring about such better ed conditions is the high purpose of Farm and Home for 1912. To this end it employs every resource of experience, science and success in all that pertains to practical farming, home life and rural progress. But the largest efficiency of the forward moveme nt in agriculture requires still more. The well-nigh universal need of farmers is MORE CAPITAL. They have sufficient assets, but the means are woefully lacking for employing these assets as a basis of credit when needed. Farm and Home seeks to supply this want by adapting to America the system of co-operative land-mortg age banking and rural credit unions, which is so astonishingly successful in German y. (See my article on Page 3 hereof from Farm and Home for December 15, also editor ial in December 1 issue.) Such rural finance obviously will enormously expand the farmer's buying power for the many things required by better farming and better "home -ing." I am doubly inspired in this great effort by the enthusiastic co-operation, interest and support expressed by Farm and Home's subscribers and advertisers. Our readers are singularly "close" to Farm and Home, perhaps more so than is the case with any other periodical. This accounts in part for the excellent results obtained by so many of our adveriil'eTscan 61R Yeelce tisers. Since farmers subscribe for Farm and Home on its merits, since it has earned and won its subscribers by thirty-two years BY HERBERT MYRICIC of honest endeavor, since it admits only reliab le advertisements, its increasing patronage by subscribers *Derwentwater. 4 July, 1911 and advertisers is a logical result. Amid the trials of life— Failures and discouragements. The honors of victory As well as weight of defeat There is ever at hand: Repose for mind and soul; I4'or body also. peace! Harmony's omnipresence— Visible in storm and calm. Potent in forms and actions. Pervading both life and death Is an object lesson: Nature is rich in Peace That may be shared by Man! Now, strengthened by this kn(m1 edge— Fed by the Ever Prpsent, Inspired by glorious faith. Quickened by work and play Enjoy peace with those wliu Master adversity. Conquer prosperity! *The charm of the English lake country! Who can ever forget It? The lessons of nature, the associations if Wordsworth, Mouthey and other choice souls. What eonirnst it all was to the cacophony of our own land! And in the stress of our strenuous American life, la it not well to grasp an occasional moment of repose to live in poise? Ili. M. Permit me to express, in this personal way, not only my own appreciation for your patronage, past, present and future, but equally so for the co-operation of your powerf ul influence in the great campaign for better rural life and improved rural credit facilities to which Farm and Home will devote itself during 1912—its thirty-third year. Wishing you and yours all health and wealth, happiness and prosperity for the coming season, believe me Sincerely yours for better agriculture, ffelk4 Editor-in-Chief FARM AND HOME President THE PHELPS PUBLISHING COMPANY ADVANCE SHEET FROM DEC. 15 NUMBER .ito '1k 1:t P,11,11 Who, = „„," g_ . 1,11111111111 Vol XXXII No. 685 Massachusetts Western and Eastern Editions, December 15, 1911 evoluti Ifli MGM, 11)1eagro, liii m By Means of Co-operative Land-Mortpape Banks .• 114 TheT,helps Ph Ore Just How to Organize Local Land Banks---How to Them Into Central Banks---How to Make Farm Federate How to Get Money on Long Time at Reasonable Rites of the Basis for the Safest and Most Marketable MortgagesInterest—How to Pay Off the Principal "Without Feeling of It"---How to Adapt to the United States the ---How to Supply that Greatest of All Rural Needs, Bonds Method of AvailAccomplishing All This, Which Has Been so Successful able Credit, Permanent or Temporary in Germany for 150 Years By HERBERT MYRICK, Editor-in-Chief Farm & Home, President The Phelps Publishing Company Land is the basis of all PERMANENT WEALTH, but it has remained for Germany to perfect a plan whereby land becomes the basis for MOVABLE CREDIT. This German method is the outcome of 150 years' experience. Its success has been so assured, the law of 1899 has made it so perfect, that this method should now be introduced throughout the United States. Only in this way can be solved the all-vital problem of supplying credit and cash to farmers in efficient form and sufficient quantity, with such ample safety as to make farm bonds 1 atintl.; Li e az airvc ketable. The German method could be adapted to American needs as follows: Local Co-operative Land Banks Each state should provide by law for the incorporation of small local co-operative land banks, the same to be subject to oversight by the state banking commissioners. Each little bank should have its capital stock paid in by its local shareholders. This capital is the surplus to guarantee Americans the bank's obligations. prefer to thus put up some money, instead of each member personally becoming jointly and severally liable for all the obligations of the bank, as is the custom in many European co-operative societies. All of these little local land banks in a state are to invest part of their capital in the shares of one central land-mortgage bank, into which they are all federated. This central bank has a trustee in each local bank. The central bank for the whole state should be under the closest supervision and regulation by the state. The whole affair is strictly co-operative. Each member has one vote, regardless of number of shares held. Each local bank has one vote in the meetings of the central bank. Function of the Local Land Bank Let us suppose that such a system is in use in Iowa, and that 100 citizens at Boone have formed the Boone co-operative land bank, each putting in $100 in cash. It thus has $10,000 paid-up cash capital, of which $2500 is invested in shares of the Iowa central land-mortgage bank. Now the Boone bank receives an application from Farmer A, who wishes to borrow $5000 on his note, secured by a first mortgage on his farm, which he thinks is worth $10,000. The bank's committee looks up the property, to see how much can be safely loaned on it. The state law is that not over 00% of the true value may be loaned and provides strictly against either over or undervaluation. The bank also wants to be careful not to jeopardize its capital or reputation by making a bad loan. So the committee is conservative, gets all the evidence possible, including the character of the borrower, whether he is likely to succeed, Finally the whether reliable, etc. committee recommends a loan of $4000. The full board of directors of the Boone bank, after reviewing the case, approve the application. Farmer A therefore signs a note for $4000 in favor of the Boone bank, and executes a mortgage upon his farm as security. The mortgage is payable to the trustee in the local bank who represents the central bank. The Central Bank Issues Bonds Now for the next step, for Farmer A has not yet received his money. The Boone bank hasn't capital enough to make the loan itself. But used to insure that the loan is a good one for all concerned. The Boone bank applies to the Iowa central land-mortgage bank for $4000, offering as security the mortgage on Mr A's farm. The principal and interest of said mortgage are guaranteed by the Boone bank, it keeps Farmer A's note in its own safe, and has the right to get back the mortgage it deposits with the central bank's trustee upon payment thereof. The local trustee at Boone certifies to the Iowa central land-mortgage bank that the loan, mortgage and guarantee are all right. The committee of the central bank verifies the papers, approves the loan, and authorizes the issue of $4000 in bonds. These bonds bear coupons for the interest which, together with the principal, is guaranteed by the Iowa central land-mortgage bank. These bonds may also be registered in the office of the state treasurer as yet further proof that they are all right. Marketing the Bonds These land-mortgage bonds, thus triply secured—by first mortgage on a conservative basis, by guarantee of local bank and by guarantee of the central bank, should then be listed upon the stock exchanges throughout the United States and foreign countries. The bonds then can be readily sold, because they will be made one of the most attractive of all investments, by virtue of the conditions below described. The central bank issuing the bonds sells them and remits the $4000 to the local bank, and it turns the money over to Farmer A. Thus the borrower in the local community, who at present is unable to get in touch with the great money markets, is enabled to mobilize his land as a basis of permanent credit. Characteristics of the Bonds These bonds should le exempt from all taxation, national, state, lops.). a‘ The 1ftnsl pays the taxes, and , . borrower should not have lo pay so high a rate of interest on his mortgage as to oblige the holder of the mortgage also to pay a tax on that Investment. Such double taxation is entirely avoided by the proposed exemption. Of course, these landmortgage bonds would be subject to inheritance taxes, which do not tax the land twice, since only the equity in land pays an inheritance tax. Federal and state laws should recognize these bonds as the safest things to be invested in by trustees, societies, savings banks, insurance companies and other institutions. The laws should provide that a minimum proportion of the surplus of national and state banks of discount might also be invested in these land-mortgage banks. In this utterly simple way these land-mortgage bonds become the most attractive of all investments. The market for them becomes incredibly enlarged. The demand for them will alv.ays be keen, even at a low rate of interest. In fact, under normal conditions in the money market, these bonds can be sold at par, even if they pay only 3, 31 or 4% interest. They will vie / 2 with both state and national bonds In stability, value and salability. would be about 4% where it is now or in that proportion. He would also pay at least 1% each year toward the reduction of the principal. By means of the compounding of interest and the steady reduction of principal, the result would be that in the course of 30 or 40 years, the principal of the mortgage would thus be automatically wiped out. Of course the farmer would have the privilege of paying up on the principal more rapidly if he so desired. Thus a total of 5% per annum, including not to exceed 4% interest, and the balance on principal, would entirely wipe out the debt on a man's 5 to 6%, Thus tilt , security of the bonds would be improving constantly, because of the payments upon the principal. And these payments would enable the system to go on and make additional loans upon other farms as needed. It is an endless chain of help, thrift, convenience, investment and co-operation. Not an Experiment Please bear in mind that this plan is not an experiment. It has proven successful during a century and a half's use in Germany. It is not paternalism. It is not socialism. It is based primarily on the co-operation of individuals. The local society or co-operative bank is composed of individuals, and it is to the interest of each member of the local society or co-operative bank to see that the original mortgage is absolutely right in every respect. By the means described, this mortgage becomes the basis of a universally salable bond, which can be converted into cash at almost any time or place, or used as collateral. In both respects, it is like a government bond. This plan is not a trust. It is not a combine. It is co-operation made simple, practical, effective. What the Borrower Pays It is common-sense association of The rate of interest which the land and people, cash and credit. It has stood the test of time-150 farmer pays on his mortgage note years' successful experience with this method has perfected it for application to the needs of American farmers. y TH7HIFE0 m It is safe, not speculative, yet the iTiCIANS‘ralEAL TICKET method will profit every dollar invested. TICS icj,THE PO POLI HE TICKET PUNCH. BUT YOU HOLD T To Nationalize Thia Plan AND SAVE. THE "IT'S ALLRIGHT TO GO FOR TH The foregoing plan may be carried SAYS JIM LIMPS. UT COUNTRY AT E LE CT oN out in any state under proper state la t v PA7 RIOT I Sri THAT THIS HERE GROCE.NY 5TORE_ FtELD5 IN THE ELL ER OUT OF HiS KEEPS A F But there is nothing to prevent LISTEN NONE L IK E WORKIN' SEASON DON'T congress providing for similar insti: iJTh TO ME. tutions under federal laws. There can TICiAN LL AINT IT AWFUL WHAT tk Pot.. In' such a system of national landI' UP. AND PROtAISE wHEN HE'S ALL HE mortgage banking, which need not HIS Mr..11'141 FAILS klC,H A‘NT IT SAD HOw interfere with a like system under AFTER CLEC,T ION? state authority. 'POLITICS CSAYS JUDGkE LIMP," The two can work along side by Ts1-4i5— BEFORE ELECTION IT'S LIKE side, just as commercial banks now ELECT RAM! ESANG:1 1:3A7-00!— AFTER operate under either national or SH—SH-5H.HUS H." state charters. The national system would have the advantage of starting the method more uniformly throughout the United States. THE CRISIS AND THE REMEDY. AN OUTLINE OF A PLAN FOR CREATING AN ELASTIC CURRENCY. 131 A. E. STILWELL, President of the Kansas City, Mexico & Orient Railway Company. A number of years ago I foresaw that sooner or later the country would inevitably suffer from the financial condition which now exists. The following plan occurred to me as being a feasible way of relieving the situation, and, after taking the matter up with President McKinley, who looked upon it with favor, I sent an outline to a number of prominent bankers, senators and congressmen. They all agreed with me that the plan could be carried out with success, but as thcre was at that time no ciistu.-Ince in business, they did not think it necessary to change existing banking methods, and the matter was dropped. I have thought over the plan continuously since that time, and I believe that if the idea embraced herein were Ina into operation, the banking interests of this country could be placed on a sound basis, so that we would have the best banking system in existence. This would result in restored confidence, and the present stringency would ininiedia tely be relieved. THE PLAN. Have congress pass a bill incorporating the United States Bank of Discount, to be a bank of issue, with a capital of three hundred million dollars; have the national banks subscribe for the stock exclusively, and provide that the stock can be used with the United States government in order to secure circulation, in the same manner that government bonds are now used, every national bank to be required to invest one-fourth of its capital in the stock of this bank; provide that the stock shall draw interest at the rate of three per cent, and that if the interest is not earned (a remote contingency) the government will make up the deficit. The United Siatcs Bank of Discount will select one representative from the board of directors of the various national banks. This representative will be a resident of the city in which the bank is located, and it will be his duty to report to the National Bank of Discount any irregularities which he sees in the management of the bank. The National Bank of Discount will have the right to examine all national banks, just as the government does now, as this bank insures all of the deposits, and, for this reason, must know the risk that it takes. This examination simply adds to the safe-guarding of the banking system. The United States Bank of Discount will issue its currency in the following way only: Every national bank will have credit with the National Bank of Discount for an amount equal to its capital and surplus. This will encourage banks to pay in a large surplus, making an additional safe-guard to the entire banking system. This credit may be used as follows: When the crops are to be moved, additional money is required. Suppose, for instance, a bank at Topeka, Kansas, has a capital of a quarter of a million dollars, and this bank wishes to avail itself of the credit which it has with the United States Bank of Discount, the amount being equal to its capital and surplus, $450,000. The Topeka bank takes to the Kansas City Clearing House, which is the representative of the Bank of Discount in the section, a quarter of a million dollars of its best paper or bonds; the clearing house passes upon the collateral, gives a certificate to the Topeka bank, stating that it is entitled to $450,000 worth of bank notes, to be issued by the United States Bank of Discount. The Topeka bank sends this certificate on to the United States Bank of Discount, and receives four hundred and fifty thousand dollars of circulation, paying five per cent on the currency thus issued. One-half of this issue must be retired in six months and the balance in one year, or the bank must be liquidated if it is unable to retire the issue in that time. When the bank wishes to pay off the $450,000, it sends this amount of national bank notes (not gold or silver certificates) to the United States Bank of Discount, and its collateral is returned by the Kansas City Clearing House, on order of the United States Bank of Discount. This plan immediately creates an elasticity to the currency of the country equal to the capital and surplus of all the national banks in the United States. jIt will be to the interest of the national banks to build up their surplus, in order that they may have a discount reserve at this bank. Instead of keeping so much money in New York, they will buy high grade bonds, such as the Massachusetts Savings Banks buy, and will keep these for the interest which they earn, knowing that they can be used at any time to secure currency. One of the most important features of the United States Bank of Discount will be the insurance of all deposits in national banks. In the pass books issued to depositors in national banks, the following might be inserted: "In case this bank should suspend or fail, the United States Bank of Discount will pay all depositors in full, within ten days." In case of suspension or failure, the United States Bank of Discount will have the following ways of reimbursing itself: 1. The assets of the suspended bank. 2. The double liability of the stockholders. 3. The insurance fund created by collecting from each national bank onefourth of one per cent of its average balances for the year. At the nd of every three years the United States Bank of Discount will declare dividends equal to one-half of this insurance fund, which will be distributed to the national banks in proportion to the amount which each has contributed. The national hanks of each state will elect one director of the bank. These directors, in turn, will elect an executive committee, which will have the entire management of the bank. THE RESULTS WHICH THIS BANK WILL ACCOMPLISH. (1) An elasticity to the currency, which will enable the banks to take care of the needs of the country during the time of moving crops. (2) A stability to the national banks, as they could at all times call upon the United States Bank of Discount for currency to the extent of their capital and surplus. (3) The insurance of all deposits would result in keeping a large amount of money in the banks which is now kept in safe deposit vaults. This would add largely to the currency in circulation, and at the same time would prevent runs in time of trouble. This insurance of deposits in national banks is as important as fire or life insurance, as safe and proper banking facilities are a necessary element in the business world. (4) This bank could never become a monopoly, as it does business only with national banks, and not with the public. Its business will be limited to the issuing of its notes to the national banks for discount. The only business which it will carry on will be the making of loans to the government and the insuring of the accounts of national banks. (5) This bank will be located at Washington, and will not be under the control of any one political party, but will be controlled by all the national banks of the United States. (6) It will receive no deposits except those of the government. (7) The whole country cannot then be made to suffer by the fighting among the men who have been caught in Wall Street. Each bank will know what it can 'depend upon in time of need. It will not be affec ted by stock gambling, and will not be dominated by men who have been carrying on their business on a stock-gambling basis. If this bank should be incorporated, I am convinced that it would solve the problem now confronting the country in regard to the bank ing system. If at the same time a bill could be passed in congress, making the short selling of stocks, wheat, corn or cotton, punishable by fine and imprison ment, one of the greatest menaces to the business interests of our land would be removed. The people who own the land and grow the crop s ought to control the prices, and not the people who speculate for their own profit. • We have recently read in the papers that a New York man has made a profit of $5,000,000 by the short selling of stock s. The owners of the stocks did not make these low prices, but men who did not own them forced the owners to sell. When timid people see the stocks whic h they own rapidly falling in price they are seized with fear, and immediat ely dump their stocks on the market, thus giving an opportunity to other pers ons to sell short at a great profit. If it is a crime for one man to sell prop erty which he does not own, but some day hopes to own, why is it not a crim e to sell the cotton or corn which a man does not own, and thus force price s down, compelling the man who owns the cotton or corn to sell at less than the real value of the commodity? Think of the great harm which can be done in times like these, by rich speculators, who have never done anything to build up the business of the country! The men who, knowing that some concern is struggling to continue its existence, take advantage of this extremity and begin to sell the stock shirt, are of the greatest harm to the business inter ests of the land. The stockholders, knowing that the company is having a struggle , begin to fear for the safety of their investment; they see the quotations of the stock going lower day by day, not knowing that the quotations are crea ted by people owning none of the stock, so they immediately begin to dump the stock on the market, thus creating the opportunity w!tich the stock speculat or has been looking for. The officers of the struggling corporation have outstanding loans, with the company's stock as collateral, and in order to save their own credit they are compelled to refuse assistance NAl-ich rylicri.R. ise, , they could give to the company. As a result, the company fails because of the short selling of some unscrupulous speculator, who is only waiting, like a vulture, to devour the unfortunate. The protection of business which woul d result if such a method were punishable, as it should be, would be of inestimable value to the entire country. CLEARING HOUSE ASSOCIATIONS Quincy, Illinois, .lanuary 10, 1911. TO THE NATIONAL BOARD OF TRADE: GENTLEMEN: The undersigned joint Special Committee representing the QUINCY CHAMBER OF COMMERCE and the CLEARING HOUSE ASSOCIATION, Quincy, Illinois, appointed to consider and prepare a paper containing suggestions on the National Monetary question, begs leave to report as follows: The IIonorable A. Piatt Andrew, Assistant Secretary of the Treasury and Special Assistant of the National Monetary Commission, Washington, D. C. read a paper in November, 1910, before the American Academy of Political and Social Science. We state substantially a few points made in his paper. "About three years ago most of us found ourselves in a country where business was conducted by curious methods. It was a large and prosperous country whose people had long prided themselves upon their achievements in business and upon the superiority of their commercial and financial equipment; yet, singularly enough, in all of the leading cities of the country coin and legally authorized currency circulated at a premium; while the usual means of payment were inconvertible notes issued without sanction of law, by Banks, Railroads, Mining Companies, firms and many other organizations. Obligations were met by such issues and not in cash—nothing like them seen in this or other countries. Twenty-five thousand Banks suddenly curtailed the facilities which they usually extended to the public. These Banks for the most part unrelated and independent of each other, and simultaneously engaged in a life and death struggle. "Harvests were plentiful, yet dealers in produce were refused credit when it was indispensable. "Railroads were burdened with idle cars, thousands of men were thrown out of employment, thousands of firms went into bankruptcy; trade came to a standstill; the credit system ceased to operate. This too in the United States—not in South America or Islands of the Seas. "In the panics of 1873 and 1893 banks suspended specie payments as well as in 1907, and inconvertible, illegal paper money took the place of coin and legal tender. "In Europe no such general collapse of credit and general suspensoin has ever taken place, except in times of revolution and war." Bankers and Banking Associations have endeavored to change such menacing conditions; Congress, however, has paid but very little attention to their suggestions. Political measures and Tariff schedules have taken precedence, and currency reform movements have been set aside. As a result panics have come on, enormous losses have been sustained and foreign and domestic commerce have become disorganized and their development retarded. It is reported that Senator Aldrich put the losses in the panic of 1907 at two dollars. At last Congress has appointed a National .Monetary Commission and a partial statement of their investigations has been printed in many books, which men in active business will have but little time to read. Much of foreign banking methods cannot be made applicable to our own country. It is well that the Commission is authorized to take several years in making its investigations and final recommendations. It is our opinion that the present Congress should not attempt to pass a measure which, like the so-called Aldrich-Vreeland Bill, will be inadequate to meet conditions which will recur under our present mixed, rigid and unscientific currency system. Commercial bodies in the leading cities have been asked to submit to the meeting of the National Board of Trade to be held in Washington January 18th, suggestions as to the legislation needed to avert panics, and such conditions and losses as have been hereinbefore mentioned. The Aldrich-Vreeland Bill has, at the suggestion and urgent solicitation of the Honorable Franklin Mac Veagh, Secretary of the Treasury, brought into existence a small number of National Currency Associations comprising a comparatively small number of National Banks. Such National Currency Associations do not even represent all the assets of National Banks, to say nothing of the very large assets represented by State Banks, Trust Companies and private Banks comprised in our present Clearing House Associations, and the assets of many large banking institutions scattered over our great country, not now members of Clearing House Associations. Many Bankers cannot realize the amount of currency which is absorbed in the west and south during the crop moving period. We should avail ourselves of our full banking power to meet such situations, especially as State Banks and Trust Companies, as well as private banking institutions are increasing more rapidly in number, capital and deposits than National Banks. To illustrate, we make the following comparative statement of the number of deposits of State and National Banks of North Dakota, South Dakota, Minnesota and Iowa, for the past twelve years: No. of State Banks DEPOSITS 1898 780 $ 90,823,000 288 1909 Gain 2473 1693 389,856,000 $299,033,000 824 536 YEAR No. of National Banks DEPOSITS 000 $ 79,477, 390,222,000 $310,745,000 Total No. of Banks 1068 3297 2229 DEPOSITS $170,300,000 780,078,000 $609,778,000 On December 31, 1880, the deposits of National Banks of the city of Chicago were $ 44,634,000 On December 31, 1908 they were 378,197,678 • On December 31, 1891, (when the new State Banking Law was adopted) the deposits of the State Banks of the City of Chicago were $ 44,442,399 On December 31, 1908 they were 362,165,080 This we think will prove that the business of such sections of the country will require assistance and immediate relief through issues of Clearing House Associations and that they should not be compelled to rely solely upon the bond secured issues of National Banks, which cannot respond to the business demands of the country; restricted, also, in using their reserves in times of stress; and whose currency issues are not retired when not needed—thus encouraging speculations, with the low rates of interest prevailing in congested centers.* Considering our vast and sparsely settled country; the great variety of climate, soil and seasons of production; traditional prejudice against Government Banks, and therefore against a great Central Bank, is there not something else to be considered? We think there is. Congress should provide for the incorporation of Clearing House Associations under federal law, clothing them with larger authority than they can posses as private bodies; and give them the power of issuing Clearing House Notes, as well as Clearing House Certificates. Then the Clearing Houses would do legally, for the *NOTE—At present business is comparatively slack. Notwithstanding this fact, there is a redundancy in National Bank circulation as compared 'with a year ago, to-wit: November 16, 1909, total National Bank circulation, $668,300,000. November 10, 1910, total National Bank circulation, $680,400,000. Illustrating that under our present system National lank circulation is not retired and redeemed when not needed. benefit of the community at large, what they now do in the issue of Clearing House Certificates extra legally and for their own benefit. (Chicago issued both Clearing House Notes, and Clearing House Certificates, in the panic of 1907, to the great advantage of all interests in this section of the country). This object might be attained by amending the Aldrich-Vreeland Bill and giving to the Currency Associations therein provided for the additional powers necessary to enable them to act as Clearing Houses. Membership in such Associations should be enlarged to include State Banks which should be required to carry reserves on demand deposits equal to those required in the National Banking Act of the various classes of National Banks. This would prevent, what we have at present, namely the centralization and congestion of money in commercial centers, and speculation as an inevitable consequence. As things now are we contract credits instead of expanding them in times of great financial revulsion. This is precisely what we could avoid by issue of Clearing House Notes as well as Clearing House Certificates. Thus interest rates would be more uniform in all sections, and ample preparation could be made for the issue of currency based upon the assets and joint guaranty of Clearing House Members. Situations in the movement of crops or other unusual or extra-ordinary emergencies could be anticipated. Such Clearing House issues, based only upon business transactions, could be made to operate immediately and automatically, that is to say; furnished when needed, and retired and redeemed when not required. How slow, expensive and ineffectual a method of obtaining circulation would it be, for individual banks in every section of the country to send securities to a central eastern point to be used as a basis for currency issues. Instead of such a bungling method, Clearing House Committees—in all sections of the country—could daily, and hourly, if necessary, pass upon the value of the assets of Bank Members (chiefly commercial paper, bonds, mortgages) as a basis for credit and note circulation. There is too much pyramiding of deposits in financial centers. Banks should have more gold and currency available in their vaults. If we are to have but one issue, secured by gold and a deposit of Bank assets as security, to be periodically redeemed as were the note issues of the New England Banks through the Suffolk Bank, Boston, and without loss; then it would seem with our vast extent of territory that Federal Clearing I louse Associations, combining practically all the banking power of the several States and Territories and banking experience of practical men; entirely disassociated from political parties, could more readily and safely put out circulating notes, to both National and State Banks, under limitations, as to the amount to be issued, and provision made for their redemption —than a so-called Central Bank not centrally located. Central and Government Banks in England and on the Continent have world wide business connections and fix the rates of interest; we have not even developed banking relations on the Western. Continent, nor in the Orient. Clearing House Associations originally organized to facilitate daily settlements between Banks in times of financial disturbances, might gradually be developed to enter these fields also. If the system of the subtreasury were changed they could secure the deposit of government revenues in the banks. Ultimately the demand issues of the government might be retired through their agency. Clearing House Associations even now are gradually developing many other most important banking functions to-wit: A—The installation of a system for the collection of country items. The first step in this direction was taken by Boston, and the example was soon followed by other Clearing House Associations with satisfactory results. B—The introduction of a Clearing House Examiner, with power to examine, and without notice, the condition of its members. This movement was first taken up by Chicago and later followed in other centers. C —The systematic investigation of commercial credits is another developing feature in the bankin,, world. The co-operation of individual Banks with the Examiners of local Clearing House Associations, as well as the interchange of credit information between the Clearing house Associations of the different cities, will come in time, and greatly minimize, if not almost completely prevent losses, inany ,tinie, occasioned by the lack of information regarding the condition of borrowers. 44. The New York Clearing House Association issued Certificates in as many as eight panics as follows: $ 7,357,000 In 1860 22,585,000 1861 11,471,000 1863 17,725,000 1864 22,400,000 1873 25,000,000 •. 1884 '6,000,000 1890 41,500,000 1893 Although an attempt was made in 1907 to handle the situation without the assistance of Clearing House Certificates, the New York Clearing House finally issued a large amount of them. In almost every instance the Clearing House Certificates were retired within four months after their issue. Respectfully submitted, E. J. PARKER, Chairman. F. W. OSBORN, President C. F. PERRY, Secretary THOMAS A. BROWN JOHN J. FISCHFR T. C. POLING JOSEPH W. WALL E.J. PARKER,President H. G. RIGGS,Secretary Chamber of Commerce, Quincy. 1 - Clearing House Association Quincy. ADVANCE PROOF NOTICE: Our monthly financial ktur will be sent regularly, without charge,to those applyingfor it. It Editors may make such extracts as they see fit. Ott k of Chicago, May 1, 1911. THE ALDRICH PLAN N OUR opinion, the most important subject now before the American people is not the with forthcoming Supreme Court Trust decisions, nor the treaty for Reciprocity Important Canada, nor even the possible revision of the Tariff by the Democrats. s no matthough these questions are, this country can continue to be great and prosperou securities are ter how they are settled. But we cannot long enjoy established prosperity if our banks. Thereto be depressed and our credit impaired by the periodical suspension of our System, fore, the most important subject of the day is Reform of our Banking and Currency Aldrich. and the practical form in which it is before us is the plan suggested by Senator general OUR experience in 1907 proved that under present conditions we may have reserves panic and suspension while our banks are sound and well managed, while our cash gold is are on a higher percentage than those of any other country, and while our stock of conas large as that oi several of the other leading nations combined. Our panics are always rs fined by our national borders. Neither our American neighbors, nor our European competito system have similar experiences. What, then, do their financial systems possess which our lacks? Briefly, four attributes: I. ELASTICITY OF CURRENCY. Our banking currency being secured by governdifment bonds, is rigid. It neither expands nor contracts with the changing needs of the ferent seasons or sections. In our currency a gold dollar never counts for more than a dollar. In Germany, for example, a gold dollar is sufficient basis for the issue of three dollars of currency, the gold in the Reichsbank being merely a reserve of 33 1/3 per cent against its currency liability, just as our national banks must keep certain reserves against deposit liabilities. In other words, note issues are one-third gold-secured, and two-thirds asset-secured currency in I Germany. Other countries have similar but varying means of ready note-issue, thus providing the elasticity to meet a crisis which our currency absolutely lacks. Bankers who in 1907 had to invest in 2% Government Bonds at an absurd price before they could get additional currency—in some cases as high as 109—and all who remember the certificates of small denominations then issued by the Clearing Houses as a substitute for money, can fully appreciate this lack of elasticity in our currency. II. MOBILITY OF BANK RESERVES. When financial trouble threatens in this country our reserves scatter. In other countries they are massed and can be used where most needed. Our banks have no system by which they can stand together and benefit from law, they the strength which is in union. They are isolated units, and, following a natural each seek to strengthen themselves, which can only be done by weakening their neighbors. balThe centres are placed at the mercy of the country banks by the system which permits ances due the latter to be counted as part of their legal reserves. Every banker naturally wishes to strengthen his cash on hand in stormy times, and the drain on the central reserve cities, therefore, culminates at the very time they are least able to meet it. Their only resource is to call loans--especially stock exchange loans—and the result is falling stock markets, liquidation, general curtailment of credit functions, and finally panic. III. LIQUIDITY OF BANK ASSETS. In countries where the banking system is dominated by a central bank with powers of note-issue, other banks have a place where they can rediscount their short-time paper and get currency. The note-issuing power of the central institution enables it to take care of an enormous amount of such business. In addition to that, if a prime discount market be established by allowing banks to accept time bills of exchange, another source of rapid liquidation of bank assets is available. If a bank has invested in these prime bills today and requires the money again tomorrow, it can get it by simply rediscounting the prime bills. 'When distress exists in any financial centre the rate of discount on such bills rises and attracts money from other and even foreign financial centres. All this is unknown to American Banking. When an American bank invests in a time obligation it locks it away until the day of maturity. It is true that smaller banks frequently call upon the larger banks to rediscount for them, but so unpopular has this natural and proper transaction become that the borrowing bank usually tries to arrange such accommodations in a way that cannot be strictly called rediscounting. In this country there is no discount market, and no central organization through which an American bank, in case of need, can quickly liquidate its short-time investments without loss of standing, or the more or less humiliating process of asking a favor. IV. CENTRALIZATION OF BANKING POWER CLOSELY ALLIED TO THE GOVERNMENT. One requires very little knowledge of finance to appreciate the tranquilizing power that may be exerted in trying times by a dominating bank closely allied to the government. When the Bank of England, or the Bank of France, comes to the rescue of an institution or a situation the mere report is enough to stop an incipient panic. All the other banks follow its lead, and crises can be met and overcome by such united action before the people know that any danger has threatened. Panic is fear without real cause. It cannot hold sway in the minds of the people after they know that their great national bank, backed by their national government, has undertaken to care for the situation. THESE are the four chief attributes of sound banking that are enjoyed by all the leading countries of the world, except the United States. To supply them, without radically changing the present system, was the colossal task assigned to the National Monetary Commission. Its Chairman, Senator Aldrich, after years of profound study, has suggested a plan, which in our view, solves the problem in a comprehensive and masterly manner. He proposes to charter "The Reserve Association of America, the capital to be about S300.000,000, the head office to be in Washington, with fifteen branches covering the entire country, divided into fifteen districts. Only national banks can become stockholders—each to the extent of 20% of its capital—and the highest dividend they can ever obtain is 5%—all excess profits, after the establishment of a surplus, ultimately going to the Federal Government. Our space does not permit of a detailed statement of the organization. We believe, however, that complicated as it may seem on first reading, the organization will prove to be simple in practice, and will result in placing the best qualified men on the boards of directors, both of the central association and its branches. We also confidently affirm that the organization completely protects the association from either political or private financial control. This Reserve Association is to be a Bank of Banks, its domestic business being confined to transactions with its own shareholders—the national banks—and the State and Federal Governments. How, then, will this institution supply the four chief needs of our financial system which we have described ? I. ELASTICITY OF CURRENCY. The bonds securing the present currency, amounting to $700,000,000, are to be purchased, and the currency assumed by the Reserve Association. The Association may sell not exceeding $50,000,000 of these bonds per year, and gradually retire the bond-secured currency, replacing it with the Association's own notes secured by onethird gold, and two-thirds good bank assets, following the German plan before alluded to. All note-issues are to be a first lien on the assets of the Association. In addition to these $700,000,000, the Association may make further issues subject, however, to a graduated tax. We do not approve of the tax, but that is a detail. The fifteen branches covering the entire country will supply the necessary redemption facilities. It will be seen that such powers of instantaneous issue and automatic redemption of bank notes supply the element of elasticity so much needed in our currency. II. MOBILITY OF BANK RESERVES. The Reserve Association shall pay no interest on deposits, but balances on its books to the credit of other banks may be counted as part of their legal reserve. Thus a bank which heretofore has carried, say, $100,000 cash reserve will carry only enough for till money—perhaps $25,000—and deposit the remaining $75,000 with the Association. This will ensure enormous deposits for the Association. and the banks will not withdraw them in troublous times on the well-known principle that they do not want the money if they are sure they can get it. Besides, when a bank must withdraw part of its balance, the Association can remit the money in its own notes, and without weakening its own reserves. Thus, the reserves of the country will be centralized in one powerful reservoir and used to provide support wherever support is needed. III. LIQUIDITY OF BANK ASSETS. All the privileges and advantages of the Association are to be equally available to all national Banks which have subscribed to its stock, whether large or small and wherever situated. The Association will stand ready and able to rediscount paper of other banks maturing within 28 days at a rate uniform for the entire country. Longer-dated paper may also be rediscounted, but such paper must be guaranteed witha by the local Association of banks. Any solvent bank. therefore, experiencing sudden •• ••• or•Aormir --wow • . Neff44 Art: , b. drawal of its deposits will be able to convert its assets into cash at a fair rate of discount— provided, of course, that its assets are good. In addition to this, the plan permits the Reserve Association to buy and sell Bills of Exchange, and allows bank s to accept Bills of Exchange for their customers with not over ninety days to run, to the exten t of half the capital and surplus of each accepting bank. Considering our enormous imports, there is now abundant foundation for this kind of business, and thus an international discount market for "prime bills" will be established in this country. This will be infinitely better than forcing surplus funds into demand loans on Wall Street, which is our only quick ly-available loan market today. IV. "CENTRALIZATION OF BANKING POWER CLOSELY ALLIED TO GOVERNMENT," will be furnished by the Reserve Assoc iation because it is to be the Fiscal Agent for the Federal Government, and the sole depos itary of government funds. The Secretary of the Treasury, the Secretary of Commerce and Labor, and the Comptroller of the Currency, are to be ex-officio members of the Boar d of Directors of the Association. In the public mind, therefore, the action of the Associatio n will be backed and supported by the government. This means confidence instead of distr ust, financial peace instead of panic. THERE are functions and attributes of the proposed Reserve Association of America which we have not mentioned because they are of minor importance and interesting chiefly to bankers. One of the most important of these is to grant Trust and Savings Banks facilities to national banks under proper restrictions, thus opening the door to the State Banks to nationalize on equal terms, and paving the way for a greater and more uniform American banking system. The reform, however, in its broadest aspects is of greater importance to the public generally than to bankers. Bankers can worr y through suspensions and panics; indeed, they sometimes make larger profits then than they make in normal times. The real sufferers from a panic are the numerous weak holders of depreciated securities, the ranks of laboring men deprived of work, and the business men of all kinds whose bank credit is suddenly curtailed. The need of the hour is an enlightened public opinion among all classes which shall be strong enough to carry through the propo sed legislation. THE NATIONAL CITY BANK OF CHI CAGO. vC. 7 e ' 1, , - A.- • ' • A SIMPLE PLAN TO SECURE AN . AUTOMATIC ELASTIC ASSET EMERGENCY CURRENCY To Be Had on Demand and Rctircd Whcn Not Needed. By LEONARD MATTHEWS, St. Lonig, Mo. Assume an agreement between the United States and the various banks, state or national, and the trust companies members of the various clearing houses of the country cart be arranged. To do this the United States must agree to keep on hand and furnish on demand legal tender currency to any clearing house in the country, and the various clearing houses collectively must agree to become liable for any losses made by any individual clearing house to the United States. Three steps only are essential to this reformat ion of the currency: 1st. The United States Treasurer shall be required to loan any clearing house in the United States, any amount of money demanded to be placed in any city where wanted. 2nd. All clearing houses shall be held liable to the United States for any loan made to any individual clearing house. 3rd. Laws and regulations must be made to enable the above to be carried out. This scheme would require no bonds or other tangible assets as security for money loaned, thus saving valuable time and possible loss in selling bonds or other assets when retiring the loans, or perhaps save the failure of a bank at a critical moment. The clearing house should charge such rates of interest that would insure a speedy return of the loans, graduating the rate according to the usual rate of interest charged in its section of the country, making it high enough that the borrower would pay it back as soon as urgent demand ceased, but not later than a fixed time. No doubt in time the interest received on these advances, less a reasonable amount, to be paid the United States for expenses incurred in preparation for the plan, would more than cover the losses likely to accrue, and accumulate a fund with which to form a central national bank. if ii should be deemed wise to do so. In case of loss on any loan by a local clearing house, a greater proportion of the loss should be assessed on such clearing house, to make it careful in accepting securities offered. Sometimes cases may arise when it would be important to sustain a failing institution to prevent undue excitement, even, if the security offered should not be deemed sufficient. In such event, with the approval of a committee, to be appointed, the loss, if any, should be divided, in proper proportion, among all the clearing h oases. By the plan proposed legal tender money will be obtained current everywhere, in contra distinction to local clearing house certificates, used only with local banks. Loans will be obtained on demand, without publicity, and returned as soon as possible, and disgraceful rates of interest being charged as recently seen in the market will me occur again. It would be an absolutely automatic elastic asset emergency currency, issued when wanted, and retired when not needed, and if desirable, the volume of the currency now outstanding, could be reduced in view; of the fact it could be so easily increased to meet temporary unusual demands. It may be objected that banks and trust companies in clearing houses would be unduly favored, but as soon as they are relieved, they in turn would loan their money to their customers and thus the whole country would be relieved. This scheme would not prevent panics, but it would reduce their force and frequency, and render it unnecessary to keep up so large a reserve fund as twenty-five per cent For illustration, suppose a bank or trust company in New York, St. Louis or San Francisco, needed assistance. It would apply to its local clearing house, which, in turn, would, after satisfying Itself as to the security offered, wire the Treasurer at Washington to place the amount to the credit of the party applying for the loan In any city where wanted. This would afford instantaneous relief. No circumlocution in putting up bonds. etc., but instead the combined assets of every bank in the various clearing houses would be liable, beside having the best ability of the whole country to manage it. To do this. there might at first be some difficulty in selecting parties best fitted for the duty, but after a few trials the writer feels sure the right men would be selected to suggest the wany details necessary to perfect the plan. It would be necessary for the Treasurer to keep bills on hand ready for emergencies, but in denominations of not less than $100,000; If this scheme prevail, state banks and trust companies members of the clearing houses, to obtain the assistance needed, should be required to conform with feileral laws governing national banks, as far as this scheme may render it necessary. As the government is constantly deranging trade and finances by its absorption of money through its custom and excise duties, it is only fair that this plan should have Its sanction and support, and it will be an important step toward taking it out of the banking business. There are many details ill perfecting this scheme unnecessary to mention here. It has been said if we did not have a Wall Street, we would have no need of emergency currency. This may be so, but the fact remains we have a Wall Street, and many of them, and they will continue as long as time lasts. A system like the above, governed by the best minds in the nation, would have a tendency to correct many evils, restrain over-speculation and prevent undue expansion. As to a permanent currency based on asset security and the formation of a great national or international bank (suggested by some), plans have not been formulated, but either may be feasible, under similar provisions, though of questionable propriety. If the above scheme is adopted, should it be deemed wise to establish such a bank, the government should own one-half of it, to be paid out of interest received on loans to banks. The foregoing plan was submitted to our Secretary of the Treasury by the writer in January, 1906, and seems to have met with favorable consideration by the special committee of the Chamber of Commerce of New York, which says, on pages 19 and 20 of its report to the Chamber, under date of October 4th, 1906: "It has been suggested to the committee that a practical method of putting into operation the principle of hank note credlt currency would be to have Congress reec,gnize this principle by authorizing banks, through a voluntary association of their own, to make such issues within certain limitations and subject to a joint guaranty by participating banks; the details of such guaranty and the provisions for safety to be devised by the banks themselves, subject to the approval of the Comptroller of the Currency. Your committee see practical difficulty in securing the representative judgment of the bankers to devise the details of such a plan, but we are so clearly convinced of the desirability of the application in some form of the principle of a credit currency that we would heartily endorse this plan if Congress and the banking interest approve it." 4 OFFICERS PRESIDENT SAMUEL MCCUNE LINDSAY Professor of Social Legislation, Columbia University VICE -PRESIDENTS A LBERT SHAW Editor of The Review of R rview!, PA u I. M. WARBURG Kuhn, Loeb & Company SECRETARY IIENRY RAYMOND MUSSEY Associate Professor of Economics, Columbia University Editor of the Proceedings of the Academy TREASURER GEORGE A. PLI M PION inn & Company, New York ASSISTANT TO THE PRESIDENT EM MA S. LAKE TRUSTEES konER r 14:KsKt NE ELY League for I'olitical Education FRANK Incorporated 1910 Founded MO J. GOODNOW Professor of Administrative Law, Columbia Universitx A. BARTON HEPBURN President Chase National Bank, New York THOMAS W. LAMONT .1. P. Morgan & Company, New York WILLIAM R. SHEPHERD Professor of History, Columbia University HENRY R. SEAGER Professor of Political Economy, Columbia Univers', y EDWIN R. A. SELIGMAN Professor of Political Economy, Columbia University MUNROE S MT T Professor of Comparative Jurisprudence, Columbia University, and Editor of the Political Science Quarterly FRANK A. VANDERLIP President National City Bank, New York ADVISORY COUNCIL NICHOLAS MURRAY BUTLER President of Columbia University ELI II U ROOT United States Senator from New York FRANCIS LvNnE STETSON New York Bar Zip Arabetny ul tiolitiral #rittire in tile QItt tif New tork 8 Preliminary Announcement Program of Second National Conference on Currency Reform October 14-15, 1913 General Topic: The Reform of the American Banking System tiENERAL TOPIC THE REFORM OF THE AMERICAN BANKING SYSTEM EXECUTIVE AND PROGRAM COMMITTEE Henry l'. Davison A. Barton liepburn Joseph French John--oo Alexander D. Noye. George A. Plimpton Henry R. Seager E. R. A. Seligman Theodore N. Vail Paul M. \Val-1)111.g IT. Parker SAMUEL McCuNE LI NDSAY, Chairman Ex-uflicio l. W. NEM u F.RER Secretary EDWARD J. BUI.I WI N KIN DAVID M. IIEY \I AN IIIOMAS If. WATSON, JR. Assistant Secretaries FIRST SESSION Tuesday, October 14, at Noon THE FEDERAL RESERVE ACT (New York Chamber of Commerce, 65 Liberty St.) SECOND SESSION Tuesday, October 14, 3 p. m. THE CENTRALIZATION OF BANKING MOBILIZATION OF RESERVES AND (New York Chamber of Commerce, 65 Liberty St.) THIRD SESSION Wednesday, October 15, 10:30 a. m. THE ELASTICITY OF CREDIT (Earl Hall, Columbia University) FOURTH SESSION Wednesday, October IS, 2130 p. m. FOREIGN AND DOMESTIC EXCHANGE FUNCTIONS OF THE REGIONAL BANKS (Earl Hall, Columbia University) WEED!Nt;S The addresses, papers and a swum:it y of the discussion Al the meeting will be published in a volume as part of proceedings of tho Academy and distributed gratis to the all members. )rders from non-members for this volume will be received and entered for delivery as soon as issued, if order is prepaid at the rate of $1.50 per ing and $2.00 per copy in cloth binding. copy in paper bind- BANQUET (FIFTH SESSION) Wednesday, October 15, 7 p. m. BANKING REFORM IN THE UNITED STATES (Hotel Astor) Earl Ilan, Columbia University is near lit t1 Si Station, Broadway Subway. 3 FIRST SESSION TUESDAY, OCTOBER 14. AT NOON NEW YORK CHAMBER OF COMMERCE, 65 LIBERTY ST. This metling, followed by an informal luncheon and the second session, will be held in the Hall of the New York Chamber of Commerce through the courtesy of the Chamber extended to the Academy. Admission will be only by special card of invitation or presentation of membership cards by memlwrs of the Clipmber or members of the Academy. Subject: "The Federal Reserve Act." Addresses by the Honorable Robert L. Owen, Chairman of the U. S. Senate Committee on Banking and Currency, and the Honorable Carter Glass, Chairman of the House ot Representatives Committee on Banking and Currency. II. Discussion Edward B. Howe, Princeton, N. 1. Irving T. Bush, New York City FOURTH SESSION WEDNESDAY, OCTOBER 15, 2.30 P.M. EARL HALL COLUMBIA UNIVERSITY Subject: "Foreign and Domestic Exchange Functions of the Regional Banks" A Symposium under the ten-minute rule SECOND SESSION TUESDAY, OCTOBER 14. 3 P. M NEW YORK CHAMBER OF COMMERCE. 65 LIBERTY ST. Subject: "The Centralization of Banking and Mobilization of Reserves." I. Addresses (limited to 20 minutes each): /. score and Organization of the Proposed Regional I. Domestic Exchange Problems: W. M. Van Detisen Benjamin Strong, J Joseph T Talbei II. Foreign Exchange Problems: Alexander 1). Noyes (;ardin John J. A. Neilson Banks II. Parker Willis, The Journal of Commerce and Commercial Bulletin A. Barton Hepburn, Chase National Bank 0. M. W. Sprague, Harvard University -1 he Mobilization of Reserves. Arthur Reynolds, Des Moines National Bank II. Discussion (under ten-minute rule): A. Piatt Andrew, (doticester, Mass. FIFTH SESSION WEDNESDAY, OCTOBER 15. 7 P M BANQUET HOTEL ASTOR • Subject: "Banking Reform in the United States" THIRD SESSION WEDNESDAY, OCTOBER 15. 10.30 A. M. EARL HALL COLUMBIA UNIVERSITY Subject: "The Elasticity of Credit" I. Addresses t. The Rediscount l'unctlons of the Proposed Regional Banks (Speakers to be antionneed 1 he Note Issue Toseph French Johnson, New York University 'E. W. Kemmerer, Princeton University John H. Finley, Toastmaster President of the University of the State of New York \hli'. by the lInNORABLE NELSt )N \V. ALI )R liuests of Honor: .1 lir Cliait iiir .e0 • anking all urrtticy and tliV t n ( t ii"" 4 riba.4"16111141; eisioSi:e a t)i .. " 4 "tir Relit esentatives Committee on Banking and Currency cunimitt, 5 MEMBERSHIP GENERAL COMMITTEE JOHN 11. FINLEY, Chairman Frank B. Anderson, San Francisco, Cal. Piatt Andrew, Jr., Boston, Mass. Nicholas Murray Butler, New York City John Claflin, New York City Henry P. Davison, New York City Davis R. Dewey, Boston, Mass. Cleveland II. Dodge, New York City Fred W. Fleming, Kansas City A. Barton Hepburn, New York City Henry L. Higginson, Boston, Mass. Edmund J. James, Urbana, Ill. Jeremiah W. Jenks, New York City Samuel McCune Lindsay, New York City Robert J. Lowry, Atlanta, Ga. Henry Morgenthau, New York City John Perrin, Pasadena, Calif. Lawrence C. Phipps, Denver, Colo. Carl C. Plehn, Berkeley, Cal. ulius Rosenwald, Chicago, Ill. ( 7harles F. Scott, Iola, Kansas I lent v R. Seager, New York City E. R. A. Seligman, New York City William F. Slocum, Colorado Springs, Colo. Robert W. Speer, Denver, Colo. James Speyer, New York City Benjamin Strong, Jr., New York Tit y Frank Strong, Lawrence, Kansas E. F. Swiney, Kansas City, Mo. It ank NV. Taussig, Cambridge, MaF. t. , Frank Trumbull, New York City Theodore N. Vail, New York City Fr;ink A. Vanderlip, New York City II(airy Walters, New York City Paul M. Warburg, New York City Harry A. Wheeler, Chicago, Ill. . Parker Willis, New York City Persons interested in the work of the Academy are in tied to become members. Annual dues five dollars. Membei s receive the "Political Science Quarterly" and four it timbers of "Procee(lings" in addition to invitations to meetings and other privileges. A()MISSION TO SESSIONS Admission to all sessions will he by membei ship or gur Cards. Members of the Academy will be admitted upon preciit at ion of their membership cards, and may obtain gue, tt cards without charge except for the First and Fifth Session, .. 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Lake, Academy of Political Science, Kent Hall, Columbia University, New York City. 7 (I OFFICERS PRESIDENT SAM U EL MCCUNE LINDSAY Professor of Social Legislation, Columbia Uniyersil y VICE-PRESIDENTS ALBERT SHAW Edit or of The 1:evit w of R rvicw PAUL M. \VARRURG 1111111, I me?) & Company SECRETARY EN RV RAN'MON D MUSEY C• Professor oi Economics, Columbia University .1.:(1 it or of the Proceedings of the Academy TREASURER (;EORGF. A. PLI MPTON (;inn & Company, New York ASSISTANT TO THE PRESIDENT EM MA S. LAKE TRUSTEES ROBERT ERSKINE ELY League for Political Educat ion FRANK J. G000Now Professor of Administrative Law, Columbia Uniyersitx A. BARTON HEPBURN President Chase National Bank, New York THOMAS W. LAMONT J. P. Morgan & Company, New York WILLIAM R. SHEPHERD o lessor of History, Columbia tin iversity HENRY R. SEAGER Pi H lessor of Political Economy, Columbia University EDWIN R. A. SELIGMAN Professor of Political Economy, Columbia University MUNROE SMITH Professor of Comparative Jurisprudence, Columbia University, and Editor of the Political Science Quarterly FRANK A. VANDERLIP President National City Bank, New York ADVISORY COUNCIL NICHOLAS MURRAY BUTLER President of Columbia University ELI II U ROOT United States Senator from New Y or k FRANCIS LY N DE STETSON New York Bar 8 TABULAR SUMAIAR Bank of England (1694). $4.g1;65.) Capital, £14,553,000 ($70,822,175). No reserve liability. Surplus , about $17,000,000, but fluctuates from week to week; by unwritcalled "rest," ten custom is never reduced below £3,000,000($14,599,500). (Value of bank buildings, perhaps $25,000,000, not carried in account.) 1. CAPITAL AND STOCKHOLDERS. Amount of capital, reserve liability, and surplus Legal provisions as to surplus None. Number of stockholders Over 10,000. Number of shares, 145,530 of £100 ($486.65) each, par value. Capital, 1s2,500,000 francs Various requirements, incl the value of central ban 32,442(Dec. 24, 1910). Character of stockholders 11,312 have not more than Restrictions upon ownership and transfer of stocks None. Restrictions upon voting power. Stockholder to vote must have 5 shares(par $486.65 each), but can have only 1 vote, no matter how many additional shares he may own. Only 200 largest shareholde to vote. Powers of stockholders Elect. governor, deputy governor, and directors, and vote by-laws. Meet once a year, elect rege Restrictions upon profits of stockholders , None, except that 6,028 s I marked "not transferable None,except that the Gover count rate above 5 per cc tioned later. None (except such as are due to taxes mentioned later). Average annual dividends, 1901-1910. 9.3 per cent. r1O=F/rfyo011.1....MINNIP 2. ORGANIZATION AND MANAGEMENT. Chief officials: By whom appointed... 13.9 per cent. In 1908, 16 ..1,0111•000111/MAIIMMAIr..1.01=111111.11•101MP•11,11MINIMPWC11171ti mnioraLSIMIOM, Governor and deputy governor, elected by stockholders (practically selected by directors). Governor and 2 deputy gove 1 year. customarily reelected a second year. Deputy succeeds governo r. No fixed period; removable From what classes or occupations, qualiticat ,ns, etc From directors(who are generally merchant bankers or financie hold 40 shares (£4,000), deputy governor 30 shares (£3,000). rs). Governor must Can not be members of Chain governors 50 shares each. Functions Governor directs general policy, supervises business of head office. Deputy governor supervises branch business. For what time Board of directors: Number 24. Governor directs general po management. General council consists of (auditors). By whom selected By stockholders holding 5 or more shares (but candidates practic ally nominated by board of directors). ! Elected by 200 largest shareli For what time 1 year, but customarily reelected; 8 of the directors retire every year. From what classes or cccupations, qualifications, etc Functions Regents for 5 years; censors Usually merchant bankers or financiers, but can not be directo rs of other banks, 5 regents and the 3 censors bill discounters, or brokers. regents must come from ge Meet weekly, serve on various committees (decide with governo rs upon changes in bank rate). Meet. once per week. Vote u Other committees 10.1111=110111111111191MON 3. BRANCHES. Number of branches in central city 9. Number of branches in other cities 9. The general council (govern° into 5 committees. The di holders who are merchants Number of head branches Number of subbranches Number of agencies Functions of head branches Functions of subbranches Functions of agencies None. All of same class. No .ubbranches. N o agencies. Same as of head office. None. 200 branches and auxiliary bu 128 succursales (branches). 72 bureaux auxiliaires. 312 villes rattachees (agencies) Same as of central institution. Same as of central institution e branch. None. Only collect bills. Managers of branches, how appointed Measure of discretion allowed 4. RELATIONS TO GOVERNMENT. Government ownership of stock Selection of officiulm Frequency and character of reports required Selected by governor and directors. Discretion subject to supervision from head office. Curren t London rates telegraphed each morning to branches. None held by Government. Government has no choice. Weekly statements required in form prescribed by act of 1844, but no separation of loans; discounts, and securities, and no distinction betwoen bankers' balances By chief of stPte from 3 candid: Subject to parent institution managers are assisted by loca None held by Government. Chief of state appoints governor Quarterly reports required; wet but with no senara iou of ban ARY OF THE LAWS, PRAM' 1( AND STATISTICS 011i PREPARED FOR THE NATIONAL MONETARY CoiN [DECEMBER, Bank of France (1800). (1 franc-$.193.) Bank of Sw, ‘, (1 kron, Reichsbank (1876). (31-4.20 marks.) 182,500,000 francs($35,222,500). No reserve liability. Surplus, $8,206,234. Capital, 180,000,000 marks($42,857,000). No reserve liability. Surplus,$16,610,000. Capital, 50,000,000 kroner ($13,400,00u). _x 1910), $3,350,000. requirements, including profits from discount rate in excess of 5 per cent, lue of central bank building, etc. 10 per cent of excess profits over a dividend of 3i per cent assigned to increasing reserve, So long as surplus is under 25 per cent , be assigned to surplus. ec. 24, 1910). 18,748(December 31, 1910). There are no stockholders. Bank belongs to P ye not more than 1 share each, and 1,468 over 20 shares each. All classes or occupations, especially banks, bankers, and merchants. (16,628 native, 2,120 foreign.) No stockholders. Administration under the cl liament. cept that 6,028 shares belonging to married women, minors, etc., are "not transferable." None, except that officials of the Reichsbank are prohibited from possessing shares. No stockholders. i largest shareholders vote. Foreigners may own stock, but are not allowed r e a year, elect regents and censors, who meet usually once a week. Each share of 1,000 marks gives 1 vote, provided that no more than 300 votes be united in one hand. — --At, annual meeting elect Central-Ausschuss, an advisory body, which meets once a cept that the Government receives three-fourths of all profit from raising disate above 5 per cent, also certain taxes and royalties on circulation menlater. Shareholders receive 3i per cent dividends and (from January 1, 1911) only 20 per cent of excess profits. No stockholders. ent. In 1908, 16 per cent; in 1910, 14 per cent. 6.93 per cent. Average annual assignments to public treasury, and 2 deputy governors, appointed by chief of state. The Direktorium, consisting of president, vice-president, and 8 managing directors appointed by Emperor on recommendation of Bundesrat. Administration managed by 7 directors, 6 appoi Crown. From the board. itself 3 members several departments. Chairman may not be period; removable at will of chief of state. For life. Nominally for parliamentary term of 3 years, p e members of Chamber or Senate. Governor must own 100 shares; deputy ors 50 shares each. No legal provisions. Chairman of board may not be one of 3 manage directs general policy of bank. Deputy governors look after details of council consists of governor, deputy governors, 15 regents, and 3 censors rs). month. The Direktorium manages the bank and fixes the discount rate. No stockholders. No stockholders. ! Conduct business of bank. Central-Ausschuss, 15 members and 15 alternates, all stockholders. 7. Elected by stockholders. A special committee of 24 members of both ho names chairman. Annually, but customarily reelected. For the duration of each Parliament, 3 years. No instructions. In practice, bankers, merchants, landlords, and manufacturers. During tenure of office may not be directors of an Can not be members of council of state, or m e per week. Vote upon changes in the rate of discount. A consultative body; meets once a month. May limit amount of securities purchased and of loans to Government. Meet weekly to supervise bank operations. Da' to transact lending business. ral council (governor, deputy governors, regents, and censors) is divided ommittees. The discount committee of 12 members includes other sharewho are merchants or manuiacturers, as well as members of the council• Curatorium. 5 members, including imperial chancellor, Prussian minister of finance, and 3' members of Bundesrat selected by that body. Final seat of authority. 200 largest shareholders. for 5 years; censors for 3 years. and the 3 censors must come from commercial and industrial classes; must come from general paying treasurers. Must own 30 shares. 1 central bank in Berlin. Audit committee appointed by Parliament. None. lies and auxiliary bure,le, . 488 (October. 1911). 26. rsales (branches). 20 Hauptstellen head offices (1911). 26. x auxiliaires. 76 Rankstellen offices (1911). None. rattachees (agencies). 392 Nebenstellen agencies and auxiliary branches(1908)(including 5 warehouses for merchandise). None. I central institution. Same as of central institution. central institution except that all discounts are referred to nearest head Auxiliary branches and agencies. All business done (discount and loans) referred to respective head branch. Same as head office. None. ct bills. (See above). I AOC from 3 candidates proposed by governor of bank. Head managers (directors) of Hauptstellen (head offices) by the imperial chancellor on recommendation of the president; managers of all other branches by the president. By central board. ) parent institution as regards rate of discount and important matters; s are assisted by local board. Head branches act under supervision of the Direktorium, subbranches under that of the respective head branches. Subject to general and special instructions. None. by Government. e appoints governor and deputy governors of bank. reports required; weekly statements voluntarily published in some detail A rn,,,Arto 15) separa 11011 of bankers' halarwes from ntb,br ils.luwifia None held by Government. Emperor appoints president and members of Direktorium, also 2 members of curatorium, of which Bundesrat selects other 3. Weekly statements_ required in.sorne detail, but no separation of bankers' bulaneep. No stock issued; belongs to legislature. Directors appointed by a special joint committ directors. King names chairman of board. . ATIST[CS OF THE PRINCIPAL BANKS OF THE LEADI ED FOR THE NATIONAL MONETARY COMMISSION BY A. PIATT ANDREW. i)E,T sin, 1911.] Bank of Sweden (1668). Bank of 8 Bank of Italy (1893). (1 krone-26.8 cents.) (1 (1 llre-S.193.) 180,000,000 lire ($34,740,000). Unpaid $11,580,000. Surplus(ordinary Capital, 50,000,000 kroner ($13,400,000). No reserve liability. Surplus (Dec. 31, Paid capital, $9,264,000 and extraordinary surplus, $1,930,000. legal, 1908), 1910), $3,350,000. (Each share is 800 lire nominal and 600 paid up.) December 31, 1908: Paid capital, 2 Unpaid capital, $4,825,000. So long as surplus is under 25 per cent of capital, 10 per cent of yearly profits must be assigned to surplus. Must equal one-fifth capital. 10 per cent of net profits, not exceedi fund, until the surplus amounts to There are no stockholders. Bank belongs to Parliament. 9,927, of which 9,703 in Italy and 224 abroad. 10,004 shareholders (1910). 23 cant balance, 44,692, owned by 9,948 i No stockholders. Administration under the charge of a commission chosen by Par- All classes, but some of the large credit establishments hold 3,000 or 4,000 shares each. of capital reserved by law to the private individuals. None, except in cases of dispute of heritage; the tribunal must consent to the transfer. Individual shareholders must be S in Switzerland. Every transfer liament. No stockholders. Each share officially registered enti holder can have more than 100 vo 30 shareholders, representing 10,000 for extraordinary meetings), elect iuling held at Rome. Meet annually and select 4 directors. General annual No stockholders. sion of 3 members and 3 substitute — --Shareholders receive 5 per cent dividend on paid-in capital and two-thirds of profits Limited to 4 per cent dividends; t the rest going to the until 6 per cent and then only one-half of remaining profits, surplus, goes to the Government. No stockholders. State. 3.275 per cent. During these years profits were being put aside to liquidate old 1907-1910, 4 per cent. Bank orgam Average annual assignments to public treasury, 11.3 per cent of capital. obligations. Direktorium-3 members—elected Administration managed by 7 directors, 6 appointed by legislature, chairman by the Genera manager and submanager elected by superior council, b ut must be a d Local manager and subrnanager Crown. From the board itself 3 members are assigned the management of the by the Government. by Bundesrat. several departments. Chairman may not be one of 3 managers. No stockholders. a I 20 shares required for a vote, but one shareholder can have no more than 50 votes. Nominally for parliamentary term of 3 years, practically longer. Indefinitely. 6 years. Bank managers are not allowed to board of another banking institut Chairman of board may not be one of 3 managers. Conduct business of bank. The general manager is head of the administration of the bank. Each has charge of one of the three and note issue. 7. Superior council of 22 members. (General manager, under general manager, and superior council comprise the directory.) Bank council, 40 members. A special committee of 24 members of both houses of Parliament appoints 6; King names chairman, 18 elected by the shareholders at a meeting held in turn every 3 years at each head branch and 4 elected annually in Rome by the shareholders. 15 elected by general meeting and For the duration of each Parliament, 3 years. Three years. 4 years. Must be Swiss citizens; not more t more than 5 members of governm During tenure of office may not be directors of any other bank,except savings banks. Can not be members of council of state, or managers of national debt office. ; Meet weekly to supervise bank operations. Daily attendance of at least 4 is needed to transact lending business. Appoint bank staff upon recommendation of the general manager. General supervision. Audit committee appointed by Parliament. loca Committee of 3 or 5 syndics elected yearly by stockholders to supervise general Bank committee, 7 members; mission, 6 members. management of bank. None. 1 central bank in Rome. Berne center for administration of n 26. Bank of Sicily and Bank of Naples are independent note-issuing banks, and have their head offices respectively in Palermo and Naples. 8 branches (including Berne and Z 26. 11. None. None. 69. The bank is obliged to have either head office or branch in capital of each of 69 ' None. Provinces, and in cities where branches of late Tuscan Bank were located. None. 22. Many private banks and credit institutions also act as correspondents for the collection of bills and payment of obligations. same as head office. Same as central institution. No subbranches. None. Can not discount directly, but receive deposits, collect bills, redeem notes. Recently "first-class agencies" have authority to discount within certain limits. By general minager upon proposal of superior council, lie is assisted by a local board of from 8 to 12 councilors or censors, selected every 6 years by assembly of shareholders. Agencies can not undertake discounting operations directly. By a recent modification of the law "first-class agencies' may discount within certain limits through a small discounting committee. None. By central board. — Subject to general and special instructions. No stock issued; belongs to legislature. None held by the Government. Directors appointed by a special joint committee of Parliament; other officials by directors. King names chairman of board. State does not select any officers, but must approve the election of the general manager and submanager. 13 agencies (1910). Agencies reimburse notes, discou over transfers; act as mediator ii By Federal Council on proposal o Confederation not allowc,1 twss reserved to the Cantons. Federal Council elects the chair!' 23 other members of the comic members of general managemen A",..11 .1 • Vi • ye., rte.".I I... TH E LEA DING Co UN-TRIES.--SHEET Bank of Switzerland (1907). franc-4.193.) dus ordinary ii. Bank of Belgium (1850). lfranc=$.193.) December 31, 1908: Paid capital, 25,000,000 francs ($4,825,000). Unpaid capital, $4,825,000. (1908) Capital, 50,000,000 francs ($9,650,000). $6,860,216. 10 per cent of net profits, not exceeding 500,000 francs a year, i8 set aside for surplus 1. CAPITAL 10 per cent of net profits in excess of 4 per cent per annum is set aside to meet losses in capital and to insure a dividend of 4 per cent on capital. fund, until the surplus amounts to 30 per cent of paid-in capital. No reserve liability. Surplus, Amount of capital, res Legal provisions as to s 10,004 shareholders (1910). 23 cantons hold 38,772 shares, 33 banks 16,536 shares; 50,000 shares. 21,221 nominative shares divided among 889 holders and 25,779 shares to bearer (1908). balance, 44,692, owned by 9,948 individuals. shares each. nsent to the of capital reserved by law to the cantons; A to the old banks of issue, and di, to private individuals. —— Individual shareholders must be Swiss citizens, firms, or corporations domiciled in Switzerland. Every transfer must be approved by the bank committee. Number of stockholde All classes. Character of stockhold No restrictions as to ownership. Restrictions upon own an 50 votes. Each share officially registered entitles holder to one vote, but no private shareholder can have more than 100 votes. 10 shares required for a vote, but 1 person can have no more than 5 votes either as a shareholder or a proxy. Restrictions upon voti at Rome. 30 shareholders, representing 10,000 shares, a quorum, meet annually (or when called for extraordinary meetings), elect 15 members of bank council, the audit commission of 3 members and 3 substitutes, and decide all affairs laid before the meeting. Shareholders' assembly meets twice a year; elects directors and censors. Acts upon all matters placed before them by the council of administration or censors. Powers of stockholders. Limited to 4 per cent dividends; the rest, except for 10 per cent credited to the surplus, goes to the Government. Shareholders receive 4 per cent of net profits; 25 per cent of remainder goes to State, 10 per cent to reserve, and the rest to the shareholders. Restrictions upon profi iquidate old 1907-1910, 4 per cent. Bank organized in 1907. (1899-1908) 15.01 per cent. Average annual divide must be ap- Direktorium-3 members—elected (on proposal of bank council) by the Bundesrat. Local manager and submanager immediately under direktorium, also appointed by Bundesrat. Governor and deputy governor appointed by the King, 6 directors elected by shareholders. 6 years. Governor serves 5 years. May be reappointed. For what time. Governor must own 50 shares, directors 25 shares; must reside in Brussels and can not be a member of the legislative body or draw a State pension or belong to board of any other bank. From what classes irds of profits going to the JIMMOMIMMEIOMMEM , Bank managers are not allowed to practice any other profession or belong to the ' board of another banking institution. Can not be members of the Nationalrat. 2. ORGANIZA Chief officials: By whom a,ppoin Each has charge of one of the three departments: Discount and giro, management, Each director is intrusted with control of one or more departments of the bank. and note issue. anager, and Functions. Board of direeto Number. General council, 14"metnbers (vvorair, 6 dirJ:.:tors, aal 7 ceasms). 15 elected by general meeting and 25 by Bundesrat. By shareholders. By whom selected. 4 years. -ears at each Bank council, 40 members. 6 years; may be reelected. For what time. Must be Swiss citizens; not more than 5 can be members of Federal Chamber nor more than 5 members of government of Cantons. From what classes General council exercises general supervision over affairs of bank, appoints discount committee, etc. General supervision. rvise general Bank committee, 7 members; local committees, 3 to 4 members; also audit commission, 6 members. Other eommitt Council of censors (7), which audits books, etc., chosen by shareholders for 3 years. Berne center for administration of note issue; Zurich center for general management. 1 head office or central institution (Brussels). ks, and have Functions. Number of branches 1 branch at Antwerp. Number of branches i None. of each of 69 located. 8 branches (including Berne and Zurich), all coordinate. 1 branch at Antwerp (as above). Number of head branc None. None. Number of subbranch _ents for the 13 agencies (1910). 39 agencies and 30 discount offices. Number of agencies. Apparently the same as at central or head office. Functions of head bra No subbranches. No subbranches. Functions of subbranc notes. Retain limits. Agencies reimburse notes, discount bills, grant loans agaHst deposits, and take over transfers; act as mediator in all other business. Act as guarantors for much of the paper discounted by the bank. They are usually private partnerships. Functions of agencies. d by a local by assembly By Federal Council on proposal of council of the bank. Agents are appointed by the King from a double list furnished by the administrati Vet. council. Managers of branches Discounts are granted provisionally by agents of the bank. Measure of discretion None held by the Government. 4. RELATI Government ownershi E nug appoints governor and deputy governor; besides, a Government commissioner is appointed by the State. Selection of officials. cent moditimits through 4•11110111MINEIMIW the general Confederation not allowed to possess any shares of the bank; hut 4, of capital are reserved to the Cantons. Federal Council elects the chairman and vice chairman of the hank council and 23 other members of the council of the bank; also on proposal of the council members of general management, directors, and subdireetors of branches. A v•••••••.1 .•••••-•••-•..•1.. 1 .1, • HEET 1. Bank of Belgium (1850). franc-11.193.) s2.),000). (1908) Capital, 50,000,000 francs ($9,650,000). $6,860,216. year, is set aside for surplus -in capital. No reserve liability. Surplus, 10 per cent of net profits in excess of 4 per cent per annum is set aside to meet losses in capital and to insure a dividend of 4 per cent on capital. res, :U .banks 16,536 shares; 50,000 shares. 24,221 nominativ e shares divided among 889 holders and 25,779 shares to bearer (1908). )1d banks of issue, and ?/ to 1. CAPITAL AND STOCKHOLDERS. Amount of capital, reserve liability, and surplus. Legal provisions as to surplus. Number of stockholders. Vi te, laut no private shareet animally (or when called (ouncil, the audit commisirs kid before the meeting. 10 pet cent credited to the 'Itaracter of stockholders. No restrictions as to ownership. Restrictions upon ownership and transfer of stocks. 10 shares required for a vote, but 1 person can have no more than 5 votes either as a shareholder or a proxy. Restrictions upon voting power. Shareholders' assembly meets twice a year; elects directors and censors. Acts upon all matters placed before them by the council of administration or censors. Powers of stockholders. Shareholders receive 4 per cent of net profits; 25 per cent of remainder goes to State, 10 per cent to reserve, and the rest to the shareholders. Restrictions upon profits of stockholders. (1899-1908) 15.01 per cent. or corporations domiciled the hank committee. All classes. Average annual dividends, 1901 1910. 111.11.- council) by the Bundesrat. irekt( rium, also appointed Governor and deputy governor appointed by the King, 6 directors elected by shareholders. 2. 01WANIZATION .1 NI I) MANAGEMENT. Chief officials: ity whom appointed. Governor serves 5 years. May be reappointed. profession or belong to the inbeis of the Nationalrat. tint and giro, management, For what time, Governor must own 50 shares, directors 25 shares; must reside in Brussels awl can not be a member of the legislative body or draw a State pension or belon board of any other bank. From what classes or occupations, qualifications, etc. Each director is intrusted with control of one or more departments of the bank. Functions. General council, 14 mettabers (kworalr, 6 dir.s,.t.)rs, ai(7 et!:14 . ilinird of directors: Number. By shareholders. By whom selected. 6 years; may be reelected. For what time. rs f Federal Chamber nor Prom what classes or occupations, qualifications, etc. General council exercises general supervision over affairs of bank, appoints discount committee, etc. members; also audit corn- Functions. Other committees. 1 head office or central institution (Brussels). 3. 111tANCIIES. Nwillier of branches in central city. 1 branch at Antwerp. Nuniher uf branches iii other cities. 1 branch at Antwerp (as above). Number of head branches. None. Number of subbranches. 39 agencies and 30 discount offices. ter I, q general management. Council of censors (7), which audits books, etc., chosen by shareholders for 3 years. Number of agencies. ' Apparently the same as at central or head office. No subbranches. ay,St depesits; and take Act as guarantors for min private partnerships. Functions of head brandies Functions of subbranches. tho papei discounted by the bank. They are usually Functions of agencies. Agents are appointed by the King from a double list, furnished by the administrative council. Discounts are granted provisionally by agents of the bank. bank; but 4 of capital are Miiiiitgcri of brat:doss, how appointed. Ivleasure of discretion allowed , NUill; n of the bail.", council and on proposal I the council keetAws of bra I I . 11,141 by the Government. 4. RELATIONS TO GOVERNMENT. Government ownership of stock. King appoints governor and deputy governor; besides, a Government commissioner is appointed by the State. Selection of officials. Managers of branches, how appointed Selected by governor and directors. Measure of discretion allowed Discretion subject to supervision from head office. Current London rates telegraphed each morning to branches. Subject to parent in managers are assiste 4. RELATIONS TO GOVERNMENT Government ownership of stock None held by Government. None held by Govern Selection of officials Govenunent has no choice. Chief of state appoin Frequency and character of reports required Weekly statements required in form prescribed by act of 1844, but no separation of loans discounts. and securities, and no distinction between bankers' balances and other deposits. No annual reports published. Methods and mechanism for government inspection No liovernitictil im,po(tion. Quarterly reports req but with no sepa,rat published with stat No regular examinati desires, and no res the hand of the gov Participation in profits In 1910, £186,731 ($908,726) for net profits on note issue in excess of £14,000 000. General and special holders. Taxation Subject to same local and general taxes as other banks, and to an annual payment of £60,000 ($291,690) in consideration of exception of hank notes from stamp duty. Pays general taxes, an circulation, one-fifti tive means covere( special taxes, $289,2 tzhiot Other payments required by Government •te from. Royalty for use of Cre "productive" circul - - - $54,040,000—$34,740, and $19,300,000 fixe Permanent loans to Government $53,604,984 (£11,015,100). Other loans to Government and their limits About $115,000,000 additional of government securities, including treasury hills, held by bank in August, 1908. Disposable governmen Custody of Government funds, with interest paid Bank is practically the sole depositary wherever it has branches. No interest paid. Bank is sole depositar Further services rendered to Government and payments for same Manages and pays dividends on public debt, for which services during year ending March, 1910, bank received £195,242($948,876.12), makestemporary advances, acts as agent for the mint. (Receives also £200 annually on every million pounds in securities in issue department.) Duration of charter The charter of 1694 is perpetual, but subject to modification or repeal by Parliament. Charter expires in 192 The bank statements do not distinguish between loans, discounts, and non-government securities. These aggregated, December 30, 1908, $219,413,121. Average amount, 1908, $114,165.196. Average, $188,618,900. Transfers funds, issues sicaimmainev,siag.mera -12...armaievimaxim rimairbom arriowasoraMINIINIMINIMMIIII 5. DISCOUNTS, LOANS, ETC. Discounts: Average amount, 1910 Average and minimum size About $5,000. No minimum. (1910) $119.60. Minn each. Average duration 40 to 50 days. 1906, 24 days; 1907, 2 age for 10 years, 24 Maximum duration allowed Maximum 4 months, exceptionally 6. 3 months, with possibl For what class'es ill community Any person, firm, or company having an account (including in reality colonial and foreign exchange banks). All classes, but about Number of signatures required 2 Brit Hi nanie, of which one must be acceptor. 3 names, of which two Other security accepted Loans on collateral: Average amount, 1910 Loan collateral accept. Not published separate from discounts and non-government securities. Average and minimum size. $500 to millions. Average duration 7 to 90 days. Maximum duration allowed 3 months. subject to possible renewal. For what classes in community Any person, firm, or company having a properly constituted account. Average for 1910, $106, Many small. M inim u Mostly for a short peni 3 months with possibl All classes. ^ Kinds of collateral accepted Stock-exchange securities, except mining shares, or exceptionally other securities of ascertainable value, Proportion of loan to collateral Varies according to class of security. Overdrafts Not alhmied except under very exceptional circumstances List published. Prin cities, and colonies, Margin varies accord ii Not allowed. Loans on real estate _ Have only been granted very except ioniaily. Securities held: What kinds allowed Scarcely any restrictions. In reality the "other securities" are supposed to include railway debentures, bonds of colonial governments. and some corporation stocks. Only government sect Government. securities in banking department, average 1910, $74,266,000. "Other securities," $146,577,600, include loans and discounts. Other securities in issue department,1910,_absout $36333.000 December 24, 1910. Average amount, 1910 18507-11 Not allowed. ' By chief of t • to from 3 caodidstes proposed by governor of bank. Oil re.00111111elllittl, l(PLL ‘,1 csestka.,‘a preffident. Subject to parent institution as regards rate of discount and important matters; managers are assisted by local board. Ilead branches act under supervision of the Direktorium, subbranches under that of the respective head branches. None held by Government. None held by Government. Chief of state appoints governor and deputy governors of bank. Emperor appoints president and members of Direktorium, also 2 members of curatorium, of which Bundesrat selects other 3. Quarterly reports required; weekly statements voluntarily published in some detail but with no separation of bankers' balances from other deposits. Annual reports published with statistics. No regular examination, but minister of tinance can call for any information he desires, and no resolution of the general council can be executed unless under the hand of the governor, representing the State. Weekly statements required in some detail, but no separation of bankers' balances from other deposits. Annual reports published with statistics. --- — general taxes, and special tax of one-twentieth of 1 per cent of "productive" Pays circulation, one-fiftieth. of 1 per cent of "unproductive" circulation. (Productive means covered by loans and discounts.) General taxes, 1910, $398,758; special taxes, $289,229. Exempted from Government income tax and license fees, but pays real estate tax and 5 per cent tax on all uncovered notes in excess of $130,900,000, and at end of each quarter of $178,500,000. Royalty for use of Credit Agricole equaling one-eighth average discount rate times "productive" circulation. Amounted to $1,419,901 in 1907. Until 1925 an indemnity of $444,000 to Prussian Government. $54,040,000—$34,740,000 without interest, including $7,720,000 for Credit Agricole, and $19,300,000 fixed government debt, law of June 9, 1857. None. Disposable government bonds, $19,228,800. Treasury bills amounting to $30,500,000 held December 31, 1910. , Transfers funds, issues treasury bills, pays coupons gratuitously for Government. %sax it i outtru. Subject to general and special No stock issued; belongs to legis Directors appointed by a specia directors. King names chair Weekly principal items belong detailed statement. The curatorium, consisting of government officials, meets every 3 months to supervise conduct of the bank. (Accounts audited by Board of Accounts of German Inspected by a select comrnitte Empire.) . committee appointed by Parli About two-thirds total profits go to Government. Government receives 70 per cent of profits after payment of 35 per cent dividend. In 1908 this amounted to All profits not necessary for assi $5,489,000, in 1910 to $3,826,500. General and special taxation totals about two-thirds profits distributed to shareholders. Bank is sole depositary. No interest paid. y Bank is sole depositary for funds of the Empire, but not for Federal States. No interest paid. Transfers funds, discounts treasury bills, pays coupons. Exempt from paying government None. (See preceding.) None. The administration of the nationa balance of 6,500,000 kroner ($40 No interest paid. Makes all government payments a , Charter runs for 10 years, but terminable at one year's notice before expiration. I Renewed in 1909 for 10 years, to 1920. Indefinite (i. e., nonterminable). Average, $188,618,900. Average 1910, local bilk $114,480,000; remitted bills, $88,805,000; foreign bills, $33,488,000. Total, $236,773,000. Inland bills, $31,748,000; all bills, (1910) $119.60. Minimum, $1 (5 fr.); 55 per cent of discounts less than 180 francs each. No minimum. Average size, $165 in 1908; $524 in 1910. $573. 1906, 24 days; 1907, 26 days; 1908, 25 days; 1909, 22 days; 1910, 24 days. Average for 10 years, 24 days. 1906, 34 days; 1907, 33 days; 1908, 34 days; 1909, 32 days; 1910, 31 days. About 50 days. (Inland bills.) 3 months, with possible renewal. 3 months—in case of farmers, once renewable. 6 months. All classes, but about 70 per cent come through banks. All classes, but about 60 per cent of discounted bills come through bankers. Of 66,700 customers, 2,400 banks, 24,000 merchants, 21,200 manufacturers, 9,900 farmers, 9,200 miscellaneous. All classes, provided bills represen 3 names, of which two must be of residents of France. 2 names. Loan collateral acceptable in place of third signature. Loan collateral not acceptable in place of second signature. Average for 1910, $106,227,200 on gold coin, gold bars, and securities. Average, $23,439,000. Many small. Average 1910, $7,839. Minimum $120 for bankers and merchants and $24 for individuals. Charter expires in 1920, terminable in 1911; last renewed in 1897. l iiiiiinlm size 250 francs ($48.25). Must be accepted (i. e., 2 signatur No regulation on this point. $5,337,000, together with $1,751, banks. $10,713. Mostly for a short period, not less than 2 weeks. 10 days (1910). 3 months with possible renewal. 3 months, with possible renewal. All classes. All classes, especially banks and bankers. All classes. List published. Principally bonds issued or guaranteed by National Government, cities, and colonies, gold, bullion, and foreign gold coins. Securities, guaranteed by governments, mortgage bonds, discountable bills, merchandise, gold, and silver. Bonds, shares, or other documental. • M Margin varies according to collateral from 20 per cent to 40 per cent. Not allow' 1. Not allim Oriiy , Decenik / n varies according to collateral--50 and 25 per cent in case of bonds, 5 per cent i in case of discountable bills and gold, at most 3 in case of merchandise and foreign securities. Not allowed. ' Not allowed. 'met;t securities. No securities purchased for investment, butgovernnient and municipal bonds bought for sale to customers, also treasury bills having an average of 30 days to run. A, 1910. Disposable government securities amounted to $19,228,800. Average (1910), $27,842,000. About 45 days. 6 months' certain or in some cases , As directors determine. Open credits, on security, are grant actually drawn, plus a commissio Average amount, 1910, $993,000, or Foreign government bonds, of read ii and bonds of the general mortgag the bonds are quoted on foreign Dec. 31, 1910, bonds held, $3,476,0 tit of shareholders. Agencies can not undertake discounting operations directly. By a recent modili' cation of the law "first-class agencies' may discount within certain limits through a small discounting committee. ' L.I. 11111 Ul. , , ject to general and special instructions. Confederation not allowed to possess a reserved to the Cantons. -- -Federal Council elects the chairman a does not select any officers, but must approve the election of the general 23 other members of the council of special joint committee of Parliament; other officials by State ectors appointed by a manager and submanager. members of general management, dir 'rectors. King names chairman of board. Annual report, balance sheet, and acco 10 days on model furnished by Governbefore submission to general meetin belonging to note issue, monthly full balance, annually Annual report. Statement required every ekly principal items ment. ment of assets and liabilities. statement. etailed -A central bureau of inspection at the ministry of the treasury examines the assets. Special board of inspectors, whose o A permanent commission of supervision also passes judgment upon mooted spected by a select committee appointed by every regular Parliament. Audit treasuries, books, and securities are by Parliament for bank and each branch. questions. committee appointed The remainder of the net profits, after Government receives one-third of profits in excess of 5 per cent or one-half of profits of a maximum dividend of 4 per cen in excess of 6 per cent. In 1910 this amounted to 3,300,000 lire ($636,900). 1 profits not necessary for assignno •at to surplus is disposed of by Parliament. $254,29ti paid to the Treasury. — In addition to general income and stamp taxes, one-tenth per cent on productive circulation, and graded tax on issues m excess of normal maximum, and 7i per The bank is free from every kind of ta xempt from paying government taxes on real estate, income, etc. cent on issues beyond the maximum allowed or not covered by 40 per cent cash. None held by the Government. stock issued; belongs to legislature. Bank contributed $6,000,000 to Italian Credit Foncier, which is now in liquidation. Bank obliged to pay expense of Government supervision, $14,000 annually. one. None. None. one. (See preceding.) None. he administration of the national debt office is granted by the bank on uncovered balance of 6,500,000 kroner ($402,000). - - -Bank of Italy obliged to lend Government up to $22,195,000, in case of need, at 1i per cent. o interest paid. Bank is sole depositary. Pays interest of 1i per cent on deposits in excess of $7,720,000. Government deposits bear interest. akes all government payments and collections free of charge. Helps in issue of loans. Conducts the business of the treasury gratuitously. Receives for custody, free of charge, s eration, and handles payments for th and hoard of alcohols. 30 years. Expires 1923. 20 years; expires 1927. Inland bills, $31,748,000; all bills, $33,781,000. $84,881,400. Average 1907, $10,769,400; 1908, $12, $573. Average in 1907, $269.72. 14 per cent were for amounts below $20 and about 70 per cent for amounts between $20 and $200. 1907, $1,403; 1908, $1,201; 1909, $1,26 About 50 days. (Inland bills.) 59 days (1907). 1907, 28 days; 1908, 18 days; 1909, 2 4 months. 90 days. All classes, provided bills represent real business transactions. Banks, credit societies, and all kinds of institutions, and at the agencies, industrial people, agricultural landowners, and small tradespeople. All classes, including agricultural 1 transactions. Must be accepted (i. e., 2 signatures at least). At least 2. 2. No regulation on this point. Treasury bills, public warehouse warrants, or loan collateral. None. • $5,337,000, together with $1,751,000 of special advances to former note-issuing banks. $18,837,765. Loans on collateral, $3,606,451, as sho Indefinite (i. e., nonterminable). AIMINEMIN.Yr11".• None. /••••••••••••• months. Average size, 1907, $32,424; 1908, $20, $10,713. 1907, 15 days; 1908, 11 days; 1909, 1 About 45 days. 4 months on government securities and 6 months on silk, etc. On treasury billb extendable to 2 years. 90 days. All classes. All classes. Mostly banks. Bonds, shares, or other documentaa v security, including warrants. Swiss federal, cantonal, aml communa Securities guaranteed by governments, silk, warehouse warrants, and pledges to, quoted in Switzerland; bonds of ti deliver commodities on a certain date. bars, coin, drafts. As directors determine. From 50 to 100 per cent (the latter on treasury bills only). On Federal loans, 90 per cent; on can 75 per cent; foreign securities, 70 Open credits, on security, are gran. .1 at the 3 months' discount rate on the amount actually drawn, plus a conunigenerally of one-half of 1 per cent per annum. - — Average amount, 1910, $993,000, ,lbout 19 per cent of the loans. Not allowed. Not allowed. Not allowed. Title deeds accepted as collateral for Foreign government bonds, of r. :ly realizable kinds, Swedish government bonds, and bonds of the general men bank and other Swedish enterprises, provided the bonds are quoted on forei i.xehanges. State securities and securities guaranteed by the State, including Italian rente, not exceeding $15,000,000. Interest-bearing bonds of the Confe temporary investment only; preci Dec. 31, 1910, bonds held, $3,47, December 31, 1910, $32,642.283. Average, 1910, $2.441.000. months' certain or in some cases 3 months' notice. 1 10. council. cations directly. By a recent nioditidiscount within certain limits through Discounts are granted provisionally by agents Of the bank. Confederation not allowed to possess any shares of the bank but reserved to the Cantons. approve the election of the general days on model furnished by Governy of the treasury examines the assets. also passes judgment upon mooted cuss of 5 per cent or one-half of profits nted to 3,300,000 lire ($636,900). of capital are Federal Council elects the chairman and vice chairman of the bank council and 23 other members of the council of the bank; also On proposal of the council members of general management, directors, and subdirectors of branches. Annual report., balance sheet, and accounts must be approved by Federal Council befere submission to general meeting. Required also to publish weekly statement of assets and liabilities. Special board of inepectors, whose officials are elected by Federal Council; the treasuries, books, and securities are periodically verified. The bank is free from every kind of taxation. Foncier, which is now in liquidation. cut supervision, $14,000 annually. None. None. per cent on deposits in excess of E ing appoints governor and deputy governor; besides, a Government comiiiissi on is appointed by the State. A statement of condition of the bank and agencies is forwarded every week to I. minister of finance and is published in official newspaper. Government commissioner watches over operations of the bank, has right to exa me the books, etc. The remainder of the net profits, after deduction of 10 per cent, for the surplus and of a !MINIMUM dividend of 4 per cent, is paid over to the Federal Treasury; 1910, Receives all profits from a discount above 34 per cent, together with of excess net profits after payment of 4 per cent dividend to shareholders, and the prof' $254,24A, paid to the Treasury. on bills held for the State; all amounted to $892,470 in 1908. Nes, one-tenth per cent on productive eSS of normal maximum, and 74 per ed or not covered by 40 per cent cash. up to $22,195,000, in case of need, at - 111111.1111.111•111! . None held by the Government. None. Patent tax on gross volume of business (1908, $43,492), stamp tax on notes (1908 $72,674), tax of of 1 per cent semiannually on excess of circulation ahoy .$53,075,000 (1908, $449,096). A payment of $44,390 toward expenses of treasury administration in the Provinces None. None. Government deposits bear no interest. Treasury funds in excess of requireme nt of service are invested in commercial securities. Receives for custody, free of charge, securities and valuables belonging to Confederation, and handles payments for the Federal Treat-Airy, post office, the customs, and board of alcohols. ess of the treltsury Government deposits bear interest. Acts as registrar and transfer officer of the national debt; as custodian of bond given by public officers and of various special funds, i winding those of the lugs bank. Government's deposits above 5,000,000 francs must be invested say am profit credited to State. 20 years; expires 1927. -nonoraiiMmammeigMiran...www. Average 1907, $10,769,400; 1908, $12,159,000; 1909, $17,007,000; 1910, $21,899,000. e for amounts below $20 and about 00. 1907, $1,403; 1908, $1,201; 1909, $1,268; 1910, *1,221. 1907, 28 days; 1908, 18 days; 1909, 29 days; 1910, 26 days. 90 days. utions, and at the agencies, industrial tradespeople. Charter extended in 1900; expires January 1, 1929. roammommk All classes, including agricultural business, provided bills represent, business transactions. Discounts December 31, 1908, $95,237,450. Average size accepted paper $421 and iionaccepted paper $62. Average for accepted paper 46 days and for nonaccepted paper 43 days. 100 days. Nlerchants, manufacturers, and, under eertaie izod ii ions, farmers. 2. loan collateral. 3; but commercial bills with 2 signatures !flay be admitted under certain conditions approved by minister of finance. None. Warehouse receipts, merchandise, or piddle fund.- ma,y be pledged in lieu of one signature. Loans on collateral, $3,606,451, as shown by the balance sheet December 31, 1910. Average size, 1907, $32,424; 1908, $20,458. 1907, 15 days; 1908, 11 days; 1909, 13(lays; 1910, 15 days. nths on silk, etc. On treasury bills 90 days. Mostly banks. ; warehouse wArrauts, and pledges to, Swiss federal, cantonal, and emninunal loans as far as quoted. loans of foreign States quoted in Switzerland; bonds of first-class Swiss banks, if quoted, etc.; gold in bars, coin, drafts. y bills only). On Federal loans, 90 per cent; on cantonal loans, 80 per cent; other Swiss securities, 75 per cent; foreign securities, 70 per cent. Not allowed. Loans sipliblic securities, outstanding December 31, 1908, amounted to $9,923,890. Not stated. 10 days to 4 months. months and 1 extension allowed. Loans on securities to other than merchants are required to be registered at the cost of the borrower at rate of of 1 per cent of the amount of the loan. National bonds, treasury bonds, and other securities guaranteed by the State. Securities accepted as collateral for not more than ', of their current market value. Current accounts of those who overdraw are canceled by resolution of of administration. Title deeds accepted as collateral for loans. the State, including Italian rente, not Not allowed. Interest-bearing bonds of the Confederation, the Cantons, or foreign countries for temporary investment only; precious metal in bars and coin. N a t iunAl puldie securities and others guaranteed by the State. Average, 1910, $2.441.000. December 31, 1908, Government securities, $9,633,291. lb(' I y01111111. Discounts are granted provisionally by agents of the bank. Measure of discretion allowed. MEM, lc but 4, of capital are the bank council and proposal of the council tors of branches. ved by Federal Council publish weekly state- None held by the Government. 4. RELATIONS TO GOVERNMENT. Government ownership of stock. Eing appoints governor and deputy governor; besides, a Government commissioner is appointed by the State. Selection of officials. A statement of condition of the bank and agencies is forwarded every week to the minister of finance and is published in official newspaper. Frequency and character of reports required. Government commissioner watches over operations of the bank, has right to examine the books, etc. Methods and mechanism for government inspection. f v Federal Council; the cent, for the surplus and Receives all profits from a discount above 3i per cent, together with of excess of Fe,leral Treasury; 1910, net profits after payment of 4 per cent dividend to shareholders, and the profit on bills held for the State; all amounted to $892,470 in 1908. Participation in profits. Patent tax on gross volume of business (1908, $43,492), stamp tax on notes (1908, $72,674), tax of of 1 per cent semiannually on excess of circulation above Taxation. $53,075,000 (1908, $449,096). A payment of $44,390 toward expenses of treasury administration in the Provinces. None. Other payments required by Government. ' Permanent loans to Government. None. Other loans to Government and their limits. Government deposits bear no interest. Treasury funds in excess of requirements of service are invested in commercial securities. Custody of government funds, with interest paid. . les 1,elonoing to Confed- Acts as registrar and transfer officer of the national debt; as custodian of bonds given by public officers and of various special funds, including those . post office, thecustoms,Furtof the sayherservices rendered to Government and payments for same. nip bank. Government's deposits above 5,000,000 francs must be invested and profit credited to State. Charter extended in 1900; expires January I, 1929. ,000; 1910, $21,899,000. Duration of charter. Discounts December 31, 1908, $95,237,450. 5. DISCOUNTS, LOANS, ETC. Discounts: Average amount, 1910. Average size accepted paper $421 and nonaccepted paper $62. Average for accepted paper 46 days and for nonaccepted paper 43 days. Maximum duration allowed. Merchants, manufacturers, and, under certain conditions, farmers. For what classes in community. 3; but commercial bills with 2 signaturea may be admitted under certain conditions approved by minister of finance. Number of signatures required. Warehouse receipts, merchandise, or public funds may be pledged in lieu of one . signature. eet December 31, 1910. A ver:e..7e duration. 100 days. ills represent business Average and minimum size. Other security accepted. Loans on public securities, outstanding December 31, 1908, amounted to $9,923,890. : Loans on collateral: Average amount, 1910. Not stated. 10 days to 4 months. Maximum duration allowed. Loans on securities to other than merchants are required to be registered at the cost of the borrower at rate of 13 of I per cent of the amount of the lmn. ff oilier Swiss securities, A verage duration. 4 months and 1 extension allowed. i-10a nti I )1 foreign States if quoted, etc.; gold in Average and minimum size. For what classes in communiiv National bonds, treasury bonds, and other securities guaranteed by the State. kinds of collateral accepted Securities accepted as collateral for not more than Proportion of loan to collateral. of their current market value. Current accounts of those who overdraw are canceled by resolution of the council of administration. Not allowed. or ,reitzn countries fur in. Overdrafts. Loans on real estate. National public securities and °the! , guaranhi‘ll by the State. Securities held: What 1;inds allowed December 31, 1908, Government seen ri t ies, $9,633,291. Average amount, 1910.