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rJE1SON ALDRICH




Monetary
..1110.11011.111•1.01.101•110.1•ININIMINIII

'
3 ASSOCIATI

CURRENCY COVIIISS ION OF THE ADITI4,1d CAY BA

Mr. A. B. Hepburn, Chairman, of New York.
James B. Forgan, Vice-Chairmvr, of Chicar-o.
vlAY. Festus J. Wade, of St. Louis.
,“

11r. Joscph T. Talhe:.t, GEtAhlemg.o.
Mr. Charles H. Hutuig, of St. Louis.
vMr. John Perrin, of Indiarpolis.
Mc. Lut}er Drake, of Onal-a.
kMr. Myron T. Herrick, of Clevelnd.
Mr. Solomon Wexler, of New Orleans.
Mr. Robert Wardrop, of Piitsburg.
v Mr. ArthuP Reynolds, of Des Moines.
Mr. F. F. Swirne7.r, of Kansas City.
Mr. Joseph A. McCord, of Atlanta.
Mr. W. V. Cox, of Washinr,ton.
Mr. John L. Hamilton, of Hoopeston, Ill.

,ry.
Mr. Frederick E. Fbrnsworth, SecreLE

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WASH INGTO N,D.C.

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Town ,

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HOUSES

Th(re of nvn: r:pr

state

Fresno, Cal.
San Diogo,
Stockton, Cl.
?ueblo,
•••••••••••••••••••••••

Doctur, Ill.

Jackson, lass.
Vicksbur,

Trnnton,
Alban,

J.
Y.

Teaumort, Texs




araosigabreala*-




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;

Suggestion for Committee.

Wm. H. Porter, Pres't Chemical 7at'l Bank, New York.
Thos. P. Be:',1, Pres't Seconu Nat'l Bank, Boston.
Ernest A. Haaill, Pres't Corn Exchange Uat'l Bank, Chit:z?.go.,_
E. F. Swinney, Pres't First

Tat'l Bank, Kansas Cit,, To.

C. F. Currier, Pres't Atlanta Nat'l Bank, Atlanta, Pa.
J. J. Gannon, Pres't New Hibernia 7atll Bank, New Orleans, La.
C. K. McIntosh, Vice-President

an Francisco 'Nat'l Bank,San
Francisco.

di

1.

Contrress shall authorize ar d direct the Secretary

of tl,e ri'reasur:/
--Direc ti on to
preNtn: notes

o preparti and keep continuo,11,1;; on h;Ind

for uLie &i )ierelnaf ter pl-ovidCd, notes of tl-e "a.tion:11
belonrrins- z.o the di-' rerent Eeserv,, CiLies, for an
(.:41,1:41 to th, capital of
1

2.
Den ornirrtt ion s

:31401 ' ilk
1 1:!

1.1iounit

reel ectively.

SACY notes sall bc; in denomination:: of ones, Los,

fives, tent:: and fiftit:s, and pi:.able to bearc:r.

3.

Sur* notes shall he redeemable in lawrul money of

t1- United l't ,
..e
i,tes

t Ole pleasure of ti- e holder

Trea,s-lry from

ra:r

TreAsu:y in
,
Tim
ner

und mtnredemi•;tion




faust

or, in lie,1
it

Lye been iLs‘led or 1.t thr:

rii . y of "ew
t

redconc(1
E;

scrimin -4 ion ::.nd
,
rnon!.1, 2 o' 1;1-- -ir dat-i

rede7nption,

tIlti Treasury o"

Tlank ruty

iepo-

finited St4tes lawful mon(,y 1)
-ere-

of or other 7atioma. Ti?i.nk no Les to an :1.moun
o,ltstandinr- no tea issued hereunder.
such payments shall b(: rivL(;-: in
of t1-1:: borroiini

t •tny f.)ub-

,
eq.l to 1,1 (-;

To 07e extent -0-at
notes, other than those

tnk, said notes shall be set apart

held in the Treasury, to repay ar1( redewl tl-e notes

so

i..-

sufld.

4.

Said notes shall he receivable by

verrinli.n t 'A L

any time in paymt nt of its excise dues or othr fisr
charges and by the AssisLao L f2reasIlrers o-- a
,.; United Stittes,

f

2
without regard to their place of issue, rThen offered for
Acceptance by
Covernmcnt for
taxes and loans

payment of loans.

They shal, also be receivablt: by nation. 1
,
-

lanks in payment of debts, when not otherwise provided by
contract.

5.

Upon the issuance of such notes, the borrouinr-

Bank shall deliver to the Treasurer of the United States,
its promissory obligation payable to his order on,or, at
the option of the borrower, before six months .ifter the
borrowing date nrd shall secure the same by the pledge of
collateral notes or debt oblir,ationL, received by the borrowing Bank in the regul-r course of its business affairs,
Security for
no tea




provided, howev:r, said notes or obligations shall have bet:n
first authenticated and 4)proved

s sufficient and rood

security by a properly constituted Committee

the Cl.ar-

ing House Association of the lieserve City, in which they
are issuable, with which Clearinir house Association the
borrowinfT, Bank must be associated, and provided further
that the associated members of said Clearing House shall
bind thwaselves in due and legal form to make rood, proportionately to their respective capitals and surpluses, any
loss or damageovhich may be occasioned by the failure of

the borrowing Rank to repay the notes, so issuco, in

c-

cordanoe with its promise.

The said promissory oblirations of the burrowing

3
i
Bank shall, to the extent of bOr..' of the capital of the
issuinr Bank, bear interest at the rate of 4;' per annum,
and, to the exi,ent of 50::,: of its said capital, shall bear
interest at the rate. of 6-: per anntmi. Thu prNceed:-; derived
Interest rharres and indemni- from this interest charce shall constitute an Indemnity Pundi
ty -Puna
until the amouni, reaches W),000,000, and all amounts received in excess of said Elm,

be paid into the rener-

al Treasury of tht, United St,A.Les.

7.

71.i.nk shall issue its notes in r

amount, \ .h.ich

in excess of its capital, nor shai. the iss- ke of note::
Amount. 0-‘'
isene.

under 1,11,-: provf,sion:;

f' this Act i„.t any one time exceed

Oon,000,o)o.

8.

The powers, hereby granted to and tile d ,ities hereby

imposed 1Jpoii the Secretary of the Treasury, shall be continuous, provide::, however, that Whenever it shall appear
Di scretion ;try
power of secrotary.




that, tl-rourh non'.racl.ion of' noceE; so iss/ied, the amoun -, of
said outstandinr note, avainst r,l'ich no depo. it, silall have
.
beenraade

US

in Article 3 provided, shall not he in excess

of .1.o s non,00n, -r'urther notes shall not he
such

time

thorized,

as the Secretary of the Treasury

deem it necessary.

at

iltll apain

AS3OCIATIONS T.rflILIITG SP)..AlaaS.

DATE

STATE

-

ArlIOCTATION

PLACE

.••••"'

May 11.

IOWA.

i

,

Bankers Associntion.

lt,nkcre As.
sociation.

Dallas.

r

/

Davenport.

r •
.

A/V44
,

Okisho
SOC

May 2g&30.




Bankers
fon.

-

TEMIESIEL.
Tennessee B:Lnkors An,sociation.
4
•

4

Oklahoma City..

kOrTATION

PLArE.

go.
.1•••

Juno 12,13,14.

----Idaho Bank(-ra As
Boise.
t -4
_

June 15,16,17.

June 21•22

June 27 &

Tune ()I. July.




CALIMEWIA.

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Ck..11•'0)-nigt Berkezte
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Bisknktt
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sociatiolft:
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7, .T7 r DAKcvA'A
10:

WYCYpTITTG.

San Francisco.

As1,t-tkv: Tr...anuga,
nd

1Torth Dakota 13rtk‘ 'a
Assocition ,
d

Fargo.

Wyoming Banko.'n Annociation,

Cheenne,

TIM?

July 11 ds 12.




AMOCIATION.

T2

4

PLArE.

Vest Vir(Iinia, Bankers Ass on i;A icn.

STA_a.

White Sulphui

DATE.

Aut7unt (?)

30mNime dur
y r.




A.T3OCIATION.

MAIL.

nankerB Assocition.

MONTANA.

NASFIATUn

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Anaconda CO

Lynri\ T w(1%1 it!Ot
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Lynn.

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ASSOCIATIONS DESIRING SPEAKERS.

DATE

STATE

ASSOCIATION

PLACE.

May 11.

IOWA.

Bankers Association.

May 16.18,

TEXAS.

Texas Bankers Association.

Dallas.

Oklahoma Bankers Association.

Oklahoma City.

Davenport.

11rV
„wow ...arirgmegewiNg10. .
'
,

I

May 22.

May 29&30.




OKLAHOMA u_

TENNESSEE.

Tennessee Bankers Association.

STATE

June 12,13,14.

Zuni, 15,16,17.

=Am.

CALIPORMIA.

PLACE.

ASSOCIATION

Idaho Bankers Association.

Boise.

California Bankers
Association,

San Francisco.

V
June 21,22,23.

Zuns 27 h 28.

June or July.




L_NO'i,TH CAROLINA.

NORTH DAKOTA.

WYOMING.

W. C. Bankers Association.

Lake Kanuga,
Hendersonville.

Worth Dakota Bankers
Association.

Fargo.

Wyaning Bankers Association.

Cheyenne.

STATE.

July 11 & 12.




WEST VIRGINIA.

ASSOCIATION'.

Vest Virginia Bankers Association.

PLACE.

White Sulphur
Springs.

DATZ.

August (?)

Some

time during
year.




STATE.

ASSOCIATION.

PLACE.

MONTANA.

Montana Bankers Association.

Anaconda (?)

MASSACHUSETTS.

Lynn Twentieth
Century Club.

Lynn.




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ASSOCIATIONS DESIRING SPEARS.

DATE

STATE

ASSOCIATION

May 11.

IOWA.

Bankers Association.

May 16.18.

TEXAS.

Texas Bankers Association.

May 22.

OKLAHOMA.

PLACE.
Davenport.

Dallas.

Oklahoma Bankers AsOklahona City.

May 29&30.




TENNESSEE.

Tennessee Bankers AsNashville.
sociation.

•

ELLE

June 12,13,14.

June 15,16,17.

June 21,22,23.

STATE

IDAHO.

CALITOPEIA.

NOLTH CAROLINA.

PLACE.

ASSOCIATION

Idaho Bankers Association.

Boise.

California Bankers
Association.

San Francisco.

N. C. BankFIrs As
Lake Kanuga,
Hendersonville.

June 27 & 28.

June or July.




NORTH DAKOTA.

WYOMING.

North Dakota Bankers
Association.

Fargo.

Wyoming Bankers Association.

Cheyenne.

TIME

July 11 & 12.




STATE.

PEST VIIkGIITIA.

ASSOCIATION.

West Virginia Bankers Issociaticn.

PLACE.

White Sulphur
Springs.

ATE.

August (?)

Some time during
year.




STATE.

ASSOCIATION.

PLACE.

MONTANA.

Montana Bankers AsEicciation.

Anaconda (?)

MASSArHUOETTS.

Lyn

Twentieth
Century Club.

Lynn.
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R. W. Whalley, General 11anaer, Parrs Lank, Ltd. 2 London. /
Christopher

i.

ITurent,

Londonv/

rr., anion Discount Co.

Prof. Henry S. Foxwell,
Aug. 13.

,anarinc Director London Cit
Edward H. Holden, 71. P., 17
Midland Bank.
R. T. Haines, Genl. Mgr. , ITational Provincial Dank of
Enrrland.

V

Sir. Georue 11urray, K. C. B., Permanent Secretary to the
Treasury.
Aug. 14.

Geo;Fe Paish, Editor of The (.:;taA.st, London.
Parrs Bank.

W. \•rlal_ley, Genl.

Aug:. 15.

'::. Middleton Campbell, Governor Bank of Enland.
Tredcrick Huth JacksonA
Directors Dank of Enrland.

Alfred C. Cole
Edward C. Crenfell

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Bankinc Cor- v/
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l,44:

Memorandum on Postal Savings Arrange. Lents.
by
F. T. Taussig.

1. The real problem in the postal savings bank question is that of
It is certain that a postal savings scheme will attract con-

investment.

siderable doIosits, and I think it probable that it will attract very large
In the course of ten or twenty years, the deposits night easily

deposits.

reach hundreds of millions.
The investment of deposits received by YMropean 7overnments is a siLple
affair.

They buy their own bonds.

United States.

This, of course, is impossible in the

Government bonds are virtually out of the market.

2. The deposit in national banks, or other banks of the ordinary
type, of the sums received as postal savings, would be bad.

These banks

are mainly commercial institutions, not designed or La:laced for placing permanent investments.

To rut the deposits in their hands would probably lead

to over-investment in their ordinary channels, to an over-expansion of mercantile credit, to ElE increase of speculative activity and eventually to a
crash.

In times of depression they simply could not 1 -se these funds; in

times of expansion they would use them badly.
2. 7ould it be feasible to use the post office simply as a collection agency, for transmission of deposits to institutions established or
authorized by the several states in which the post offices are located?
Let the United States offer to ::ake the root offices collecting agencies in
states which are willing, to cooperate, and in those only.

The states might

establish savings (i.e., investLent) institutions under their own management;
c. they might authorize or designate private institutions existing within their
017;11 limits.
4. The states, and the local bodies within the states (counties or
tovnEC, are borrowilc all the time.




They might establish state z2stal

-2
savings institutions, investing the deposits in state and local securities
(possibly in mortgage loans also, if deposits exceeded public needs?).

4

In

other words, they might gather the savings of their own citizens and lend them
to their own public bodies.

Very likely the money would sometimes be care-

lessly used, but the depositors would be safe.

No state is likely to en-

danger debts due to its own citizens.
b. The states might designate private savings institutions to which'
the post office would be authorized to transmit money deposited.

These

savings insitutitions should be such as comformed to a regulatilftstate law,
and wore supervised by state offioers.
in authorizing the use of th

Very possibly the United States,

ot office for collection, should require that

states making use of the opportunity for transmission to private institttions
must enact legislation on specified lines as regards the organization and
supervision of its savings banks.

Under such an arrangement, every post

office would . 1.1t up conspicuously a list of banks authorized by the state,
and undertake to transmit to any of the banks so designated deposits put in
its hands.
6. The question would arise whether the United States should guarantee the deposits, possibly retaining something in the nature of a comrAsuion
out of which a guarantee fund might be aermmulated.

my

impression is that

the United States had better not guarantee, but simply act as a collection
agent, and leave all responsibility for safety of the moneys with the states.
7. Dofore proceeding on any such plan, it would be wise to confer
with persons of influence in some of the states which now have inadequate
savings bank facilities and see whether they would use their influence toward gettingtates to come in.

If one or two of the important western

states which nov have no well-devised system would be likely to enter upon
this arrangement, its possibilities would be greatly increased.




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pURTLUS 11:LZETIVi,;
.

JT3 .DLT,1Qfl

ELGENE

,.)F ORLEANS.
NEV 011LgaiNC.

nec3nt duvolopmonts in financial

atters have clearly

demonstrated that the lack of clasUl,
.,Ity in tAir clirrenc'y 2:-otem is
liot only a gfavc menac.- to our commercial int( -(,sts at tiffloo, but
that it can also seriously di.;tarb the equilibrium or the entire
financial world.

The United States has more than once resorted to

artificial means to stimulate the flow of gold to thin countrypand
we have also soon the lradin- foreign money markets imposinc artificial
barriers to prevent thu export of gold to America.

The fact that this

struggle for gold was most intense during our crop moving period
,and
the further fact that interest rates both at home and abroad -rc
now
materially lower than they were while thu crops were being marketed,
indicates that much of the trouble at least could have boon avoided,
if we had been able to expand our circulating medium durinr that pe,
riod.

It is true that we have had the heavy burden of abnormal crop.;

to carry, but we hope to have that burden placed upon us often in
the
future v and let us hope that some element of elasticity Till be introduced into our currency in the near future that will materially
lesson
the weight of the burden.
A country that has P33.68 circulating medium latr capita

4
4'
'4101
,

certainly has ample currency for any ordinary c nditionc,wha
t we need
is ar element of elasticity that will mable us to expand
this ciroalatinr, medium when thu extraordinary lemnnd comes,
and,perhars more
impox-Vnt still, to contract it during periods of
redundancy,whon
Orfr




'.346

-

*MN

,
t

•

A°111 1'
'

:1- urcr
.)

-2
replenish their cash holdings to the required extent.

On the other

hcmd,when the bank.3 are confronted by a considerable surplus reserve,
owin,7 to keen ccmpetition and a lack of co-operation amonr7 the bankspefforts are made to reduce the surplus reserve as far as possible;neallw
all of these banks pay

2g on

bankers' balances ,and naturally feel com-

pelled to earn some return on this money.

The same condition exists to

a greater or less degree among the banks of other cities,but much that
I say will be confined to the banks of New York City, as conditions there
are closely watched as the index of general conditions.
This competition in placing the surplus reserve on call,tends
to lower interest rates, which in turnlif continued for any length of
time,ehcourages speculation to an unnatural and dangerous degree pand
taim tempts the banks to place their funds in fixed investments rather
than keep them in liquid form.

It is during these periods of abnormally

low interest rates, and excessive speculation, that the foundation for
much subsequent t-spuble is laid.

When the season for crop moving ar-

rive, the bankc, inL;tcad of beinr fortified with a heavy surplus reservr.s would certainly be desirable, find themselves undor the nec000ity
Gallin

loans, and consequently seriously disturbinr credits, in order

to provide the nece;;sary funds to finance the crops.
This tendency to:iards n rigid reservepoccasioned on the one
hand by the legal requirement that it shall not
the other b

o below P5(70, and on

competition and lack of co-operation r:reventing thecktc^umu-

lation of any large surplus reserve, undoubtedly intensifies to a great
exton

the evils incident to an inelastic currency.
If the Nation-1 banks, not only of New York City, but of ail

:
the leading coz- .ercial centers as well, or even the entire system of
National bankJ, would during the sprinz; and summer months, 711.en money
plertirul, o.

11,t.

_A

tc

1:-,

static.1 surplun auserve, t7-,cy
i'od to Lcet th,

clemLno:

:••1

zrup

wciting fr. that 1)11.od L.) n_ five 1,,f;
propara`,ian,^.r0 then cali:. .

10:ms *:

2 71,z3c: t17 nan
,
,
.
•

a surrluJ

cscv

c.uld b

Lmks. to ,'o-loparate, or by



the

ar.!kJuluulr.
che.n.)

ti

Y'l^t1VC

-0.=rvc

Bulievinn that much hood could bu accomplished by legislation along this line, on October 24th,1906,,I wrote Mr.Leslie M.
Shaw, Secretary of the Treasury, as follows&
New Orleans,La.,October 24,1906.
Hon.Leslie M.Shaw,
Secretary uf the Treasury,
7ashinf-ton D0
• •
Dear sirsI have rcell with deep interest your article in the
Daily Banker
Stockholder on 71mergency Currency. I believe your
plan would be the best solution to the problem plaut like you I thin::
it exceedingly doubtful whether such legiblation is passed before
the country has experienced anotl-er panic.
Ce,ad not very much the same results be accomplished
2
National Bc,.n.1?: :.ct were su =ended as to require the National
Bonk() of New Yorl- City to gradually increase their reserves,beginning in March until thy reach say 30% by July let, of each year,
ad then allow them to gradually decrease their reserves until they
reach cry 2P% by November lst,again increasing the,:. after that date
until they reach Pfr': by February 1st. WhilP this would not give an
elastic currency in the strictest sense, it would give one that
would expand automatically durinc the natural period of strin7enL4,
and automatically contract during the natural period of low interest
rates.
* * * * * * * * * * I believe it would beneeit thu banks as well
as business intefests generally ,for not only would it have a tendency to make interest rates firmer during the Spring and early Sum:11--i
but the banks would be allowed to use t'reir 4-sunds somewhat more freely
when interest rates are generally higher.
To berro from your illustratieno the Rail Read would
store its empt7 cars at its tcrminur during the dull season, instead of runninr- them loaded with " straw,chaffe and worthless
plunder."
If some of the responsibilities of a Central Bank were
imposed upon the New York Banks collectively,the granting of some of
the privileges of a Central Bank to the sane bankslincludin7 the
issue of emergency currency m might afterwards some as a natural consequence. Such a system might be more'in keeping with American
ideas,
than the creation of a Central Bank.
If the popular pfejudi.::e against the Nu' York br117 reserve going below
ie too deeply rooted to render such a course
safo p the minimum might be made 2570. Of course, the relief would
be
proportionately less.
If the above suggestions are not practieni trlease pardon my trespassing on your time; no doubt your desk is fluodd
with
panacets.
Very respectfully,
Eugene H.Reberts.
TO ralch
•••••••••••••••••....1.-

*




Shaw repli:
4101•1111=11,

This cerrespereerce is
published with the kind
consent of Mr.
Shaw,

"TRL

GURY

DEPARTMENT.'

" OFFICE OF THE SECRETARY,'
/
" WASHINGTON.
9
" Noverbor 10,1908.
w My dear Mr. Roberts:-'
Your letter of October P4th awaitc my
return.

I a-.1 70in

into r discussion of the matter referred to

in your letter at some length in my annual report,but have very
little hope of accomplishing anything.*
Very truly yours*,
w.L.M.Shaw.w
The letter addressed to Yr. Shaw contained only a crude
suggestion of legislation designed to create a surplus reserve in

-4



anticipation of the annual crop movement. Mr. Chaw with that treadtl
and depth of view of our financial ccnditions that characterized
the administration of his office disausscd this question in 1L1nE11aL
that so forcibly expresses the benefits that would result to both
the banks and the business communitylthat I quote at some length

ri.).1.

)
his Annta.1 no,- ort to Congress, though it is no doubt fanillar to all
my r(aders:" Another indication of ..he want of co-operatLor.,not only
in Yew York Cil4 but quite as much throughout the country generally,
is discoverable in reserves.

Admittodl,condittons have beer no worse

in New York than elserthere, tho the weekly statement reveals conditions
only in that city.

Repeatedly within the last fiVe years surplus re-

serves have been practically eXhausted in midsummer, and sometimes
the ai,gregate surplus reserve of the associated banks in New York ClAy
ha3

eoualce that rciforted b7 a qincic irstitution.

oldnion that this condition indiLtoc

be unCcfrtood c.r;
,
any want of concr.1-vrtism, but

r

do knol, Tht ¶f thrc wore the
,
bankz, („1 tle

,
s1iohtcl2t noc.12,u sc of co-ok.,Istion be+17cci
vr:r

I must not

,
larre 1 ererve would be gathered 1,- Lidsumrnr to provide

fcr lamloased buslne_.s ope,etions inctdcnt t- 4ho orop-moWirr st,a;.on
..
H-c —vivnl of eoraa). ccial activity annually ,7:0,ncsfao(1. Cu.flhc

• ar

4

.

•01.

autumn and w4 nter months.
*
" Whether co-operation car be secured by statute Is a
question on which students of the situation will of course differ. I
suggest for the consideration of Congress twc possible plane: First,
a graduated reserve, determined by statute.

The objection to this

plan is that conditions vary with different seasons.

Sometimes thc

crisis is (lefer.'ed,ard occasionally the most stringent season ir during the sl
)rinre.
clothe th

Second, a better plan, in my judonent.would be tc

Secretary of the Treasury with authority to require all

banks, at certain times iixt by him, to slightly and gradually increase their reserve and hold the same within their ()yr, vaults,with
corresponding authority to release the same from time to tire as in
hi- judcEent will best serve the business interests of the country."
*

* * *

*****

****

* Supposo the national banks
or by

c,

*

*

elther by statute

r'irecLion of the Secretor; of the T.-rastry to increase their

rcseilm,,and to carry the same in ti cd u7:n vaults, i- an amount equal
to 1 re

:cnt of their capital sLsc-k ovrr: fiftetn day fron tLo first

Cay cf .Apr4 to the first day nfneptoribol-.
.1

This contraction urder

ordinary conditions prevailing in these x..nths would work no herdstip
upon any institution, nnd--uld .1--3
-1t in the collection of
of 1-: rovve money 7ith Alich L

80,000,000

11. demands of increase0 busincsr.
cct ,

It is prc'hnble,'an6 under ordlrnry circumstances well-nigh certlin,
that
the banks would find such a contraction profitable, for intrst rates
during the summer would nor be likely then to drop excessively low,and
It is equally certain that the rates would not be dangerously high in
the fall and winto,
'."
"It may he

thrt the banks car now strengthen their rc-

thc summer on their own motion.

The best answer to

this ir the admitted fact that they do not do It to sny considelablc,
eYtent, and foT the reason already pointed out--want of oo-opc.ation.
No one ",_,Ank,nor the banks of any one eLty, will contrarat their roserve
when all other banks are loaning the lL t
pvailable dollm.r at the
beet




rate obtal_nable, however low that rate may be."
The beneficial effects of the accumulation of a large
surius reserve by a Central Bank during periods of abnormally low
,
interest rates are very abl: described by Mr.N.G.Piersun, former
Givernor of t1-0:: Netherlands Bank in a letter under date of Jay 25th,
1906,addr('ssed to Mr. JL7m Claflin, Chairman Special Currency Commission uf thc Now York Chamber of Commerce.

This letter is well worth

the most careful study of all students of finance; in it are set forth
some old-filloned principles of banking that some of us arc perhaps
a little inclined to fot. et in this day of fierce competition for
g
busiress.

"
I quotu from ti- l ttc

rL.

to:

" Ewry wel: the main fiLures of the balance sheet Pre
rul;linhed, ihL,luding thpt of the :surplus, to which consf.derablr attenticin

raid.

It is expected--nnd this expectation has always

be-n realized—that the Bank will always hcep,in ordinary times, a
large surplus, so as to be able to meet any extraofdinaxy demand.

Vie

leck upon this as one of the unwritten conditions--anw..Itter becausE.
would be impossible tu fcrmulate them correctly--urOcr %.hich the
cl_artor htu, 1;cf.11 granted.

There are periods--and they last very long

sometimes—durinc which thL, surplus rises to an enormous sum,but the
Bank does not care.

It knows quite well that better times for it will

return, and that the community is all the safer for not having the domrnd for money stimulated immediately by wry low rates of interest."
The Bank

of Enuland

also gucessfully applied the same

principle in borrowing from the market when inte-c3t rates are abnormally low.
Let

letter.

odcr the second point referred to ir my
,
taX
Could the function:: of a CLnrall:Sbank be performed by a

nunber of rational bank7, pc;Lirr jointly throur:h a Cmtral Bankinc AS3,,
ciation chprtL2cd by Congress?
That ce-eperation 2ould be secured by such a plan has been
amply demonstrated by the success of the clearing house system.

The

c1eerin7, huus, is amost c.:; firmly cstrblishod in ou-r financial orcrInization a bankin- itsolf.




Mir

-7
In times of great financial stress our clearing house
system has proven itself a veritable Gibralter of strength. A
Central Banking Association would in a sense occupy the position or
a rational Cleartn

Hcuse, for in it would be bound together for

purposes of co-operation, ETUC/1 rational banks az voluntarily and
in compliance with the legal restrieLions as to membership entered
the association.
The functions of such an association should be clearly
and specifically defined and limited by Congress ,and the requi-:0cents for m(Tibership fixed.
To attempt to grant the privilef,e of membership to all
National bank.„,, would perhaps make such an association too unwieldy to
accompli.,h much ,00d.

In fact such a system would naturally have

ccrIti in New York, and the privilege of menbo:.:Ship should certainly
he cyterdod t,

the National banks or such other cities as would in-

surc its Lcmorits beinr enjoyed by the entire coun.r.
212

ciallon,

r

to the powel.r: which should be delegated t(_, nuch an aL;,,-

7ill suggest thruo pand consider them in the ordc.,; of thei-

imrortance as they appeal to uy judgment.
The' ,'Lyintion or the reserve of the banks belonr-ing to the
association within limits fixed by law, the banks boinr required to
increase their reserve durinc: periods of redundancy.

Mr. Mar! has

suggested that this authority be vested in the nrcvetary of the Treasury.
Could not such a power be more scfcl, administered by a body of representative men,such as would necessaril
of

Central Banking Association than

so tl- t Board of Directors
individual?

If the

Cecretary of the Treasury were mace ex-of- icio chairman of such a
"
Loard,the association would always have the benefit of his advice and
guidance ,but the country would never face th

serious crisis that

might come with thc sudden death or resiLnation of a Secretary of the

Treasiry at a time when the whole country might be struLzling to avert
a crisis.

A Boar4 o

Directors on which the Government and the banks

had equnl representation, the Secretary of the Treasury beinG ex-officio
chairmans woul6 certainly inspire the utmost confidonne both at homo
and abroad.



;;.4TTZ:-

Perhaps the sfcst and best credit currency that could be

cl_evisod would be a national bank note izsued by any bank belon7inr tu
ithout any security other than the
the Central Lanicinr- Ass6clatio1L, guarantee of all uhc banks bclonrinr to the association, the banks
::.akinr the gurLnntee might be in(lemnified either by a tax constituting
a safety fund, or by deposit of collateral; it 1r hardly necessary to
enter into n. disaus;.don o'" that point.
Such n brnk note issue has the sanction o.T se eminent an
authority a,: 7r. Jacob H.Schiff.

,
In an addrer_ s delivered boforr the

f
Illinois I:anufactu- ers Association at Chicago On Dccembnr lith11900,he
advocated c•wth an issue in the fellonr language:
,
It should hovmverowith approp:date lecislation for autl orizinc the creation

an asset currencrapon some such plan a: has been
,

proposod obe Icticablr to establish

Central Association of the Na-

tional banks, which is to possess no other function than to issue to the
banks in the association the circulating notes to which, under the stipulations and restrictions the law is to impose, they shall bc entitled."
-r.- 17-•*****::*

" It will be practicable to create an economically sound p and,
because of the joint liability of thr; banks, everywhere acceptable ctroulatinc mediumpthat will readily respond and contract with the demands
of trade and conmerce.

Both excessive and unsound superabundance of

money, as well as untuctified scarcity, such as we arc no

witnessing

and which ifpermitted to run into oxtremes, can not but become inimical
to the propserity of tbn country, can thus be prevented."
As to the stability of such an issue, it would be abselute4
unquestioned.

For the sake of illustration, sunposc that a Ocntral

BankinL Association was composed of the National bnnks in the following
cities: Now York, Boston,Philadelphia,Pittsbtrgh, Cincinnati l Chicage,
A

St.Louis, New Orleans,Kansas Oity,and San Francisco--A note issued by
any bank belon,7inc to the association would have a capital and surplus
in excess of

500,000,000.00back of it; it would have the stability of

a Government guaranteed note, but without the necessity of that guarantee.



-9_
Sucl' an issue of notes 7o1.110 in no way con2lict with the
present boric' secured notes, and it should be limited to sue' an
'
aiaeunt as would - G rrasonabl.y all-le to surply the extra furas necessary
0
to li,arket our crops.
The Board o

rircctors or such an association should have

auLhor4_% to regulate the is:
.ue of such notes within the limits proscribed by the association's charter.

As to the tax that should be

placed on such notes,that would be a mc.tter to be determined by Congrpss.
It would necessarily be a -clicatc calculation, for it should be high
enoujt to preclude at all times :lie possibility of inflation, and
still low enough to make it reasonably certain that the banks would find
it profitable to issue the notes every year durinL; -1 1r- crop-moving pe6
riod, for the appearance of these notes at such times should be an
evidence of our prosperous condition, and not a danger signal to advertise our adversity, as would be the case if the tax wore so high as
to make it profitable to issue the notes only during periods of seVerc
stringency.
Let us consider for a moment the funclemertal principles at
the base of the different systems of credit currency proposed.
(1)

That of notes secured by the guarantoe of the Gevernmont,the tax

on the notes indemnifying the Government against loss incurred thrau6h
failed banks.
This is eminently satisfactory provided Congress is willing
to put the Government guarantee on a rv,to secured otherwise than by
a
Government bond.

It is at best doubtful whether Congress will consent

to such legislation.

CO

Notes secured by a safety fund created by a tax on the circulation,

or by a deposit of collaterals.
Such an i:;:me

het belltdesirable exnerimentsbecause it
A

is an open question whether gal, the Deolac would At a:1

,,_Taus

accept

such notes on a parity with Government issues.

Bankin

The safety of a note i.:suod by any bank belonginz to n
Oentral
Association would be such as to assure its ready acceptance at

all times :ithout the Government luarantou.




-30-

THIA0-

provision should be made for the deposit of Government

funds in any bank belonginc to the association without security,all
of the banks of the association beinr liable to the Government for
Thc' Government might receive some interest on its

the deposit.

balances, and provision choulci be made for the seLtinr aside of a
portion of this interest an a safety fund to inLemnify the banks
against loss occasioned b

Government furv":, beimr on dcrocit in some
,

member of the association that might fail.

Thc aunt of interest

set asid( could be calc-lc.tcd with almost as much ac-

necessary tc 12

curacy aE, is obtained in calculating the amount of premium nucessary
to indemnify a life insurance company for writing a policy.
arran,ement for deliosit of funrIJ ir

Such an

ankc belonging to the association

,
need not in any way affott the pr so:It .s.stem of distributing Government deposits.

The bank not belonging to the association irlirlAt still

receive its deposit, and deposit bonds for its security, as is done at
present.
In addition to to three powers indicated above, Imowtoftewgic
Gtezo
riplIt he granted such an association. Cur
country is the only one of the first Importance commercially,that bac
no official bank rate of discount.

Thc rate for call money in MCW

York to a great extent takes its place as an index of the condition
of the money market, and when the rate reaches such absurdly high figur-:),
as it sometimeb does, we feel the -ad need of an official minimum rate
of discount.

I will not enter into a discussion of the prar ticabili%r
.

or advisability of such power being delegated to a Central Bankinj
sociation,

I am aware that there would be great diversity of opinion

on that point, but 1 do bclicve that a currency system, as above outlined o would practically do away with the absurd call rates that we freclucntyly have.

The very fact that the banks had the right to issue

otrrency subject to a tax would prevent the call I
-etc advancing to
any groat extent beyond the rate of tax on the notes, unless the bank
should find themselves in the position of having issued all the notes
permitted, but it should be possible to avoid such a situation.




-117oula thL -eanks willinjl
Bankin7 As.73ociation?

elome membel-s of a C:mLral

It is reasonable to suppose that they would

tional
exccl,tion that a
with practical unanimity,for it is a rare
of a clearin7 house asnueiabank located in a city is not a membela Central Dankinr: Astion. The liability of a bank as a member of
a: a member of
sociation would hardly be ;1.,ator than that incurred
y for the charter of
a clearinc, house association,for it is customar
restrictions
a clearimg house to provide fo, the issue und,r proper
house certificates;
,
of an emer6ency circulation in the form of cl:,11.in:
being legal tender,
these certificates7 thou:h sevorelr handicapped by not
IC it not time
have, netbortheless,often been of inestimable value.
upon sucn
to remove the poscibIlitj of having to fall back

ceude

instrument of credit in the future?
The profits incident to the issue of unsecured notes and
t1-1

receipt of Government fund: without the denosit of bonds should

memberbe made sufficiently great to cause ithe banks to eagerly seek
ship in the association.
There are perhaps no banke:::; in the world who show keener
appreciation of the accounts of their customers, and are more eager
to always look after the best interests of these customers, than are
Amori,:un banke-s. To cite an illustration, it is nothing unusual for P
Now York bank to be willing to lend funds at 5% to an interior bank
that has maintained good balancos,oven though the call rate may 'hP
near 505.

If our bankers will only realize that in seeking a solu-

tion of our currency troubles,it is the interests of their million
depositors that arc first to be considered, and not an

of

direct benefit

that may be gained by the banks, ac will no doubt find a speedy solution; and as the prosperity of the banks is so closely interwoven
;,
with that of their customer, the indirect benefits that will come to
the banks can hardl:' be calculated.




EXTRACTS RELATING TO CUHRENCY AND BA7KI1TG,
FROM TEE REPORTS OF COMPTROLLERS 07 THE CURRENCY FROM 1872 TO 1907, INCLUSIVE.

LIST OF COMPTROLLERS.
John Jay Knox: 1872-1883.
Henry W. Cannon: 1884-1385.
W. L. Trenholm: 1886-1888.
Edward S. Lacey: 1889-1891.
A. B. Hepburn: 1892.
James H. Eckels: 1893-1897.
Charles G. Dawes: 1898-1900.
William 3. Ridgely: 1901-1907.




1
EXTRACTS RELATING TO CURRENCY AND BANKING,
FROM THE REPORTS OF COMPTROLLERS OF THE CURRrTCY .EOM 1872 TO 1907, INCLUSIVE.
(Pages referred to are those of the Finance Reports
for the years named).

1872 - Reserve: 83-85.

1873 - Free banking:76-81.

Reserve: 81-90.

Panic of 1873: 90-95.

Intrest on Deposits: 95-96.

1874

1875 - National 7anking System: 191-205.
National Bank Notes: 191-196.

Treasury notes vs.
State Banks, res-

trictions on: 206-207.

1876 - Bank of North America: 120-121.




ited States: 121-125.
States: 125-129.
1863: 129-130.

First Bank of the Un-

Second -- ank of the United
'

Massachusetts -sanking from 1782-

Suffolk Bank System: 131.

York Banking from 1784-1876: 133-139.
Banks, New York: 135.
York: 137.

Indiana: 142-143.

Kentucky: 144.

Mississippi: 146.

Safety-fund

Free Banking System,New

Ohio: 139-142.

inois: 143-144.

New

Ill-

Tennessee: 145.

State and National Bank Sys-

tems Compared: 147-152.

2.

1877

1878 - National Banking System: 144-166.
al Bank Notes: 160-166.

Treasury Notes vs. Nation-

Summary of principal require-

ments of National Bank Act: 193-200.

187 9 - Treasury Notes vs. National Bank Notes: 120-123.

1880 - Bank of France, transactions of for 1879: 126.

Bank of

Germany, transactions of for 1879: 129.

1881
1882
1883 - Treasury Notes vs. National Bank Notes: 212-214.

1884 - Panic of May, 1884: 148-155.

1885 - Bank note issues of different countries: 93-111.




United states 93-100.
England 101-103.
Scotland 103.
Ireland 103.
Canada 103-104.
Australasian Colonies (English)
France 105.
Uermany 106.
Austria 106.
Belgium 107.
Netherlands 107.
Denmark 107.
Norway 108.
Sweden 108.
Russia 109.

105.

3.

Switzerland 109.
Italy 109.
Spain 110.
Portugal 110.
Japan 110.

1886 - Suggested amendments to National Banking Laws: 472-47
6.
Arguments concerning National Banking System: 532535.

1887 - Suggested amendents to National Banking Laws: 396-4
30.
Arguments concerning, etc: 508-518.

1888 - Suggested amendments to National Banking Laws: 426-43
7.
Interstate commerce

regulation of banking: 434.

Violations of law by National ranks: 493-496.
Excessive loans 493.
Loans upon real estate 493.
Investments in bonds,stocks,etc. 494.
Deficient reserve 494.
Excessive dividends 494.
Improper reduction of surplus 495.

1889 - Defense of national banking system: 386-399.

1890 - Suggested amendments to National Tanking Laws: 365.




Substitutes for aloney: 381.

4.

1891 - Monetary stringency of 1890: 324-330.

Clearing-house

certificates: 327-330.

1892 - Currency - its soundness and elasticity: 306-317.
Suggested amendments to national banking laws:
319.

1893 - Clearing-house certificates: 352.
ments to

Suggested amend-

national banking laws: 356-361.

Sug-

gested currency legislation: 361-362.

1894 - Sug7ested amendments to national tanking laws: 393-399.

1895 - Suggested




amendments to national banking laws: 376-378.

7anking systems of foreign countries: 379-393.
Belgium 381.
Canada 381.
Chili 382.
China 382.
Denmark 382.
Ecuador 383
France 383
Germany 384.
Guatemala 384.
Haiti 385.
Hawaii 385.
Italy 385.
Netherlands 385.
Paraguay 386.
Peru 386.
Portugal 386.
Russia 387.
Switzerland 387.
Turkey 387.

5.
Uraguay 388.
Venezuela 388.
England 389.
State banking systems: 393-415.

1896 - History of State bank failures prior to 1863: 432-448.
Same froa 1863 to 1896: 448-452.

Suggested amend-

ments to national '_anking laws: 496-506.

1897 - National banking legislation reviewed: 330-339. Postal savings banks in different countries: 362-386.

1898 - Suggested amendments to national ';anking laws: 193-207.
Branch banking recommended: 222.

1899 - Emergency currency recommended: 399-406.

1900 - Strengthening of reserves recommended: 469-471.

Ef-

fect of Act of March 14, 1900: 473-479.

1901 - Suggested amendments to national banking laws: 551-555.

1902 - Review of national banking system: 478-486.




Branch banking
National 497-499.
State 499-503.
7ond and asset currency discussed: 509-515.

6
.

1903 - Suggested amendents to national banking laws: 486-488.

1904 - Banking in Japan: 505-506.

Sugr;ested amendments to

national banking laws: 506-508.

1905 - Sug7ested amendments to national banking Laws: 428-431.

1906 - Plan for elastic currency: 395-408.

1907 - Crisis of 1907: 441-443.




reserve: 443-451.

Central bank of issue and

These figures from Statesmen's Yearbook, 1907.

Banking in Scotland.

4,726,070

Population of Scotland, 1906,

Circulation Scottish banks, June 1, 1906

7,543,000 pounds

Number of banks, 11, with 1159 branches
101,062,000 pounds

Total deposits

24,110,000 pounds

Cash on hand

Banking in Canada

4
0*

Population of Canada, 1901

5,371,315

Notes ir circulation, 1901

t50,600,000

Notes in circulation, 2905

t
,64,025,648

Capital of banks, 1905

$,F82,655,88

Indebtedness, 1905

4266,224,167

Total Exports, 1906

t256,000,000

Total Imports, 1906

2.94,000,000
$531,243,476

Total deposits in banks, 1905




4

1=I7TY-Iti.NTH

CONGRESS.

NELSON W.ALDRICH,r HAiRMAN,
WILLIAM D. ALLaSON, JOHN W.DANIEL,
JUL
C.OURROWS. HENRY M. TELLER,
''rtOMAS O. PLATT,
HERNANDO D. MONEY,
H. r. HANSDROUGH, JOSEPH W. DAILEY,
ARTHUR P. GORMAN,
JOXN C. SPOONER
SOIES PENROSE,
EUGENt HALE,
ARTHUR D. SHELTON,CLERK




COMMITTEE ON FINANCE,
U.S. SENAl E.

,ry into lonsl elc,Frint

? ,
ns,ttonnl ,Tn,:r of

-MEP.

or nnr,0,1,%, Ovy,
16h.

houses.

1

,
:r
,
lonslity t7 n bpn; tInlicteei -ith
hold A !1#20,1%,
r.)f

;nt,

•

currency,

ti3

*J-,
:,reof should

i1
,

P3fillf. of

,gity for rn
.
,- floes

nurwi to

:)nrent in my srecific

,
+‘,-0-t.",-,irs in rqlevor

1 ,7 t1-.r,, , -fifths
,-

itrre-1%,enoy
shou16 fur-

.
:
11(,mrin;

hnlominG to

nrtionnl

r

.
nieh sil;rovei collnterrl rennrity, At:rellon the cleftring honce should
(s)
,
es) the :nrertment nt 'rrshincton to istrak nne forwnrd to it t:1P notes
Of tho nntioniq't

r0.,.rrinc hoe to

pn)),:torteing to 4

to thn loos' requirements.

An PfnowIt

et,usl

T think thr.t the :rent rinnittnory of the

nomrtroller of the Currency wou1,7

?ervielon of
fle.ovide for n rro•por sur

this en:J.t:ency nurreony.
The nnttonn, bn
01r
1,14

" 4 In 7\

-lont the oonntry ehould be
lmninern t,.Aron:1
mIllrtrP1

'tint or t

mt -.(111C be mcoh!APhie on se-

,
,ir anilf !T*nny currency.
coqrt of thrl Aseao or tl
Liven lochlity

ho

.o to +lie nlenrtnc bonne, tnprent

,
.
rn(- -ive his c )rtifinntn

(a)

'relintry

PR

tO

notns

-cnurittes

tl;cir sufficiency.

1
or +he hrnk c1t, rn 4e or it' et from

to insurn iis s-endy rel-irn to fho
Is over.




,
The hrnl e-raminer of ony

4

,
f):., rtmentvIlbn

emercency

From Bankers Magazine, Nove,r_ber 1907.

Germany had 469 branch banks in 1906.
January 1, 1906, the Imperial Bank had-invested in bills of exchange $335,250,000
advanced azainst securities, $71,250,000
invested in government bonds, $65,750,000
loaned against government bonJs, t7,000,000
October 17; 1 1907, the ImperiF:l. Pz rk llagt
,
'
cash on hand #192,125,000
bills, g308,165,000
loans, t29,510,000
outstanding notes, 099,140,000

40

SCOTLAND.
September 21, 1907, tl-el authorized circuLlaticr nf 9 Scotch banks
Was $13,381,750
the a7erage circulation was $46,649,810
average amount of god and silver held against it as $30,092,385
-

0 -

DANK OF FRANCE
October 17, cash on hand in gold and silver, 042,000,000
bills of exr:harge, $226,000,000
cutstadii,6 circulation, $977,50n,000
public deposits, $43,500,000
private deposits, t95,500,000

k
1

I

I

)4
* 1 %6.0
0

/
1
4
7""




,
\

\- "
1.

-

alb;

\

C.)

•.?

v1 •

•
J

r*
.

r
41

FIFTY-NINTH CONGRESS.
NELSON W.ALDRICH,CHAIRMAN,
WILLIAM O. ALLISON, JOHN W.DANIEL,
JULIUS C.SURROWS, ,ENRY M. TELLER,
HERNANDO D. MONEY,
THOMAS C. PLATT.
NC.HANSPROUGH , JOSEPH W. DAILE
ARTHUR P. GORM.* N
00NER ,
JOHN C S0
ZOIES PENROSE.
EUGENE HALE.
ARTHU1 D. SliELTON r:LIERH




COMMITTEE ON FINANCE,
U.S. SENATE.

Provincial Clearing-House Returns.
Leeds

3r
Leicest,

Birminghara.

Bristol

1900

53,433,373

23,959,313

16,306,373

12,230,250

1901

52,814,120

29,408,482

16,041,512

10,671,993

1902

56,117,413

31,376,643

16,005,9'18

10,689,416

1903

35,116,148

31,572,591

17,146,031

10,671,412

1904

.53,200,879

30,452,459

17,565,545

11,148,572

1905

55,559,590

31,164,018

18,401,188

11,097,349

1906

58,622,373

31,025,458

21,064,878

11,439,755

Liverpool

Manchastur

Newcastle

Sheffield
20,340,774

1900

167,733,729

248,750,613

85,382,800

1901

158,375,032

235,290,432

82,181,804

18,930,815

1902

166,318,373

L34,686,933

80,896,770

13,779,614

1903

174,851,572

238,507,662

77,702,709

19,257,944

1904

198,319,206

248,544,567

77,457,492

18,425,(--0

1905

203,653,667

263,336,003

63,466,519

13,351,103

1906

188,739,338

293,616,108

54,759,038

19,925,827




(Bank _re' Magazine, .%:.nu. ry, 1908)

^elect list of references on the
Nei Yo-, Safety-Fund system.
:k

In Knox's "Hir,tory of bankinz in
tt
"H13t. of banks in N.Y." in Rhodes' Journal of banking,v.1S,
1892, pp. 35- 388.
Thite'a "Nitional and state bgnks"in !7,ound curr,
Iney,180CI pp.205-220
L.C.Poot's,"Ned York P-ink ,- urrency;S.Ifety-fund 178. 1)ond z;ecurity."
;
Indianapolis Inonetary lonvention,1298.-Report
N.Y.(State)--^emrtrollor-1848-4U
session,1829,pp.173-18C (rorran's Iltn.)
:akcr,H.7. 73ankLI and bankinc in the TT.S. 73oston1 1(353.
,
v.
neaveland,John. Di.nking systems of New York. 7d ert.
'3ank1na ,
::ystem of N.Y.
(in Banker's raga'71n - ,v.3,ray,104S,
:
rp.C78-683)
Flagg,A.C. Fe' historical facts respeting -str-iblihment ...of banks..
.n
N.Y... Brooklyn, 1868.
Histcr, of Nev York banking (In anker's rs.ap..,aAne(U.Y.)v.31,Mar.1:;77,
pr.657- (CC)
Knox,J.J. Pirranent national bank -Arulatich.
Amr:riean
ausoc.
ProceedInga of -mn-nt;rr,
f.f. 57-5G)
v.(tate)
Annual rort of 7rink
(In 7.Y.--Assemb1y IoT1ment3,1830-1842.)
Annual reporz cr TInk lor- issj.oners,Jan/25, 1341.
(In N.Y. Asseml:ly docurenlz,C4th ess.,1E41,v.3,no.C4.)
Annu - 1 rport of the ?omptroller(A.I.rlagg)
J1n.121e46
(In 7.v. Azaembly d0cs.,1E4C,v.1, no.25.)
Annual rport or the Cowptroller, Jan/(7,,1847.
(In N.Y. A3.ceirl1y
Annual report o7 the Comptroller, Jan.-,184S.
(7.Y.--Asaemb1y Jols.184F-, v.1,ro.4.)
Annual report or the Corptroller
"111-r've) 17 ,1.30, 1848
,
(In N.Y. As:;erftly
1849,v.1, no.5.)
Corrittee on bankli and in:curance lompanies.
7eport,1P4. (Tr 1Thin1,-.er's
,
maga3ive,v.8,'Pay,1849,rr.C84-C89/
Root, L.C. New England hank eurr-mly. (In Sound
currency. Feform club,
1n6,1,1- .7,53 784. Repr.of
18)5.)
Tucker,(leo. Theory of nn y
hani- in1.reI3ticiated. 183e.
7.r. 70th Conm.-lst
Hous, e7.doc.__ZI. Bank returns. Aug.7,1S48.
.
U.r.
1.7! Lless. Conate.ex.3ol.nolCpt.1 Letter fror Sec. of
treas.
7, MF7; to-harilin7 st.qti-ztics, 183n-r3.
77
7
7
1893.
p,r't Condition of banks throughout 7.r. Letter,Treas. 1868
.
(7.!7. 38th Thrj
1
seas. Hou73c ex.doc.107.)
7
;hite,Horace. 7oney and bailing.
ft
Ntional and ;7.tat e blnka(In Sound lurreney. 74 cform 71u1- ,1896
111.M5-Can.)
Frare,A.J. Inaurinc7 bunk dposits (In Conmressional record,
(Oth Cong.
lat1 ess. v.42,Yar.2,K4)8.)
.
;

5777;17,1:.




Kansas City, Mo., April 9, 1908.

At a meeting of the Kansas City Clearing House Association the
following statement respecting the Aldrich Bill
Was unanimously adopted as the sense of the meeting, and copies thereof directed to be sent to the President
of the United States, the Vice-President, and Speaker of the House of Representatives, and to each member of
the Senate and the HouF,e:
The members of the Kansas City Clearing House Association have carefully considered the Aldrich Bill
in the form in which it has passed the Senate, and beg to call attention to the following reasons why the bill, in
their judgment, should not become a law:
The provision in Section eight of the bill, requiring banks outside of reserve or central reserve cities
to hold in their own vaults four-fifths of the reserve required, either in lawful money or in the bonds specified
in Section two of the bill, would work great evil to the commercial and financial interests of the country, by
locking up from $150,000,000 to $200.000,000 now available for active business purposes. The country bank
is without adequate protection against burglary and robbery, and the danger of loss from these would be greatly
increased with the increased temptation resulting from the larger hoard. As matters now stand, the country
bank practically carries only counter money at home, and has its large reserve stored, without expense to itself,
in the larger cities, in secure vaults and under ample police protection.
Furthermore, by keeping balances in the larger cities, the banks outside the reserve or central reserve
cities establish a credit with their reserve or central reserve correspondents, and by reason of that credit are
able to get aid from these correspondents when needed for crop moving or other business purposes. It is not
to be expected, however, that a correspondent would so readily furnish money to an outside bank keeping practically no balance with it.
Section eleven of the bill provides, under severe penalties, that "no national banking association shall
invest any part of its funds or deposits in the stocks or other securities of any corporation or association any
of the officers of which are officers or directors of such banking association." The word "invest," while it
usually suggests the idea of purchase or acquisition by exchange for permanent purposes, has also, and frequently, been held to include a loan. In its comprehensive sense it signifies the laying out of money in such
manner as to produce revenue, whether the method be by loan or by purchase of stocks or other property.
23d Cyclopedia of Law and Procedure 348 and 349, and the cases there cited under the head of "Invest' and
"Investment." The word "S enrities" has been held to include promissory notes and bills of exchange within
,
its meaning. 25th .V.\1. and Eng. Enc. of Law 180. Giving to the words "invest" and "securities" the significance pointed out, and which they so readily bear, and the effect of the provision quoted is to forbid alike a loan
to any company in which a director of the bank may be a director, and a loan to such director with the securities of his company as collateral.
So far as this prohibition relates to the officers of banks, there is no objection to it, but there is serious
objection to it as including directors. It would radically change the structure of our banking system, and
restrict the conduct and supervision of it to men engaged in no other business. The Directors of our National
flanks are today in greater part the active and leading merchants and manufacturers of the country, and if
they may not borrow from the banks in whose boards they are rendering gratuitous service, money for the legitimate uses of their regular business, they must necessarily withdraw from these boards. Such a change in
the system would not enhance either its safety or efficiency. We appreciate the evil the bill designed to
remedy by this prohibition, but the provision is sweeping in its effects far beyond the requirements of the
remedy. In the absence of State enactments imposing like limitations upon the conduct of State Banks and
Trust Companies, the National flanks would be placed at a great disadvantage. But we deny the wisdom of
the regulation, even if made universal. The intimate blending of banking with all the other business interests
of the country resulting under the present system is, we believe, more conducive to the general welfare than
will be the establishment of a distinctive money-lending class.
It has been suggested that the Aldrich Bill is in tended to be but a temporary measure, preliminary to
the formation of a comprehensive and final system of currency. For this very reason it should be conservative,
and not make radical innovations upon methods and usages that have the sanction of forty years of experience.
It is better to do nothing at present than to risk doubtful expedients, even though they are not long to he
persisted in, for harm can be done more readily than undone, and its effects may continue after the cause has
been removed.

Kansas City Clearing House Association,
J. THRALLS, Secretary.

F. P. NEAL, President.

MEMBERS OF KANSAS CITY CLEARING HOUSE.
Central National Bank,
Gate City Bank,
New England National Bank,
Commerce Trust Co.,
German American Bank.
Pioneer Trust Co.,
Commercial National Bank,
Inter-State National Bank,
Traders Bank,
Corn Belt Bank,
Missouri Savings Bank,
Union National Bank,
Fidelity Trust Co.,
National Bank of Commerce,
Western Exchange Bank,
First National Bank,
National Bank of the Republic,




/CLfrAKING HOUSE .ASSOCLAZION OF THE
BANKS OF PHILADELPHIA
.„,
..•

APRIL ioth, 1908.

At an adjourned meeting of the Clearing House Association, held at noon today, at which
Joseph Moore, Jr., President of the National Bank of the Northern Liberties, presided. The
following resolutions, reported by the Special Committee on Financial Legislation, were
unanimously adopted, and signed by each of the thirty-two Banks of the Association.
WHEREAS, the Aldrich Bill, as passed by the Senate, embodies provisions which would
seriously restrict the ability of National Banks, to extend accommodations to the business public,
and require the withdrawal as Directors of many of the best men now identified with our Banking
Institutions; and
WHEREAS, the said Bill would revolutionize the legal reserve requirements of the National
Bank Act by introducing into reserves approved bonds which, in our opinion, have no place in
bank reserves, and by increasing the cash reserves of National Banks would withdraw many millions of dollars, now available for loans to the business community, to be locked up in vaults or
invested in specified bonds:
THEREFORE, BE 1T
RESOI.VED, That in our judgment the transfer of this money from banks, where it is now
available for lending purposes, to an idle fund, would seriously impair the working capital of the
country, and result in the curtailment of credits to the very class of borrowers the Bill is
intended to benefit.
RESOLVED, That while there is every reason to forbid loans by a Bank to its officers,
there is very serious objection to such prohibition against loans to Directors, or companies in
which Directors are interested. This would tend to bring about the withdrawal from Boards of
Directors of the men who have, in the past, proved most helpful by their counsel and business
experience.
RESOLVED, That a temporary measure, such as the Aldrich Bill was avowedly designed
to be, and which is not called for by any present emergency, should not be permitted greatly
to change the conditions under which the National Banks are now operating, as such changes
would seriously disturb the business interests of the country, and that unless Sections 8 and ii
be eliminated, it would be advisable to disapprove the Bill entirely.
We would THEREFORE MOST RESPECTFULLY URGE that the entire matter of
our banking and currency laws should be referred by Congress to a Commission composed of
representative business men and financiers, in conjunction with members of the Senate and House
of Representatives, to consider thoroughly the subject of our National Finances, and to present
the result of their investigations and deliberations at the next session of Congress.
(140m4gooktieic.,)
A Committee of three consisting of Messrs. Rushton, Rue and Moore, was appointed to
go to Washington to present the Resolution to both the Senate and House Committees on Banking, and copies will be sent to every member of Congress as well as to all the correspondents of
the Philadelphia Banks throughout the country.




Apri1. 12t12 t1908.
The Clearin

House Arsociat!cr of the Banks o

WHEREAS, The Aldrich Bill, as passed b7 the Senate, embodies
provisions which would seriously restrict the ability of National
Banks to extend accommodations to the business public, and require
the withdrawal as Directors of many of the best men now ident
ified
with our Banking Institutions; and
WHE-hEAS, the said Bill would revolutionize the
legal reserve
requirements of the National Bank Act by intro
ducing into reserves
approved bonds which, in our opinion, have no place
in bank reserves,
and by increasing the cash reserves of National
Banks would withdraw
many millions of dollars, now available for loans
to the business
community, to be locked up in vaults or inves
ted in specified bonds:
THEREFORE, BE IT
RESOLVED, That in our judgment the transfer of
this money from
banks, where it is now available for lending
purposes, to an itile
ft:'1(1, would seriously impair the working capit
al of the country,
and result in the curtailment of credits to the
very class of
borrowers the Rill is intended to benefit.
(Is every)
RESOLVED, That while there 4wwwrammmilik reaso
n to forbid loans
A
by a Bank to its officers, there is very
serious objection to suoh
a prohibition against loans to Directors,
or companies in which
Directors are interested. This would tend
to bring about the
withdrawal from Boards of Directors of the
men who have, in the past,
proved most helpful by their counsel and
busines: experience.
,
RESOLVED, That a temporary measure, such
as the Aldrich Bill
was avowedly designed to be, and which
is not called for by any
present emergency, should not be permitted great
ly to change the
conditions under which the National BanTh are
now operating, as
such changes would seriously disturb the
business interests of the
country, and that unless Sections 8 and
11 be eliminated, it would
be advisable to disapprove the Rill
entirely.
We would THEREFORE MOST RESPECTFULLY
URGE that the entire matter
of our banking and currency laws
sho, 11 be referred 1 7r Conrress to
a Commissior.




WVia Ot

DIL6G;OLU

4wct ;14:J;0.4
;0 Eixvieug

bd-TpITc'

.Aiotisszeoci ;c ;Fe
ucco-

myTcj xonrci

;1.76

tibLIOAQV. LW:4'14G4.*
(
L -RD "1

'WE
VIgLIGY PUT

PH=Y2)

•••••••

op •

• O...

.10V.

jr

:Jrvi"
r- ;pc) ;10

ukTI

oga

•

10
1 40INGII.4:w

404, wis "maxi./O.

-

•
O. 7

Jfl

.;u0o.
composed of representative

business men and financiers, in

conjunction with members of the Senate and
House of representatives,
to consider thoroughly the subject
of our National Finances,
and
to present the result of
their investigations and
deliberations
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