Full text of Statements and Speeches of Carter Glass : Banking and Currency Reform : Speeches in the House of Representatives

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T O c f V
t. ; I I i I

BANKING AND CURRENCY REFORM
The real opposition to this iiiil is not as to Government control, upon
which we shall never y i e l d ; it is not a s ' t o the capital subscription required, which is precisely that of the Ahlrich scheme, unanimously
indorsed by the American Bankers' A s s o c i a t i o n ; it is not as to the 3
per cent dividend allowed member banks, (lie exact limit prescribed in
the Ahlrich b i l l ; it is not as to compulsory membership, which w a s provided in another way in the Aldrich s c h e m e ; it is n o t as to the bondrefunding proposition, infinitely simpler and less expensive than the
Aldrich device. It is none of those things, Mr. Chairman, t h a t vexes the
big bankers. It is a loss of profits derived from a system which makes
them the legal custodians of all the reserve f u n d s of the country,
$240,000,000 of which funds on the 24th day of November, 1912, they
had piit into the maelstrom of Wall Street stock operations.

OP

HON. CARTER GLASS
OF

vriiGriTsrrA.
IN

THE

llOUS 10 OF REPRESENTATIVES

S E P T E M B E R 10 AND 13, 1913

7"

WASHINGTON
1013
10022—12:550

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T H E H O U S E OF

Wednesday,

G LASS,

VIRGINIA,
REPRESENTATIVES,

September

10, 1913.

The House in Committee of (lie Whole House on the state of the Union
had under consideration the 1»111 (II. U. 78157) to provide for the establishment of Federal reserve banks, for furnishing an elastic currency,
affording means of rediscount Ing commercial paper, and to establish a
more effective supervision of bunking in the United States, and for other
purposes.

Mr. GLASS. Mr. C h a i r m a n , I desire to present to t h e House, a s
in Committee of t h e Whole, a brief e x p l a n a t i o n of II. It. 7S37,
reported f r o m t h e l l a n k i n g a n d Currency Committee, w i t h immaterial a m e n d m e n t s , a n d to give t h e reasons which a c t u a t e d t h e
committee in its construction a n d consideration of t h i s m e a s u r e .
I would ask t h e kind indulgence of my colleagues a s I m a k e
this presentation of t h e hill, a n d would especially request t h a t
(ho continuity of my speech be not i n t e r r u p t e d , a s t h e topic is
technical a n d a s I a m unused to a d d r e s s i n g t h e House.
W h e n wo come to consider Iho bill p a r a g r a p h by p a r a g r a p h
u n d e r the live-minute r u l e t h e c h a i r m a n of t h e committee a n d
o t h e r members who h a v e collaborated w i t h h i m will bo glad to
a n s w e r till questions, if they can.
I t h i n k it is p r e t t y generally agreed t h a t t h e r e is a pressing
necessity for currency legislation in (his country. T h e country
itself t h i n k s so if a n y significance may be a t t a c h e d to the thous a n d s of letters received by (he l h i n k i n g a n d Currency Coimnit•tee of (he H o u s e w i t h i n (he l a s t six m o n t h s or to t h e resolutions
passed by h u n d r e d s of commercial bodies t h r o u g h o u t the United
S l a t e s calling f o r immediate consideration a n d action by Congress. F r o m every q u a r t e r a n d f r o m all classes of citizens (lie
demand lias proceeded; and, in die j u d g m e n t of t h e H a n k i n g
a n d Currency Committee, Congress should no longer evade an
i m p e r a t i v e duty.
"A BARBAROUS

SYSTEM."

F o r m o r e (ban a q u a r t e r of a c e n t u r y t h e r e h a v e been strong
s y m p t o m s of a n intense d i s s a t i s f a c t i o n with the prevailing national b a n k i n g a n d currency s y s t e m ; a n d this s p i r i t of discontent has been a c c e n t u a t e d as, f r o m time to time,.the u t t e r inadequacy of t h e system h a s been m a d e m a n i f e s t in periods of financial peril. While t h e existing system iias operated s a t i s f a c t o r i l y
u n d e r o r d i n a r y business conditions, a n d while t h e a d m i n i s t r a tion of the system f o r (he HO y e a r s of its history f u r n i s h e s a
•high t r i b u t e to t h e integrity a n d ellicieney of those concerned
in its operation a n d oversight, its very best f r i e n d is bound to
a d m i t t h a t , in time of s t r e s s and storm it lias broken down
utterly. T h i s h a s occurred so often and the ensuing d i s a s t e r
10022—12M5G

4

h a s b e e n so d r e a d f u l a s t o c a u s e Hie b a n k i n g e x p e r t s of o t h e r
n a t i o n s a n d practical financiers e v e r y w h e r e to m a r v e l a t our
continued f a i l u r e either to adopt a better system or correct t h e
e v i l s of t h e o n e w e h a v e . F i n a n c i a l t e x t b o o k w r i t e r s o£ E u r o p e
have characterized our American system as " b a r b a r o u s , " and
e m i n e n t b a n k e r s of t h i s c o u n t r y w h o , f r o m t i m e t o t i m e , h a v e
a p p e a r e d b e f o r e t h e B a n k i n g a n d C u r r e n c y C o m m i t t e e of t h e
H o u s e , h a v e n o t h e s i t a t e d t o c o n f e s s t h a t t h i s b i t t e r c r i t i c i s m is
m e r i t e d . W h i l e w e m a y b o a s t t h a t n o n o t e h o l d e r l i a s e v e r lost
a d o l l a r , a n d t h a t t h e l o s s e s of d e p o s i t o r s c o n s t i t u t e a n incons i d e r a b l e p e r c e n t a g e of t h e t o t a l l i a b i l i t i e s of t h e b a n k s , n e v e r t h e l e s s t h e f a i l u r e of t h e s y s t e m in a c u t e e x i g e n c i e s h a s c a u s e d
w i d e s p r e a d b u s i n e s s d e m o r a l i z a t i o n a n d a l m o s t u n i v e r s a l dist r e s s . F i v e t i m e s w i t h i n t h e l a s t oO y e a r s financial c a t a s t r o p h e
l i a s o v e r t a k e n t h e c o u n t r y u n d e r t h i s s y s t e m ; a n d it w o u l d b e
d i f f i c u l t t o c o m p u t e t h o e n o r m o u s losses s u s t a i n e d b y all c l a s s e s
of s o c i e t y — b y t h e b a n k s i m m e d i a t e l y i n v o l v e d ; b y t h e m e r c h a n t s Whose c r e d i t s w e r e c u r t a i l e d ; b y t h e i n d u s t r i e s w h o s o
siiops w e r e c l o s e d ; b y t h e r a i l r o a d s w h o s e c a r s w e r e s t o p p e d ;
b y t h e f a r m e r s w h o s e c r o p s r o t t e d in (lie fields; b y t h e l a b o r e r
w h o w a s d e p r i v e d of b i s w a g e . T h e s y s t e m l i t e r a l l y h a s n o
r e s e r v e f o r c e . T h e c u r r e n c y b a s e d u p o n t h e N a t i o n ' s d e b t is
a b s o l u t e l y u n r e s p o n s i v e to t h e N a t i o n ' s b u s i n e s s n e e d s ; T h e lack
of c o o p e r a t i o n a n d c o o r d i n a t i o n a m o n g t h e m o r e t h a n 7,:)00
n a t i o n a l b a n k s p r o d u c e s a c u r t a i l m e n t of f a c i l i t i e s a t a l l p e r i o d s
of e x c e p t i o n a l d e m a n d f o r c r e d i t . T h i s p e c u l i a r d e f e c t r e n d e r s
disaster inevitable.
EFFORTS

AT

HEFORM.

F o r y e a r s t h e business and banking community has been
c a s t i n g a b o u t f o r a r e m e d y . I n 1SDS t h e I n d i a n a p o l i s M o n e t a r y
Commission met a n d offered suggestions which were ignored.
Later the American Bankers' Association a t Atlantic City
d r a f t e d a n e m e r g e n c y c u r r e n c y bill w h i c h w a s i n t r o d u c e d b y
M r . F o w l e r , r e f e r r e d to t h e B a n k i n g a n d C u r r e n c y C o m m i t t e e ,
but never reported or enacted into law. Several y e a r s therea f t e r w e h a d t h e L o v e r i n g bill, a n d n e x t t h e F o w l e r bill, cons i d e r a t i o n of w h i c h l a t t e r m e a s u r e w a s r u d e l y i n t e r r u p t e d b v
t h e a c t i o n of t h e R e p u b l i c a n c o n g r e s s i o n a l c a u c u s in M a y , 1908.
Ignoring the Banking and Currency Committee, the party caucus
a g r e e d u p o n t h e V r e e l a n t l bill f o r a n e m e r g e n c y c u r r e n c y a n d
c a u s e d t h e d i s c h a r g e of t h e H o u s e B a n k i n g a n d C u r r e n c y Comm i t t e e f r o m f u r t h e r c o n s i d e r a t i o n of c u r r e n c y m a t t e r s a t t h a t
s e s s i o n of C o n g r e s s . M e a n w h i l e , M r . A l d r i c h h a d i n t r o d u c e d a
bill in t h e S e n a t e a n d , by a n a c t of l e g i s l a t i v e m i s c e g e n a t i o n ,
t h e t w o b e c a m e one, a n d in h y p h e n a t e d f o r m w e h a v e t h e
V r e e l a n d - A l d r i c h '.aw, w h i c h soon will e x p i r e b y l i m i t a t i o n .
N o t o n e d o l l a r of c u r r e n c y h a s e v e r b e e n i s s u e d u n d e r i t s p r o visions, t h u s literally confirming t h e prediction m a d e a t t h e t i m e
by those who opposed t h e m e a s u r e . H o w e v e r , the commission
f o r w h i c h t h e bill p r o v i d e d w a s d u l y a p p o i n t e d a n d f o r t h r e e
y e a r s , a t a c o s t of n e a r l y $300,000 to t h e G o v e r n m e n t , p r o s e c u t e d
t h e w o r k of i n v e s t i g a t i o n , m a k i n g its r e p o r t a n d r e c o m m e n d a tions to t h e Sixty-second Congress.
THE

AT.DRICII

SCHEME.

I do not desire at this time to m a k e a n y c o m m e n t s upon t h e
w o r k of t h e M o n e t a r y C o m m i s s i o n . I t is t r e a t e d in s o m e det a i l in t h e r e p o r t of t h e B a n k i n g a n d C u r r e n c y C o m m i t t e e
3 0022—12350

w h i c h a c c o m p a n i e s t h e bill n o w u n d e r c o n s i d e r a t i o n ,
i t is
sutlicient to s a y t h a t t h o s e m e m b e r s of t h e B a n k i n g a n d Currency C o m m i t t e e p e c u l i a r l y c h a r g e d w i t h t h e responsibility of
r e c o m m e n d i n g legislation f e l t p r e c l u d e d f r o m c o n s i d e r i n g t h e
so-called A l d r i c h bill by r e a s o n of t h e f a c t t h a t t h e p l a t f o r m of
t h e D e m o c r a t i c P a r t y a d o p t e d a t B a l t i m o r e explicitly d e n o u n c e d
t h a t proposed legislation. I t is i n t e r e s t i n g to n o t e also t h a t t h e
p l a t f o r m of t h e P r o g r e s s i v e P a r t y likewise d e n o u n c e d t h e p l a n
of t h e M o n e t a r y Commission, w h i l e t h e p l a t f o r m of t h e Republican P a r t y w a s silent on t h e s u b j e c t . T h e wisdom of t h e s e
p l a t f o r m d e c l a r a t i o n s h a s since been j u s t i f i e d by t h e f a c t t h a t
t h o u s a n d s of b a n k e r s h a v e a b a n d o n e d t h e A l d r i c h bill a n d even
some of t h o s e w h o m it w a s m o s t i n t e n d e d to benefit h a v e publicly confessed t h a t t h e m e a s u r e c o n t a i n s some exceedingly
d a n g e r o u s provisions.
T h e p r o p o n e n t s of (he bill n o w u n d e r c o n s i d e r a t i o n did n o t
h e s i t a t e to a p p r o p r i a t e a n y suggestion of a m e r i t o r i o u s n a t u r e
m a d e by t h e M o n e t a r y Commission, j u s t a s t h e so-called A l d r i c h
s c h e m e e m b o d i e d m a n y of t h e p r o v i s i o n s of (he F o w l e r bill a n d
t h e M u h l e m a n c e n t r a l b a n k p l a n . W e also m a d e a c a r e f u l
s t u d y of t h e b r a n c h b a n k i n g s y s t e m of C a n a d a a n d w h i l e w e
f o u n d t h a t it h a d a d m i r a b l y served i t s p u r p o s e in t h a t c o u n t r y
w e c a m e to t h e conclusion t h a t it would n o t b e possible to a p p l y
it to t h e A m e r i c a n s y s t e m w i t h o u t v i t a l a l t e r a t i o n s w h i c h w o u l d
r u n a t h w a r t (lie b a n k i n g p r i n c i p l e s a n d t h e b u s i n e s s h a b i t s to
w h i c h t h e A m e r i c a n people h a v e been so long a c c u s t o m e d .
Hence, a f t e r e x h a u s t i v e i n v e s t i g a t i o n a n d h e a r i n g s , e x t e n d i n g
over a period of m a n y m o n t h s , t h e p e n d i n g bill w a s d r a f t e d a n d ,
a f t e r full c o n s i d e r a t i o n a s to e v e r y d e t a i l , is r e p o r t e d to t h e
H o u s e w i t h t h e r e c o m m e n d a t i o n t h a t it be passed. T h u s , M r .
Chairman, the Banking and Currency Committee feels t h a t it
h a s f u l l y d i s c h a r g e d i t s own d u t y a n d t h a t f u r t h e r responsibility is w i t h t h i s body.
T I M E TO ACT.

I v e n t u r e to e x p r e s s t h e s i n c e r e h o p e t h a t t h e H o u s e will
n o t d e l a y t h e e n a c t m e n t of t h i s bill. T h e chief a n d e v e r l a s t i n g
c u r s e of a t t e m p t e d b a n k i n g a n d c u r r e n c y legislation in t h i s
c o u n t r y h a s been t h e p r o n e n e s s of public m e n to p r o c r a s t i n a t e .
When the Vreeland-Aldrich makeshift w a s adopted ex-Secretary
Lyman J . Gage w a r n e d the committee and Congress t h a t the
bill w a s " m e r e l y a d a n g e r o u s n a r c o t i c to lull t h e N a t i o n to
sleep, f r o m w h i c h s l u m b e r i t would s o m e d a y a w a k e n i n
agony."
R e m e m b e r i n g t h a t financial p a n i c s in t h e U n i t e d
S t a t e s a r e decennial, a n d t h a t wo a r e f a s t a p p r o a c h i n g t h e
t i m e - l i m i t f r o m 1007 to 1917, it s e e m s to me t h a t t h e obligation
to l e g i s l a t e is i m m e d i a t e . Wo s h o u l d n o longer, f r o m h a b i t or
t i m i d i t y , g r a v e l y s h a k e o u r h e a d s a n d insist t h a t w e " w i l l n o t
be h u r r i e d in t h i s m a t t e r " ; t h a t w e w a n t f u r t h e r t i m e f o r cons i d e r a t i o n ; t h a t we m u s t h a v e o t h e r h e a r i n g s a n d a d d i t i o n a l
i n f o r m a t i o n . S o m e t i m e s I a m b r o u g h t to w o n d e r , Mr. C h a i r m a n , w h a t s o r t of i n f o r m a t i o n is w a n t e d by t h e public m e n w h o
e t e r n a l l y p l e a d f o r d e l a y . T h e r e is no t h e m e on e a r t h u p o n
w h i c h i n f o r m a t i o n m a y m o r e r e a d i l y be o b t a i n e d t h a n u p o n t h e
c u r r e n c y question. T h e r e is no topic upon w h i c h w e h a v e m o r e
a u t h o r i t a t i v e e x p e r t e x p r e s s i o n a n d t h e r e a r e f e w s u b j e c t s upon
"He g e n e r a l p r i n c i p l e s of w h i c h e x p e r t opinions a r e in g r e a t e r
accord. If it did no o t h e r good, t h e M o n e t a r y Commission, a t
iOO'_'i»—i<>ar,it

6

a cost of a p p r o x i m a t e l y $150,000, a s s e m b l e d a g r e a t l i b r a r y on
t h e s u b j e c t of b a n k i n g a n d c u r r e n c y r e f o r m , w h i c h f o r t w o
y e a r s h a s been a c c e s s i b l e t o e v e r y M e m b e r of C o n g r e s s . L e s s
t h a n six m o n t h s a g o t h e B a n k i n g a n d C u r r e n c y C o m m i t t e e of
t h e H o u s e closed e x h a u s t i v e h e a r i n g s on t h e s u b j e c t , a t w h i c h
t h e b e s t s e l e c t e d r e p r e s e n t a t i v e s of e v e r y k n o w n n a t i o n a l g r o u p
t e s t i f i e d big b a n k e r s a n d l i t t l e b a n k e r s , m e r c h a n t s a n d f a r m ers, c r e d i t m e n a n d m a n u f a c t u r e r s , c u r r e n c y e x p e r t s , l a b o r i n g
m e n a n d textbook writers. And t h e r e is scarcely a provision
of t h i s p e n d i n g c u r r e n c y bill w h i c h m a y n o t b e r e l a t e d to t h e s e
h e a r i n g s . T h e y t o o k t h e w i d e s t r a n g e a n d reflected e v e r y conc e i v a b l e v a r i e t y of o p i n i o n ; a n d t h e r e i s a b s o l u t e l y n o e x c u s e
for f u r t h e r delay.
T H E rtiEDGE OF r A K T I E S .

All p a r t i e s a r e c o m m i t t e d to t h e s o l u t i o n of t h i s p r o b l e m .
W h e n t h e V r e e l a n d - A U l r i c h bill w a s p a s s e d five y e a r s a g o t h e
R e p u b l i c a n P a r t y in C o n g r e s s s o l e m n l y p l e d g e d itself to s p e e d i l y
r e p l a c e t h a t t e m p o r a r y e x p e d i e n t w i t h a p e r m a n e n t a n d comp r e h e n s i v e s t a t u t e , w h i l e o n e of t h e l a t e s t p u b l i c e x p r e s s i o n s
of t h e l a s t R e p u b l i c a n P r e s i d e n t w a s u p o n t h e n e c e s s i t y of b a n k ing and currency reform. Mr. T a f t declared t h a t —
It is more Important than tlio tariff, more Important than conservation, more important than the question of trusts and moro important
than any political legislation t h a t has been presented.

T h e l a s t n a t i o n a l p l a t f o r m of t h e D e m o c r a t i c P a r t y comm i t t e d u s to " a s y s t e m a t i c r e v i s i o n of t h e b a n k i n g l a w s of t h e
c o u n t r y , " a n d t h e D e m o c r a t i c P r e s i d e n t of t h e U n i t e d S t a t e s
w h o w a s elected on t h a t p l a t f o r m a p p e a r e d a t t h e S p e a k e r ' s
d e s k of t h i s H o u s e m o r e t h a n t w o m o n t h s a g o a n d u r g e d Cong r e s s n o t to w a i t u n t i l " t h e d e m a n d s of t h e c o u n t r y s h a l l h a v e
become reproaches."
T h e P r e s i d e n t recommended t h e lines
u p o n w h i c h w o s h o u l d proceed, s a y i n g :
We must have a currency, not rigid as now, but readily, elastically
responsive to sound credit, the expanding and contracting crcdits of
everyday transactions, the normal ebb and How of personal and corporate* dealings.
Our banking laws must mobilize reserves; must not
permit the concentration anywhere in a few hands of the monetary
resources of the country or their use for speculative purposes in such
volume as to hinder or impede or stand in the way of other moro legitimate, more fruitful uses. And the control of the system of banking
and if issue which our new laws are to set up must be public, not
private, must be vested In the Government itself, so that the banks
may lie the instruments, not the masters, of business and of individual
enterprise and initiative.
REGIONAL RESERVE B A N K S .

U p o n t h e s e p r e c i s e l i n e s t h i s bill i s c a s t . G u i d e d by t h e
l a m p of e x p e r i e n c e , t a k i n g n o t e of t h e f a c t t h a t , in t i m e of
e m e r g e n c y , c l e a r i n g - h o u s e a s s o c i a t i o n s in t h e g r e a t m o n e y
c e n t e r s , a n d even i n s m a l l e r c o m m u n i t i e s , r e p e a t e d l y succeeded in a r r e s t i n g
financial
disaster, the House Banking
a n d Currency Committee conceived t h e idea t h a t regional
o r g a n i z a t i o n s of i n d i v i d u a l b a n k s t h r o u g h o u t t h e c o u n t r y
might effectually prcveut disaster. Hence, the f u n d a m e n t a l
i d e a of t h e bill n o w p r e s e n t e d Is t h e c r e a t i o n of a n e w
c l a s s of b a n k s to bo k n o w n a s F e d e r a l r e s e r v e b a n k s . T h e
c o u n t r y i s to b e d i v i d e d i n t o t w e l v e p a r t s , h a v i n g r e f e r e n c e t o
c a p i t a l a n d t h e e x i s t i n g c o u r s e of b u s i n e s s ; a n d in e a c h of t h e s e
r e g i o n s is t o b e o r g a n i z e d a F e d e r a l r e s e r v e b a n k . T h e minim u m c a p i t a l i s tx> l>» $3,000,000 a n d t h e b a n k is t o b e o w n e d
10022—12350

7

a n d o p e r a t e d by I he s t o c k h o l d i n g h a n k s of <ho d i s t r i c t , both
N a t i o n a l a n d S t a t e . T h e c a p i t a l i z a t i o n of t h e r e s e r v e b a n k is
to be 20 per c e n t u m of t h e c a p i t a l of t h e s t o c k h o l d i n g b a n k s ,
one-half paid in a n d one-half s u b j e c t to call. T h e b u s i n e s s of
t h e r e s e r v e b a n k w i l t be t h e rediscount ing of p a p e r p r e s e n t e d
by m e m b e r b a n k s g r o w i n g o u t of c o m m e r c i a l , i n d u s t r i a l , a n d
a g r i c u l t u r a l t r a n s a c t i o n s , w i t h a m a t u r i t y in s o m e c a s e s of n o t
m o r e t h a n !)0 a n d in o t h e r s of not m o r e t h a n 120 d a y s . T h e s e
b a n k s m a y also buy a n d sell G o v e r n m e n t securities, gold a n d
silver bullion, f o r e i g n coin, f o r e i g n e x c h a n g e , a n d o p e n - m a r k e t
bills of given m a t u r i t y . T h e y a r e also to conduct, w i t h o u t
c h a r g e , t h e fiscal o p e r a t i o n s of tho U n i t e d S t a t e s G o v e r n m e n t .
U n d e r t h i s bill t h e r e is v a s t l y less i n t e r f e r e n c e w i t h t h o
e x i s t i n g i n d e p e n d e n t b a n k i n g s y s t e m t h a n w a s p r o v i d e d by t h e
Aldricli scheme. E a c h m e m b e r b a n k is to deal d i r e c t l y w i t h
i t s regional r e s e r v e b a n k in s e c u r i n g r e d i s c o u n t s , a n d in n o
case is its p a p e r to be g u a r a n t e e d by o t h e r b a n k s . W h i l e subject to limited c o n t r o l by t h e F e d e r a l r e s e r v e b o a r d , t h e r e g i o n a l
r e s e r v e b a n k is given a n i n d e p e n d e n t s t a t u s a s well a s exceedingly i m p o r t a n t f u n c t i o n s . I t h a s tho i n i t i a t i v e in fixing r a t e s
of d i s c o u n t w i t h i n its t e r r i t o r y a n d t h e e x c l u s i v e d e t e r m i n a t i o n
of t h e a m o u n t of p a p e r to b e r e d l s c o u n t e d f o r m e m b e r b a n k s .
I t is o p e r a t e d by a b o a r d of n i n e d i r e c t o r s , t w o - t h i r d s of w h o m
a r e selected d i r e c t l y by t h e m e m b e r b a n k s a n d o n e - t h i r d by
t h e F e d e r a l r e s e r v e b o a r d . T h r e e of t h e n i n e d i r e c t o r s m u s t
f a i r l y r e p r e s e n t t h e c o m m e r c i a l , i n d u s t r i a l , or a g r i c u l t u r a l
i n t e r e s t s of t h e c o m m u n i t y .
SMALL BANKS

PROTECT*;D.

I n o r d e r to p r o v i d e a g a i n s t control by t h e l a r g e r b a n k s of
a given d i s t r i c t , t h e m e m b e r b a n k s of e a c h region a r e d i v i d e d
into t h r e e g r o u p s equal, a s n e a r l y a s m a y be, in n u m b e r a n d
of s i m i l a r c a p i t a l i z a t i o n . E a c h b a n k , r e g a r d l e s s of i t s size, i s
given one vote in tho selection of d i r e c t o r s . N o t w i t h s t a n d i n g
t h e c a r e w h i c h h a s been e x e r c i s e d t o p r o t e c t t h e r i g h t s of t h e
s m a l l b a n k s in t h e selection of d i r e c t o r s , f e a r s c o n t i n u e to b e
e x p r e s s e d t h a t t h e l a r g e r b a n k s of tho d i s t r i c t m a y control tho
system. Iiy r e f e r e n c e to t h o last a n n u a l r e p o r t of t h e Comptroller of t h e C u r r e n c y a n y b o d y w h o e n t e r t a i n s a d o u b t on t h i s
point, m a y r e a d i l y h a v e h i s a p p r e h e n s i o n q u i e t e d . I s h a l l embody t h o t a b l e t a k e n f r o m t h e c o m p t r o l l e r ' s r e p o r t in m y
remarks:
Xumbcv

of national

banks,

classified

Class.
$25,000
Over $25,000 niul less than $50,000...
$50,000 and less than $100,000
$100,000 ami less than $250,000
$250,000 and less than $1,000,000
$1,000,000 and less than $5,000,000...
55,000,000 and over
Grand total

by capital

(paid in), on Sept.

Number. Per cent.
2,001
381
2,321
2,000

Amount.

.}, 1012.
Per cent.

109
18

27.09
5.15
31.33
27. 12
0.73
2.29
.21

$50,0G9,730
12,819,335
121,452,200
251,053,385
195,282,230
234,305,700
175,000,000

4.79
1.23
11.90
24.29
18.07
22.40
10.72

7,397

100.00

1,016,012,5S0

100.00

4 as

I t will be n o t e d t h a t of t h e 7,007 n a t i o n a l b a n k s 2,004 h a v e n o t
m o r e t h a n .$25,000 c a p i t a l ; 2,321 h a v e less t h a n .$100,000 ; 2,00(5
h a v e less t h a n .$250,000, w h i l e only 085 b a n k s exceed a capi1002" i2:i.r>G

8

t a l i z a t i o n of $250,000. T h u s of t h e 7,397 n a t i o n a l b a n k s in t h e
s y s t e m (>,712 m a y bo classified a s small b a n k s , m a k i n g it n e x t
to impossible f o r t h e l a r g e r b a n k s to control.
NUMBER AND RESOURCES.

T h e q u e s t i o n lias r e p e a t e d l y been a s k e d a s to w h y t h e n u m b e r
of F e d e r a l r e s e r v e b a n k s is fixed a t 12, to w h i c h I reply t h a t t h e
n u m b e r a d o p t e d is a c o m p r o m i s e b e t w e e n t h e e x t r e m e suggestion of HO ou one h a n d a n d 15 on t h e o t h e r . T h e g r e a t c e n t r a l
r e s e r v e city b a n k e r s a d v o c a t e b u t 3 regional r e s e r v e b a n k s , to
be located, of course, in t h e i r c e n t r a l r e s e r v e cities, while a dist i n g u i s h e d m e m b e r of t h e o t h e r b r a n c h of Congress a d v o c a t e s 1.
f o r e a c h of t h e 48 S t a t e s . T h e c o m m i t t e e in fixing t h e n u m b e r
a t 12 g a v e c o n s i d e r a t i o n to t h e a m o u n t of a v a i l a b l e c a p i t a l of
all t h e n a t i o n a l b a n k s , w h i c h a g g r e g a t e s $1,010,012,5S0. T h r e e
c o m p e t e n t a c t u a r i e s h a v e m a d e suggestive divisions of t h e
c o u n t r y into 12 regions, a n d t h e r e c a n be no possible d o u b t , if
all t h e n a t i o n a l b a n k s go i n t o t h e system, t h a t t h e m i n i m u m
c a p i t a l can lie s e c u r e d in t h e w e a k e s t of t h e 12 d i s t r i c t s . T h e
N e w Y o r k b a n k will h a v e a p p r o x i m a t e l y $20,000,000 c a p i t a l ;
t h e Boston b a n k m o r e t h a n $10,000,000; t h e Chicago b a n k n e a r l y
$11,000,000; t h e St. L o u i s b a n k $0,000,000; t h e C i n c i n n a t i b a n k
$10,000,000; t h e P e n n s y l v a n i a b a n k $12,000,000; t h e W a s h i n g ton b a n k $S,000.000, a n d , a s p r e v i o u s l y s t a t e d , t h e w e a k e s t
b a n k in t h e s y s t e m , l o c a t e d e x p e r i m e n t a l l y a t N e w O r l e a n s .
$5,500,000. T h i s , of course, is m e r e l y a s u g g e s t i v e division of
t h e c o u n t r y ; t h e a c t u a l division is to be m a d e by t h e F e d e r a l
reserve board a f t e r painstaking investigation.
T h e r e s o u r c e s of t h e F e d e r a l r e s e r v e b a n k s c a n only be app r o x i m a t e d . B a s i n g t h e c a l c u l a t i o n on t h e a g g r e g a t e c a p i t a l
of t h e n a t i o n a l b a n k s , t h e F e d e r a l r e s e r v e b a n k s will h a v e a
c a p i t a l of $101,000,000; a b o u t $100,000,000 in r e s e r v e f u n d s a n d ,
p e r h a p s , $200,000,000 of G o v e r n m e n t deposits, m a k i n g a t o t a l
of $701,000,000, g i v i n g t h e m a n a g g r e g a t e c r e d i t - e x t e n d i n g
c a p a c i t y of g r e a t p r o p o r t i o n s . T h a t such a d d i t i o n a l f a c i l i t i e s
a r e needed f o r t h e d e v e l o p m e n t of t h e c o u n t r y c a n n o t s e r i o u s l y
be q u e s t i o n e d . I n t h i s connection I shall a s k l e a v e to i n s e r t
in m y r e m a r k s a t t h i s p o i n t a n Associated P r e s s d i s p a t c h f r o m
S n c k e t t ' s H a r b o r , N. Y., u n d e r d a t e of S e p t e m b e r 5, 1013, cont a i n i n g t h e t e s t i m o n y of F r a n k A. Vanderlip, p r e s i d e n t of t h e
N a t i o n a l City B a n k of N e w Y o r k City, who a s s o r t s t h a t $2,000,000,000 can lie p r o f i t a b l y i n v e s t e d w i t h i n t h e n e x t five y e a r s in
developing t h e electrical i n d u s t r y of t h i s c o u n t r y a l o n e :
COULD USB

BILLIONS.

SACKETTS HARBOR, N . Y . , September

5.

E i g h t m i l l i o n d o l l a r s a w e e k f o r five y e a r s — $ 2 , 0 0 0 , 0 0 0 , 0 0 0 in a l l c a n profitably be Invested in d e v e l o p i n g t h e e l e c t r i c a l Industry in t h i s
c o u n t r y , in the o p i n i o n of F r a n k A. Vanderlip, p r e s i d e n t of t h e N a t i o n a l
City Hank, of N e w York. Mr. Vanderlip so declared t o - n i g h t in addressi n g r e p r e s e n t a t i v e s of the electrical i n d u s t r y in the U n i t e d S t a t e s , meeti n g a t A s s o c i a t i o n Island.
He s a i d in p a r t :
, .
,
" ' i n m a k i n g such an e s t i m a t e one does not need to d r a w o n o n e s
imagination.
I.Utle more is needed t h a n a g r a s p of present-day stat i s t i c s , c o m p a r e d w i t h t h o s e of 5 or l o y e a r s ago, to g i v e t h e b a s i s f o r
such an estimate."
LARGER USE ou- ELECTRICAL POWER.

" W h e n w e think w h a t is c e r t a i n t o be done in t h e w a y of electrification of s t e a m railroad t e r m i n a l s and heavy m o u n t a i n g r a d e s ; w h e n w e
reflect on t h e larger use of electrical e n e r g y for i n d u s t r i a l power i n
a g r i c u l t u r a l uses, and in c o n t i n u e d g r o w t h of n e c e s s a r y i n t e r u r b a n
10022—12350

9

linos, \vc do n o t n e e d to look f u r t h e r i n t o t h e possible d e v e l o p m e n t of
t h e i n d u s t r y to see a r e q u i r e m e n t for $ 4 0 0 , 0 0 0 , 0 0 0 a y e a r of n e w
capital.
" T h a t m e a n s a n $ S , 0 0 0 , 0 0 0 n e w c a p i t a l i s s u e e v e r y w e e k f o r the
n e x t live y e a r s ,
i t is s u c h n c a p i t a l r e q u i r e m e n t t h a t you g e n t l e m e n
are f a c i n g , and w h i c h m u s t be s u c c e s s f u l l y m e t if your e n e r g i e s are to
h a v e a n a d e q u a t e iield of d i s p l a y . C a n y o u g e t i t ?
OXIIEU DEMANDS FOE

CAI'ITAH.

" T o g e t a f u l l a p p r e c i a t i o n of t h e difficulties, you m a y w e l l g l a n c e
o u t s i d e of y o u r o w n field, h o w e v e r , and n o t e t h a t t h e r e will m a t u r e
w i t h i n t h a t five-year period w e l l over $ 1 , 0 0 0 , 0 0 0 , 0 0 0 of s t e a m railroad
securities.
T h e r a i l r o a d s in five y e a r s w i l l need, say, $ 4 , 0 0 0 , 0 0 0 , 0 0 0
for refunding and fresh capital.
S t a t e s and m u n i c i p a l i t i e s will absorb
in the n e i g h b o r h o o d of $ 1 , 5 0 0 , 0 0 0 , 0 0 0 more, so w i t h t h e $ ' i , 0 0 0 , 0 0 0 , 0 0 0
y o u r i n d u s t r y w i l l need (here s h o u l d be provided b e t w e e n n o w and U13
end of 1 0 1 8 b e t w e e n $ 7 , 0 0 0 , 0 0 0 , 0 0 0 and $ 8 , 0 0 0 , 0 0 0 , 0 0 0 f o r t h e s e t h r e e
p u r p o s e s alone, to sjiv n o t h i n g of g e n e r a l i n d u s t r i a l and o i l i e r n e e d s .
" T h e s e are b e w i l d e r i n g figures. T h e y s o u n d more like a s t r o n o m i c a l
m a t h e m a t i c s t h a n t o t a l s of round, h a r d - e a r n e d dollars. T h e r a i s i n g of
t h e s e s u m s , h o w e v e r , is the p r a c t i c a l problem t h a t financiers h a v e directly in f r o n t of t h e m . "
FEDERAL RESERVE HOARD.

T do n o t d e s i r e to w e a r y i h e Iloiise, Mr. C h a i r m a n , w i t h too
d e t a i l e d a d e s c r i p t i o n of t h e p r o v i s i o n s of litis b i l l ; t h e r e f o r e
in t h e b a l a n c e of m y t i m e I shall deal only w i t h i t s s e v e r a l
v i t a l f e a t u r e s . Overseeing t h e w h o l e n e w s y s t e m of F e d e r a l
r e s e r v e b a n k s , a s a c a p s t o n e of t h e scheme, is c r e a t e d a F e d e r a l
r e s e r v e b o a r d , c o n s i s t i n g of seven m e m b e r s . T h r e e of t h e m , t h e
.Secretary of tiie T r e a s u r y , t h e S e c r e t a r y of A g r i c u l t u r e , a n d
t h e C o m p t r o l l e r of the C u r r e n c y , a r e m e m b e r s ex officio, a n d
t h e o t h e r f o u r m e m b e r s a r e to bo a p p o i n t e d by t h e P r e s i d e n t of
t h e U n i t e d S t a t e s f o r a t e r m of eight y e a r s each. A s set o u t
in t h e r e p o r t of t h e committee, t h e r e a s o n s f o r t h e selection of
1 tie t w o T r e a s u r y officials i s self-evident. T h e T r e a s u r y Dep a r t m e n t n o t only is, b u t will c o n t i n u e to be, a f u n d a m e n t a l l y
i m p o r t a n t f a c t o r in (he financial o r g a n i z a t i o n of t h e c o u n t r y ,
w h i l e t h e C o m p t r o l l e r of Ihe C u r r e n c y , in c h a r g e of t h e n a t i o n a l
b a n k i n g system, will be a n e c e s s a r y a d j u n c t in Ihe m a n a g e m e n t
of t h e r e s e r v e b a n k s y s t e m proposed i n t h i s bill. T h e Secret a r y of A g r i c u l t u r e h a s been a d d e d b e c a u s e of i h e belief t h a t
c o n d i t i o n s in t h e p r o d u c i n g r e g i o n s of t h e c o u n t r y would d e s e r v e
special c o n s i d e r a t i o n a t t h e h a n d s of t h e F e d e r a l r e s e r v e b o a r d ,
a n d t h a t t h e S e c r e t a r y of A g r i c u l t u r e is the n a t u r a l represent a t i v e of t h e s e i n t e r e s t s . I t i s f u r t h e r t h o u g h t t h a t t h e presence of t h i s otlicial 011 t h e r e s e r v e b o a r d will s i v e its d e l i b e r a t i o n s a b r o a d e r c h a r a c t e r t h a n if it w e r e composed a l t o g e t h e r
of m e m b e r s p r i m a r i l y equipped f o r t h e t e c h n i c a l d e t a i l s of
b a n k i n g . T h e hill p r o v i d e s t h a t not m o r e t h a n t w o of t h e
p r e s i d e n t i a l a p p o i n t e e s s h a l l belong to Ihe s a m e political p a r t y ,
t h u s e m p h a s i z i n g t h e view of t h e c o m m i t t e e t h a t t h e b o a r d
should bo a n o n p a r t i s a n i n s t i t u t i o n .
NO CENTRAL

BANK.

B y n o t a f e w p e r s o n s of intelligent o b s e r v a t i o n a n d long experience t h e confident belief is e n t e r t a i n e d t h a t 110 necessity
e x i s t s f o r a n y c e n t r a l body of control. T h e y c o n t e n d t h a t w e
m i g h t s a f e l y l i m i t t h e o p e r a t i o n s of t h e n e w s y s t e m to a given
n u m b e r of regional r e s e r v e b a n k s w i t h t h e f u n c t i o n of d i v i s i o n a l
c l e a r i n g - h o u s e a s s o c i a t i o n s a n d distinctively i n d e p e n d e n t of one
a n o t h e r . B u t t h e best e x p e r t a n d p r a c t i c a l b a n k i n g opinion
i n s i s t s t h a t t h e first essential of b a n k i n g a n d c u r r e n c y r e f o r m
10022—i2:r>o

10

is a c o r r e l a t i o n of all I ho n a t i o n a l b a n k s a t least, so a s to
rentier possible a quick mobilization of r e s e r v e s a t a n y t h r e a t e n e d
point in t i m e of emergency. On t h i s l a t t e r t h e o r y w a s b a s e d in
l a r g e d e g r e e s e v e r a l c u r r e n c y p l a n s considered by t h e R a n k i n g
a n d C u r r e n c y C o m m i t t e e of t h e H o u s e p r i c r to t h e a d o p t i o n by
Congress of t h e V r e e l a n d - A h l r l c h A c t ; a n d a l t o g e t h e r b a s e d
on t h i s t h e o r y w a s t h e proposal of t h e M o n e t a r y C o m m i s s i o n
to e s t a b l i s h a single r e s e r v e association, w h i c h in r e a l i t y w o u l d
h a v e provided a c e n t r a l b a n k of b a n k s . Indeed, in its final
a n a l y s i s t h i s s c h e m e of t h e M o n e t a r y Commission, m o r e f a m i l iarly k n o w n a s t h e A l d r i c h bill, f a l l s s h o r t of being a c e n t r a l
b a n k in t h e b r o a d s e n s e of t h e t e r m only b e c a u s e i t c o n t a i n s
n o provision w h i c h w o u l d a u t h o r i z e t h e t r a n s a c t i o n of b u s i n e s s
w i t h t h e public. T h e r e w a s m e t h o d in Ibis omission, it being
p a r t of t h e g e n e r a l c o n t r i v a n c e to avoid every s e m b l a n c e of
competition witli t h e g r e a t b a n k s of t h e c o u n t r y .
I h a v e observed, Mr. C h a i r m a n , t h a t c e r t a i n e m i n e n t b a n k e r s ,
a p p e a r i n g r e c e n t l y b e f o r e a legislative c o m m i t t e e of t h e o t h e r
b r a n c h of Congress, h a v e spoken c o n s i s t e n t l y a n d v e h e m e n t l y in
f a v o r of a c e n t r a l b a n k ; b u t if you will c a r e f u l l y e x a m i n e t h e
h e a r i n g s h a d by t h e B a n k i n g a n d C u r r e n c y C o m m i t t e e of t h i s
H o u s e l a s t w i n t e r you c a n n o t avoid t h e conclusion t h a t t h e s e
g e n t l e m e n do not m e a n e x a c t l y w h a t (hey say. T h e y do n o t
w a n t a real c e n t r a l b a n k . T h e y simply w a n t to e s t a b l i s h a cent r a l b a n k i n g i n s t i t u t i o n w h i c h t h e y m a y control a n d u s e f o r
( h e i r own convenience, b u t to w h i c h (be A m e r i c a n people m a y
n o t r e s o r t f o r a n y b u s i n e s s p u r p o s e w h a t s o e v e r . T h e s e gentlem e n , w h e n a p p e a r i n g b e f o r e (be B a n k i n g a n d C u r r e n c y Committee of t h e H o u s e , w e r e d i s t i n c t l y a s k e d if t h e y should be u n d e r stood a s a d v o c a t i n g a n a t i o n a l c e n t r a l b a n k w i t h b r a n c h e s
t h r o u g h o u t t h e c o u n t r y , doing b u s i n e s s w i t h i n d i v i d u a l s , firms,
a n d c o r p o r a t i o n s , a s well a s w i t h individual banks, w h e r e u p o n
(hey v e r y p r o m p t l y replied t h a t t h e y w e r e simply a d v o c a t i n g a
c e n t r a l b a n k of b a n k s . A c e n t r a l b a n k such a s I h a v e described,
Mr. C h a i r m a n , o r a c e n t r a l b a n k s u c h a s A n d r e w J a c k s o n destroyed, is t h e very last t h i n g t h a t t h e g r e a t b a n k s of t h i s count r y w o u l d d e s i r e to see, f o r (lie r e a s o n t h a t s u c h a n i n s t i t u t i o n
w o u l d n e c e s s a r i l y i m p o r t f o r t h e m c o m p e t i t i o n of t h e v e r y s h a r p e s t description. H e n c e , in t h e c o n s t r u c t i o n of t h e bill of t h e
M o n e t a r y Commission, g r e a t p a i n s w e r e observed a n d m u c h ing e n u i t y e x e r c i s e d to a v o i d a n y t h i n g of t h i s kind.
VICES AND DANGERS AVOIDED.

I n t h e r e p o r t of (ho B a n k i n g a n d C u r r e n c y C o m m i t t e e of t h e
H o u s e n o w b e f o r e t h e M e m b e r s w e h a v e in s o m e d e t a i l set f o r t h
(he o b j e c t i o n s of t h e c o m m i t t e e to t h i s A l d r i c h scheme, a n d in
t h e c o n s t r u c t i o n of (lie bill now u n d e r c o n s i d e r a t i o n t h e comm i t t e e v e r y a n x i o u s l y a n d c a r e f u l l y s o u g h t to a v o i d t h e vices
a n d t h e d a n g e r s w h i c h a r e n o w g e n e r a l l y recognized in t h e
A l d r i c h plan. I n t h a t plan t h e r e w a s a b s o l u t e lack of a d e q u a t e
g o v e r n m e n t a l c o n t r o l ; a n d w h i l e t h e r e w a s g r e a t p r e t e n s e of
p r o t e c t i n g t h e i n t e r e s t s of small b a n k s , t h e v e r y g e n i u s of t h e
s c h e m e a n d t h e involved n a t u r e of its m e c h a n i s m m a d e it cert a i n t h a t t h e p r a c t i c a l o p e r a t i o n of t h e s y s t e m w o u l d i n u r e to
t h e a d v a n t a g e of (he l a r g e financial i n s t i t u t i o n s of t h e c o u n t r y .
Moreover, t h e possibilities of inflation u n d e r t h i s Aldrich s c h e m e
w e r e so s t a r t l i n g ( h a t t h e b a n k i n g c o m m u n i t y of t h e c o u n t r y
100212

123:»0

11

itself b e c a m e a l a r m e d ; a n d t h e d i s t i n g u i s h e d p u b l i c i s t w h o s o
n a m e a n d f a m e were chiefly associated w i t h the m e a s u r e w a s
p r a c t i c a l l y d r i v e n f r o m t h e p u b l i c p l a t f o r m b y t h e t e r r i f i c exp o s u r e of t h i s d e f e c t I n t h e bill b y a p r o m i n e n t b a n k e r of t h e
W e s t , a d d r e s s i n g a society of p o l i t i c a l e c o n o m i s t s a n d s h o w i n g
t h a t i t i n v o l v e d e x p a n s i o n to t h e a m o u n t of s i x t h o u s a n d mill i o n s b e f o r e t h e r e g u l a t i n g f a x a p p l i e d . E v e n J a m e s B. F o r g a n , of Chicago, a n d J o h n P o r r i n e , of C a l i f o r n i a , s t r o n g advoc a t e s of t h e s c h e m e , a d m i t t e d t h a t i t p r o v i d e d " s u c h v a s t c r e d i t e x t e n d i n g p o w e r a s to bo a l m o s t b e y o n d belief a n d c e r t a i n l y f a r
b e y o n d r e q u i r e m e n t s in a n y p a n i c . "
Aside f r o m its clumsy
m e c h a n i s m , i t s d a n g e r s of i n f l a t i o n , i(s p e r i l t o t h e i n d e p e n d e n t
b a n k i n g s y s t e m w h i c h t h e s p i r i t of t h i s R e p u b l i c a n d t h e busin e s s h a b i t s of t h e A m e r i c a n p e o p l e h a v e f o r GO y e a r s sust a i n e d , (ho w h o l e t h i n g w a s l i t e r a l l y s a t u r a t e d w i t h m o n o p o l i s t i c
tendencies.
I n t h e F e d e r a l r e s e r v e b o a r d , w h i c h t h e bill r e p o r t e d b y y o u r
c o m m i t t e e p r o v i d e s , t h e r e will n o t b e d i s c o v e r e d a n y of t h e d e f e c t s w h i c h w e r e e s s e n t i a l f e a t u r e s of t h e A l d r i c l i bill.
No
c a p i t a l s t o c k i s p r o v i d e d ; n o s e m b l a n c e of a c q u i s i t i v e n e s s
p r o m p t s i t s o p e r a t i o n s ; 110 b a n k i n g i n c e n t i v e is b e h i n d , a n d 110
financial
i n t e r e s t c a n p e r v e r t o r c o n t r o l . I t is a n a l t r u i s t i c ins t i t u t i o n , a p a r t of t h e G o v e r n m e n t i t s e l f , r e p r e s e n t i n g t h e
A m e r i c a n people, w i t h p o w e r s s u c h a s n o m a n w o u l d d a r e misuse. I do n o t i g n o r e t h e f a c t t h a t t h e b a t t e r i e s of t h e b i g
b a n k e r s h a v e been directed a g a i n s t t h i s board or ( h a t t h e
s h a r p e s t c r i t i c i s m s of t h i s bill r e l a t e to t h e p o w e r s w i t h w h i c h
t h i s F e d e r a l r e s e r v e b o a r d i s v e s t e d ; a n d yet, M r . C h a i r m a n ,
t h e r e i s s c a r c e l y a p o w e r e n u m e r a t e d in s e c t i o n 32 of t h i s bill
w h i c h h a s n o t b e e n e x e r c i s e d b y t h e G o v e r n m e n t f o r 50 y e a r s
or, i n d e e d , w h i c h h a s n o t b e e n c o n f i d e d t o o n e o r t w o p u b l i c
functionaries.
NO EXTRAORDINARY

TOWERS.

N e a r l y e v e r y p o w e r c o n f e r r e d b y t h i s bill on t h e F e d e r a l res e r v e b o a r d , c o m p o s e d of seven m e m b e r s , h a s been f o r h a l f a
c e n t u r y v e s t e d b y t h e n a t i o n a l b a n k a c t i n t h e S e c r e t a r y of t h e
-Treasury a n d t h e C o m p t r o l l e r of t h e C u r r e n c y , to bo e x e r c i s e d
m t h e c o n d u c t a n d c o n t r o l of t h e n a t i o n a l b a n k i n g s y s t e m . I t
d o e s n o t seem n e c e s s a r y h e r e a n d n o w to e n u m e r a t e t h e s e
P o w e r s ; t h e y r e l a t e to e x a m i n a t i o n , r e g u l a t i o n , p u b l i c a t i o n , a n d
control. Strictly speaking, t h e F e d e r a l reserve board p e r f o r m s
» o b a n k i n g f u n c t i o n ; t h e b a n k i n g b u s i n e s s of t h e s y s t e m is
w i t h i n t h e e x c l u s i v e j u r i s d i c t i o n of t h e r e g i o n a l r e s e r v e b a n k s ,
o w n e d a n d o p e r a t e d b y a n a g g r e g a t i o n of i n d i v i d u a l m e m b e r
b a n k s . B u t t w o of (ho p o w e r s c o n f e r r e d by t h i s bill u p o n t h e
f e d e r a l r e s e r v e b o a r d h a v e b e e n b r o u g h t in s e r i o u s q u e s t i o n o r
s u b j e c t e d t o p u n g e n t c r i t i c i s m . O n e of t h e s e p o w e r s i s t h e r i g h t
" f t h e b o a r d t o " r e q u i r e , in t i m e of e m e r g e n c y , F e d e r a l r e s e r v e
wanks to r e d i s c o u n t t h e d i s c o u n t e d p r i m e p a p e r of o t h e r F e d e r a l
r e s e r v e b a n k s . " A n d it i s a s i n g u l a r f a c t t h a t t h e r a g i n g controversy which this provision h a s aroused w a s initiated by
o a n k e r s w h o c o n t r i b u t e d t h o u s a n d s of d o l l a r s to f a s t e n u p o a
this c o u n t r y the wretched Aidrich scheme, which would h a v a
i m p o u n d e d t h e s u r p l u s f u n d s of t h e e n t i r e b a n k i n g c o m m u n i t y
or A m e r i c a i n t h e v a u l t s of a s i n g l e c e n t r a l b a n k , t o b e b y i t
t r a n s f e r r e d a t a n y time to a u y point f o r a n y purpose t h a t might
10022—1235G

12

a p p e a l to (he s w e e t will or w h i m of (he g o v e r n i n g h o a r d of
t h a t i n s t i t u t i o n . H e r e w e provide, u n d e r t h e s e v e r e s t restrictions, a mobilization of b a n k i n g s t r e n g t h " i n t i m e of emergency," by r e q u i r i n g a s t r o n g regional r e s e r v e b a n k to go to t h e
t e m p o r a r y relief of a n o t h e r regional r e s e r v e b a n k in a p l a i n
b u s i n e s s t r a n s a c t i o n , w i t h o u t risk, b u t a c t u a l l y w i t h g r e a t e r
profit to t h e succoring b a n k t h a n it m i g h t c o m m a n d u n d e r
ordinary circumstances.
Monn.rxixr; nEserves.

T h i s p o w e r l i t e r a l l y c o r r e l a t e s Ihe r e g i o n a l r e s e r v e b a n k syst e m ; it is a p a r t of t h e process of mobilizing reserves. And
y e t g e n t l e m e n of t h e b a n k i n g f r a t e r n i t y w h o h a v e f o r live
y e a r s p e r s i s t e n t l y rolled t h i s p h r a s e on t h e i r t o n g u e s m a k e
t h i s provision of (he c o m m i t t e e ' s hill a n object of b i t t e r a t t a c k
T h e y w e r e p e r f e c t l y willing, u n d e r (lie Aldrich scheme, to conlide ( h i s p o w e r to b a n k e r s , o p e r a t i n g for gain, b u t a r e u n w i l l i n g
to lodge it: w i t h t h e G o v e r n m e n t of (he U n i t e d S t a t e s to be used
for p a t r i o t i c p u r p o s e s u n d e r a s y s t e m devised for t h e good of
t h e c o u n t r y , i n c l u d i n g t h e solvency of t h e b a n k s t h e m s e l v e s .
A s a m a t t e r of f a c t , Mr. C h a i r m a n , s t r i c t l y s a f e g u a r d e d a s w e
h a v e it here, ( h i s p o w e r is n e i t h e r d a n g e r o u s n o r e x t r a o r d i n a r y .
It is e s s e n t i a l (o (IK; s y s t e m proposed a n d s o m e w h a t a n a l o g o u s
to t h e p o w e r e x e r c i s e d f o r y e a r s by t h e S e c r e t a r y of t h e T r e a s u r y alone, when, in t i m e of emergency, lie h a s w i t h d r a w n Gove r n m e n t d e p o s i t s a t will f r o m b a n k s in one p a r t of t h e c o u n t r y
a n d t r a n s f e r r e d t h e m to b a n k s in a n o t h e r p a r t of t h e c o u n t r y
in a n e f f o r t to c u r e a d e s p e r a t e s i t u a t i o n , t h e d i f f e r e n c e b e i n g
t h a t , w h e r e a s t h e t r a n s f e r s h a v e h e r e t o f o r e been m a d e to t h e
g r e a t m o n e y c e n t e r s f o r I lie p u r p o s e of a r r e s t i n g stock-gambling
panics, t h e t r a n s f e r s u n d e r t h i s bill, if e v e r r e q u i r e d a t all, w i l l
be m a d e to p r o m o t e l e g i t i m a t e commercial t r a n s a c t i o n s .
Such
t r a n s f e r s , you will note, a r e only r e q u i r e d by t h i s bill to be
m a d e in t i m e of exigency. We believe t h a t t h e p o w e r will n o t
be invoked once in half a c e n t u r y , f o r t h e r e a s o n t h a t if ( h i s
bill should be e n a c t e d into l a w it will so w i t h d r a w t h e r e s e r v e
f u n d s of t h e c o u n t r y f r o m slock s p e c u l a t i v e uses a n d a p p l y
( h e m to commercial, i n d u s t r i a l , a n d a g r i c u l t u r a l t r a n s a c t i o n s ,
t h a t we shall r a r e l y e v e r a g a i n h a v e b a n k p a n i c s in t h e U n i t e d
States.')
S C S r E X DINa RESERVES.
T h e o t h e r p o w e r c o n f e r r e d by t h i s bill upon t h e F e d e r a l
r e s e r v e b o a r d w h i c h lias been m o d e r a t e l y criticised is t h e
r i g h t given s a i d h o a r d to s u s p e n d (he r e s e r v e r e q u i r e m e n t s
a g a i n s t deposit liabilities. Yet, Mr. C h a i r m a n , a p o w e r a k i n to
t h i s h a s been exercised by t h e C o m p t r o l l e r of t h e C u r r e n c y
Willi respect (o n a t i o n a l b a n k s f o r n e a r l y 50 y e a r s . U n d e r
section 5101 of t h e n a t i o n a l - h a n k act, (he C o m p t r o l l e r is implicitly a u t h o r i z e d to t o l e r a t e f o r a period of ,*]0 d a y s a violalion of t h e r e s e r v e r e q u i r e m e n t s of t h e a c t w i t h o u t a p p l y i n g
a n y p e n a l t y . By t h i s ollicer t h e p o w e r h a s s o m e t i m e s been
a b u s e d a n d v i o l a t i o n s h a v e been t o l e r a t e d f o r several y e a r s
i n s t e a d of f o r a single m o n t h . T h e p e n a l t y p r e s c r i b e d by t h e
n a t i o n a l - b a n k a c t f o r ( h e offense i n d i c a t e d Is so r a d i c a l ' t h a t
it lias n o t been a p p l i e d in t h e w h o l e h i s t o r y of ( h e n a t i o n a l
b a n k i n g system. B u t h e r e we h a v e c o m m i t t e d (he power t o
a b o a r d of seven men c h a r g e d w i t h (he d u t y of p r e s c r i b i n g a n d
j OOL'L! li.'.'iriG

13

e n f o r c i n g a r e a s o n a b l e p e n a l t y f o r v i o l a t i o n of Hie l a w . L i k e
t h e p o w e r of e n f o r c e d r e d i s c o u n t s , t h i s f u n c t i o n w i l l r a r e l y , if
e v e r , b e e x e r c i s e d b y t h e F e d e r a l r e s e r v e b o a r d . I t is, h o w ever, i m p o r t a n t t h a t the Federal reserve board should h a v e
t h i s power. I t w a s suggested by t h e f a c t t h a t t h r e e t i m e s
w i t h i n (50 y e a r s t h e B r i t i s h P a r l i a m e n t f o u n d i t n e c e s s a r y t o
s a n c t i o n b y l a w t h e a c t i o n of t h e B a n k of E n g l a n d i n s u s p e n d i n g s p e c i e p a y m e n t s in o r d e r t o a r r e s t p a n i c s in G r e a t B r i t a i n .
" POLITICAL

CONTROL."

But, Mr. C h a i r m a n , b i t t e r a s h a s been the criticism leveled a t
t h e p o w e r s of t h e F e d e r a l r e s e r v e b o a r d p r o v i d e d b y t h i s bill,
t h e y h a v e n o t b e e n c o m p a r a b l e t o t h o d e n u n c i a t i o n b y big
b a n k i n g i n t e r e s t s of w h a t i s t e r m e d t h e " p o l i t i c a l s t r u c t u r e "
of t h i s b o a r d . I t is c o n t e n d e d t h a t t h e b a n k s s h o u l d h a v e a t
least a minority representation upon the Federal reserve b o a r d ;
a n d I f r a n k l y a d m i t t h a t the claim upon its f a c e seems both
r e a s o n a b l e a n d e x p e d i e n t . I n d e e d , t h e f i r s t t e n t a t i v e d r a f t of
t h i s bill c o n t a i n e d s u c h a p r o v i s i o n ; b u t , a f t e r t h o r o u g h c o n sideration and full discussion, a different conclusion w a s
r e a c h e d . u T h i s F e d e r a l r e s e r v e b o a r d is d i s t i n c t l y a G o v e r n m e n t
i n s t i t u t i o n ? a n d e m i n e n t b a n k e r s w h o w e r e h e r e in W a s h i n g t o n
last winter and spring contending for representation were met
w i t h t h e c h a l l e n g e to c i t e o n e i n s t a n c e w h e r e p r i v a t e i n t e r e s t s
w e r e r e p r e s e n t e d on a n y G o v e r n m e n t b o a r d in this or a n y o t h e r
civilized country. T h e y could not a n s w e r .
A s a l r e a d y p o i n t e d o u t , t h e a s s o c i a t e d b a n k s will o w n a n d
o p e r a t e t h e r e g i o n a l r e s e r v e b a n k s p r o v i d e d b y t h i s bill, w h i c h
a r e m a d e a f t e r a p e r i o d of y e a r s t h e e x c l u s i v e m e d i u m s of Gove r n m e n t issues a n d s u b j e c t to no severer e x a m i n a t i o n n o r
g r e a t e r c o n t r o l t h a n n a t i o n a l b a n k s of t h e e x i s t i n g s y s t e m in
t h e i r r e l a t i o n s t o t h e G o v e r n m e n t . If it m a y b e s a i d t h a t they
h a v e i m p o r t a n t r e s p o n s i b i l i t i e s , it m a y l i k e w i s e b e s a i d that;
t h e y a r e g i v e n g r e a t p r i v i l e g e s , h o l d i n g t h e r e s e r v e f u n d s of t h e
c o u n t r y a n d t h e d e p o s i t s of t h o G o v e r n m e n t , a m o u n t i n g in t h e
a g g r e g a t e t o n e a r l y $(500,000,000. T h e F e d e r a l r e s e r v e b o a r d ,
t e c h n i c a l l y s p e a k i n g , h a s n o b a n k i n g f u n c t i o n . I t is s t r i c t l y a
b o a r d of c o n t r o l , p r o p e r l y c o n s t i t u t e d of h i g h G o v e r n m e n t olli
clnls, d o i n g j u s t i c e t o (lie b a n k s , b u t f a i r l y a n d c o u r a g e o u s l y
r e p r e s e n t i n g t h e i n t e r e s t s of t h e people. T h e d a n g e r w h i c h t h e
b a n k i n g c o m m u n i t y p r o f e s s e s t o s e e is n o t t h e r e a l d a n g e r
w h i c h 1 a p p r e h e n d . T h e b a n k e r s s e e m t o f e a r t h a t m e n of t h e i r
c r a f t will be e x c l u d e d ; b u t t h e r e a l p e r i l of t h e p r o v i s i o n i s t h e
p o s s i b i l i t y of too m a n y b a n k e r s b e i n g i n c l u d e d . O b s e r v e w h a t
I m e a n : T h e S e c r e t a r y of t h e T r e a s u r y will b e a m e m b e r of
t h i s b o a r d , a n d n i n e t i m e s o u t of t e n t h a t f u n c t i o n a r y is a p r a c tical b a n k e r . T h e C o m p t r o l l e r of t h e C u r r e n c y w i l l b e a m e m b e r of t h i s b o a r d , a n d n e a r l y a l w a y s t h a t official is a p r a c t i c a l
b a n k e r . I n a d d i t i o n to this, t h e bill r e q u i r e s t h a t o n e of t h e
f o u r p r e s i d e n t i a l a p p o i n t e e s s h a l l b e a p e r s o n of b a n k i n g exp e r i e n c e ; so t h a t w e s h a l l u n d o u b t e d l y h a v e a m p l e b a n k i n g repr e s e n t a t i o n o n t h e h o a r d , a n d t h e t a l k of p o l i t i c a l c o n t r o l , in
t h e l a s t a n a l y s i s , is t h e e x p r e s s i o n of a g r o u n d l e s s c o n j e c t u r e .
A FOTILE

OUTCRY.

N o g r e a t r e f o r m a t i o n in a n y e x i s t i n g i n s t i t u t i o n w a s o v e r
a c c o m p l i s h e d e x c e p t in t h e f a c e of s e v e r e c o n t e n t i o n . T h e c l a t t e r w h i c h w e h a v e h e a r d in c e r t a i n q u a r t e r s a b o u t t h e " u u c o n 10022—1235G

s t i t u t i o n a l i t y " o f Mils p r o p o s e d s y s t e m a n d t h e " c o n f i s c a t o r y "
n a t u r e of t h e p o w e r c o n f e r r e d u p o n t h e F e d e r a l r e s e r v e b o a r d is
m e r e l y p a r t of a c u n n i n g l y d e v i s e d p r o p a g a n d a to f o r c e c o n c e s sions in a n o t h e r direction a n d to coerce C o n g r e s s into y i e l d i n g
on c e r t a i n o t h e r p o i n t s w h i c h vitally affect c e r t a i n big b a n k s
with extensive stock exchange connections.
We have taken
every reasonable precaution against asserting any power here
t h a t m a y be regarded a s unconstitutional. W e a r e not proposing
t o d i s t u r b a n y v e s t e d i n t e r e s t . T h e r e i s n o t h i n g of a c o n f i s c a t o r y
n a t u r e i n a n y of t h e p o w e r s t o b e e x e r c i s e d b y t h e F e d e r a l
reserve board.
T h i s t a l k t a k e s u s b a c k t o t h e p r e d i c t i o n s of
disaster when the Interstate Commerce Commission w a s established. T h e n t h e r e w a s a n o u t c r y t h a t C o n g r e s s w a s a b o u t to
" d i s t u r b t h e b u s i n e s s i n t e r e s t s " of t h e c o u n t r y ; t h e n w e encountered the frantic contention that the Government w a s about
to " s e i z e p r i v a t e property."
S e n a t o r H o a r , of M a s s a c h u s e t t s , s a i d :
Hero is a proposition which would lie destructive to great business
interests of the country, especially to tlio export business of the principal city of the S t a t e which 1 represent.
I hope the public interest
affected will have a full opportunity to bo heard.
S e n a t o r N e l s o n W . A l d r i c h , of Itliode I s l a n d , s a i d :
In order to cure evils which are apparent to the farmers of Illinois
or Michigan, you propose to demoralize the whole commerce of tlio
country ; you propose to establish an arbitrary, unjust, unreasonable,
Impracticable rule.
S e n a t o r O r v i l l e I I . P i a t t , of C o n n e c t i c u t , p r e d i c t e d t h a t t h e
p a s s a g e of t h e I n t e r s t a t e C o m m e r c e b i l l —
would result in an immediate rate war by all the railroads of the United
States, the evil consequences of which would be greater than any evil
now e x i s t i n g under pooling contracts.
It would ruthlessly demoralize
business and be far-reaching in its injurious results.
S e n a t o r L e l a n d S t a n f o r d , of C a l i f o r n i a , d e c l a r e d :
It' tills bill shall become a law its consequences will be most disastrous
to tlio various business interests of the country.
S e n a t o r J o s e p h 10. B r o w n , of G e o r g i a , s a i d :
The fact t h a t a few bad men have controlled great linos of railroads
Is no reason why Congress should seriously cripple the great railroad
interests of the country and destroy the property invested in by hundreds of thousands of people,
'litis bill will prevent the rapid and
cheap transportation of commodities, retard the growth of our cities,
and do immeasurable damages to our productive resources.
G e n . C h a r l e s II. G r o s v e n o r , of O h i o , p r e d i c t e d t h a t :
It will unsettle rates, disorganize the industries of the country, and
thus force a reconstruction of systems of production. Meantime labor
will suffer, f a r m products will lack a remunerative market, and uncertainty will discourage industry.
It is a dangerous stride toward Neutralization of power in the hands of the few to the hindrance, vexation, and permanent injury of the many.
"William C. O a t c s , of A l a b a m a , s a i d :
In Holland it is a capital felony to kill a stork, because the stork
destroys the eels which bore through the dikes and inundate the country. To my mind this bill is a knot of eels which may bore through
the dikes of s a f e t y and Hood this country w i t h trouble. I view It w i t h
grave apprehension.
C h a r l e s I I . A l l e n , of M a s s a c h u s e t t s , d e c l a r e d :
To pass this bill would be to put us at very great disadvantage, and
while I am not prepared to go so far as some and sec in imagination the
y a w n i n g w a l l s marking in desolate ruin the spot where once stood
thriving and populous factories, yet I must say * * * that the
result of a n y shrinking of values is quite likely to show itself first
10022- 12:k"><;

15
"pon (he poor people. * * * I m u s t protest against the passage of
this measure, destined as it is to work an injury against New England
and New England interests.

L e w i s I l a n b a c k , of K a n s a s , s a i d :
My judgment •
« * loads me to believe t h a t the legislation proposed by (lie bill in Question will be f a t a l to the best interests of mv
Mate, as well as to the whole country. I think it is s a f e to s a y « « '*
t h a t these great lines of industry, the product of capital and the employer of labor, ought not to be interfered with, as they will be by the
provisions of this bill.

I. Newton Evans, of P e n n s y l v a n i a , s a i d :
It is also of the utmost importance t h a t we legislate so that the millions and millions of dollars invested and otherwise emplo3'ed in the
internal commerce of this v a s t country shall not bo so deranged as to
bring about a crisis in our financial affairs, which not only bankrupt
many railroads, but, like the pebble on the smooth waters, its influence
Would be felt far aud wide. Agriculture, commerce, manufactures, and,
most of all. labor would suffer greatly by such a result.

T h e National Republican ( R e p u b l i c a n ) , of W a s h i n g t o n , commented :
It is fair to suppose that Congress did n o t Intend to wreck railways,
to ruin communities, to destroy private properly, to impoverish whole
sections of the country, to break down manufacturing interests, to g i v e
foreign traders (he advantage over home ones, to discriminate over one
Port in favor of anorher, tr. advance the interests of the Canadian railways, or to recnact the civil rights bill, yet it did all these tilings w h e n
it passed the bill entitled "A bill to regulate commerce."

T h e Chicago J o u r n a l ( R e p u b l i c a n ) reflected n e w s p a p e r opinion largely w h e n it s a i d :
The President should bo urged to call Congress together at once t h a t
it may rescue the commercial interests of the country from impending
disaster. Let the power that enacted the offending s t a t u t e he given a n
opportunity to right the great wroug it h a s d o n e — a n d the sooner the
better.
IIIK

CRITICS

CRITICIZED.

And now, Mr. C h a i r m a n , in connection w i t h t h i s bill, we h a v e
t h e s a m e o u t c r y f r o m interested q u a r t e r s a n d t h r o u g h inspired
n e w s p a p e r comment. T h e critics, w h e t h e r of one political p a r t y
or a n o t h e r , a c c e n t u a t e objection to Government control a n d
affect to s t a n d a g h a s t a t t h e t r e m e n d o u s power coniided to a
political board. T h i s criticism e m a n a t e s a t t i m e s f r o m men
Who should be a s h a m e d to p r o j e c t i t ; f r o m gentlemen who stood
upon this floor a n d upon t h e floor of a n o t h e r c h a m b e r five y e a r s
uul vehemently supported t h e Yreeland-Aldrich Act. T h o s e
now affect c o n s t e r n a t i o n a t the powers w i t h which we proto vest t h i s F e d e r a l reserve b o a r d should look to t h e i r
records in c u r r e n c y legislation. When they complain t h a t
(ve tills Government h o a r d of seven public officials the arbi_ r i g h t of note issue, f o r very consistency's s a k e they
should recollect t h a t u n d e r t h e Yreeland-Aldrich Act they voted
to confide tills power in even more a r b i t r a r y degree to t h e Secret a r y of t h e T r e a s u r y alone, t h u s c o n f e r r i n g upon a single political a p p o i n t e e of t h e P r e s i d e n t t h e t r e m e n d o u s responsibility,
ijs well a s t h e g r e a t power, of dispensing $506,000,000 of currency and, w i t h i n his sole discretion, d e t e r m i n i n g t h e v a l i d i t y
n
»Ul sufficiency of $0~)0,000,000 of commercial p a p e r a n d o t h e r
securities.
Among o t h e r things, t h e Vreeland-Aldrich bill, section 2. deal" ' g w i t h t h e application of b a n k s f o r currency, provides t h a t :
Comptroller of the Currency shall immediately transmit such appucation 4.0 the Secretary of the Treasury w i t h such recommendation
!;,, n e thinks proper, and if, in the judgment of the Secretary of the
treasury, business conditions in
in the locality demand additional circu10022—12;!5(!

I

16
latlon, and if lie is satisfied that a linn in favor of the United States
on the securities so deposited and on the assets of the banks composing
the association will be amply sufficient for the protection of the United
States, he shall direct an issue of additional circulating notes to the
association on behalf of such bank, etc.

I beg t h e s e c r i t i c s t o n o t e t h e l a n g u a g e of t h e s t a t u t e :
If in the judgment of the Secretary of the Treasury business conditions demand additional circulation!

And again:
If the Secretary of the Treasury be satisfied

t h a t t h e s e c u r i t i e s d e p o s i t e d a r e a m p l y sufficient f o r t h e protect i o n of (lie U n i t e d S t a t e s . C o u l d a n y b o d y c o n c e i v e of p o w e r
m o r e a r b i t r a r y o r of c e n t r a l i z a t i o n m o r e c o m p l e t e ? T h e r e i s
n o t h i n g c o m p a r a b l e to it in litis bill, f o r h e r e w o c o m m i t t h e
p o w e r t o a b o a r d of seven, h a v i n g a t r a i n e d a n d t r u s t e d r e p r e s e n t a t i v e a t e v e r y p o i n t of origin, a p p l y i n g e v e r y p r e c a u t i o n a n d
g o i n g t h r o u g h e v e r y d e t a i l k n o w n to p r u d e n t b a n k i n g p r o c e s s e s .
W h e n I b i s e x t r a o r d i n a r y p o w e r w a s c o n f e r r e d by t h i s H o u s e
five y e a r s a g o on a s i n g l e official of (lie G o v e r n m e n t a n d o b j e c t i o n
w a s m a d e by MR. JAMES, n o w a S e n a t o r f r o m K e n t u c k y , t h e
l e a d i n g R e p u b l i c a n m e m b e r of t h e B a n k i n g a n d C u r r e n c y Comm i t t e e , Mr. BURTON, n o w a S e n a t o r f r o m Ohio, e x c l a i m e d w i t h
much feeling and effect:
I say that for one I favor lodging authority with the Secretary of
1 lit? Treasury and allowing him, under the great responsibilities of his
position, to determine the amount of issues rather than to leave the
decisions t o the banks.

W i t h how much more reason, Mr. C h a i r m a n , m a y we who
s t a n d f o r t h i s c u r r e n c y bill i n s i s t n o w t h a t t h i s p o w e r s h a l l be
lodged w i t h a G o v e r n m e n t b o a r d , c o m p o s e d of h i g h a n d exp e r i e n c e d m e n , f o u r of t h e m w i t h long t e n u r e of office a n d all of
t h e m , let u s hope, k e e n l y a p p r e c i a t i n g t h e i r g r e a t r e s p o n s i b i l t i e s
a n d c o u r a g e o u s l y d e t e r m i n e d to d o t h e i r d u l y a s r e p r e s e n t a t i v e s
of t h e A m e r i c a n p e o p l e . a T h e r e is n o p o l i t i c s in t h i s m a t t e r ;
t h e r e c a n be n o n e . It is m y e a r n e s t c o n v i c t i o n , b a s e d u p o n l o n g
a n d s e r i o u s r e f l e c t i o n , t h a t no m a n c a n conceive, a s n o n e h a s
y e t p o i n t e d o u t , h o w a n y p a r t of t h i s s y s t e m c a n be p e r v e r t e d to
p o l i t i c a l uses. In m y j u d g m e n t if t h e U n i t e d S t a t e s litis e v e r h a d
a P r e s i d e n t i n g e n i o u s e n o u g h to do t h i s evil t h i n g , it h a s n e v e r
h a d o n e d e s p e r a t e e n o u g h , a n d n e v e r will h a v e o n e s h a m e l e s s
e n o u g h , to t h u s b e t r a y t h e c o n f i d e n c e of t h e N a t i o n . I happe$ffl3&5t?
to be p r e s e n t w h e n a n e m i n e n t b a n k e r s u g g e s t e d s u c h a p q k & j f t g r
b i l i t y to t h e p r e s e n t o c c u p a n t of t h e e x e c u t i v e c h a i r , a n d h e a m i p y
t h i s b a n k e r v a i n l y c h a l l e n g e d to s h o w h o w it m i g h t bo
s h a l l n o t soon f o r g e t t h e e m p h a s i s w i t h w h i c h t h e P r e s i d e n t s © * *>-'•
the United States declared t h a t no m a n would ever be f o u n d
w h o w o u l d bo w i l l i n g to i m p e r i l h i s r e p u t a t i o n o r t a r n i s h h i s
f a m e by so flagrant a p r o s t i t u t i o n of h i s h i g h office P ' l t b r o u g h t
to m i n d ( h e s p l e n d i d d e c l a r a t i o n m a d e on t h i s floor b y Cong r e s s m a n BURTON, of Ohio, five y e a r s a g o in d i s c u s s i n g t h i s v e r y
topic, w h e n h e c o m p a c t e d t h e w h o l e , t h i n g in a s i n g l e s e n t e n c e ,
exclaiming:
There are executive
the incumbents, with
perform, because they
favoritism or injustice
honored when dead.

acts which are theoretically possible, but which
their weighty responsibilities, would never dare
would know that if their course w a s marked by
they would be discredited while living and dis-

T h e X r a y of p u b l i c i t y is t u r n e d f u l l u p o n t h e o p e r a t i o n s of
( h i s F e d e r a l r e s e r v e b o a r d . T h e r e can be n o t h i n g s i n i s t e r a b o u t
10022-

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Its t r a n s a c t i o n s . M e e t i n g w i t h it a t l e a s t f o u r t i m e s a y e a r ,
a n d p e r h a p s o f t e n e r , will he a b a n k e r s ' a d v i s o r y council r e p r e s e n t i n g every r e g i o n a l r e s e r v e d i s t r i c t in t h e system. T h i s council will h a v e access to t h e r e c o r d s of t h e b o a r d a n d is a u t h o r i z e d
to tfive a d v i c e a n d o f f e r s u g g e s t i o n s c o n c e r n i n g its g e n e r a l
policy. H o w could w e h a v e e x e r c i s e d g r e a t e r c a u t i o n in safeg u a r d i n g t h e public i n t e r e s t ?
BANKING REFORM AND Till! FARMER.
F o r a brief period a n d in c e r t a i n q u a r t e r s t h i s bill w a s assailed by t h o s e w h o p r o f e s s e d to believe t h a t it w a s w r i t t e n in
d i e i n t e r e s t of t h e c r e d i t o r class. I suspect, Mr. C h a i r m a n ,
t h a t t h e r e a r e s o m e f o l k s w h o a r e i n c a p a b l e of a c c u r a t e l y disc r i m i n a t i n g t h e r e a l " c r e d i t o r c l a s s " w h e n it comes to t h e
h a n k i n g business. As a m a t t e r of f a c t , in t h e g r e a t v o l u m e of
business t r a n s a c t i o n s (lie " c r e d i t o r c l a s s " is t h e people w h o
loan money to b a n k s . I n t h i s sense tlie b a n k s t h e m s e l v e s a r e
d i s t i n c t l y d e b t o r s to t h e i r d e p o s i t o r s n o t w i t h s t a n d i n g t h e l a t t e r
•ire m a n y t i m e s b o r r o w e r s of money a n d c r e d i t . l i n t , f o r popuh s t i c purposes, t h e " d e b t o r c l a s s " h a s been c r a f t i l y t u r n e d to
m e a n e v e r y b o d y w h o b o r r o w s or d e s i r e s to b o r r o w m o n e y ; a n d
t h e a t t e m p t is m a d e to h a v e it a p p e a r t h a t u n d e r t h i s bill
g r e a t e r difficulty will be e x p e r i e n c e d by " t h e p l a i n p e o p l e " in
negotiating loans t h a n under the existing system.
A p e r s i s t e n t a n d p e r n i c i o u s e f f o r t h a s been m a d e to c r e a t e
t h e impression t h a t t h i s bill, in some u n e x p l a i n e d w a y , discriminates against the American f a r m e r . To cure these imaginary
d i s c r i m i n a t i o n s t h e r e h a v e been suggested financial n o s t r u m s
t h a t w o u l d c a u s e t h e j u d i c i o u s to grieve a n d w h i c h , if a c c e p t e d ,
Would involve t h e w h o l e c o u n t r y in r u i n . P r e s e n t e d in t h e
i n t e r e s t of t h e f a r m e r a n d in tile n a m e of D e m o c r a c y , t h e y
would i m p o v e r i s h t h e f o r m e r a n d e t e r n a l l y d i s c r e d i t the l a t t e r .
Some of t h e s e s u g g e s t i o n s h a v e been p r o m p t e d by a n e x u b e r a n t
h u t u t t e r l y m i s d i r e c t e d z e a l ; o t h e r s by a p i t i f u l i g n o r a n c e of t h e
subject, a n d o t h e r s still h a v e t h e i r i n s p i r a t i o n in t h e p e r e n n i a l
a n d u b i q u i t o u s d e m a g o g y of a c e r t a i n c l a s s of politicians. I t
would h a v e been sheer foolishness, Mr. C h a i r m a n , f o r t h e prop o n e n t s of t h i s bill to h a v e u n d e r t a k e n a n y d i s c r i m i n a t i o n
a g a i n s t t h e A m e r i c a n f a r m e r , to w h o s e f a v o r a v a s t m a j o r i t y
of M e m b e r s h e r e o w e t h e i r political e x i s t e n c e a n d w h o s e i n t e r ests t h e y w e r e commissioned to r e p r e s e n t . And, sir, it w o u l d
h a v e been c o w a r d l y in t h e H a n k i n g a n d C u r r e n c y C o m m i t t e e
°f t h e H o u s e h a d it s o u g h t to p l e a s e t h e a g r i c u l t u r a l i n t e r e s t s
hy p a r t i a l legislation, h u r t f u l to tlie b a n k i n g a n d c o m m e r c i a l
i n t e r e s t s of t h e U n i t e d S t a t e s . W e h a v e d o n e n e i t h e r of t h e s e
things. Wre h a v e s o u g h t to d o e x a c t j u s t i c e to all c l a s s e s ; a n d
a n y public m a n w h o would h a v e u s do o t h e r w i s e a f f r o n t s t h e
intelligence a n d d i s p a r a g e s tlie p a t r i o t i s m of t h e A m e r i c a n
f a r m e r n o less t h a n h e o u t r a g e s t h e sense of j u s t i c e of t h e
A m e r i c a n m e r c h a n t a n d b a n k e r . I t Is g r a t i f y i n g to r e p o r t to
t h e H o u s e t h a t w h i l e in s o m e d i r e c t i o n s t h e r e h a v e been m a n i f e s t a t i o n s of selfishness a n d in o t h e r s a m u s i n g r h e t o r i c a l ex*
h i b i t i o n s in b e h a l f of t h e people, t h e c o m m i t t e e lias h a d a
c l e a r perception of i t s d u t y a n d liar* yielded n e i t h e r to g r e e d
ll
o r to d e c l a m a t i o n . I t lias s t e e r e d a s t r a i g h t course, r i g h t bet w e e n Scylla a n d C h a r y b d i s .
1 0 0 2 2 - - 121S5G

2

18

T h e r e q u i r e m e n t s of tlio A m e r i c a n f a r m e r f o r b a n k c r e d i t a r e
no d i f f e r e n t f r o m t h e n e e d s of o t h e r m e m b e r s of t h e c o m m u n i t y .
T h e f a r m e r r e q u i r e s l o a n a b l e c a p i t a l to e n a b l e h i m t o e x t e n d
b i s a g r i c u l t u r a l o p e r a t i o n s a s f a r a s t h e r e is p r o f i t in t h e m , a n d
to t a k e a d v a n t a g e of m a r k e t c o n d i t i o n s w h i c h call f o r t h e
a p p l i c a t i o n of m o r e w e a l t h t h a n h e a c t u a l l y possesses.
Howe v e r . w h i l e t h u s e s s e n t i a l l y on t h e s a m e b a s i s a s o t h e r s in res p e c t to l o a n a b l e f u n d s a n d h i s n e e d of c r e d i t , t h e f a r m e r is
p e c u l i a r in t h e r e s p e c t t h a t h e o r d i n a r i l y r e q u i r e s a l o n g e r
t e r m of c r e d i t t h a n do s o m e o t h e r m e m b e r s of t h e c o m m u n i t y ,
a n d in m o s t c o u n t r i e s r e q u i r e s c u r r e n c y in t h e t r a n s a c t i o n of
h i s b u s i n e s s r a t h e r t h a n book c r e d i t w i t h t h e b a n k .
FA KM

LOAN'S.

T h e p r e s e n t bill i s i n t e n d e d to r e n d e r c a p i t a l a v a i l a b l e to
b a n k s t h r o u g h t h e r e d i s c o u n t o p e r a t i o n , a n d a t t h i s p o i n t I des i r e briefly to call a t t e n t i o n to t h o s e p h a s e s of t h e 1)111 w h i c h
b e a r upon t h e f a r m e r a n d his w e l f a r e a n d in r e g a r d to w h i c h it
is p r o b a b l e t h a t t h e a g r i c u l t u r i s t will be d i r e c t l y h e l p e d .
I n section 11 of t h e bill w e h a v e p r o v i d e d f o r t h e re.liscounting of p a p e r p o s s e s s i n g a m a t u r i t y of n o t m o r e t h a n 00 d a y s
in o n e c a s e a n d in a n o t h e r c a s e p a p e r .possessing a m a t u r i t y
of n o t m o r e t h a n 1120 d a y s . I n t h e s a m e s e c t i o n w e h a v e provided f o r t h e m a k i n g of a c c e p t a n c e s by n a t i o n a l b a n k s a n d t h e
r e d i s c o u n t i n g of t h o s e a c c e p t a n c e s by F e d e r a l r e s e r v e b a n k s .
T h e r e h a s been a g r e a t d e a l of m i s a p p r e h e n s i o n in m a n y q u a r t e r s w i t h r e f e r e n c e to t h e m e a n i n g of t h e 00-day p r o v i s i o n in
t h i s p a r a g r a p h . T h e c l a i m lias c o n s t a n t l y b e e n m a d e t h a t t i n s
00-day p r o v i s i o n w o u l d be of no s e r v i c e w h a t e v e r to t h e f a r m e r ,
b e c a u s e t h e f a r m e r n e v e r b o t h e r s w i t h so s h o r t a loan a s 00
d a y s . T h i s , of c o u r s e , is a n e n t i r e m i s a p p r e h e n s i o n of t h e w h o l e
s i t u a t i o n . T h e t e r m s of t h e bill d o not p r o v i d e t h a t t h e p a p e r
shall not be d i s c o u n t e d if it r u n s m o r e t h a n (-)0 d a y s , b u t m e r e l y
t h a t it s h a l l n o t be d i s c o u n t e d until it is w i t h i n 00 d a y of m a t u r ity. In o t h e r avoids, t h e bill e n a b l e s t h e b a n k e r w h o h o l d s t h e
f a r m e r ' s p a p e r to s h o r t e n t h e l i f e of t h e f a r m e r ' s p a p e r by 00
d a y s a n d to t h a t e x t e n t get new f u n d s w i t h w h i c h to a i d t h e
f a r m e r . N o w , j u s t w h a t d o e s t h i s mean'.' .Suppose t h a t t h e
l o a n s of a f a r m i n g c o m m u n i t y m a d e by n a t i o n a l b a n k s will
a v e r a g e 00 d a y s , w i t h a r e n e w a l f o r 00 d a y s , o r six m o n t h s in
all.
It is e v i d e n t t h a t a b a n k w h i c h h a d loaned, let u s s a y
$25,000, f o r f o u r m o n t h s w o u l d b e a b l e to p r e s e n t t h i s . p a p e r a t
t h e e n d of t h e first 150 d a y s of t h e life of t h e l o a n a n d to get a
r e d i s c o u n t f o r t h e r e m a i n i n g 00 d a y s . T h a t i s to say, it w o u l d
be a b l e to d r a w b a c k t h e a m o u n t of t h e f a r m e r ' s c r e d i t a t t h e
e n d of t h e first 150 d a y s a n d to r e l e n d t h a t s u m to o t h e r people.
W h e n t h e t i m e c a m e f o r r e n e w a l t h e b a n k w o u l d , of c o u r s e , h a v e
to bo in position to p a y i t s loan o r r e d i s c o u n t to t h e F e d e r a l
r e s e r v e b a n k if it e x t e n d e d t h e f a r m e r ' s a c c o m m o d a t i o n f o r
a n o t h e r 00 d a y s o u t of n e w f u n d s t h a t h a v e c o m e in m e a n w h i l e ;
b u t it could a g a i n r e d i s c o u n t a t t h e e n d of a n o t h e r 3 0 - d a y
p e r i o d . I n o t h e r w o r d s , if t h e c o m m u n i t y w e r e d o i n g i t s b a n k ing upon a f o u r m o n t h s ' p e r i o d of c r e d i t t h e b a n k w o u l d be
a b l e t o s h o r t e n t h i s in p r a c t i c e to a 30-day p e r i o d of c r e d i t . I t
is e n t i r e l y c o n c e i v a b l e t h a t by t h i s p r o c e s s it s h o u l d p r a c t i c a l l y
t r e b l e t h e a m o u n t of b a n k i n g c a p i t a l w h i c h it could, if n e c e s s a r y ,
p l a c e a t t h e d i s p o s a l of t h e c o m m u n i t y .
10022 - 12350

19

•Now, et u s suppose t h a t t h e c o u n t r y h a n k , a s is no d o u b t
n e q u e n t l y t h e case, docs n o t h a v e a s t e a d y r u n of l o a n s s u c h
' s would j u s t i f y (ho use of t h e m e t h o d j u s t described. L e t u s
suppose i n s t e a d of t h a t t h a t (he d e m a n d f o r loans is likely to
i)o b u n c h e d " in t h e l a t e s p r i n g a n d then to s l a c k e n so t h a t (ho
l u n d s of t h e b a n k s a r e tied u p on, lot u s say, six months* p a p e r
Under (ho 120-day provision of t h i s bill s u c h b a n k s would bo
•11)10 IO t a k e six m o n t h s ' p a p e r a s soon nrf it w a s t w o m o n t h s
oiil to a F e d e r a l r e s e r v e b a n k a n d r e d i s c o u n t it. In o t h e r
w o r d s , f u n d s ( h a t would o r d i n a r i l y h a v e been tied u p f o r f o u r
m o n t h s longer will now be a c t u a l l y a v a i l a b l e to meet such
a d d i t i o n a l d e m a n d s a s m a y conic to t h e b a n k in t h e c o u r s e of
»e s u m m e r a n d e a r l y a u t u m n . H e r e , a g a i n , it is e v i d e n t t h a t
no loan period being p r a c t i c a l l y c u t d o w n by t w o - t h i r d s (lie
j o a u m g p o w e r of (ho b a n k is trebled, a s s u m i n g t h a t it is a b l e
to o b t a i n f r o m ( h e F e d e r a l r e s e r v e b a n k (ho r e d i s c o u n t s f o r
h a s t h e b a s i s in (lie s h a p e of p a p e r g r o w i n g o u t of
agricultural transactions.
!

UANDMNO FARXt CROPS.
I h a v e been c o n s t a n t l y h e a r i n g t h a t (he proposed bill a f f o r d e d
to b a s i s f o r a c c o m m o d a t i n g tlio f a r m e r w h o h a d r a i s e d his
* i o p s a n d w h o d e s i r e d (o get m e a n s t h a t w o u l d e n a b l e him to
1
t « e m a l o n g p e n d i n g i m p r o v e m e n t of prices.
Nothing
could bo m o r e u n j u s t o r f u r t h e r f r o m (ho f a c t s of (lie c a s e
'Man tins. A s a m a t t e r of f a c t , t h e bill m a k e s a m p l e p r o v i s i o n
tot t h e h a n d l i n g of (ho g r e a t e x p o r t c r o p s of (ho c o u n t r y , s u c h
a s cotton, w h e a t , corn, a n d t h e like. Not only does it p r o v i d e
t o r loans of t h e kind a l r e a d y r e f e r r e d to, b u t 'in t h e p a r a g r a p h
tola ting to a c c e p t a n c e s it m a k e s a m p l e provision f o r e n a b l i n g
j n e o w n e r or r a i s e r of c r o p s to r e t a i n t h e t i t l e to t h e m w h i l e
" l e y a r e being disposed of a b r o a d . Lot u s see how t h i s w o r k s
t t a cotton g r o w e r in t h e S o u t h , f o r e x a m p l e , needs f u n d s he
! U ' r i l l l g 0 " 1 t h i l , ) a n k n c a r b i s homo to g r a n t him it specified
ciecht of, gay .$,,0,000. I n t h i s e v e n t ho w o u l d d r a w a hill of
c h a n g e o r d r a f t on I ho b a n k in q u e s t i o n f o r , say, six m o n t h s
I
would a t t a c h to it (he d o c u m e n t s s h o w i n g s h i p m e n t . T h e
Oftnk w o u l d a c c e p t t h i s p a p e r a n d h e would t h e n bo in p o s i t i o n
to sell t h e hill p r a c t i c a l l y a n y w h e r e . T h e c r e d i t would b e b a s e d
on a n a c t u a l o w n e r s h i p of cotton p r o t e c t i n g t h e a c t u a l a m o u n t
>t tiie bill a n d i n v e s t o r s p r a c t i c a l l y e v e r y w h e r e would feel en!lt I i b o r t
i>n
y t 0 p u r c h a s e t h i s p a p e r f r e e l y b e c a u s e it h a d
eon g u a r a n t e e d b y t h e b a n k w h i c h a c c e p t e d it.
Everywhere
1
t h e c o u n t r y w h e r e (hero w e r e idle f u n d s t h e r e w o u l d he a
Hinand f o r t h e s e bills. Not only F e d e r a l r e s e r v e b a n k s , b u t
" t n p r b a n k s w o u l d c o n s t i t u t e a m a r k e t f o r s u c h bills
When
o r l V ^ ° ! m t c d t I l c l ' ° U l p y w o u l a c o n s t i t u t e a v i r t u a l e x t e n s i o n of
lhoso bnnIcs
nm
' e n a b l i n g (hem to i n c r e a s e t h e i r l o a n i n g
i'uwor t r e m e n d o u s l y a n d t h e r e b y to give to (Jieir c u s t o m e r s
P<*tedlUOdnUOn

WhiCh

LOWER

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latter

C0Uhl

I N T E R E S T TO 'J III:

UOt

oUlonviso

Have ex-

FARMER.

The u n q u e s t i o n a b l e effect of Ibis now s y s t e m would bo to d r a w
Whn . V n W i d I ° i u v n r i o u s P a r t s of t h e c o u n t r y to t h o s e regions
C0llU1 b 0 u s e d 10 b o s t
diini,?. ,
a d v a n t a g e , a n d a s a r e s u l t to
10 r a l
Whir. »
° o f i , l t 0 1 ' e s t P r e v a i l i n g in t h e c o m m u n i t i e s
(
' f
receive t h e a d d i t i o n a l c a p i t a l t h r o u g h t h e use of t h e
JU0J2—12300

20

a c c e p t a n c e m e t h o d . T h e r e is no reason w h y a t t h e p r e s e n t t i m e
t h e r e should be v a r i a t i o n s in r a t e s of i n t e r e s t f r o m o per cent
in New York City to 12 or 15 per cent in s m a l l t o w n s in t h e
cotton-growing regions, if a s t a n d a r d kind of p a p e r w e r e provided it s h o u l d c o m m a n d e x a c t l y t h e s a m e confidence a n d b e a r
e x a c t l y t h e s a m e r a t e of i n t e r e s t in one p a r t of t h e c o u n t r y a s
in a n o t h e r . T h i s would m e a n t h a t a c c e p t a n c e s based upon
g o o d s — p r o t e c t e d by cotton in t h i s i n s t a n c e — w o u l d c o n s t i t u t e
a s t a n d a r d k i n d (if p a p e r w h i c h would be a v a i l a b l e f o r redisc o u n t a t a n y F e d e r a l r e s e r v e b a n k , a s well a s p u r c h a s a b l e by
investors and banks everywhere throughout the country. The
consequence w o u l d be, a s a l r e a d y s t a t e d , a very g r e a t r e d u c t i o n
in t h e r a t e of i n t e r e s t to t h e g r o w e r or f a c t o r w h o h a d p r o d u c e d
cotton a n d m e r e l y r e q u i r e d l o a n a b l e f u n d s a s a b a s i s f o r
business.
It is t r u e t h a t t h e use of t h e a c c e p t a n c e principle is l i m i t e d in
t h i s bill to t h o s e c o m m o d i t i e s a n d o p e r a t i o n s t h a t a r e connected
w i t h e x p o r t a t i o n a n d i m p o r t a t i o n . T h i s l i m i t a t i o n h a s been
c o m p l a i n e d of by m a n y of those who believe t h a t its e x t e n s i o n
to domestic o p e r a t i o n s would be highly a d v a n t a g e o u s to i n d u s t r y
a n d would bo f r e e f r o m t h e d a n g e r s w h i c h o t h e r s h a v e predicted. W h a t e v e r opinion may !>e e n t e r t a i n e d on t h i s h e a d ,
h o w e v e r , it is c e r t a i n t h a t t h e cotton g r o w e r or t h e w h e a t shipper can not s h a r e it in a n y such proportion a s can o t h e r commercial f a c t o r s . T h e f a c t t h a t so m u c h of o u r cotton goes a b r o a d
a n d t h a t w e still s h i p g r a i n in e n o r m o u s q u a n t i t i e s m e a n s t h a t
those who a r e concerned in t h e e x p o r t a t i o n of these i t e m s h a v e
been e x c e p t i o n a l l y f a v o r e d t h r o u g h t h e r e s t r i c t i o n of t h e acc e p t a n c e b u s i n e s s to t h e m so t h a t w h a t e v e r f u n d s a r e r e a d y
to be employed in Hint line" of p a p e r will go d i r e c t l y a n d w i t h out i n t e r f e r e n c e into t h e c h a n n e l s a f f o r d e d to t h e m by t h e t r a d e
in these commodities.
f w a n t lo a d d a n e m p h a t i c w o r d u p o n (lie o t h e r p h a s e of t h e
s u b j e c t to w h i c h I h a v e a l r e a d y r e f e r r e d t h e f a r m e r ' s i n t e r e s t
in g e t t i n g not only a c c o m m o d a t i o n u n d e r t h e t e r m s of t h i s bill,
b u t his interest in g e t t i n g it in t h e c h e a p e s t possible w a y . I
h a v e a l r e a d y i n d i c a t e d t h e r e a s o n s for t h i n k i n g t h a t t h e w o r k ing of t h e d i s c o u n t p o r t i o n s of the bill will g r e a t l y r e d u c e t h e
f a r m e r ' s i n t e r e s t b u r d e n a n d supply him w i t h m e a n s f o r m a r k e t i n g his c r o p s to a d v a n t a g e . F r o m t h e s t a n d p o i n t of t h e
m e c h a n i s m employed by t h e f a r m e r t h e r e is, however, m u c h to
be said in a d d i t i o n to w h a t I h a v e a l r e a d y pointed out. Tod a y t h e f a r m e r in m a n y p a r t s of t h e c o u n t r y w a n t s h i s accomm o d a t i o n in t h e f o r m of c u r r e n c y . T h i s he c a n not get u n d e r
t h e e x i s t i n g c o n d i t i o n s w i t h o u t involving t h e b a n k in h e a v y
e x p e n s e a n d consequently n e c e s s i t a t i n g t h e p a y m e n t of a mater i a l l y h i g h e r r a t e of i n t e r e s t by h i m s e l f . T h e r e a s o n f o r t h e
c o n d i t i o n s to w h i c h I h a v e t h u s r e f e r r e d is t h i s :
U n d e r t h e n a t i o n a l - b a n k i n g a c t t h e b a n k w h i c h w a n t s $100
in notes m u s t b u y $100 in b o n d s a n d deposit t h e m w i t h t h e
T r e a s u r y . A s s u m i n g t h a t these bonds w e r e b o u g h t a t par, i t
cost $100 in c a s h to get $100 in notes, a n d t h e b a n k m u s t f u r thermore place with the Treasury a 5 per cent redemption f u n d
f o r t h e p u r p o s e of b e a r i n g t h e r e d e m p t i o n of t h e n o t e s w h e n
(hey a r e b r o u g h t to t h e T r e a s u r y . I will not go into t h e det a i l s of Ihe cost of issuing n o t e s f u r t h e r a t t h i s point t h a n
barely to r e f e r (o t h e s e m a t t e r s a n d to t h e a d d i t i o n a l o u t l a y
10022

12.;r»o

21

i n v o l v e d in g e t t i n g (lie p l a t e s a n d p a y i n g (ho c h a r g e f o r t r a n s p o r t a t i o n of p a p e r n e c e s s i t a t e d b y t h e p r e s e n t n o t e s y s t e m ,
f h e b a n k gets 2 per cent interest upon its bonds a n d ' w h a t e v e r i n t e r e s t it c a n s e c u r e f r o m l b s c o m m u n i t y by l e n d i n g t h e
notes. W h e n a l l o w a n c e h a s b e e n m a d e f o r t h e e x p e n s e s a l r e a d y
m e n t i o n e d a n d f o r t h e d u e s h a r e of a d m i n i s t r a t i v e o u t l a y involved i n t h e p r o c e s s of c o n d u c t i n g t h e b a n k , a n d p r e s u m a b l y
a s s i g n e d to t h e l o a n s m a d e by t h o i s s u e of notes, in p r o p o r t i o n
t o t h e i r a m o u n t , a s c o m p a r e d w i t h t h e t o t a l l o a n s of t h e b a n k ,
it i s c l e a r t h a t t h o p e r c e n t a g e of profit is v e r y s m a l l w h e r e
a n y t h i n g like a r e a s o n a b l e r a t e of i n t e r e s t to t h e b o r r o w e r is
c h a r g e d . T h o b o r r o w e r m u s t t h e r e f o r e , a n d is in p r a c t i c e ,
r e q u i r e d to p a y a v e r y h i g h r a t e of i n t e r e s t to a n y b a n k w h i c h
h a b i t u a l l y m a k e s i t s l o a n s by i s s u i n g i t s o w n notes. O b v i o u s l y ,
t h e r e f o r e , a n y t h i n g t h a t will r e d u c e t h e cost of t h i s n e c e s s a r y
i n s t r u m e n t will r e d u c e t h e c h a r g e f o r l o a n s to t h e f a r m e r .
U n d e r t h e p r o p o s e d bill it is c l e a r t h a t b a n k s m a y o b t a i n a
s u p p l y of n o t e s f o r c u s t o m e r s w h o w a n t t h e i r l o a n s in t h i s f o r m
by p a y i n g to t h o F e d e r a l r e s e r v e b a n k of t h e d i s t r i c t in w h i c h
t h e y a r e s i t u a t e d s u c h r a t e of r e d i s c o u n t a s m a y b e n e c e s s a r y
to g e t (lie r e s e r v e b a n k to t a k e t h e i r p a p e r . A s t h e r e s e r v e
bank can then get t h e notes b y ' s e g r e g a t i n g (he borrower's
p a p e r to p r o t e c t ( h e a c c o m m o d a t i o n t h u s s e c u r e d , it is e v i d e n t
t h a t t h e r e is no r e a s o n w h y t h o n o t e s s h o u l d cost t h e f a r m e r
a n y t h i n g m o r e ( b a n t h e r a t e of r e d i s c o u n t fixed by t h e F e d e r a l
r e s e r v e b a n k p l u s s u c h c o m m i s s i o n a s t h e local b a n k m a y c h a r g e
f o r i n d o r s i n g t h e b o r r o w e r ' s p a p e r a n d p a s s i n g it on t o t h e res e r v e b a n k . T h i s c h a n g e a l o n e o u g h t to r e d u c e t h e cost of g e t t i n g
n o t e s f o r b a n k l o a n s b y a v e r y m a t e r i a l p r o p o r t i o n of i t s prese n t a m o u n t . W h i l e no o n e c a n c a l c u l a t e t h e e x a c t s a v i n g w h i c h
will t h u s be m a d e w i t h p r e c i s i o n , I s h o u l d b e i n c l i n e d t o estim a t e t h a t t h r o u g h ( h e e l i m i n a t i o n of b o n d s e c u r i t y a n d t h e subs t i t u t i o n of t h e n e w p l a n of i s s u e t h e r e s h o u l d be no good r e a s o n
Why t h e n o t e l o a n s m a d e by b a n k s in a g r i c u l t u r a l r e g i o n s
s h o u l d r u n to a h i g h e r f i g u r e t h a n p e r h a p s <! o r 7 p e r c e n t a s
a g a i n s t t h e c h a r g e of 12 to 15 p e r c e n t t h a t m a y n o w b e f o u n d
Hi m a n y of ( h e s m a l l t o w n s of t h e AVcst a n d S o u t h d u r i n g ( h e
h e i g h t of (lie s e a s o n .
A s p r e v i o u s l y s t a t e d , Mr. C h a i r m a n , w e h a v e n o t s o u g h t in
J n s bill to h e l p t h o f a r m e r b e c a u s e h e is a f a r m e r , b u t to h e l p
h e c o m m u n i t y w h i c h r e s o r t s to ( h e b a n k s f o r l o a n s a n d to h e l p
' l i e fa-wner a s a n e c e s s a r y a n d i m p o r t a n t f i g u r e in t h a t community. We have helped him a s we have helped (he m e r c h a n t
a n d m a n u f a c t u r e r a n d o t h e r m e m b e r s of t h e b o d y politic, b y
e n a b l i n g h i m to s e c u r e , a s w e t h i n k , b e t t e r a n d m o r e a b u n d a n t
bank accommodation.
H u t , in a d d i t i o n to t h i s , w e h a v e rem o v e d t h e e x c e p t i o n a l b u r d e n s w h i c h r e s t upon t h o r u r a l borr o w e r u n d e r t h e s y s t e m of n a t i o n a l b a n k - n o t e i s s u e w h i c h n o w
p r e v a i l s , a n d w e h a v e t h e r e b y p l a c e d h i m u p o n a f o o t i n g of
g r e a t e r e q u a l i t y a n d of e q u i t y of t r e a t m e n t by m a k i n g h i s
c r e d i t I n s t r u m e n t s a s r e a s o n a b l e in t h e i r e x p e n s e to h i m a s a r e
' h o s e e m p l o y e d by t h o m e r c h a n t a n d m a n u f a c t u r e r . W e h a v e
» o t a t t e m p t e d to e x a l t h i m a n d his i n t e r e s t s a b o v e t h o s e of
o t h e r e l e m e n t s in t h e c o m m u n i t y , b u t w e h a v e s o u g h t to give
h i m w h a t w e believe h e w a n t e d — a n o p e n a n d f a i r s h a r e u p o n
° q u a l t e r m s in t h e c o m m e r c i a l c r e d i t of t h e c o u n t r y .
10022—12350

22
E x a c t l y tlie s a m e a d v a n t a g e , a n d in like degree, t h a t will he
a f f o r d e d t h e f a r m e r s of t h e c o u n t r y u n d e r t h e r e d i s c o u n t provision of t h i s bill will e x t e n d to e v e r y d e s c r i p t i o n of l e g i t i m a t e
b u s i n e s s a n d i n d u s t r y ; hence I will n o t f u r t h e r consider t h i s
section of t h e m e a s u r e .
BANK

RESERVES.

Section 20 of t h e p e n d i n g bill, Mr. C h a i r m a n , c o n s t i t u t e s one
of its vital f e a t u r e s . I t is t h e r e a l p o i n t of a t t a c k b y the big
b a n k e r s of t h e c e n t r a l r e s e r v e cities. R e c e n t l y a t t h e i r Chicago
c o n f e r e n c e a n d now b e f o r e a s t a n d i n g c o m m i t t e e a t tlie o t h e r
e n d of t h e Capitol t h e s e g e n t l e m e n e n u m e r a t e v a r i o u s a l t e r a tions w h i c h t h e y w o u l d h a v e m a d e in t h i s bill. H u t in r e a l
t r u t h t h e i r f u n d a m e n t a l a n d i n s u p e r a b l e objection is to t h e
r e s e r v e r e q u i r e m e n t . All o t h e r f a u l t finding is simply s t r a t e g i c .
T h i s is no c o n j e c t u r e of my o w n ; I a s s e r t it a s a f a c t w h i c h
h a s boon h o m e in u p o n m e t i m e and t i m e a g a i n since t h e first
p r i n t of t h i s bill c a m e f r o m t h e press. I a s s e r t it a s a f a c t
a n d h a v e conclusive proof of its verity. N o t one of t h e b a n k e r s
w h o h a v e recently testified b e f o r e tlie S e n a t e c o m m i t t e e can
controvert the statement.
" T h e w h o l e fight of t h e g r e a t b a n k e r s is to d r i v e u s f r o m o u r
firm resolve t o b r e a k down t h e a r t i f i c i a l connection b e t w e e n
t h e b a n k i n g b u s i n e s s of t h i s c o u n t r y a n d t h e stock s p e c u l a t i v e
o p e r a t i o n s a t t h e money centers. 1 1 T h e M o n e t a r y Commission,
w i t h m o r e d i s c r e t i o n t h a n c o u r a g e , a b s o l u t e l y e v a d e d t h e probl e m ; b u t t h e H a n k i n g a n d C u r r e n c y C o m m i t t e e of t h e H o u s e
h a s gone to t h e very root of t h i s g i g a n t i c evil a n d in t h i s bill
p r o p o s e s to c u t t h e c a n c e r out. U n d e r e x i s t i n g l a w w e h a v e
p e r m i t t e d b a n k s to p y r a m i d c r e d i t upon c r e d i t a n d to call t h e s e
c r e d i t s reserves, ft is a m i s n o m e r ; they a r e n o t reserves. And
w h e n financial t r o u b l e s come a n d t h e c o u n t r y b a n k s call f o r
t h e i r money w i t h w h i c h to p a y t h e i r c r e d i t o r s t h e y find it all
invested in stock-gambling o p e r a t i o n s . T h e r e is suspension of
payment and the whole system breaks down under the strain,
c a u s i n g w i d e s p r e a d c o n f u s i o n a n d a l m o s t inconceivable d a m a g e .
T U B BEAT, FIFIUT.

T h e a v o w e d p u r p o s e of t h i s hill is to c u r e t h i s e v i l ; to withd r a w the r e s e r v e f u n d s of t h e c o u n t r y f r o m t h e congesteil
money c e n t e r s a n d to m a k e t h e m r e a d i l y a v a i l a b l e f o r b u s i n e s s
u s e s in t h e v a r i o u s sections of t h e c o u n t r y to which t h e y belong.
T h i s w e propose to do c a u t i o u s l y , w i t h o u t a n y shock to t h e existing a r r a n g e m e n t , g r a d u a t i n g t h e o p e r a t i o n to p r e v a l e n t conditions a n d e x t e n d i n g it over a period of .'{(> month*. T h i s a f f o r d s
a m p l e t i m e to d i e r e s e r v e a n d c e n t r a l r e s e r v e city b a n k s to
a d j u s t t h e m s e l v e s to d i e r e s e r v e r e q u i r e m e n t s of d i e n e w system. O u t of a b u n d a n t p r e c a u t i o n w e h a v e a c t u a l l y given t h e m
a longer t i m e t h a n t h e best p r a c t i c a l b a n k e r s of t h e c o u n t r y
h a v e s a i d w a s n e e d e d . Hilt, Mr. C h a i r m a n , t h e p l a i n t of t h e s e
g e n t l e m e n is not a s to t i m e b u t a s to f a c t . T h e y d o n o t w a n t
e x i s t i n g a r r a n g e m e n t s d i s t u r b e d ; t h e y d e s i r e to p e r p e t u a t e a
fictitious, unscientific system, s a n c t i o n e d by law, b u t c o n d e m n e d
b y e x p e r i e n c e a n d b i t t e r l y offensive to t h e A m e r i c a n people—a
system which everybody knows encourages and promotes the
w o r s t description of stock g a m b l i n g . ' T h e real opposition to t h i s
bill is n o t a s to G o v e r n m e n t control, upon w h i c h w e shall n e v e r
y i e l d , ' ' i t is not a s to t h e c a p i t a l s u b s c r i p t i o n required, w h i c h is
10022—12350

23

precisely t h a t of t h e A l d r i c h s c h e m e u n a n i m o u s l y indorsed by
t h e A m e r i c a n B a n k e r s ' A s s o c i a t i o n ; it is n o t a s to t h e .1 p e r c e n t
d i v i d e n d a l l o w e d m e m b e r b a n k s , t h e e x a c t limit p r e s c r i b e d in
t h e Aldrich b i l l ; it is not a s to c o m p u l s o r y m e m b e r s h i p , w h i c h
w a s p r o v i d e d in a n o t h e r w a y in (he A l d r i c h s c h e m e ; it is n o t
•'is to (he b o n d - r e f u n d i n g proposition, infinitely s i m p l e r ' a n d less
e x p e n s i v e t h a n t h e A l d r i c h device. I t is n o n e of t h e s e tilings,
Mr. C h a i r m a n , t h a t v e x e s (lie big b a n k e r s . I t is a loss of p r o f i t s
d e r i v e d f r o m a s y s t e m w h i c h m a k e s t h e m (he legal c u s t o d i a n s
of all (lie r e s e r v e f u n d s of (be c o u n t r y , $210,000,000 of w h i c h
f u n d s on t h e 24th d a y of N o v e m b e r , 1912, they h a d p u t into t h e
m a e l s t r o m of W a l l S t r e e t stock o p e r a t i o n s .
DISAGREEING

CRITICS.

T d i s t i n c t l y a m n o t a p p e a l i n g to (he p r e j u d i c e a g a i n s t g r e a t
b a n k e r s . No m a n w o r t h y to be a r e p r e s e n t a t i v e of (lie A m e r i c a n
People o u g h t to d e a l w i t h a p r o b l e m of s u c h m a g n i t u d e w i t h o u t
f e e l i n g p r o f o u n d l y t h e obligation to be f a i r a n d j u s t to e v e r y
i n t e r e s t involved. B u t so s h o u l d t h e big b a n k e r s d e a l w i t h us.
't'hey h a v e a s s u r e d u s t h a t t h e bill is w o r k a b l e ; y e t in a n o t h e r
Place they s a y it is not. T h e c r i t i c s a r e n o t a g r e e d a m o n g t h e m selves even a s to w h a t (lie bill p r o v i d e s o r a s to w h a t it m e a n s .
Mr. J a m e s B. F o r g a n , t h e N e s t o r of A m e r i c a n b a n k e r s , testified
before the Senate committee last F r i d a y t h a t this measure would
c o n t r a c t c r e d i t s to t h e e x t e n t of $1,800,000,000, w h e r e a s Mr.
Chas. <}. D a w e s , a n e x - C o m p t r o l l e r of (ho C u r r e n c y , now presid e n t of a l a r g e b a n k in Mr. F o r g a n ' s own city, publicly a s s e r t e d
ji week ago t h a t t h e bill involves a n e n o r m o u s inflation. So in
he F a s t r e c e n t l y a n e m i n e n t b a n k e r of N e w York City d e c l a r e d
t h a t u n d e r t h i s bill t h e r e w o u l d be a f r i g h t f u l c o n t r a c t i o n of
credit, w h e r e a s in ( h e s a m e city ( h e f o r e i g n e x c h a n g e e x p e r t
or one of t h e biggest b a n k s t h e r e figured o u t f o r (lie p r e s i d e n t of
t h e i n s t i t u t i o n t h a t possible e x p a n s i o n u n d e r t h e bill w o u l d
reach ( h e a g g r e g a t e a m o u n t of n e a r l y $2,000,000,000.
And t h u s t h e conflict of opinion r u n s . As a m a t t e r of f a c t ,
Mr. C h a i r m a n , n e i t h e r of t h e s e p o s t u l a t e s is t r u e .
Certainly
it is impossible t h a t b o t h of t h e m c a n be t r u e . I t m a y be contin e n t l y a s s e r t e d t h a t t h e r e will not be one d o l l a r of h a r m f u l
c o n t r a c t i o n u n d e r t h i s b i l l ; a n d t h o s e w h o u n d e r t a k e to figure
o t h e r w i s e c o n v e n i e n t l y i g n o r e (lie f a c t t h a t w e h a v e r e l e a s e d a
c o n s i d e r a b l e p o r t i o n of e x i s t i n g b a n k reserve. F r a n k l y , t h e r e
enn be e x p a n s i o n u n d e r (he b i l l ; a n d , a c c o r d i n g to Mr. F r a n k
v
a n d e r l i p , of (he N a t i o n a l City B a n k of N e w York, (lie c o u n t r y
Mat now greatly needs credit expansion.
l i e figures t h a t
•-,000,000.000 can be used w i t h i n t h e n e x t five y e a r s in developu,
« a single i n d u s t r y in America. B u t (he c o m m i t t e e h a s caref u l l y p r o v i d e d a g a i n s t d a n g e r o u s or u n d u e e x p a n s i o n . If t h e
j w n k s of (he c o u n t r y will n o t e x e r c i s e common p r u d e n c e in t h e
m a t t e r , it is w i t h i n t h e p o w e r of t h e F e d e r a l r e s e r v e b o a r d to
compel t h e m to d o so by l a y i n g a firm h a n d upon t h e r a t e of
discount. Moreover, (lie gold-reserve r e q u i r e m e n t a n d t h e red e m p t i o n f a c i l i t i e s a f f o r d e d by t h e bill will h a v e a p o w e r f u l
tendency toward checking expansion.
B u t I will n o t longer
tllG
ij
a t t e n t i o n of t h e H o u s e upon t h i s p a r t i c u l a r p h a s e of
n o s u b j e c t . I d e s i r e briefly to d e m o n s t r a t e t h e e n t i r e feasib l y of t h e scheme p r o v i d e d by t h i s bill f o r s h i f t i n g t h e rew i t h o u t c o n t r a c t i n g c r e d i t . T h e m a t t e r h a s been figured
u,,
t by (he best e x p o r t s in t h e c o u n t r y . It h a s been gone over
10022 12.150

21-

witli e x t r e m e c a r e a n d wo confidently c h a l l e n g e criticism of t h e
f a c t s a n d figures p r e s e n t e d .
P R E S E N T ITESERVE

REQUIREMENTS.

Section 22 of tiie bill p r o v i d e s f o r a revision of t h e e x i s t i n g
r e s e r v e s of n a t i o n a l b a n k i n g a s s o c i a t i o n s , which, u n d e r t h e
p r e s e n t r e s e r v e system, a r e d i v i d e d into t h r e e classes, ( a ) count r y b a n k s , ( b ) r e s e r v e city b a n k s , ( c ) c e n t r a l r e s e r v e city
b a n k s . C o u n t r y b a n k s a r e r e q u i r e d to bold 0 per cent of t h e i r
d e p o s i t l i a b i l i t i e s in l a w f u l money a n d 0 per cent in b a l a n c e s
w i t h o t h e r b a n k s ; r e s e r v e city b a n k s a r e r e q u i r e d to hold 12>}
per cent of t h e i r d e p o s i t s in l a w f u l money a n d 1 2 i per cent in
b a l a n c e s w i t h o t h e r b a n k s in c e n t r a l r e s e r v e c i t i c s ; c e n t r a l res e r v e city b a n k s a r e r e q u i r e d to hold 25 p e r cent pf t h e i r deposits ( i n c l u d i n g those of o t h e r b a n k s w i t h t h e m ) in l a w f u l money
in t h e i r own v a u l t s .
T h e a i m of t h i s m e a s u r e is to t r a n s f e r those r e s e r v e s a w a y
f r o m b a n k s o t h e r t h a n those to which t h e y belong, so t h a t ultim a t e l y b a n k r e s e r v e s will be held p a r t l y in t h e v a u l t s of t h e
banks' to w h i c h t h e y belong, a n d p a r t l y in t h e regional r e s e r v e
b a n k s , t h e r e s e r v e b a n k s t a k i n g t h e place of e x i s t i n g r e s e r v e
city a n d c e n t r a l r e s e r v e city b a n k s in t h e i r r e l a t i o n to m e m b e r
banks.
PROPOSED RE3ERVH

REQUIREMENTS.

C a r r y i n g o u t t h i s p l a n , it is provided ( a ) t h a t 5 per cent of
t h e o u t s t a n d i n g d e p o s i t s of all b a n k s shall be c a r r i e d in t h e
n e w r e s e r v e b a n k s ; ( b ) f> p e r cent of t h e d e p o s i t s of p r e s e n t
c o u n t r y b a n k s to be c a r r i e d in c a s h in t h e i r o w n v a u l t s ; ( c )
2 p e r cent of t h e d e p o s i t s of p r e s e n t c o u n t r y b a n k s to be c a r ried e i t h e r in c a s h in t h e i r o w n v a u l t s o r a s a b a l a n c e w i t h
n e w r e s e r v e b a n k s ; ( d ) 0 per c e n t of t h e d e p o s i t s of p r e s e n t
r e s e r v e city a n d c e n t r a l r e s e r v e city b a n k s to be c a r r i e d in c a s h
in t h e i r own v a u l t s ; ( e ) i p e r cent of t h e d e p o s i t s of p r e s e n t
r e s e r v e city a n d c e n t r a l r e s e r v e city b a n k s to be c a r r i e d e i t h e r
in c a s h iu t h e i r own v a u l t s or a s b a l a n c e s w i t h t h e new r e s e r v e
banks.
I t m a y be h e r e e x p l a i n e d t h a t t h e " b a l a n c e s " spoken of c a n
be o b t a i n e d by r e d i s c o u n t i n g p a p e r w i t h t h e n e w reserve b a n k s .
TUB DEMONSTRATION.
F r o m t h e f o r e g o i n g it is c l e a r t h a t a s some d i s c r e t i o n is l e f t
to t h e b a n k s a b o u t t h e i r r e s e r v e s t h e e x a c t position of those
r e s e r v e s a t a n y given t i m e c a n not be p r e d i c t e d . M a x i m u m a n d
m i n i m u m l i m i t s can, however, bo fixed. T h i s is d o n e a s f o l l o w s :
A t t h e d a t e of J u n e 4, 10K3 ( c o m p t r o l l e r ' s l a s t r e p o r t ) , t h e
p r e s e n t b a n k r e s e r v e in c e n t r a l r e s e r v e cities w a s $101),(501,42-1
held in cash.
At t h e n a m e d a t e , t h e r e s e r v e w h i c h would h a v e been req u i r e d u n d e r t h i s bill would h a v e been 0 per c e n t of n e t d e p o s i t s
t h e n s u b j e c t to r e s e r v e r e q u i r e m e n t s in cash, a n d 0 p e r cent in
b a l a n c e s w i t h t h e new r e s e r v e b a n k s , a s f o l l o w s :
To be held in cash
Jjt»
To be held as balancea
Total

i " . l'-",o—>
? 8 2 , 259, 070

F r o m tills it is c l e a r t h a t if t h e b a l a n c e s u n d e r t h e new p l a n
w e r e e s t a b l i s h e d by t a k i n g a c t u a l money a n d p u t t i n g it in t h e
r e s e r v e b a n k s the a c t u a l r e l e a s e of c a s h a s c o m p a r e d w i t h t h e
p r e s e n t plan would be t h e d i f f e r e n c e between t h e total n e w res e r v e a n d t h e p r e s e n t reserve, while if t h e r e s e r v e b a l a n c e s w e r e
10022 -12350

25

created by rediscount ing (lie cash released under tbo now p i m
would be t b e difference between t h e cash required to be held
under t h e n e w plan a n d t h e cash now a c t u a l l y held.
That
would s i g n i f y :
Maximum release of cash
Minimum release of cash

s ° 0 S 473 5S9
127'345* 754

At t h e s a m e d a t e mentioned above the b a n k i n g reserve In
reserve cities a s held by t h e b a n k s w a s :
Held in cash
u e l d in balances

$250,383,020
232, 790, 071)

Total

483,183,005

U n d e r t h i s bill these b a n k s would h a v e to hold in cash 9 per
cent of t h e i r net deposits s u b j e c t to reserve r e q u i r e m e n t s a n d a
like a m o u n t in balances which would be f o r the reserve cities a s
!l
group:
Hold in cash
»te!d in balances

$175, 128, 701
175 ( 1 2 8 , 7 0 1

Comparing these figures with t h e p r e s e n t r e q u i r e m e n t s a s
a l r e a d y given it is seen t h a t t h e new plan might mean e i t h e r a —
Maximum release of cash
Or a maximum contraction of cash

I

$75, 255, 225
6o| 873) 4 7 0

At t h e s a m e d a t e mentioned above t h e b a n k i n g reserve in
c o u n t r y b a n k s w a s held a s f o l l o w s :
{(eld iu cash
ieid in balances

$2,89,302,177
;>,10, 089, 129

J

Total

GOO, 0 8 1 , 3 0 0

U n d e r this bill t h e cash required would be 5 per cent of t h e i r
net deposits subject to reserve r e q u i r e m e n t s a n d 7 per cent in
balance? (2 of t h i s a t t h e b a n d ' s d i s c r e t i o n ) . T h i s would mean :
To be held in cash
-to be held In balances

$180,533,042
252, 717, 100

Oil t h e s a m e principle a s b e f o r e t h i s would mean a m a x i m u m
release o r contraction a s f o l l o w s :
Maximum release
Maximum contraction

$108, 8 5 8 , 5 3 5
143, 888, 505

•

T h u s it a p p e a r s t h a t t h e r e would be a possible m a x i m u m contraction a s f o l l o w s :
Reserve city banks
U m n t r y banks

S99, 973, 4 7 0
143, 888, 505

Total
d e d u c t central reserve city release

243.802,041
127,345,754

Net contraction

110,510,287

I t is also evident t h a t t h e result m i g h t work o u t a s f o l l o w s :
Released by central reserve city banks
Released by reserve cltv hanks
Released by country banks
Total

1

$208,473,589
75, 255, 225
108, 858, 5 3 5
452, 587, 349

It might reasonably be asked which of these r e s u l t s would
Probably be r e a c h e d ? Assume t h a t the first ( c o n t r a c t i o n ) w a s
' h e net result owing to b a n k s fulfilling their reserve requirejnents by depositing cash in every instance. T h e Government
balances which a r e now to be poured into t r a d e c h a n n e l s
t h r o u g h t h e new reserve b a n k s will r u n f r o m .f20q.000.000 to
10022-

12350

26

$250 000,000. B e a r i n g in m i n d t h e fact t h a t t h e c a p i t a l of t h e
n e w b a n k s lias to lie r a i s e d in cash, it will he seen t h a t indep e n d e n t of t i n s c a p i t a l t h e m o n e t a r y s i t u a t i o n would he l e f t
a b o u t t h e s a m e a s it is to-day, except t h a t t h e n e w r e s e r v e
b a n k s would be in position to a d d t h e i r l o a n i n g p o w e r to t h a t of
t h e older b a n k s . If we now a s s u m e t h a t t h e t r a n s f e r of r e s e r v e s
r e s u l t e d in the e x t r e m e limit of e x p a n s i o n a l r e a d y r e f e r r e d to,
it would be noted t h a t (lie c a s h is released only on t h e a s s u m p tion t h a t t h e r e s e r v e r e q u i r e m e n t s a r e m e t by r e d i s c o u n t i n g .
If, h o w e v e r , t h e new r e s e r v e h a n k s h a v e to hold o n e - t h i r d in
l a w f u l money in o r d e r to m a k e these discounts, it is c l e a r t h a t
only t w o - t h i r d s of $152,587,319, or a b o u t .$300,000,000. will be
released. Of t h i s s u m a c e r t a i n p a r t w o u l d lie needed in bringing t h e r e s e r v e s of S t a t e b a n k s w h i c h m a y become m e m b e r s of
t h e new a s s o c i a t i o n s n p to t h e level w h i c h is r e q u i r e d of t h e m .
I I o w m u c h t h i s would bo can not be positively a s s e r t e d .
If it be a s s e r t e d t h a t t h i s process will lead to inflation t h e
a n s w e r to be m a d e is t h a t w h e t h e r it will or n o t is a m a t t e r
in t h e h a n d s of t h e r e s e r v e b a n k s , w h i c h h a v e it in t h e i r power,
by fixing t h e i r r a t e of d i s c o u n t s u i t a b l y , to p r e v e n t t h e b a n k s
f r o m c r e a t i n g r e s e r v e b a l a n c e s in exccss of t h e r e q u i r e d .r> per
cent. If t h e r e s e r v e b a n k s should do this, it w o u l d be f o u n d
t h a t t h e r e q u i r e d 5 per cent r e f e r r e d to w o u l d lie a b o u t $350,(M)0,000, w h i l e t h e a m o u n t w h i c h the b a n k s a t t h e i r option m i g h t
or m i g h t n o t o b t a i n in t h i s w a y w o u l d be a b o u t $213,000,000,
t h e a c t u a l c a s h r e q u i r e d to be held by t h e m u n d e r t h e new p l a n
being as follows:
Central reserve c i t y b a n k s
Reserve c i t y b a n k s
Country banks
Total

$ 1 4 1 , 127, 8"r>
17;"., 128 . 0 1
180, 5:!:',, 0 1 2
490, 7 0 0 , 1 7 S

A d d to t h i s t h e a m o u n t which t h e r e s e r v e b a n k s c a n a t t h e i r
option m a k e it w o r t h w h i l e f o r t h e o t h e r b a n k s to hold in c a s h ,
or to deposit w i t h t h e m in cash, a n d w e h a v e a total of a b o u t
$710,000,000. T h e a c t u a l cash held to-day by t h e b a n k s a t h o m e
a n d in t h e r e d e m p t i o n f u n d is a b o u t $1)50,000,000. Something'
like $210,000,000 would t h u s b e released u n d e r t h e p r o b a b l e
w o r k i n g o u t of t h e s y s t e m a n d t h i s w o u l d be d r a w n upon f o r
t h e o t h e r p u r p o s e s a l r e a d y r e f e r r e d to.
COUNTRY BANKS UNDER T H E BILL.

T h e r e h a s been a s t r e n u o u s e f f o r t to p r e j u d i c e t h e c o u n t r y
b a n k s a g a i n s t t h e bill, Inspired, a s I believe a n d h a v e r e a s o n to
a s s e r t , by b a n k i n g i n s t i t u t i o n s w i t h close a n d e x t e n s i v e W a l l
S t r e e t affiliations. T h e p r o p a g a n d a w a s not p r o m p t e d by a n y
special solicitude f o r t h e c o u n t r y b a n k s , b u t by c h a g r i n over
file prospect of b e i n g d e p r i v e d by t h i s bill of t h e r e s e r v e f u n d s
of t h e c o u n t r y h a n k s . Sir. OWEN, (be S e n a t o r f r o m O k l a h o m a ,
in a l e t t e r w h i c h h a s since been m a d e a S e n a t e d o c u m e n t ,
s h a r p l y pointed o u t t h e f a l l a c y of t h e c o n t e n t i o n t h a t c o u n t r y
b a n k s a r e Offered no i n d u c e m e n t s to come into t h i s s y s t e m ; so
it w o u l d seem s u p e r f l u o u s f o r mo lo p r e s e n t t h i s a s p e c t of t h e
c a s e h e r e . H o w e v e r , 1 shall do so very briefly.
L e t it be a s s u m e d t h a t a b a n k of $100,000 c a p i t a l ( n o surp l u s ) is t h e o w n e r of $75,000 in U n i t e d S t a t e s 2 per cent bonds
a n d h a s o u t s t a n d i n g $75,000 of c i r c u l a t i o n .
L e t it also be
a s s u m e d that, t h i s bank h a s total o u t s t a n d i n g d e p o s i t s of
$100,000. T h e h a n k is a c o u n t r y hank.
10022 12n.r)0

27

H o w will t h e n e w p l a n a f f e c t t h i s i n s t i t u t i o n ? Tn t h e first
Place, t h e b a n k in q u e s t i o n , if i t h a s $100,000 of deposits, m u s t
h a v e on h a n d in i t s own v a u l t s 0 p e r cent of t h a t a m o u n t in
cash, o r $24,000, a n d m u s t h a v e 9 p e r cent of t h a t a m o u n t , or
v«>0,000, a s a b a l a n c e w i t h t h e r e s e r v e city b a n k .
, U n d e r t h i s bill t h i s b a n k m u s t h a v e a r e s e r v e of 32 p e r
i n s t e a d of 15, of w h i c h 5 p e r cent, o r $20,000, m u s t be in casft
t h e v a u l t s , w h i l e $20,000 m u s t u l t i m a t e l y be placed w i t h t h e
r e s e r v e b a n k a n d $8,000 m a y be k e p t e i t h e r in t h e one place o r
in t h e other, w h e n Hie w h o l e m e a s u r e h a s become o p e r a t i v e a t
t h e e n d of t h r e e y e a r s .
As t h e b a n k h a s $21,000 c a s h w h e n it e n t e r s t h e system, it i s
•Vf,000 a b e a d of t h e a m o u n t r e q u i r e d to be held in i t s o w n v a u l t s ,
i t can d r a w f o r t h e r e m a i n i n g $28,000 r e q u i r e d of it upon i t s
Present r e s e r v e city c o r r e s p o n d e n t , w i t h w h i c h it h o l d s $;]G,000
s e n d i n g t h e $28,000 chock to t h e n e w F e d e r a l r e s e r v e b a n k .
A l t e r t h e t r a n s a c t i o n is over its r e s e r v e s will be complete, a n d
h will h a v e $4,000 in c a s h a n d $S,000 in b a l a n c e s over a n d
a b o v e w h a t it n e e d s to m e e t it r e s e r v e r e q u i r e m e n t s .
T h e b a n k , however, m u s t c o n t r i b u t e $10,000 to t h e c a p i t a l
stock of t h e F e d e r a l r e s e r v e b a n k w h i c h it lias joined. If it
P a y s t h i s a m o u n t o u t of t h e $12,000 s u r p l u s it: will become t h e '
o w n e r of $10,000 stock In t h e n e w r e s e r v e b a n k a n d will still
wave $2,000 s u r p l u s o u t of its f o r m e r balances.
T h i s b a n k w a s receiving p r o b a b l y 2 p e r cent upon t h e $:?(j,000
b a l a n c e s it c a r r i e d , m a k i n g in all $720 a y e a r . A s s u m i n g t h a t
- sto<-'k
Il>e n e w r e s e r v e b a n k p a y s 5 per cent, it will yield
j u income of $500 a y e a r . T h e b a n k , moreover, h a s $2,000 of
i r e o c a s h still r e m a i n i n g w h i c h it can loan a f t e r w i t h d r a w i n g it
&
l ) l ' o s e u t c o r r e s p o n d e n t s — s a y , a t 5 p e r cent, b r i n g i n g in
a n n u a l l y . O r if it w e r e to u s e (his $2,000 a s a r e s e r v e
upon w h i c h to build u p n e w loans it could lend a b o u t $10 000
chereon, w h i c h a t 5 p e r cent w o u l d yield it $800. On t h i s b a s i s
"10 c h a n g e d s i t u a t i o n of t h e b a n k m i g h t r e s u l t in a loss of a b o u t
11
?1
3"ear o r in a g a i n of $580 or in a n y t h i n g b e t w e e n (hose
^ o sums. T h e r e a s o n a b l e e x p e c t a t i o n w o u l d be t h a t (he b a n k
« o u r d g e t a m a t e r i a l i n c r e a s e in i t s revenue. J u s t how m u c h
u o u l d d e p e n d upon (he e x t e n t of t h e loans it could m a k e in
espouse to d e m a n d in (lie c o m m u n i t y .
J
'bo b a n k would bo a b l e to e x c h a n g e e a c h y e a r 5 p e r cent of
I . , f l ? f o n t * 7 5 ' 0 0 0 o f 2 Per c e n t bonds, o r $3,750. If w e a s s u m e
" i t t h e b a n k sells t h e :? p e r c e n t b o n d s it receives t h r o u g h
u s e x c h a n g e a t p a r , a n d w i t h the proceeds p a y s off t h e n o t e s
a s s n f ° , U s t a , 1 ( l i n ; ? n « a i n s t t b c m > t b e effect is simply to r e d u c e its
lhlbilit,es
W i
,
l>y e q u a l a m o u n t s , a t t h e s a m e t i m e refl 0ln t h e noccssit v
tif»h r K
'
- of r e t a i n i n g t h e 5 per cent redempbasi r 1 m W a s h i n g t o n w h i c h a t once b e c o m e s a v a i l a b l e a s a
f i m i r o r , ™ s e r v e l o a n s a t home. T h i s 5 per cent r e d e m p t i o n
b e 0 1 1 <?:>> Tr
lo-»,.
• ' '° e q u i v a l e n t to a b o u t $183. If t h i s w e r e
If h o l ' o 0 C t , y n t 5 i m ' c o u t ifc w o u l d . v i o l ( l n n income of $9.25.
nbone «i 5 i > w S r P l l S C d u s a 1 2 P e r cent r e s e r v e a g a i n s t loans,
a n s c o u l d b o m a d o w b i o b !lt c
yiel
p e r cent w o u l d
oho™ ,
, T h l s i f t a k c n i u connection w i t h t h e s h o w i n g m a d e
Uce t h 0 l o s s t 0
11
the enin°• «r.-r
^
y e a r or w o u l d i n c r e a s e
Wltb
PoinTci i i 0
c o r r e s p o n d i n g c h a n g e s in i n t e n n e d i a t o
w c e n
10s0 t u
oxt
outstnnm
V
'°
r e m e s . If t h e b a n k s h a d no n o t e s
b 0 1 u l s w b i c b 11
ivo« ;
°fi U i- 1 S t
c o n v e r t e d a n d sold, it
loooo f U 1 ( l f u n d s c q u a l t o l b e a m o u n t of t h e b o n d s t h u s

28

sold w h i c h could bo loaned a t 5 per cent i n s t e a d of t h e 2 p e r
cent now paid by t h e bonds. T i n s would be a d i f f e r e n c e of :*>
per cent per y e a r in f a v o r of t h e n e w p l a n on a p r i n c i p a l of
$3,750. On tiie o t h e r hand, if t h e b a n k simply paid off i l s
o u t s t a n d i n g n o t e s o u t of n o n r e s e r v e money on h a n d ( a s in
m a n y c a s e s it m i g h t ) a n d held t h e now 15 per cent b o n d s a s a n
i n v e s t m e n t it: would protit to (he extent of 1 per cent over t h e
e x i s t i n g s i t u a t i o n on a p r i n c i p a l of $3,750 a y e a r or $37.50 t h e
first y e a r , $75 t h e second y e a r , a n d so on. At t h e end of 20
y e a r s it: would be .1 per cent a h e a d on i t s w h o l e $75,000 bonds,
or $750 a n n u a l l y . In t h i s e v e n t it is c l e a r t h a t w i t h i n t h r e e
y e a r s (he i n c r e a s e d r e v e n u e f r o n t its b o n d s w o u l d offset a n y
possible loss d u e to (ho sacrifice on t h e 2 per c e n t i n t e r e s t on
reserves. A g a i n s t t h i s m i g h t f a i r l y he set off t h e income, if
any, t h a t it m i g h t h a v e m a d e by l o a n i n g I lie c a s h used to cancel
its o u t s t a n d i n g b a n k notes.
S u m m a r i z i n g , it is s a f e to s a y t h a t upon the n a r r o w e s t possible b a s i s likely to p r e s e n t itself in t h e c a s e of t h i s b a n k t h e
i n s t i t u t i o n would, if it p a i d u p i t s w h o l e r e s e r v e s u n d e r t h e new
p l a n in cash, f u l l y c l e a r itself a n d m a k e a n a d d i t i o n a l r e v e n u e
of f r o m $200 to $500. If i n s t e a d of p a y i n g u p i t s r e s e r v e s in
c a s h it got the r e s e r v e c r e d i t by r c d i s c o u n t i n g , it m i g h t p r o f i t
to a very much g r e a t e r d e g r e e ; how m u c h g r e a t e r c a n not bo
e s t i m a t e d w i t h o u t k n o w i n g t h e r a t e of i n t e r e s t in t h e comm u n i t y a n d t h e e x t e n t to w h i c h it could obtain p a p e r eligible
f o r rediscount,
REFUNDING BONDS.

K e t i r e m e n t of the n a t i o n a l - b a n k c i r c u l a t i o n , f r e q u e n t l y red u n d a n t a n d n e v e r elastic, is r e g a r d e d a s one of t h e e s s e n t i a l s
of c u r r e n c y r e f o r m . D u r i n g t h e 12 y e a r s t h a t I h a v e s e r v e d
a s a m e m b e r of t h e B a n k i n g a n d C u r r e n c y C o m m i t t e e t h e universal t e s t i m o n y of b a n k e r a n d b u s i n e s s m a n , t e x t w r i t e r a n d
political economist h a s f a v o r e d t h i s a l t e r a t i o n in t h e e x i s t i n g
system. All political p a r t i e s a r e pledged to t h i s r e f o r m , n o t a b l y
t h e D e m o c r a t i c P a r t y , w h i c h lias r e p e a t e d l y d e c l a r e d f o r it.
I n ils p l a t f o r m of 189G it d e c l a r e d :
C o n g r e s s alone lias tlie power to coin and issue money, a n d P r e s i d e n t
J a c k s o n declared that, t h i s p o w e r could aot be d e l e g a t e d It) Corporations
or Individuals. We I herefore d e n o u n c e t h e Issuance of n o t e s intended to
c i r c u l a t e a s money by n a t i o n a l b a n k s a s In d e r o g a t i o n of the C o n s t i t u tion, a n d w e d e m a n d t h a t all paper w h i c h is m a d e a legal tender f o r
public and p r i v a t e debts, or w h i c h is receivable f o r d u e s to the l.'nlted
S t a t e s , shall be issued by the G o v e r n m e n t of the U n i t e d S t a t e s and
s h a l l bo redeemable in coin.

A g a i n , in PJOO, t h e D e m o c r a t i c p l a t f o r m on t h e s a m e s u b j e c t
declared that—
A p e r m a n e n t n a t i o n a l - b a n k currency, secured by G o v e r n m e n t bonds,
m u s t have a p e r m a n e n t debt (o rest, upon, and if I lie bank currency is
to increase t h e debt m u s t also increase.
T h e Republican c u r r e n c y
s c h e m e Is t h e r e f o r e a s c h e m e for f a s t e n i n g upon the t a x p a y e r s a perpetual a n d g r o w i n g debt.
Wo are opposed to this p r i v a t e c o r p o r a t i o n
paper c i r c u l a t e d a s m o n e y but w i t h o u t legal-tender q u a l i t i e s a n d demand (he r e t i r e m e n t of t h e n a t i o n a l bank n o t e s a s f a s t a s G o v e r n m e n t
p a p e r or s l i v e r c e r t i f i c a t e s can bo s u b s t i t u t e d f o r them.

T h i s m e a s u r e p r o v i d e s f o r t h e g r a d u a l r e t i r e m e n t of n a t i o n a l b a n k c i r c u l a t i o n over a period of 20 y e a r s a n d the reversion of
t h e r i g h t of note issue to t h e G o v e r n m e n t of t h e U n i t e d S t a t e s .
Such a n a l t e r a t i o n in t h e e x i s t i n g s y s t e m n e c e s s i t a t e s t h e r e f u n d ing of United S t a t e s 2 per c e n t bonds, w h i c h a f f o r d t h e b a s i s of
b a n k - n o t e c i r c u l a t i o n . T o my m i n d it n e e d s no a r g u m e n t to dePennine t h a t both t h e h o n o r a n d t h e c r e d i t of t h e G o v e r n m e n t
a r e involved in t h e proposition t h a t w h e n e v e r t h e G o v e r n m e n t
J 0022

12o. r )«

29

W i t h d r a w s t h e c i r c u l a t i o n p r i v i l e g e f r o m i t s 2 per cent b o n d s i t
should r e i m b u r s e tho h o l d e r s of i t s s e c u r i t i e s for t h e i n e v i t a b l e
d e p r e c i a t i o n w h i c h will ensue. T h e r e f u n d i n g s c h e m e w h i c h w e
h a v e h e r o p r o v i d e d c o n t e m p l a t e s t h i s ; a n d w h i l e it involves
t h e a s s u m p t i o n by t h o G o v e r n m e n t of a slightly i n c r e a s e d interest c h a r g e , it is p e r f e c t l y m a n i f e s t t h a t t h e G o v e r n m e n t lias long
ago received i t s c o m p e n s a t i o n in t h e a b n o r m a l l y low r a t e a t
which it h a s been enabled f o r y e a r s to float its i n d e b t e d n e s s
u n d e r t h e e x i s t i n g system.
B u t a s i d e f r o m tliis, Mr. C h a i r m a n , tho bill p r o v i d e s o t h e r
c o m p e n s a t i o n s . I t e n a b l e s t h e G o v e r n m e n t to r e s u m e a n d exercise a f u n c t i o n w h i c h f o r 50 y e a r s h a s boon confided to priv a t e c o r p o r a t i o n s , t h e v a l u e of w h i c h h a s been v a r i o u s l y comb a t e d to bo b e t w e e n l i a n d 2 j p e r c e n t u m on t h e a m o u n t of
circulation outstanding.
In a d d i t i o n to t h i s t h e G o v e r n m e n t
s h a r e s in (lie e x c e s s e a r n i n g s of t h e regional r e s e r v e b a n k s ; a n d
hnally,' but: m o s t i m p o r t a n t of ail. t h i s n e w s y s t e m will p r o v i d e a
r e d i s c o u n t scheme so m u c h less e x p e n s i v e t h a n t h e e x i s t i n g bonds e c u r e d c u r r e n c y p l a n a s to m a k e c e r t a i n a r e d u c t i o n in t h e
i n t e r e s t c h a r g e upon commercial t r a n s a c t i o n s w i t h t h e b a n k s ;
so t h a t , f r o m every p r a c t i c a l point of view, a s well a s upon
c o n s i d e r a t i o n s of public honor, t h e 2 per cent G o v e r n m e n t b o n d s
s h o u l d be r e f u n d e d into :> p e r e e n t s or paid b y t h e Governm e n t a t p a r w i t h a c c r u e d i n t e r e s t . I a m well a w a r e t h a t t h e r e
!
»re c r i t i c s of t h i s plan w h o a r e not m e r e c a v i l a r s ; b u t w e do
not f e a r to s u b j e c t o u r a t t i t u d e on t h i s q u e s t i o n to t h e d i s p a s s i o n a t e j u d g m e n t oi' t h e A m e r i c a n people.
DIVISION- OF E A R N I N G S .

T h e division of e a r n i n g s provided by t i n s bill f o r t h a F e d e r a l
r e s e r v e b a n k s will s t a n d tho t e s t of f a i r d i s p u t a t i o n , albeit
m a n y of t h e b a n k e r s a r e i n s i s t i n g t h a t t h e c u m u l a t i v e d i v i d e n d
Provided s h o u l d be i n c r e a s e d f r o m 5 to <i p e r cent. T h e r a t e
r
'\-ed by t h i s bill is e x a c t l y t h e r a t e fixed by t h e A l d r i c h hill,
which tho b a n k e r s u n a n i m o u s l y indorsed. B u t t h e contention is
h a t t h o A l d r i c h bill did not s h i f t r e s e r v e s a n d t h u s d e p r i v e
t h e c o u n t r y b a n k s of the 2 p e r c e n t i n t e r e s t w h i c h t h e y h a v e
received u p o n t h e i r b a l a n c e s w i t h c o r r e s p o n d e n t b a n k s . T h a t
i s true. N e i t h e r did t h e A l d r i c h bill r e d u c e c o u n t r y r e s e r v e s
f r o m i n to 12 p e r c e n t a n d o t h e r r e s e r v e s f r o m 25 to I S per
cent, n o r did t h e A l d r i c h bill provide, in a d d i t i o n to a cumul a t i v e dividend, t h a t t h e s t o c k h o l d i n g b a n k s m i g h t roceive 40
Per c e n t of t h o e x c e s s e a r n i n g s of t h e system. I h a v e a l r e a d y
Pointed o u t t h a t t h e i n t e r e s t to be derived by c o u n t r y b a n k s
lroin c r e d i t e x t e n s i o n s b a s e d on t h e r e s e r v e - r e l e a s e clause of
this bill will g r e a t l y m o r e t h a n c o m p e n s a t e thoin f o r t h e loss of
i n t e r e s t on t h e i r balances, to s a y n o t h i n g of t h e v a s t l y s u p e r i o r
a d v a n t a g e s of a b a n k i n g s y s t e m w h i c h will n e v e r b r e a k d o w n
over a b a n k i n g s y s t e m w h i c h h a s r e p e a t e d l y involved all t h e
b a n k s a n d t h e whole c o u n t r y in d i s a s t e r .
NOTE

ISSUKS.

I n t h i s c o u n t r y t h e r e is s h a r p division of opinion upon tlr*
Question of n o t e issues, one school of t h o u g h t c o n t e n d i n g t h a t it
is s t r i c t l y a b a n k i n g f u n c t i o n a n d a n o t h e r tiiat it is a n essential
f u n c t i o n of g o v e r n m e n t . I n t h i s bill we h a v e provided t h a t t h e
G o v e r n m e n t shall issue t h e notes, b u t only upon a p p l i c a t i o n by
t'»e b a n k s a n d t h r o u g h t h e b a n k s . T h e c o n t r o v e r s y over thia
provision is e n t i r e l y s e n t i m e n t a l . T h e reetion a s it s t a n d s con
10022—12350

:io
s t i t u t e s a c o m p r o m i s e ; b u t t h e r e is not a single element of uns o u n d n e s s in I lie provision. B e h i n d (lie n o t e s is a gold r e s e r v e
of .'53 i per cent, c o m m e r c i a l s e c u r i t y a m o u n t i n g to d o l l a r f o r
dollar, a first a n d p a r a m o u n t lien on all t h e a s s e t s of t h e r e s e r v e
b a n k s a n d , s u p e r i m p o s e d , t h e obligation of t h e U n i t e d S t a t e s .
T o t h o s e who a d v o c a t e G o v e r n m e n t issue, it m a y be said t h a t
they h a v e it h e r o in t e r m s , w i t h d i s c r e t i o n in tlio F e d e r a l res e r v e b o a r d to issue upon a p p l i c a t i o n o r to w i t h h o l d . T o those
w h o contend f o r b a n k issues, we m a y s a y t h a t , in t h e p r a c t i c a l
o p e r a t i o n of t h e s y s t e m , you h a v e it h e r e ; because only upon
a p p l i c a t i o n of t h e b a n k c a n t h e G o v e r n m e n t issue. T o t h o s e
who affect, or sincerely e n t e r t a i n , s o l i c i t u d e f o r t h e Governm e n t ' s c r e d i t , Tt m a y be pointed out, a s a p r a c t i c a l fact, t h a t t h e
s e c u r i t y b e h i n d t h e n o t e s h e r e provided is m a n y t i m e s m o r e t h a n
sullicicnt to p r o t e c t (lie G o v e r n m e n t b e f o r e t h e n o t e lioldur
would r e a c h t h e T r e a s u r y c o u n t e r . W h a t e v e r o t h e r o b j e c t i o n s
m a y be u r g e d to t h e system, n o t a c r i t i c of t h i s b i l l — b a n k e r ,
b u s i n e s s m a n , or s p e c i a l i s t — h a s e v e r s u g g e s t e d t h a t t h e n o t e
h e r e p r o v i d e d is not a s sound a s gold itself. [ A p p l a u s e . ]
CONCLUSION.

I will not, Mr. C h a i r m a n , w e a r y M e m b e r s w i t h a n e x p l a n a tion n o w of t h e m i n o r d e t a i l s of t h i s m e a s u r e ; t h e s e a r e f u l l y
set o u t in t h e p r i n t e d r e p o r t which a c c o m p a n i e s t h e bill. W e
h a v e m a d e p r o v i s i o n f o r f o r e i g n b a n k i n g , d e s i g n e d to e x t e n d
o u r f o r e i g n t r a d e by f u r n i s h i n g q u i c k e r e x c h a n g e s a n d a f f o r d i n g
infinitely b e t t e r b a n k i n g f a c i l i t i e s in t h a t field of e n t e r p r i s e .
W e h a v e i n c o r p o r a t e d in t h e bill a s a v i n g s - d e p a r t m e n t clause,
w h i c h will e n a b l e t h e n a t i o n a l b a n k s of t h e c o u n t r y to do busin e s s of t h i s n a t u r e u n d e r a u t h o r i t y of t h e s t a t u t e r a t h e r t h a n
in d i s r e g a r d of t h e law. Wo h a v e p r o v i d e d a m o r e effective a n d
less e x p e n s i v e m e t h o d of d o m e s t i c e x c h a n g e a n d collection a n d
also a s y s t e m of e x a m i n a t i o n a n d publicity w h i c h b e t t e r safeg u a r d t h e b a n k i n g o p e r a t i o n s of t h e c o u n t r y .
T h e w o r k of t h e B a n k i n g a n d C u r r e n c y C o m m i t t e e h a s been
t e d i o u s a n d laborious, d e a l i n g w i t h a s u b j e c t exceedingly complex a n d u p o n t h e d e t a i l s of which, if not upon t h e g e n e r a l
p r i n c i p l e s involved, t h e r e a r e w i d e d i v e r g e n c i e s of opinion a n d
v a r y i n g d e g r e e s of a n t a g o n i s m . W e h a v e done t h e best we could.
W i t h o u t p r a c t i c a l b a n k i n g experience, d i s c l a i m i n g e x p e r t knowledge of t h e s u b j e c t , f h a v e t r i e d a s c h a i r m a n of t h e c o m m i t t e e
1o reconcile conflicting views, to compose all f r i c t i o n f r o m
w h a t e v e r s o u r c e a r i s i n g , to e m b o d y in t h e bill t h e t e c h n i c a l
k n o w l e d g e of t h e b a n k e r , t h e wisdom of t h e philosophers, a n d
t h e r i g h t s of the people. W e h a v e not d e s i r e d to a p p r o a c h o r
consider t h e q u e s t i o n f r o m t h e s t a n d p o i n t of p a r t y politics. I t
is too u n i v e r s a l a problem f o r t h a t . I t is n o t a m a t t e r f o r p a r t y
a d v a n t a g e . I h a v e k e p t in c o n s t a n t c o n t a c t a n d p l e a s a n t interc o u r s e w i t h t h e r a n k i n g m i n o r i t y m e m b e r of t h e c o m m i t t e e , giving him e v e r y successive r e p r i n t of t h e bill, a f f o r d i n g all t h e inf o r m a t i o n t h a t he m i g h t desire, a n d i n v i t i n g in good f a i t h such
s u g g e s t i o n s a s lie m i g h t c a r e to m a k e . A n d now, Mr. C h a i r m a n ,
s u r e of o u r g r o u n d , y e t conscious of h u m a n l i m i t a t i o n s , w e subm i t t h i s bill to t h e j u d g m e n t of t h e House, Challenging a f a i r cons i d e r a t i o n of its p r o v i s i o n s a n d devoutly invoking t h e p a t r i o t i c
c o o p e r a t i o n of o u r colleagues in w h a t should be a g r e a t service
to t h e c o u n t r y a n d a m e m o r a b l e a c h i e v e m e n t of t h e S i x t y - t h i r d
Congress. [Loud a p p l a u s e . ]
J 0022 -12350

S P E E C H

II 0 IST . OA R T E R
OP
IN

VIRGINIA,

T H E I I O U S B OF

Saturday,

GL A SS,

REPRESENTATIVES,

September

13, 19J3.

Union F 0 ' 1 8 0
Committee of tlie Whole House on the s t a l e of the
for til
, "n;' 01- consideration the hill (II. K. 7S37) to provide
currmi» estjiluishment
of Federal reserve hanks, for furnishing an elastic
i r t o l (ll
est-1 iiliui,' / n i o r o "K means of rediscount ing commercial papen and to
an , ' .
eftective supervision of banking in the United States,
tor other purposes.

Mr. GLASS. Mr. C h a i r m a n , t h e m e m b e r s of (lie R a n k i n g a m i
^ f i r r e n e y Committee of t h e H o u s e on t h i s side of (lie aisle have
leason to feel a lively sense of s a t i s f a c t i o n over t h e f a c t t h a t ,
<uier a general discussion of t h e currency bill reported to t h e
£ louse by t h e committee extending, over it period of four da vs.
«o impression a d v e r s e to t h e m e a s u r e seems to h a v e boon
created.
I c o n f e s s to a sense of personal gratification t h a t my op.m»ig speech in p r e s e n t i n g t h e bill to (lie House seems to h a v e
•' Ulcninted every objection t h a t might, in reason, be o f f e r e d ;
•"m 1 truBt 1 may, with becoming modesty, e x p r e s s t h e judgment
l,
«U it a n s w e r e d every a d v e r s e suggestion before it w a s m a d e
" e r e upon t h e lloor of (he Iiouse, except, perhaps, one or two
I'oints involving, I suspect, legal refinements.
Member a f t e r Member on t h e Republican side h a s come for« « r d (o (his stand and, declaring he had t h i s or t h a t objection
the bill, nevertheless'concluded t h a t it is so much b e t t e r t h a n
»>e existing system lie would h a v e (o vote f o r it upon its final
Passage. Wo, of course, think it is ro much b e t t e r t h a n (lie
J-Msting system t h a t it should p a s s (he House w i t h a unanimt h a t will i n s u r e its speedy e n a c t m e n t into law.
There
S
cems to be little serious objection to (lie details of the hill.
Our Republican f r i e n d s a p p a r e n t l y do not object so much to
what (he bill provides as to t h e m a n n e r of its consideration,
j here h a s been a good deal of criticism on t h i s score, a s if we
'.id proceeded in a most u n u s u a l way and adopted unprecedented methods.
Some gentlemen who h a v e urged t h i s objection a r e absolutely
^'ncore in t h e i r opposition to c a u c u s processes. I h a v e a degree
toleration for colleagues w h o ' r e a l l y t a k e t h a t view, and to
lose I beg (o repeat t h e a s s u r a n c e t h a t we h a v e n o t desi-ed
« m a k e a p a r t i s a n m a t t e r of t h i s banking a n d , c u r r e n c y bill in
j y offensive Sense. R u t it must be remembered t h a t we logist i c t h r o u g h a n d by p a r t i e s h e r e ; a n d I h a v e been unable to
m e r s t a n d how we may ever expect to overcome t h a t defect of
u 11
1 American system, if it lie a defect.
0 lliKS 1 , 0 0 1 1
in™
complaint about (here not h a v i n g been hear"gs on t h e bill. T h e a n s w e r is t h a t (he bill itself is t h e prodex
reno
t e n s i v e h e a r i n g s on the subject of b a n k i n g and cury i r e f o r m . A s soon a s it became definitely known t h a t the
V iy-third Congress would be immediatelv charged with t i n
r
Jf 10022—j 2330
*
;;i

32

responsibility of c u r r e n c y legislation t h e B a n k i n g a n d C u r r e n c y
C o m m i t t e e of tlio H o u s e set a b o u t g e t t i n g i n f o r m a t i o n on tlio
s u b j e c t . W o h a d e l a b o r a t e hearings, a s I h a v e a l r e a d y s t a t e d ,
to which not only w e r e t h e b a n k e r s of tlio c o u n t r y i n v i t e d b u t
t h e select r e p r e s e n t a t i v e s of every n a t i o n a l g r o u p in A m e r i c a .
T h e r e p r e s e n t a t i v e s of t h e t r a d e - u n i o n s , t h e f a r m e r s ' u n i o n s
a n d g r a n g e s , c o m m e r c i a l bodies, r a i l r o a d employees, tlio m a n u f a c t u r e r s , t h e c r e d i t men, s p e c i a l i s t s 011 t h e s u b j e c t — a l l w e r e
i n v i t e d to t e s t i f y a w l did t e s t i f y .
As to t h e c o n s i d e r a t i o n of t h e bill by t h e C o m m i t t e e ou
B a n k i n g a n d C u r r e n c y , t h e D e m o c r a t i c m e m b e r s h a d conferences of t h e i r o w n ; b u t t h e r e w a s 110 b i n d i n g obligation upon
a n y m e m b e r to vote f o r a n y provision t h e r e a g r e e d upon.
For weeks we carefully and diligently considered every
f e a t u r e of a t e n t a t i v e m e a s u r e , d i s c u s s i n g t h e a l t e r a t i o n s t h a t
w e r e d e s i r a b l e a n d m a k i n g c h a n g e s t h a t seemed to be w i s e .
D u r i n g all of t h a t period, a s I h a v e previously indicated, I
kept in c o n s t a n t c o m m u n i c a t i o n a n d c o n t a c t w i t h t h e senior
B e p u b l i c a n m e m b e r of t h e c o m m i t t e e , a s s u r i n g him t h a t w e
did not c a r e to m a k e a p a r t i s a n issue of t h e problem. W e f e l t
obliged, however, t o proceed in t h e u s u a l w a y .
A f t e r w e h a d a g r e e d 011 t h e d e t a i l s of t h e bill it w a s t a k e n
to a p a r t y c a u c u s . I s t h a t a s t a r t l i n g p r o c e d u r e ? I s t h e r e
a n y t h i n g of a n u n u s u a l n a t u r e a b o u t t h a t ? I s it s o m e t h i n g
so e x t r a o r d i n a r y a n d g e n u i n e l y u n i q u e a s to occasion a m a z e m e n t on t h e R e p u b l i c a n side of t h i s H o u s e ?
Mr. P L A T T . Will the g e n t l e m a n yield?
Mr. G L A S S . C e r t a i n l y .
Mr. P L A T T . I a s k f o r i n f o r m a t i o n . I s it u s u a l to t a k e bills
into caucus, d i s c u s s t h e m there, a n d s e t t l e t h e m b e f o r e t h e y h a v e
been in g e n e r a l d e b a t e in t h e H o u s e ?
Mr. C L A S S . I t is ou (he B e p u b l i c a n side. W h e n t h e Republ i c a n s w e r e in t h e m a j o r i t y it w a s n o t only u s u a l , b u t a l m o s t
invariable.
Mr. P L A T T . I h a v e been i n f o r m e d t h a t t h e r e h a s only been
one case on one bill.
Mr. C L A S S . I n e v e r h a v e k n o w n a n i m p o r t a n t m e a s u r e to
pass t h i s H o u s e r e l a t i n g to t h e c u r r e n c y or tariff t h a t w a s not
a g r e e d on in p a r t y c a u c u s or p u t t h r o u g h u n d e r p a r t y rule.
' Mr. P L A T T . W a s t h a t in c a u c u s b e f o r e going in g e n e r a l deb a t e in t h e H o u s e ?
Mr. G L A S S . Tlio V r e c l a n d c u r r e n c y bill w a s p u t in t h e Bep u b l i c a n caucus, a n d t h e r e w a s 110 d e b a t e of a n y d e s c r i p t i o n on
it in (lie H o u s e u n t i l (lie d a y it w a s passed. T h e n only f o u r
h o u r s of general d e b a t e w e r e a l l o w e d i n s t e a d of f o u r d a y s ,
wliich w e h a v e given you. [ A p p l a u s e on t h e D e m o c r a t i c side.J
Mr. SLOAN. Will t h e g e n t l e m a n y i e l d ?
Mr. G L A S S . Yes.
,
Mr SLOAN. A s a n o t h e r n e w Member, I would like to a s k
(lie g e n t l e m a n if tlio P a y n e tariff bill w a s c o n s i d e r e d in c a u c u s
by the B e p u b l i c a n P a r t y ? I do n o t know. I w a s not h e r o a t
tiie time, a n d I h a v e n o t been i n f o r m e d . I do n o t m e a n (lie
cofo mt m
h ei t tHe eo,u sbeu. t I m e a n t h e c a u c u s of t h e R. e p u b l i c a n M e m b e r s
M r G L A S S . I w a s here, b u t I w a s n o t in t h e s e c r e t s of tlio
Republican Party.
1 i m a g i n e t h e tariff bill w e n t to c a u c u s ;
b u t if not, t h e R e p u b l i c a n P a r t y of t h e H o u s e w a s t h e n o p e r a t ^ . ^
J 0022"-12350
^

I

33

l a g u n d e r r u l e s a n d discipline t h a t r e q u i r e d e v e r y R e p u b l i c a n
M e m b e r to toe (lie m a r k or let Uncle J o e k n o w t h e r e a s o n w h y .
LApplauso on t h e D e m o c r a t i c side.]
Mr. S T E E N E R S O N . Will (he g e n t l e m a n y i e l d ?
Mr. GLASS. Yes.
Mr. S T E E N E R S O N . H a s (lie g e n t l e m a n ever r e a d t h e resolution t h a t w a s p a s s e d a t (he R e p u b l i c a n c a u c u s w h i c h a g r e e d
t o (ho Yreeland-Aldrich bill?
Mr. G L A S S . Y e s ; 1 h a v e r e a d it. I h a v e it r i g h t b e f o r e me,
a n d 1 a m going to r e a d it to you p r e s e n t l y . [ A p p l a u s e on t h e
D e m o c r a t i c side.l
Mr. S T E E N E R S O N . So h a v e I. I s a y t h e g e n t l e m a n misrepresents t h a t resolution
Mr. GLASS. I d o n o t m i s r e p r e s e n t t h e resolution, b e c a u s e
1 h a v e not yet r e f e r r e d to it.
Mr. S T E E N E R S O N . T h e g e n t l e m a n s a i d w e w e r e b o u n d by
t h e a c t i o n in c a u c u s .
Mr. G L A S S . I h a v e n o t s a i d a n y t h i n g of (lie k i n d ; b u t I a m
ng to say it, a n d p r o v e it.
Ir. S T E E N E R S O N . I d e f y t h e g e n t l e m a n to p r o v e it.
J r . G L A S S . I will r e a d t h e resolution.
Ir. S T E E N E I I S O N . if t h e g e n t l e m a n will p e r m i t me, I will
d it.
Mr. G L A S S . Go a h e a d .
/
Mr. S T E E N E R S O N . T h i s is (ho resolution a d o p t e d a t t h e
c a u c u s on M a y n, 100S, on (ho Y r e e l a n d c u r r e n c y b i l l :
lfesolvcJ,
T h a t this m e e t i n g or any a d j o u r n m e n t thereof Is only a
conference and not a caucus, and shall not have the binding effect of a
caucus ; and that those w h o participate in its deliberations shall be absolutely free hereafter to act in accordance willi their own Judgment
with reference to all m a t t e r s considered before it.

T h a t is f o u n d on p a g e 6 2 1 0 of t h e C O N G R E S S I O N A L R E C O R D ,
M a y 14. 1008, first session, S i x t i e t h Congress.
Mr. G L A S S . And to show J u s t how s i n c e r e you w e r e in t h a t
expression, when C h a r l e s N. F o w l e r , the R e p u b l i c a n c h a i r m a n
(
>f the R a n k i n g a n d C u r r e n c y Committee, u n d e r t o o k to act on
t h e resolution h i s head c a m e off. H o w a s r e m o v e d f r o m h i s
Position a n d Mr. Y r e e l a n d w a s m a d e c h a i r m a n in h i s s t e a d .
[ A p p l a u s e on t h e D e m o c r a t i c side.] T h a t is h o w m u c h f r e e d o m
t h e r e was.
Mr. S T E E N E R S O N . H e r e is t h e R E C O R D b e f o r e me.
Mr. G L A S S . A n d t h e r e 1 h a v e given you t h e r e a l t r a n s a c t i o n
a s it o c c u r r e d . Mr. F o w l e r , w h o h a d been e i g h t y e a r s c h a i r m a n of (lie R a n k i n g a n d C u r r e n c y C o m m i t t e e , w a s h u m i l i a t e d
a n d d e c a p i t a t e d b e c a u s e lie w a s simple e n o u g h to t h i n k y o u r
c a u c u s resolution m e a n t w h a t it said.
Mr. S T E E N E R S O N . Oh, n o ; t h a t is n o t it, I d e n y t h a t .
Mr. I i E L G E S E N . Will t h e g e n t l e m a n yield
T h e C H A I R M A N . D o e s (lie g e n t l e m a n y i e l d ?
Mr. G L A S S . I did n o t yield, b u t I will.
Mr. I i E L G E S E N . A s s u m i n g t h a t t h e R e p u b l i c a n s f o r long
3'Oars h a v e d o n e b u s i n e s s a l o n g t h e s a m e line D e m o c r a t s a r e n o w
d o i n g business, is it n o t t r u e (lie D e m o c r a t s h a v e c o m p l a i n e d
n,,
d criticized t h a t m e t h o d f o r t h e l a s t 10 y e a r s ?
Mr. (J L A S S . Y e s ; J O H N S H A R P WIRJ.r.vMS used to r u s h u p
a n d d o w n t h i s a i s l e n e a r l y every d a y in t h e session, e x c l a i m i n g :
H e r e is a n o t h e r o u t r a g e you a r e a b o u t to p e r p e t r a t e , " a n d
t h a t i s w h a t you gentlemen a r e d o i n g now w h e n w e a r e pr<>
Posing to p a s s t h i s bill.
5i"oi>2—iL»:;r»G - :5

34

Mr. J O H N S O N of W a s h i n g t o n . W i l l t h e g e n t l e m a n y i e l d f o r
a question?
Mr. G L A S S . Oh, n o ; I w a n t to p r o c e e d .
Mr. J O H N S O N of W a s h i n g t o n .
1 j u s t w a n t e d to a s k if t h e
D e m o c r a t i c c a u c u s w a s p a r t of t h e n e w f r e e d o m ?
Mr. G L A S S . Y e s ; o u r c a u c u s a c t i o n p o r t e n d s t h e n e w f r e e d o m — a n e w f r e e d o m s i g n a l i z e d b y a n a c h i e v e m e n t t h a t no o t h e r
C o n g r e s s h a s e v e r e x c e e d e d . W e a r e g o i n g to give you a revision of t h e t a r i f f a n d p a s s a c u r r e n c y bill a t a s i n g l e s e s s i o n
of C o n g r e s s . T h a t is n e w f r e e d o m , b o t h i n d u s t r i a l a n d financial. [ A p p l a u s e on t h e D e m o c r a t i c side.]
T h e gentleman f r o m Minnesota [Mr. STKENKRSON] t a l k s about
t h i s r e s o l u t i o n of h i s p a r t y " c o n f e r e n c e " b y w h i c h n o b o d y w a s
b o u n d . Let u s see w h a t M e m b e r s of h i s o w n p a r t y t h o u g h t of
t h a t r e s o l u t i o n . H e a r t h e p l a i n t of Mr. P r i n c e , a R e p u b l i c a n
m e m b e r of t h e C o m m i t t e e on B a n k i n g a n d C u r r e n c y of t h e
H o u s e , w i t h r e s p e c t to t h i s r e s o l u t i o n t h a t t h e g e n t l e m a n h a s
read:
My follow Members, put the yoke upon you if you will.

F r e e to a c t a s you p l e a s e ! Y e t h e r e w a s a R e p u b l i c a n M e m b e r
c o m p l a i n i n g t h a t t h e l a s t o n e of you w a s a b o u t to p u t on t h o
yoke, a n d t h e l a s t o n e of you did. T h e g e n t l e m a n w h o r e a d tn«*
resolution j u s t now went along w i t h the rest.
[ L a u g h t e r on
t h e D e m o c r a t i c side. |
" W a l k u n d e r t h e y o k e , " s a i d Mr. P r i n c e ; " u n d e r b u c k , ' a s
t h e e x p r e s s i o n w a s a t t h e t i m e w i t h r e s p e c t to a y o k e of o x e n ,
lie went on:
Now (lie yoke may be easy and the burden light, but t want to s a y
to von that I will not bo put under the yoke. I will not assume the
burden and go before my constituents and say that I am in favor of
makeshift legislation; that I am In favor of discharging a committee ot
this H o u s e ; that I am in favor of overriding tiie wishes ot the people;
that f am to be a mere tobacco sign.

W a s t h e g e n t l e m a n f r o m M i n n e s o t a a m e r e t o b a c c o sign on
t h a t occasion?
Mr. S T E E N E R S O N . T h e gentleman who m a d e those r e m a r k s
r e m a i n e d in t h e p a r t y , a n d w a s t h e c h a i r m a n of a c o m m i t t e e ,
a n d c o n t i n u e d so d u r i n g t h a t C o n g r e s s a n d t h e n e x t . H e w a s
n o t k i c k e d o u t of t h e p a r t y .
Mr. G L A S S . I r e f e r r e d to M r . F o w l e r , w h o w a s k i c k e d o u t
of t h e c h a i r m a n s h i p of t h e C o m m i t t e e 011 H a n k i n g a n d C u r r e n c y .
Mr. S T E E N E R S O N . No. I a m t a l k i n g a b o u t a n o t h e r m a n ,
w h o r e m a i n e d c h a i r m a n of h i s c o m m i t t e e .
Mr. G L A S S . Now, Mr. C h a i r m a n , w h e n I w a s i n t e r r u p t e d
1 w a s trying to indicate j u s t how we have proceeded with this
b i l l ; a n d a l i t t l e f u r t h e r on I d e s i r e to c o n t r a s t out 1 c o n d u c t
w i t h t h a t of c e r t a i n g e n t l e m e n w h o h a v e a s s a i l e d us. 1 s a i d
w e k e p t in c o n s t a n t c o m m u n i c a t i o n w i t h t h e s e n i o r R e p u b l i c a n
m e m b e r of t h e H a n k i n g a n d C u r r e n c y C o m m i t t e e , a d v i s i n g w i t h
h i m in good f a i t h a s to t h e p r o v i s i o n s of t h e bill a n d a s k i n g
s u g g e s t i o n s f r o m h i m . W e received s u g g e s t i o n s f r o m h i m a n d
e m b o d i e d s o m e of tliem in t h e bill t h a t w a s s u b s e q u e n t l y rep o r t e d h e r e , a f t e r w e h a d c o n s i d e r e d it in c a u c u s a n d t a m e d
s o m e of o u r o w n m e m b e r s . [ L a u g h t e r on t h e R e p u b l i c a n s i d e . l
Mr. SLOAN. W i t h the yoke?
[Laughter.J
Mr. G L A S S . No. By c o n v i n c i n g t h e m of t h e e r r o r of t h e i r
w a y . T h e bill w a s a d o p t e d by a v o t e of 1G3 a y e s to I) noes.
W e t h e n took it to t h e f u l l C o m m i t t e e 011 H a n k i n g a n d C u r 10022

-12300

35

rency for consideration, a n d there amendments were made.
O n e of t h o a m e n d m e n t s o f f e r e d b y m y c o u r t e o u s f r i e n d , M r .
S M I T H of M i n n e s o t a , a n d a c c e p t e d by t h e D e m o c r a t s w a s tod a y m a d e t h e s u b j e c t of s h a r p R e p u b l i c a n c r i t i c i s m h e r e
L L a u g h t e r on t h o D e m o c r a t i c side.)
T h a t is a siniDlo r e c i t a l of t h e e n t i r e p r o c e d u r e upon w h i c h
wo h a v e b e e n so b i t t e r l y a r r a i g n e d . T h e g e n t l e m a n f r o m P e n n s y l v a n i a [ M r . M O O R R I i n i t i a t e d t h o t a l k a b o u t t h e " g a g r u l e of
t h e D e m o c r a t i c m a j o r i t y , " a n d n e x t tlie g e n t l e m a n f r o m Wyom i n g [ M r . MoNDiar.l p e r f o r m e d . W i t h a m i e n of i n j u r e d innoc e n c e a n d an u n c t i o n t h a t w o u l d h a v e m a d e D i c k e n s a s h a m e d
of U r i a h H e e p [ l a u g h t e r ] ; w i t h a s i m u l a t i o n t h a t w o u l d h a v e
d r i v e n Mr. P e c k s n i f f , b r o k e n h e a r t e d , into oblivion [ l a u g h t e r ] h e
d e p r e c a t e d t h e p a r t i s a n zeal of D e m o c r a t i c m e m b e r s of t h e Comm i t t e e on B a n k i n g a n d C u r r e n c y a n d t h e D e m o c r a t i c c a u c u s
H e even t r i e d to i n v e s t t h e w h o l e t h i n g w i t h a n a i r of m y s t e r y
s u g g e s t i n g t h a t t h e r e w a s s o m e t h i n g s i n i s t e r a b o u t it
lie
h e a r d t h e q u e s t i o n h a d b e e n a s k e d in t h o c a u c u s a n d n e v e r
. • a n s w e r e d a s t o " w h o h a d w r i t t e n t h e bill."
It o c c u r s to m e t h a t if t h e g e n t l e m a n ' s c u r i o s i t y w a s a c u t e
e n o u g h to a s c e r t a i n t h a t s u c h i\ q u e s t i o n h a d b e e n a s k e d lie
m i g h t h a v e been d i l i g e n t e n o u g h to h a v e l e a r n e d t h a t it h a d
oeen p r o m p t l y a n s w e r e d . A s a m a t t e r of f a c t , it w a s a s k e d
As a m a t t e r of f a c t , it w a s a n s w e r e d ; a n d it w o u l d h a v e b e t t e r
c o m p o r t e d w i t h t h e u s a g e s of f a i r d e b a t e b a d t h e g e n t l e m a n
trom Wyoming stated the answer along with the inquiry. There
i s n o s e c r e t a b o u t it. E v e r y p r o v i s i o n of t h i s bill w h i c h w a s
n o t w r i t t e n by I! le c h a i r m a n of t h e c o m m i t t e e o r s o m e m e m b e r
>1 t h e c o m m i t t e e w a s w r i t t e n u n d e r t h e i m m e d i a t e d i r e c t i o n of
he c h a i r m a n by t h e e x p e r t of t h e c o m m i t t e e , w h o h a d t h o r o u g h
t e c h n i c a l k n o w l e d g e of t h e s u b j e c t . T h a t is t h o w a y t h e bill
w a s p r e p a r e d ; a n d , now, w h e r e is t h e m y s t e r y a b o u t "it? A f t e r
a n , it is not a q u e s t i o n a s to w h o w r o t e t h o bill. I t is a queson a s to w h a t it c o n t a i n s ; a n d t h a t s e e m s to bo a v o i d e d by
h e cri ICS. T h e y all r e t u r n to t h e s a m e " K i n g C a u c u s " p l a i n t ,
i'
" n o w i s e a f f e c t s t h e m e r i t s of t h e l e g i s l a t i o n p r o p o s e d .
M r . O R E E N of I o w a . W i l l t h e g e n t l e m a n yield V
M r . C L A S S . Yes.
Mr
'"ou
Ar

G R E E N of I o w a . I will b r i n g t h e g e n t l e m a n t o t a l k
he s u b j e c t w h i c h h e s p o k e of j u s t n o w . B y v i r t u e of
1,10
m»tioual b a n k s will h a v e to s u b s c r i b e
«LASS.
I will c o m e to t h a t p r e s e n t l y . 1 w a n t to t a l k
n t t l e m o r e a b o u t w h a t y o u r s i d e t a l k e d a b o u t chiefly, a n d
t n e n I will c o m e to t h e p r o v i s i o n s of t h e bill, t h o u g h not o n e
them has been successfully assailed.
E E N of I o w a . I w a n t e d to a s k a q u e s t i o n . Will t h e
hOntleman y i e l d f u r t h e r ?
JJR. G L A S S . N o t r i g h t n o w ; b u t I w i l l f u r t h e r on.
Mr. G R E E N of I o w a . V e r y well,
G L A S S
NM I
- T h u gentleman f r o m Wyoming [Mr. M O N D F I L ]
" a u e m u c h a d o a b o u t t h e p a r t i s a n r y of t h i s s i d e of tl;e H o u s e ,
e w
, , 1,1 ! l p i o l l s v o i n a b o u t 1 , 1 0 p a t r i o t i s m w h i c h s h o u l d
l/.M
° t h o c o n s i d e r a t i o n a n d e n a c t m e n t of c u r r e n c y leuis«J«on. f a m c o n s t r a i n e d to q u e s t i o n t h e s i n c e r i t y of t h o g e n t l e n a n w h e n h e v e n t u r e s to d e c r y t h e p a r t y c a u c u s , f o r of tlia
t a i l i n g figures in t h e R e p u b l i c a n c a u c u s live y e a r s a g o on t h o
l e e i a n d c u r r e n c y bill t h e g e n t l e m a n f r o m W y o m i n g i l t r . M o x 10022—12350

36

m a x ] w a s one of tlio f o r e m o s t . H o w c a n ho reconcile h i s p r e a c h m e n t s now w i t h h i s p e r f o r m a n c e s t h e n ? H o w did o u r Republican f r i e n d s proceed on t h a t occasion? T h e y i n t r o d u c e d t h e
V r e e l a n d bill in t h e H o u s e on t h e l.'Uh d a y of May, 1908, l a t e i n
t h e a f t e r n o o n . B e f o r e 11 o'clock on t h e 14th d a y of M a y t h e
g e n t l e m a n f r o m P e n n s y l v a n i a [Mr. D a l z e l l ] b r o u g h t in a rule.
Will my f r i e n d who i n t e r r u p t e d me a w h i l e ago i n s i s t t h a t h e
w a s not b o u n d by. the r u l e ? H e voted f o r it.
Mr. S T E E N E R S O N . 1 will s a y to t h e g e n t l e m a n t h a t I voted
f o r it b e c a u s e I f a v o r e d it. It w a s a n e m e r g e n c y m e a s u r e .
Mr. G L A S S . T h e r u l e r e a d :
Itcxolvcd
T h a t a f t e r t h e a d o p t i o n hereof the C o m m i t t e e on B a n king
anil Currency s h a l l be d i s c h a r g e d a m i the H o u s e s h a l l proceed to t h e
c o n s i d e r a t i o n of II. it. 2 1 8 7 1 —

I w a s a m e m b e r of t h e C o m m i t t e e on B a n k i n g a n d Currency, a n d I a s s e r t h e r e t h a t t h e bill n e v e r got to t h e d o o r s of
t h e c o m m i t t e e . Not only t h a t , I a s s e r t t h a t w h e n t h e r u l e w a s
b r o u g h t in the bill h a d n o t y e t come f r o m t h e G o v e r n m e n t P r i n t i n g Otlice. T h e r u l e f u r t h e r p r o v i d e d t h a t —
D e b a t e thereon s h a l l be c o n c l u d e d a t n o t l a t e r t h a n 5 o'clock p. m.
to-day.

[ L a u g h t e r on t h e D e m o c r a t i c side.]
T h e t i m e to be e q u a l l y d i v i d e d b e t w e e n t h e f r i e n d s and the opponent:)
of t h e bill
It s h a l l be in order to offer a s a s u b s t i t u t e fur the bill 11. It.
107:50
On the c o n c l u s i o n of the debate, a s h e r e i n provided, a v o t e s h a l l
be t a k e n w i t h o u t d e l a y or i n t e r v e n i n g motion first on the q u e s t i o n of subs t i t u t i n g 11 It. 1«7:J0, If said bill shall h a v e been offered, a n d then u p o n
t h e p a s s a g e of the bill or t h e s u b s t i t u t e in lieu t h e r e o f , a s t h e c a s e
m a y be.

W h a t did all t h a t m e a n ? It m e a n t t h a t t h e V r e e l a n d bill,
m a d e t h e s u b j e c t of c a u c u s action by t h e R e p u b l i c a n P a r t y , w a s
b r o u g h t i n t o t h e H o u s e one e v e n i n g a n d r e f e r r e d to t h e B a n k i n g
a n d C u r r e n c y C o m m i t t e e , which it n e v e r r e a c h e d ; t h e c o m m i t t e e
w a s d i s c h a r g e d n e x t m o r n i n g f r o m c o n s i d e r a t i o n of a bill t h a t
it h a d n e v e r seen. U n d e r t h e r u l e no a m e n d m e n t s w e r e allowed to be o f f e r e d on e i t h e r side of t h e H o u s e , a n d d e b a t e w a s
to be concluded in f o u r h o u r s . It p e r m i t t e d a s u b s t i t u t e to be
offered, b u t a c t u a l l y p r e s c r i b e d t h e very t e x t of t h e s u b s t i t u t e .
[Laughter.]
I t undertook-' to m a k e t h e D e m o c r a t i c s i d e responsible f o r a s u b s t i t u t e t h a t t h e D e m o c r a t i c side h a d not
c o n s i d e r e d a n d did n o t f a v o r ; a n d w h e n no D e m o c r a t would
o f f e r t h e s u b s t i t u t e in t h e t e r m s provided by t h e R e p u b l i c a n
r u l e a R e p u b l i c a n Member, t h e g e n t l e m a n f r o m C a l i f o r n i a [Mr.
KAIIN], a s s u m e d to offer a D e m o c r a t i c s u b s t i t u t e to a Republican c u r r e n c y bill, t h e r e b y not only mocking j u s t i c e b u t m a k i n g
a h a r l e q u i n a d e of t h e e n t i r e proceeding.
Mr. A L L E N . Will the g e n t l e m a n y i e l d ?
Mr. G L A S S . Yes.
Mr. A L L E N . Does t h e R K C O K D show w h e t h e r t h e bill w a s
r e a d or n o t ?
Mr. G L A S S .
I do not now recall. I once h e a r d J o h n ,7. I n g a l l s
d e s c r i b e P a r a d i s e Lost a s " t h a t g r e a t epic poem w h i c h everybody p r a i s e s a n d nobody r e a d s . " [ L a u g h t e r . ] T h e V r e e l a n d A l d r l c h bill, w h e t h e r r e a d or not, w a s t h a t g r e a t legislative ena c t m e n t t h a t no R e p u b l i c a n w a n t e d , b u t f o r w h i c h all of t h e m
v o t e d u n d e r c a u c u s rule. [ L a u g h t e r . ]
T h e Aldrich end of it w a s denounced by R e p u b l i c a n s in t h i s
C h a m b e r a n d t h e V r e e l a n d end of it v a s d e n o u n c e d by Republicans in t h e o t h e r C h a m b e r ; a n d w h e n t h e r e w a s a l e g i s l a t i v e
10022-

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37

union of Iiio t w o bail m e a s u r e s t h e c o m p o s i t e bill r e p r e s e n t e d
HO per cent of H o u s e i n f a m y a n d 50 p e r cent of S e n a t e i n f a m y ,
a c c o r d i n g to r e l i a b l e R e p u b l i c a n t e s t i m o n y .
[Laughter.]
T h e R E C O R D will s h o w t h a t Mr. P r i n c e , a R e p u b l i c a n M e m b e r ,
a s k e d w h e r e ho could get a copy of t h e bill, a n d Mr. F I T Z O E R A L D ,
of N e w York, d e c l a r e d t h a t no copies w e r e to bo o b t a i n e d . T h e
t e l e p h o n e s in (ho c l o a k r o o m got busy, a n d a f e w copies w e r e s e n t
u p f r o m t h e G o v e r n m e n t P r i n t i n g Office, w h e r e u p o n Mr. F I T Z oERALI) took one of t h e s e a n d called a t t e n t i o n to t h e f a c t t h a t t h e
p a p e r w a s not y e t d r y on w h i c h it w a s p r i n t e d .
T h a t is t h e w a y t h e g e n t l e m a n f r o m W y o m i n g [Mr. M O N D E L L ] ,
so p i o u s l y c o m p l a i n i n g of o u r p r o c e d u r e now, p e r f o r m e d w h e n
he l a s t h a d occasion to c o n s i d e r c u r i e n c y legislation, l i e voted
f o r a g a g r u l e t h a t g a v e us only f o u r h o u r s of d e b a t e , cont r a s t e d w i t h f o u r d a y s f o r t h i s bill. H e voted f o r a r u l e t h a t
denied both t h e D e m o c r a t i c a n d R e p u b l i c a n sides t h e poor privilege of o f f e r i n g a single a m e n d m e n t to t h e bill, w h e r e a s wo s h a l l
give e v e r y R e p u b l i c a n full o p p o r t u n i t y to o f f e r a m e n d m e n t s to
t h i s bill.
S h o u l d not t h e g e n t l e m a n be a s h a m e d of t h a t sort of inconsistency on t h e floor of t h e H o u s e ?
Mr. B U C H A N A N of Illinois. Will t h e g e n t l e m a n y i e l d ?
Mr. G L A S S . Yes.
Mr. B U C H A N A N of Illinois. W a s t h e V r e e l a n d - A l d r i c h biil
read a n d c o n s i d e r e d u n d e r t h e f i v e - m i n u t e r u l e ?
Mr. G L A S S . Oh, n o ; never. Not only not read a n d considered u n d e r (he live-minute rule, b u t t h e y did n o t p e r m i t a solit a r y a m e n d m e n t to be offered to it. And y e t t h e t h r e e gentlen
>on w h o h a v e most b e m o a n e d t h e m e t h o d of p r o c e d u r e in t h e
P r e p a r a t i o n a n d c o n s i d e r a t i o n of t h i s bill w e r e (ho ( h r e e gentlemen m o s t conspicuous in " p e r p e t r a t i n g a n o u t r a g e " on J O H N
S H A R P W I L L I A M S a n d t h e D e m o c r a t i c M e m b e r s of t h a t Cong r e s s — M r . M O O R E , of P e n n s y l v a n i a ; Mr. M O N D E L L , of Wyoming, " O l d F a i t h f u l " [ l a u g h t e r ] ; a n d my good a n d genial
i r i e n d f r o m P e n n s y l v a n i a , Mr. BURKE, all of t h e m s t a n d p a t t e r s ,
' h e Inst one of t h e m toeing t h e m a r k w h e n t h e w h i p c r a c k e d
a n d each sneezing e v e r y t i m e t h e S p e a k e r took snuff. [ L a u g h t e r . 1
Mr. P L A T T . Will t h e g e n t l e m a n y i e l d ?
Mr. GLASS. Oh, y e s ; I a l w a y s yield willingly to my f r i e n d .
Mr. P L A T T . I w a n t e d to a s k w h y t h e D e m o c r a t i c P a r t y
should s t a r t o u t b y t a k i n g t h e w o r s t p r e c e d e n t of t h e RopubHcans i n s t e a d of t h e best.
Mr. G L A S S . W o h a v e not d o n e t h a t . I h a v e t r i e d to p o i n t
° a t . in c o n t r a s t , how decently w e h a v e t r e a t e d you in r e q u i t a l
ol
tiie bad t r e a t m e n t accorded u s w h e n y o u r side h a d c h a r g e of
c u r r e n c y legislation. W e shall let you offer all t h e a m e n d m e n t s you w a n t to offer, a n d w i t h g r o a t c h e e r f u l n e s s a n d consistency w e will vote m o s t of t h e m down. [ L a u g h t e r . ]
We
shall do t h a t , I t h i n k , b e c a u s e w e a r e n o t w i l l i n g to believe t h a t
a P a r t y responsible f o r (ho V r e e l a n d - A l d r i c h bill could possibly
i m p r o v e t h i s bill.
[Laughter.]
T h e speech of m y f r i e n d f r o m W y o m i n g is a s t r a n g e m i x t u r e
of sense a n d , if I m a y s a y it w i t h o u t (ho l e a s t offense, nonsense. l i e a s s e r t s t h a t t h e F e d e r a l b o a r d is given m o r e p o w e r
u n d e r t h i s bill t h a n a n y i n s t i t u t i o n on e a r t h , w h e r e a s I h a v e
shown, a n d n o m a n h e r o c a n show t h e c o n t r a r y , t h a t t h e r e is
scarcely a p o w e r w i t h w h i c h t h a t b o a r d is invested which h a s
100122 12350

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not b e e n p e r f o r m e d b y o n e o r t w o G o v e r n m e n t f u n c t i o n a r i e s f o r
t h e l a s t HO y e a r s .
I c h a l l e n g e a n y M e m b e r on t h i s floor r i g h t n o w to n a m e a
p o w e r c o n f e r r e d u p o n t h e F e d e r a l r e s e r v e b o a r d by t h e p e n d i n g
bill t h a t lias n o t b e e n e x e r c i s e d by t h e S e c r e t a r y of t h e T r e a s u r y or t h e C o m p t r o l l e r of t h e C u r r e n c y u n d e r t h e n a t i o n a l - b a n k
a c t w i t h r e s p e c t to e x i s t i n g b a n k s i n s o m e s e n s e or d e g r e e f o r
m a n y y e a r s , e x c e p t t h e p o w e r of n o t e issue.
I t is c o m p l a i n e d t h a t t h e F e d e r a l r e s e r v e b o a r d h a s t h e
o p t i o n to i s s u e n o t e s or n o t to i s s u e . Of c o u r s e it h a s .
Did
n o t t h e b a n k e r s u n d e r t h e A l d r i c h s c h e m e h a v e t h e o p t i o n of
i s s u i n g o r not i s s u i n g n o t e s a s t h e y m i g h t p l e a s e ? W h y n o t ,
w h e n t h i s is a G o v e r n m e n t issue, give t h e F e d e r a l b o a r d t h e
o p t i o n ? W h e n I d i r e c t e d a t t e n t i o n to t h e f a c t t h a t t h e Vreel a n d bill, f o r w h i c h t h e g e n t l e m a n f r o m W y o m i n g voted, v e s t e d
t h i s p o w e r w i t h t h e S e c r e t a r y of t h e T r e a s u r y alone, h e i n s i s t e d
t h a t I h a d n o t c o r r e c t l y q u o t e d it. W h e n 1 a s k e d h i m in w h a u
p a r t i c u l a r I h a d m i s q u o t e d , h e s a i d ho d i d not h a v e t i m e t o
a n s w e r . I o f f e r e d to y i e l d h i m t i m e to a n s w e r , b u t h e h a s n o t
a n s w e r e d yet. W h y ? Because I quoted the l a w correctly. T h e
V reel a n d bill d i s t i n c t l y , in scetiou 2, v e s t e d t h e S e c r e t a r y of
t h e T r e a s u r y w i t h t h e e x c l u s i v e p o w e r of i s s u i n g $500,000,000
of c r e d i t c u r r e n c y a n d p a s s i n g on t h e sufficiency of s e c u r i t y ; so
t h a t t h e g e n t l e m a n w a s w i l l i n g to v e s t w i t h o n e m a n t h e v e r y
p o w e r t h a t he p r o t e s t s is too g r e a t to be l o d g e d w i t h s e v e n m e n t
l i e t a l k s d e r i s i v e l y a b o u t t h i s bill s e t t i n g u p a P o o h - B a h in
t h e b a n k i n g s y s t e m , t o t a l l y i n s e n s i b l e of t h e f a c t t h a t t h e m e a s u r e w h i c h lie h e l p e d p u t on t h e s t a t u t e book d o e s v a s t l y w o r s e
in t h e w a y of c o n c e n t r a t i n g c o n t r o l . I m i g h t a p t l y p a r a p h r a s e
h i s d o g g e r e l a n d r e m i n d h i m t h a t t h e S e c r e t a r y of t h e T r e a s u r y
u n d e r t h e V r e e l a n d - A l d r i c h A c t is n o t o n l y —
" The rook, and the captain hold,
And tho mate of the Nancp brig,
And the boatswain ti^ht. and the mldshlpmite,
But—</ic whole internal
ri<j.

[ L a u g h t e r a n d a p p l a u s e on t h e D e m o c r a t i c s i d e . l
T h e g e n t l e m a n s n e e r i n g l y c r i t i c i z e d t h e P r e s i d e n t of tlio
U n i t e d S t a t e s , a n d r a t h e r o f f e n s i v e l y , I r e g r e t to s a y , i n t i m a t e d
t h a t Mr. W i l s o n h a s b e e n u s i n g p a t r o n a g e t o f o r c e c u r r e n c y
l e g i s l a t i o n . 1 d o not b e l i e v e a w o r d of it. [ A p p l a u s e on t h e
D e m o c r a t i c side.l
I r e f u s e to b e l i e v e t h a t t h e p r e s e n t o c c u p a n t
of t h e W h i t e H o u s e is c a p a b l e of u n d e r t a k i n g to s w a y m e n ' s
o p i n i o n s o r to c o e r c e t h e i r a c t i o n s by t h e u s e of F e d e r a l p a t r o n age. [ A p p l a u s e on t h e D e m o c r a t i c s i d e . l
T h e gentleman f r o m Wyoming, a s did t h e gentleman f r o m
Pennsylvania, criticized the President f o r his alleged invasion
of t h e p r i v i l e g e s of t h e l e g i s l a t i v e b r a n c h b y u n d e r t a k i n g t o
c o e r c e m e m b e r s of t h e B a n k i n g a n d C u r r e n c y C o m m i t t e e a n d
l i k e w i s e m e m b e r s of t h e D e m o c r a t i c c a u c u s . R e t o r t to t h a t s o r t
of c o m m e n t is e a s y . I m i g h t r e m i n d him, w e r e I d i s p o s e d t o
be d i s a g r e e a b l e , t h a t t h e p r e c e d i n g o c c u p a n t of t h e W h i t e
H o u s e c a u s e d h i s A t t o r n e y G e n e r a l t o d r a w u p a r a i l r o a d bill
w h i c h a c c o m p a n i e d a p r e s i d e n t i a l m e s s a g e to C o n g r e s s , a d v i s i n g
u s to p a s s it. [ A p p l a u s e . ]
B u t w h a t h a s all t h a t t o d o w i t h
t h e m e r i t s of a c u r r e n c y bill n o w u n d e r c o n s i d e r a t i o n ?
T h e gentleman f r o m Pennsylvania [Mr. BUHKF.J discovered a
m a r e ' s n e s t in t h i s bill. " W e h a v e to fight o v e r t h e b a t t l e
10022—12350

3D

f o r tlio gold s t a n d a r d , " lie e x c l a i m e d . F o r t h e first t i m e , h e
s a i d , s i n c e Hie R e p u b l i c a n P a r t y 1M y e a r s a g o p u t a d e c l a r a t i o n
on t h e s t a t u t e b o o k s in f a v o r of t h e gold s t a n d a r d , t h e d o c t r i n e
h a s b e e n r e p u d i a t e d in a c u r r e n c y bill. W h a t n o n s e n s e !
The
g e n t l e m a n s e e m s i g n o r a n t of t h e f a c t t h a t t h e n a t i o n a l b a n k
n o t e s w h i c h F e d e r a l r e s e r v e n o t e s will g r a d u a l l y d i s p l a c e a r e
r e d e e m a b l e in " g o l d o r l a w f u l m o n e y . " H e s e e m s not to k n o w
t h a t t h e V r e e l a n d - A l d r i c h Act, f o r w h i c h h e voted five v e a r s a g o
r e q u i r e s t h a t its e m e r g e n c y n o t e s s h a l l be redeemed* in " gold
or lawful money."
H e s e e m s n o t to u n d e r s t a n d t h a t t h e
Aldrich scheme, which he confessedly f a v o r s now, uses precisely
t h e s a m e p h r a s e a s to t h e r e d e m p t i o n of t h e n o t e s f o r w h i c h t h e
bill p r o v i d e s — " gold o r l a w f u l m o n e y . " E v e n so s a n e a n d ord i n a r i l y s e n s i b l e a p a p e r a s t h e N e w Y o r k S u n a p p e a r s to be
a l a r m e d b e c a u s e t h i s bill f o l l o w s t h e - n a t i o n a l b a n k i n g a c t a n d
tin; V r e e l a n d - A l d r i c h s t a t u t e a n d t h e p r o v i s i o n of t h e A l d r i c h
s c h e m e c o n c e r n i n g n o t e r e d e m p t i o n . T h e y affect, to t h i n k w e
h a v e m a d e a n a s s a u l t upon t h e gold s t a n d a r d . W h a t a pitif u l s o r t of o p p o s i t i o n to t h i s bill t h a t is.
My e x c e l l e n t f r i e n d , Mr. BURICE, f o u n d out s o m e t h i n g else.
T h a t e to r u i n h i s s p e e c h by c a l l i n g a t t e n t i o n to h i s d i s c o v e r y .
I L a u g h t e r . 1 H e s a i d w e h a v e p r o v i d e d in t h i s bill in b e h a l f
of t h e a g r i c u l t u r a l classes, f o r l o a n s on u n e n c u m b e r e d f a r m
lands, but have discriminated against the h u m b l e laboring
m a n in t h e c i t i e s ; t h a t w e d e n y t h e w o r k m a n t h e r i g h t t o
b o r r o w m o n e y w i t h w h i c h to d e f r a y t h e cost of h i s m o d e s t
h o m e . I n t h a t s a m e speech h e a d m i t t e d t h a t h e w a s f o r t h e
A l d r i c h bill, b y r e f e r e n c e to section <10 of w h i c h it will bo
n o t e d t h a t no l o a n on real e s t a t e i s p e r m i t t e d in a n y o n e of t h e
'17 r e s e r v e c i t i e s or t h e t h r e e c e n t r a l r e s e r v e c i t i e s of t h e c o u n try.
Mr. B U R K E b e i n g f r o m P i t t s b u r g h , a r e s e r v e city, t h u s
advocates a scheme that expressly denies his humble laboring
m e n (lie r i g h t to b o r r o w m o n e y t o d e f r a y t h e c o s t of t h e i r
m o d e s t h o m e s . [ L a u g h t e r on t h e D e m o c r a t i c sido.l
A n d so t h e s e a s t o n i s h i n g i n c o n s i s t e n c i e s proceed, M r . C h a i r man. T h e gentleman f r o m Wyoming [Mr. MONDELL] advoc a t e d t h e m o b i l i z a t i o n of r e s e r v e s , b u t a s s a i l e d t h e v e r y provision of t h i s bill w h i c h p r o v i d e d f o r m o b i l i z a t i o n ; h e a d v o cated decentralization and assailed the very decentralizing
f e a t u r e of t h i s bill.
H e t a l k e d a b o u t t h e f a i l u r e of t h i s
m e a s u r e to p r o v i d e u n i f o r m d i s c o u n t r a t e s . T h e A l d r i c h bill
p r o v i d e d a u n i f o r m d i s c o u n t r a t e ; b u t , If you will e x a m i n e t h e
h e a r i n g s h a d b e f o r e t h e C o m m i t t e e on B a n k i n g a n d C u r r e n c y ,
you w i l l t h e r e see t h a t e m i n e n t b a n k e r s o p e n l y a d m i t t e d t h a t
i t w a s a n i m p o s s i b l e p r o v i s i o n . T h e t r u t h is, it w a s a pret e n s e . W h i l e t h e bill p r o v i d e d t h a t ( h e r a t e of d i s c o u n t s h o u l d
bo u n i f o r m , n o m e t h o d w a s d e v i s e d to m a k e t h e r a t e u n i f o r m ,
w h e r e a s t h e o p e n - m a r k e t p r o v i s i o n of t h e p e n d i n g bill will ena b l e t h e r e s e r v e b a n k to e n f o r c e Its r a t e o.f d i s c o u n t .
N e x t , t h e g e n t l e m a n f r o m W y o m i n g c r i t i c i z e d t h e bondr e f u n d i n g p r o v i s i o n of t h i s bill, s a y i n g it w o u l d cost t h e Gove r n m e n t $7,000,000 p e r a n n u m , w h e r e a s r e f u n d i n g u n d e r t h e
A l d r i c h bill w o u l d n o t c o s t t h e G o v e r n m e n t a cent. S u c h simpliclty, s u c h c r e d u l i t y , w e r e n e v e r w i t n e s s e d b e f o r e s i n c e t h e
w o r l d w a s c r e a t e d . A s a m a t t e r of f a c t , if t h e r e w a s o n e p r e t e n s e in t h e A l d r i c h bill m o r e o b v i o u s t h a n m a n y o t h e r s , it w a s
t h e p r e t e n s e t h a t t h e G o v e r n m e n t w o u l d be i n v o l v e d in no cost
10022—1235(3

40

in r e f u n d i n g t h e 2 per cent bonds. W h y n o t ? T h e 2 p o r c e n t s
w e r e to be r e f u n d e d into t h r e e s . W h o w a s to p a y t h e difference?
T h e p r e t e n s e w a s t h a t (lie G o v e r n m e n t w a s to lie
a u t h o r i z e d to levy a f r a n c h i s e t a x in o r d e r to c o m p e n s a t e itself.
B u t t h e f r a n c h i s e t a x w a s to come out of t h e G o v e r n m e n t ' s p a r t
of the e a r n i n g s of t h e F e d e r a l r e s e r v e a s s o c i a t i o n , so t h a t t h e
G o v e r n m e n t w a s r e q u i r e d to t a k e i t s own f u n d s w i t h w h i c h to
pay itself!
T h e P r o g r e s s i v e floor l e a d e r of tlie H o u s e [Mr. M U K O O C K ] ,
l i k e most o t h e r g e n t l e m e n w h o h a v e spoken, t h o u g h t t h e r e
w e r e d e f e c t s h e r e a n d b l u n d e r s (here, a n d m i s t a k e s e l s e w h e r e
in t h e bill, b u t g r a c i o u s l y conceded t h a t it w a s so m u c h b e t t e r
t h a n t h e e x i s t i n g s y s t e m t h a t lie w a s inclined to vote f o r it, hoping t h a t it would be i m p r o v e d a t t h e o t h e r e n d of t h e Capitol.
N e v e r t h e l e s s , lie criticized t h e D e m o c r a t i c m a j o r i t y f o r a n alleged, violation of ils p l a t f o r m pledges. T h e bill, lie said, is
timid, w e a k , h a l t i n g , b e c a u s e it does n o t i n c l u d e a provision
a g a i n s t i n t e r l o c k i n g d i r e c t o r a t e s a s p r o m i s e d in t h e D e m o c r a t i c
platform.
A s a m a t t e r of f a c t , (he D e m o c r a t i c p l a t f o r m
d e c l a r a t i o n a g a i n s t i n t e r l o c k i n g d i r e c t o r a t e s t r e a t e d t h a t subject a s a n a n t i t r u s t proposition a n d did n o t a s s o c i a t e it w i t h
b a n k i n g a n d c u r r e n c y l a w s a t all. And it is a t r u s t proposition.
W h a t does t h e p l a t f o r m s a y on t h e s u b j e c t ? T h e e x a c t lang u a g e is t h i s :
We favor the declaration by law of tbe conditions upon which corporations shall be permitted to engage in interstate trade, including
among others the prevention of holding companies, of interlocking directorates, etc.

So t h a t d i e d e c l a r a t i o n t h e r e h a d no connection w i t h or relation to (lie s u b j e c t of b a n k i n g a n d c u r r e n c y ; a n d it is a b s u r d to
c h a r g e t h a t (lie D e m o c r a t s in C o n g r e s s h a v e r e p u d i a t e d t h e i r
p l a t f o r m m e r e l y b e c a u s e they r e f u s e to embody e x t r a n e o u s matt e r i n a bill f o r a b a n k i n g a n d c u r r e n c y system. T h e p r e s i d i n g
g e n i u s of the Money T r u s t i n v e s t i g a t i o n w a s t h e employed a t t o r ney, Mr. S a m u e l IJntorineyer, of N e w York, w h o so scarcliingly
i n t e r r o g a t e d t h e w i t n e s s e s ; a n d lie lias publicly d e c l a r e d t h a t t h e
t w o s u b j e c t s h a v e n o r e l a t i o n one to tlie o t h e r . H e goes to t h e
e x t r e m e of s a y i n g t h a t a n y b o d y w h o u n d e r t a k e s to a s s o c i a t e one
w i t h ( h e o t h e r a n d to c o m p l i c a t e t h i s c u r r e n c y legislation w i t h
t h e proposition to e m b o d y in it t h e P u j o r e c o m m e n d a t i o n s " i s
a party marplot."
B u t , p r a y , w h a t is t h e position of t h e P r o g r e s s i v e P a r t y upon
c u r r e n c y l e g i s l a t i o n ? My f r i e n d f r o m K a n s a s [Mr. M U R D O C H !
m a d e a speech y e s t e r d a y covering seven pages in t h e R E C O R D ,
a n d it c o n t a i n e d seven lines a b o u t c u r r e n c y r e f o r m . H e w a s
given t h e privilege of n a m i n g a m e m b e r of t h e B a n k i n g a n d
C u r r e n c y C o m m i t t e e . A m I not c o r r e c t in t h a t s u p p o s i t i o n ?
Mr. H A Y E S . H e w a s .
Mr. G L A S S . W h y d i d h e n o t p e r s u a d e tills P r o g r e s s i v e
M e m b e r to e m b o d y in s o m e one of t h e n u m e r o u s bills h e introduced some provision a g a i n s t I n t e r l o c k i n g d i r e c t o r a t e s ? T r e a t e d
a s a t r u s t question, w e k n o w v e r y well t h e position of t h e gent l e m a n ' s l e a d e r , Mr. Roosevelt, on t h e s u b j e c t of monopoly,
b e c a u s e it is recalled t h a t h e m a d e t e r m s w i t h t h e g r e a t Steel
T r u s t m a g n a t e s a n d promised t h e c u l p r i t s i m m u n i t y b e f o r e they
p e r p e t r a t e d t h e i r c r i m e of a b s o r b i n g (lie T e n n e s s e e Coal & I r o n
10022—12S50

41

Co., ( l m S c o n s u m m a t i n g o n e of t h e m o s t g i g a n t i c i n d u s t r i a l monopolies of t h e w o r l d . [ A p p l a u s e on t h e D e m o c r a t i c side.]
l e t , w i t h t h i s r e c o r d of his chief s t a r i n g h i m in t h e f a c e , t h e
•• degressive iloor l e a d e r h e r e c r i t i c i z e s t h e D e m o c r a t i c P a r t y
upon t h e p r e t e n s e t h a t it h a s v i o l a t e d f a i t h w i t h (lie people a n d
r e p u d i a t e d i t s p l a t f o r m b e c a u s e it will not e m b o d y in a b a n k i n g
•jud c u r r e n c y bill s o m e t h i n g t h a t r e l a t e s p r o p e r l y to t r u s t s a n d
c o m b i n a t i o n s in r e s t r a i n t of i n t e r s t a t e t r a d e .
Mr. C h a i r m a n , I believe I will not f u r t h e r t a x t h e p a t i e n c e
t h e H o u s e by c o m m e n t i n g on s u c h i r r e l e v a n t c r i t i c i s m s of
he bill. T h e y seem to h a v e m a d e no s e r i o u s i m p r e s s i o n . L
Vo
hoen g r a t i f i e d , a s well a s a s t o n i s h e d , a t t h e m o d e r a t i o n of
g e n t l e m e n w h o h a v e essayed to c r i t i c i z e t h e bill. I t is a complex
Piestlon, a n exceedingly difficult p r o b l e m , a n d w h i l e I k n e w
u i a t wo h a d t h r a s h e d it, o u t a m o n g o u r s e l v e s p r e t t y t h o r oughly I s c a r c e l y h o p e d t h a t w e h a d m a d e s u c h a good j o b of
1C
« s t h e c r i t i c i s m s f r o m t h a t s i d e of t h e H o u s e w o u l d i n d i c a t e .
1
will not proceed longer 111 t h e d i s c u s s i o n of t h e m a t t e r , a n d
A
Uiank m y c o l l e a g u e s f o r t h e i r p a t i e n t a t t e n t i o n .
[Applause.]
F E D E R A L

L F S

R

°WERS

NOT

AS

[Extract from

D E S E R V E

HOARD.

GREAT A S T H O S E OF
COMMISSION.
CONGRESSIONAL IIECORD,

INTERSTATE

COMMERCE

Sept. 10, 1013.]

on^n'i a r A D D K N T h e r e o u g h t lo be m i n o r i t y r e p r e s e n t a t i o n
t h e r> , ) 0 a r d ' a , ' d t h e men w h o f u r n i s h t h e money to o r g a n i z e
10 f e d e r a l r e s e r v e b a n k s p r o p o s e d t o be o r g a n i z e d u n d e r t h e
" n s of t h i s bill o u g h t to h a v e a voice 111 t h e i r m a n a g e m e n t .
i J r> C L A S S . Will t h e g e n t l e m a n p e r m i t a Question?
J jr. MADDEN.
Certainly,
d o n / ' C L A S S . W a s it f o u n d n e c e s s a r y to p u t r a i l r o a d presiUii • f 01" r a l l r o a a m a n a g e r s on t h e I n t e r s t a t e C o m m e r c e Comm o n in o r d e r t h a t t h e G o v e r n m e n t m i g h t elliciently s u p e r «md control t h e r a i l r o a d s ?
Cas
, M A D D E N - T h a t i s Quite a ditTerenf. p r o p o s i t i o n . In t h e
l'e 1 C>e I n t e r s t a t e C o m m e r c e Commission w e give t h e m only
nro" i t o r y p o w e r - 1,1 t h o c n s o o f t l i e reserve bank board they
Cn a b s o , n t 0
ilen
J u r i s d i c t i o n to m a n a g e a n d control e v e r y
11 ot b u s i n e s s t h a t m a y be c r e a t e d or c o n d u c t e d by t h e F e d a
{. r e s e r v e b a n k s .
at m G I j A S S - M r - C h a i r m a n , I s h a l l p u t i n t o t h e R E C O R D r i g h t
n , ™ 1 8 P o i n t a s t a t e m e n t of t h e p o w e r s of t h e I n t e r s t a t e Comtlm
Commission, s h o w i n g t h a t t h e y a r e infinitely g r e a t e r t h a n
^ Powers g r a n t e d to t l u F e d e r a l r e s e r v e b o a r d . *
stnf
T h e g e n t l e m a n is not f a m i l i a r w i t h t h o i n t e r Ol,
ire-conimerco law, e v i d e n t l y .
I G I j A S S - 1 w i l i s a y t o t l l ° g e n t l e m a n f r o m Illinois [ M r .
h a t 1 n i ! l y n o t 1,0 a s
of p,
f a nil l i a r w i t h t h e technical t e r m s
I n t o w a s h o ' b l l t 1 l l a v e r c a d t h c P o w e r s c o n f e r r e d upon t h e
torm n ° C o m m e r c e C o m m i s s i o n , a n d , in my conception of t h e
thio ' h o y a r o infinitely g r e a t e r t h a n t h e p o w e r s c o n f e r r e d on
u
j s reserve board.
t o ^ J ^ N .
Mr. C h a i r m a n , I s i m p l y w a n t to s a y In reply
» Y FRIEND f r o m V i r g i n i a [ M r . G L A S S ] , t h e c h a i r m a n of t h e
10022—12360

42
c o m m i t t e e , i n c h a r g e of t h e b i l l , a s 1 u n d e r s t a n d t h e p o w e r of t l i o
I n t e r s t a t e C o m m e r c e C o m m i s s i o n i t i s t h a t it h a s t h e p o w e r
to r e g u l a t e t h e r a t e s lo be c h a r g e d by t h e r a i l r o a d c o m p a n i e s ,
b u t n o p o w e r w h a t e v e r t o m a n a g e t h e r a i l r o a d s of t h e N a t i o n .
O n t h e o t h e r h a n d , I u n d e r s t a n d t l i o p o w e r of t h e F e d e r a l
r e s e r v e b o a r d to b e n o t o n l y lo d i r e c t b u t to c o n t r o l a n d r e g u l a t e
e v e r y p h a s e o f t h e m a n a g e m e n t of t h e F e d e r a l r e s e r v e b a n k s ,
d o w n to tlio s m a l l e s t i t e m .
They have nothing whatever to do with the
finances
of t h e
railroads, a n d they can only say to t h e railroad c o m p a n i e s t h a t
t h e r a t e p r o p o s e d to b e c h a r g e d is u n j u s t a n d t h a t t h e y m u s t
m o d i f y t h e r a t e to m e e t w h a t t h e I n t e r s t a t e C o m m e r c e C o m m i s sion believes to bo a j u s t one.
Mr. GLASS.
M r . C h a i r m a n , I w i l l n o t c o n s u m e t h e t i m e of
t h e c o m m i t t e e r i g h t n o w i n r e a d i n g i n d e t a i l t h e p o w e r s of t l i o
I n t e r s t a t e C o m m e r c e C o m m i s s i o n , b u t will a s k to i n s e r t in t h e
K K C O K D t h i s r e c i t a l of t h e p o w e r s :
EXHIBIT.

l'lilXCirAI,

DUTIES

OF

THE

INTERSTATE

COMMERCE

COMMISSION-.

(Revised to February, 1900, by II. T. Ncwcoiub.)
SECTION 1A. TO order the construction, maintenance, and operation
upon reasonable terms of switch constructions between any railway
and anv lateral branch line of railroad or private sidetrack where safe,
reasonably practicable, and there is suMeh'nt business.
SEC (SA 1 To modify the requirements of the law as to length of
notice of changes in 'rates or as to publishing, posting, and filing rate
schedules or
tariffs.
SEC. OU.2 To execute and enforce the law.
SEC. OC.2 To apply to district attorneys of tlio United S t a t e s to ins t i t u t e and prosecute proceedings for the enforcement of the law.
SEC 01>.3 To Issue subpoenas and subpoenas duces tecum.
S E C O I O 3 To order t e s t i m o n y taken by deposition for use before Itself.
SEC. OF.3 To appoint persons to take depositions In foreign countries
for use before
itself.
.
,
,t
,
SEC. 1 3 A 3 To receive complaints and Investigate matters made the
subject of complaint.
SKC. lSIt. To Institute Inquiries
on its own motion
and " t o the
same effect as though complaint had been made."
SEC. 1 4 A . 1 3 To make w r i t t e n reports of i t s Investigations.
SEC. 14Ii." To Include in its reports of investigations its " d e c i s i o n ,
order, or requirement in the premises," and, if it awards damages, i t s
" findings of3 fact."
,,,,,,
,
SEC. 15A. " T o determine and prescribe," a f t e r " full hearing,
what
will be the j u s t and reasonable rate or rates, charge or charges, to be
thereafter observed as the maximum to be charged, and what regulation or practice In respect to such transportation is just, fair, and
reasonable to be thereafter f o l l o w e d ; and to make an order t h a t the
carrier shall cease and desist from such violation, to tlio e x t e n t to which
the commission Ilnd the same to exist, and shall not thereafter publish,
demand, or collect any rate or charge for such transportation in excess
of the maximum rate or charge as prescribed, and shall conform to the
regulation or practice as prescribed."
SEC. 15H.» To prescribe, within certain limits, when i t s orders shall
take effect and
how long they shall remain In force.
SEC. 15C. 3 To prescribe divisions of Joint rates.
SEC. IR.L),3 To establish through routes and lix Joint maximum rates
and divisions
of rates on such routes.
„
.
t
Sue 1510 3 To prescribe maximum allowances for services connected
w i t h transportation performed by owners of the goods transported.
S u e s . 10A 3 and 10a. To make orders directing the payment of money
damages.
,
SEC. 10T?.8 To suspend, reverse, or modify its own orders.
2
SEC. IOC. To employ counsel " i n any proceeding" under the law.
SEC. TOD.2 To apply to the Federal courts to compel obedience lo
i t s orders.
SEC. IFIK.S To defend suits brought " t o enjoin, set aside, annul, or
suspend
" anyiL'MG
of Its orders.
1002'-'

43
8

SEC. 17A. To make and alter its own rules of practice.
' r ° Prosecute anywhere, by one or any number of Its
members
" a n y Inquiry necessary to its duties."
0
20Al1 T o
law '
require annual reports from carriers subject to the
ann^n" 2 0 n > t T o .Prescribe the form of such reports and to require
thcm to
Information " Cl ' a
" a 1 1 q u e s t i o n s " on which it " m a y need
T o nx
a ( l ! , < 0 after which all carriers subject lo the law
n inn m V °
? ! P e a r a s m « y 1)0 " a uniform system of accounts and the
manner In which such accounts shall be kept.
T
Penscs
° r e q u , r e s P c c l i l 1 monthly reports of earnings and ex-

l r tpr prescribe
the forms of all accounts, records, and
nei'mui . a<
? " l c movement and receipts and expenditures of money
y Limit ted to be kept by the carriers.
T
carriers
° h Q V ° c o n s t a n t access to and to Inspect the accounts of
MENHN'M1A'13 TT° RE,IY?R,T annually to Congress and to make "recommendation,! as to additional legislation."
Dnf,
m m!'1," P°wers were added by the Mann-Elldns Act, 1 0 1 0 :
Jiesponsiblhtics added :
interstate telegraph, telephone, and cable companies.
®erco^CommIsslon^ h ' 1 U l P U t a b s o l u t c l y i u b a n d s ot ' Interstate Corndecision1 t 0 s u s p e n d
P l ' ° P ° s o d changes in rates pending hearing and
nio''™0, A ™ c n d c t l
as to require written quotation of particular
on written request.
1oln? Wer » t 0 o r d o r - , a f t o r hearing, " through r o u t e s " and to prescribe
^ h e on l y°Sf I mi tat i orI s°' a re— ° t h ° C o n Q e c t i u g c a r r i e r s 1 3 a water line:
o n d i 2 T ' \ n t 110 through r 0 " t e shall be formed with a street railway not
"'gaged in passenger business.
xvhJn T J l n t 110 r o l l t o ™ay be established when the transportation i3

mission.

W

'

03

WH1 b

°

bcr

°nd

the

^rischction of tha com

J ? ) ' r h a t no railroad shall be required to embrace in the throuch
onto substantially less than the entire length of its road or any
intermediate road under its control, which lies between the termini
or the proposed route.
tram
i P ^ r t r ," a y ^Mignatc in writing the route he prefers through
l , I C to take, subject to exceptions made by the commission
passes clause moditled.
' hisslficatlon of property for transportation ordered
own ' V}' Amended so as to give same powers to inquiries on " i t s
t0
rates
° U " c o m P l a l n t " In the matter of ordering
SEC. 15.1 1 Amended
to
give
the commission Jurisdiction over all r e t i re Li^m""
t , r a c t l ^ 9 of carriers and the power to prescribe reasonable
' f i l i a t i o n s to be hereafter followed.
'•very carrier to provide reasonable facilities for through routes
noi- c c Jtaln
supplementary acts the commission Is also given extensive
,l W^s V V h e '/"^'-cement of the safety-appliance and hours-of-servlcc
and the collection of data covering accidents.
r

(Extract from an article in the Quarterly Journal of Economics, 1910
by I'\ II. Dixon.)
a t ( v i ° on a ~ I } y , t , h c a c t s o f 1 9 0 0 a n d 1 0 1 0 they (the people) have creth'.n u administrative
agency clothed with powers more extraordinary
e v o r b c f o r c 1)ccn
of ti
Intrusted to auy similar body in the history
Ov ' . i n
country.
The
Interstate
Commerce Commission has iurisdiction
cx.-LS 11 Important
carriers of interstate commerce in the United States,
so
rct'nV
operating
solely
by
water.
Their rates, classiUcations,
eithn»
, s* a n < 1 Practices are subject to the commission's authority
withb y or! t without
complaint.
r
e
s
p
e
c
t i v e rate changes may bo
for 10
coinm? i n
months beyond their effective date, and If the
bo in
°, wills it may never become effective.
Its permission must
secured beiore a less rate can be charged for a longer than a shorter
I Accounting and reporting sections,
a prosecuting sections. No. 30 possibly in this class,
0
of cnVn V, ,aln,s
powers and duties relate to the receipt and adjudication
rcdi-mT "
. to the procurement of testimony necessary therefor, or to
m e s s wrongs complained against and shown by testimony to exist.
10022—12350

distance.
A t Its discretion it m a y e s t a b l i s h through routes and j o i n t
rates.
Its orders are in force w h e n made unless i h e courts set them
aside, and this the courts can not do w i t h o u t a hearing a f t e r notice.
F i n a l l y , if present r u l i n g s are not o v e r t h r o w n , the courts will e n f o r c e
all t h e c o m m i s s i o n ' s orders, u n l e s s t h e y are u n c o n s t i t u t i o n a l or beyond
ila a u t h o r i t y .
Surely the people of the United S t a t e s have placed
upon this c o m m i s s i o n a g r a v e responsibility.
Upon its w i s d o m and
justice the people rely for a s u c c e s s f u l regulation of the Interstate
commerce of ( h i s country.
(Other i n t e r s t a t e commerce l e g i s l a t i o n
e n a c t e d under s e p a r a t e m e a s u r e s a t the last s e s s i o n of Congress include an act g r a n t i n g a u t h o r i t y to the commission to i n v e s t i g a t e railroad a c c i d e n t s ; a s u p p l e m e n t t o the s a f e t y - a p p l i a n c e a c t s requiring
t h a t cars a f t e r J u l y 1, 1011. he equipped with sill steps, hand brakes,
ladders, and r u n n i n g b o a r d s : and an a m e n d m e n t to the employers
liability act defining the procedure and right of a c t i o n . )

Mr. M A D D E N . Will t h e g e n t l e m a n yield f o r a q u e s t i o n ?
Mr. G L A S S . Yes.
Mr. M A D D E N . I w o n d e r if Hie g e n t l e m a n w o u l d contend
t h a t t h e I n t e r s t a t e C o m m e r c e Commission can d e m a n d t h e
a s s e t s of one r a i l r o a d c o m p a n y to help o u t a n o t h e r if t h e o t h e r
is in d i s t r e s s ?
Mr. G L A S S . As I read t h e powers of the Interstate Commerce Commission, it c a n initiate a joint rate which in i t s
effect would be doing that very thing.
Mr. M A D D E N . Well, (lie g e n t l e m a n h a s not a n s w e r e d my
question. T h e F e d e r a l r e s e r v e h o a r d will h a v e t h e p o w e r to
d i r e c t o n e F e d e r a l r e s e r v e h a n k to r e d i s c o u n t t h e p a p e r of
a n o t h e r F e d e r a l r e s e r v e b a n k u n d e r c e r t a i n conditions.
Mr. G L A S S . Y e s ; a n d it will i n u r e to t h e benefit of t h e discounting bank.
Mr. M A D D E N . Well, h a s t h e I n t e r s t a t e C o m m e r c e Commission t h e p o w e r u n d e r a n y c o n d i t i o n s to d i v e r t t h e a s s e t s of one
r a i l r o a d to a n o t h e r in o r d e r to help it o u t ?
Mr. G L A S S . I a n s w e r e d t h e g e n t l e m a n t h a t it has, in t h a t it
h a s t h e p o w e r to i n i t i a t e a j o i n t r a t e w h i c h m i g h t h a v e t h a t
effcct.
Mr. B O R L A N D . Mr. C h a i r m a n , will (he g e n t l e m a n y i e l d ?
T h e CHAIRMAN. Does the gentleman yield?
Mr. G L A S S . I do.
Mr. B O R L A N D . I w a n t e d to suggest to (he g e n t l e m a n f r o m
Virginia I Mr. GLASS) t h a t t h e I n t e r s t a t e C o m m e r c e Commission does h a v e p o w e r to compel a c o m m o n c a r r i e r to a c c e p t a
c e r t a i n c l a s s of business, w h e t h e r t h e common c a r r i e r w i s h e s to
do so or not.
Mr. M A N A I I A N . Mr. C h a i r m a n , let m e suggest to t h e c h a i r m a n of t h e c o m m i t t e e t h a t t h e I n t e r s t a t e C o m m e r c e Commission
h a s t h e p o w e r to compel t h e i n t e r c h a n g e of f r e i g h t cars, t h e
a c t u a l e q u i p m e n t of one r a i l r o a d w i t h a n o t h e r r a i l r o a d , by
o r d e r s to t h a t e f f e c t ; a n d u n d o u b t e d l y it is e x p r e s s l y p r o v i d e d
t h a t t h e a s s e t s of one r a i l r o a d in its e q u i p m e n t c a n be compelled to lie h a u l e d c l e a r a c r o s s t h e c o n t i n e n t a n d be used by
o t h e r10022—-12oii0
r a i l r o a d s f o r t h e public good.