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"FINANCIAL FREEDOM UNDER WOODROW WILSON SPEECH OP HON. CARTER GLASS OJfcP V I U G r l i S T t A . AT T H E JEFFERSON DAY CELEBRATION IN Washington, April 13, 1916 [Inserted in tho C O N O R E S H I O N A L R E C O R D by unanimous consent, April 14, 1U1G.J WASHINGTON GOVKRNMENT PUINTINO OFFICE 87825—15517 S V E E C IT OK HON. CARTER OF GLASS, V I It G I N I A , AT A JIOFKEUSON DAY BANQUET I N W A S H I N G T O N , April IS, 1916. The House of Representatives having under consideration the agricultural appropriation bill, Mr. GARRETT addressed the Chair. Mr. GAIlltETT. Mr. Gliairuinn, I ask unanimous consent to p r i n t i n t h e RECORD a s p e e c h d e l i v e r e d b y H o n . CARTER GLASS, of Virginia, at the Jefferson banquet held in this city last night. The C H A I R M A N . The gentleman from Tennessee asks unanimous consent to print in the RECORD a speech delivered by Hon. GARTER GLASS at the Willard Hotel last night. Is there objection? There was no objection. Speech of Hon. Carter Glass at the Jefferson Day Banquet. Mr. Toastmaster and gentlemen, the task to which I shall briefly address myself this evening is that of presenting a compendium of the financial achievements of this Democratic administration as they relate themselves directly or indirectly to the Federal reserve act. This can not more impressively be done than by drawing a simple contrast between the deficiencies of the old system, with its persistent disorders, and the effectiveness of the newer system in abating the distempers which, for so long a period, afllictcd the country in every phase of its business life. And it may be remarked at the outset that the defects of the old system were so glaring, as the failure to remedy them was so fraught with disaster, that the omission, when we contemplate it, not only causes amazement but constitutes an offense against the well-being of this Nation of which our political adversaries should feel ashamed. It affords justification for an indictment of the Republican Party from which it can find no avenue of escape. The party was plainly incompetent or it was afraid to alter a banking and currency system which lent itself so inevitably to the enterprises of financial adventurers and, periodically, visited every community of the country with blight. FIFTY YEARS OF BARBAROUS BANKING. For exactly half a century, almost to the very day, the United States was compelled to endure the handicap of the most unscientific banking and currency system of any that prevailed In the major nations of the earth. For a part of the time we seem to have been ignorant of our plight ; for another part indifferent 2 37825—15517 3 to the situation, aiul for the remainder of the time afraid to apply the remedy lest we should wound the sensibilities or interfere with the profits of a privileged class. We were during no protracted stage without ample warning, for (lie malady manifested itself frequently and violently in disturbances which swept the country like a hurricane from end to end. Five times within 30 years, immediately preceding the advent of this administration, a financial catastrophe had overtaken us right in the midst of apparent business prosperity and contentment. Kncli time the disaster was due largely, if not altogether, to a defective banking and currency system; and it is literally certain that our always tedious restoration was rendered vastly more difficult and painful by the sad lack of well-devised facilities. SIAMESE TWINS OK DISORDER. The old system had two fundamental defects. One was an Inelastic currency; (lie other a fictitious bank reserve. They were Siamese twins of disorder; and sometimes I am inclined to ascribe the Invariable failure of our Republican friends to reform the financial system of (he country to their unwillingness to subdue both of these evils at. the same time. While they repeatedly would tackle llx> problem of an inelastic currency, which everybody wanted solved, tney seemed never in a mood to defy the powerful interests behind* (he national bank reserve system, through the peculiar operation of which nearly the whole sum total of idle bank funds in the United States was congested at a single center for use in (lie stimulation of speculative enterprises. AM IJNIIESI'ONSI VK CURRENCY. The national currency was inelastic because based on the bonded indebtedness of the United States, rather than upon the sound, liquid business assets of the country. For 50 years we proceeded upon the assumption that the* country always needed a volume of currency equal to its bonded indebtedness, and never at any time required less, whereas we frequently did not need near as much as was outstanding and just as often could have absorbed vastly more than was available. Hence when il happened that the circulating medium was redundant! when Its volume was too great: to be used in local commercial transactions, instead of taking it through the expensive process of retirement it was bundled off to the great reserve centers at a nominal Interest rate, to be thrown, at call, into the vortex of stock speculation. In a different way and to an immeasurably greater extent the business of the country was made to suffer by this rigid currency system in times of stirring development and enterprising activity. It could not begin to meet the commercial and industrial requirements of the country. For example, the total capitalization of the national banks of a given comniunitv in time of stress, under the old system, measured the full capacity • if those banks to respond to the currency requirements of the locality. If the combined capital stock of the national banks of a city was $.->.000,000, that exactly circumscribed the ability of those banks to supply currency of their own issue to meet the demands of business, albeit these might necessitate the use of $10,000,000 or more. And in time of panic, such as that which convulsed the country in 1007, had these banks held 37825—i r»r> 17 &Q8 4 $5,000,000 of gilt-edge short-time commercial paper in their vaults, they could not, under the old system, have exchanged a dollar of it for currency wherewith to make up the deficiency and promptly respond to the requirements of business, for practically all tiio hanks were in the same desperate plight, every one, with rare exceptions, looking .nit for itself, with no other source of supply. A NOTA1SI.E ACHIEVEMENT. The first notable financial achievement of the Wilson administration was to revolutionize I his wretched currency system, the unhappy victims <>r which are without number and the losses beyond human approximation.'I We substituted for a rigid bondsecured circulating medium, unresponsive at hnv time to the commercial requirements of this great Nation, a perfectly elastic currency, based on the sound, liquid commercial assets of the country", responsive at all times and to the fullest extent to every reasonable demand of legitimate enterprise. It comes forth when required and is canceled when not needed. The amount is ample when business is active and only enough when business is lax. Contradistinguished from bond-secured currency, every dollar of it is based on a stable commercial transaction, whether of a mercantile, industrial, or agricultural nature, fortified by a 40 per cent gold reserve, by the assets of a great banking system, by the double liability of member banks, and by the plighted faith of a CJovernment of a hundred million free citizens. So that in a case similar to the one cited a while ago. where the banks of a given community, with $.1,000,000 of liquid commercial assets, could not, under the old system, in time of stress get a dollar of currency on their holdings, because there was no source of supply, the same banks, under the Federal reserve system, could exchange their $5,000,000 of liquid assets at a Federal reserve bank for $5,000,000 of the best currency on earth, less a fair rate of discount. That one reform, gentlemen, represents the difference between disaster and success. A V I C J O L ' S HESKITVE SYSTEM. Another fundamental defect of the old system was its fictitious bank reserve, created by that provision of the nationalbank act which authorized a deposit or book credit of individual country banks, with banks in reserve and central reserve cities to be counted as reserve, just as if held in the vaults of the interior banks. On these reserve balances, subjected to a process of multiplication, the big bunks of the money centers would pay nominal interest, which operated as a magnet to attract the reserve funds of the entire country; so that on March 14. 1014, eight months before the Federal reserve system was put in actual operation, the New York banks alone held $8;?G.l)00,000 of the funds of outside banks, while they were loaning outside banks only $102,000,000. Already the congressional monetary inquiry had disclosed the startling fact that on November 24. 1012, the legal custodians of these reserve funds had put $240,000,000 of them in the maelstrom of Wall Street stock operations. Do you realize quite what that means? It means that these millions and many millions more were withdrawn from the reach of mercantile and industrial uses throughout the United States at a fair rate of interest and loaned to stock gamblers at an abnormally low rate of interest in comparison. 37825—15517 I 5 Wo talk about tho law of supply and demand and pass laws to punish combinations in restraint of trade; but before the enactment of the Federal reserve act tho banking community, under the sanction of the atrocious system of an inelastic currency and a fictitious reserve, was enablef. to defy the law of supply and demand both in tho. lax season and in the tense. For in the season of lax trade and abundant currency, as I have already Indicated, instead of keeping the money at home and giving the local commercial and industrial interests tho advantage to bo derived from low rates of discount, the surplus funds were sent to the money centers for the accommodation of Wall Street. A PANIC UUEEDEU. And, likewise, the old system was a rank panic breeder. In periods of greatest business activity the country was made to suffer desperately for lack of adequate credit facilities. When the prospect was brightest; when men of vision and ambition and energy wotdd press forward in pursuit of prosperity and tho hum of industry would literally be heard throughout tho land, two links in the chain would suddenly snap, tearing to shreds tho whole business fabric and carrying dismay to every community on tho continent. That is to say. in plain terms, that when the country banks of tho United States, trying to respond to tho commercial and industrial demands upon them in their respective localities, being unable to issue additional currency, would seek to draw in their reserve balances from tho congested centers, and when the big banks of these centers would, in turn, be compelled to call their loans on stock, thus contracting tho credit facilities of " t h e street," interest rates would quickly .jump, mounting higher and higher, until panic would ensue, banks throughout the country would stop payments across Hie counter and consternation would reign where confidence and contentment so soon before had prevailed. I have said the losses are beyond computation; and that is so. They affected not alone tho financial institutions immediately involved, but the merchants whose credits were suspended; the industries whoso shops were closed; the railroad.; whose cars were made-idle; the farmers whose crops rotted in the Holds; the laborer who was deprived of his wage. No business enterprise, if any individual, over entirely escaped. ANOT1IEU GIT EAT ACHIEVEMENT. Another great achievement of the Wilson administration, therefore, was to remedy tins monstrous condition. No other legislative effort, as I recall the history of events, was ever directed agaiiwt this bank-reserve evil, tt required courage. It constituted a challenge to the dominating financial interests of America, and they accepted the invitation to the conflict. It was a memorable light, in which sound economic principles triumphed so completely that many of tho great bankers who seemed once implacable now concede that a tremendous advance has been made in the direction of scientific banking, and there is a general concurrence of belief that the Federal-reserve system saved this country from a financial convulsion in tho fateful autumn of 1014, even before it was in full operation. We corrected this vicious bank-reserve system by establishing regional reserve banks and making them, instead of private banks in tho money centers, the custodians of the reserve funds 37825—15517 6 of tlio United States; by making these regional hanks, instead of private correspondent hanks, the great rediscount agencies of the country; by requiring Ihcse regional hanks to minister to commerce and industry rather than to the schemes of speculative adventure. Under the old regime we had been taught to believe that the balance of the country was dependent on the money centers. Under the new dispensation the fact has been revealed that the money centers are dependent on the balance of the country. Under the old system the Country banks were subservient to the money centers, for only there could they resort for rediscount favors. Under the new'system it is no longer a question of favor; it is purely a question of business. Under the old system it was at times a question of ability to serve, and at other times of willingness. The new system supplies both the ability and the incentive to do business. Indeed, this financial product of the Wilson administration is both a proclamation of emancipation and a declaration of independence for the national banking system of the United States. NEW YORK'S RIGHTFUL PRIMACY UNDISTURBED, I noted the other day that a Representative In Congress tauntingly referred to the fact that hank deposits in New York had vastly increased since the adoption of the Federal reserve act and triumphantly asked what had become of the boast that the primacy of New York as a money center would under the new system depart. Such talk, however specious it may seem, is assuredly not sensible. Nobody ever made such a silly boast. Nobody ever dreamed of such a stupid notion. Nobody ever pretended to desire anything of the kind. Of course, New Yorklias more deposits under the Federal reserve act than ever hefore. So has Pittsburgh, so has Boston, so lias Baltimore, so has Richmond, so has Chicago, so has San Francisco, so has Dallas, so have the banks of a thousand other communities scattered from one end to the other of this country. That is exactly what we expected; that is precisely what we predicted; that is the very thing the Federal reserve act was designed to accomplish. It was contrived for the express purpose of putting the whole national banking system on such a sound basis us to create confidence and stimulate business and swell the volume of deposits of every community of the United States. People put their money in batiks now, and banks redeposit with other banks now, because they know that under the new system no panic will ever come to keep them from getting their funds hack. The proponents of the Federal reserve act had no idea of impairing the rightful prestige of New York as the financial metropolis of (his hemisphere. They rather expected to confirm its distinction, and even hoped to assist powerfully in wresting the scepter from London and eventually making New York the financial center of the world. Eminent Englishmen with the keenest perception have frankly expressed apprehension of such result. Indeed, momentarily this has come to pass. And we may point to the amazing contrast between New York under the old system in 1007, shaken to its very foundations because of two bank failures, and New York at the present time, under the new system, serenely secure in its domestic hanking operations and confidently financing the great enterprises of European nations at war. 3782")—15517 7 AN INSPIRING CONTRAST. OPVL^M' nft,er years of Theodore Roosevelt and 43 years n • r V - St r H ' N e w Y o r k < , o u , d n o t l ( , t i l country bank have $•>0,000 of bank currency to meet the ordinary requiremen s of commerce or the pay rolls of industry. In 'lOl.?, nfter three years of Woo, row Wilson and one year of the new system New York let two European nations, in the very cataclysm of a s t ^ d t v w U h T ^ ? 5 0 ?; 0 0 ?,' 0 0 0 ' S , i " U > i , v i ^ banks of that city with larger deposits than ever before in their existence Oh yes, Mr Toastmaster, New York City banks hn-e S e ^ deposits to-day than they had 17 months ago by $001000 )0 thus putting to shame the evil Republican V o p t o that he Inderal reserve act would create a disastrous constric "on of i , m ? i i , i t a t o a i,unie f s'Ki/str" THE ° COUNTRY'S RESERVES SECURE. But, with all this, there are some things that New York nnr>o had wh ch it has not to-day and never will have again a as he ederal reserve act shall remain on the statute books" It has not the gold reserve funds of the country for se he stock markets of ' the Street," nor has it any longer the power to contro the rediscounting system of the United Sta es u on terms of its own adjustment. To-day 12 regiona ba f? of t o new system, strung from Maine to Mexico, f ,,,,, , ^ . he Pacific, hold more than $500,000,000 o f l l " , , will have many millions more, to be used as basic c ies for cheerfully rediscounting the c o n m i e r d a p a p e r »f t i o merchants and manufacturers, the farmers and s t o e exporters and Importers of America, with not dollar for l o whirlpool of speculation. And these trade loans are alrea v being made at an average rate of interest 1} per cent lowSr 1 an lias prevailed before in a long number of years. FOREIGN BANKING. In the foreign field, for the first time In the history of natlona banking six great branch banks have already K i esta rishe.1 in countries to the south of us, four of theni l v tlU v^l national bank of all others that most desperatelyresi ted 1 e passage of the Federal reserve act, but which w s , , / avail of ts advantages. Other branch banks I n " , ™ , t.ion, and before many years have elapsed the branch bank * system authorized by this Democratic a d m i n i s t r a t i o n w l I not on y be saving millions of dollars in foreign exel a ge h the?to aid to London, Berlin, and Paris, but will be a p S 5 in astabhslnng and fostering foreign trade relations throughout RURAL CREDITS. I sometimes think that in its eagerness to do more for the farming community of the United States this De »T ministration has failed to appropriate full ! i great things It already has done. Not in fiO v i publican Party ever write a provision into the national bank act for as much as one dollar of rural credits. On the contr y by the text of the law, by the rulings of the Treasury nd' J decisions of the courts, every semblance of fa.-m credi s w s seduously excluded. In the first great banking n eas re put on he statute books by the Democratic Party, in nine i f! the inauguration of a Democratic President there ?o mill of dollars of farm-credit facilities, whatever pro "esslona Z 8 1 national hank could In loaned on improved farm land by any legislation of a Republican Congress. Under the Federal reserve act, according to a computation by the late Charles A. Conant, one of the best tinancial exports this country ever had, K3.~)!),01 >0,000 are made available for loans on farm mortgages alone having live vears to run. In the matter of current rediscounts every possible advantage is given to farm credits over mercantile paper, and In the matter of acceptances on the exportation of the groat staple products of this country infinite aid is extended to the American farmers. In addition to this the Federal reserve svstom has already bad a power!ui lull nonce in lowering the'rate of interest, and in this circumstance alone it limv conlidently be predicted that the farmers of the country will be saved annually hundreds of thousands ol dollars. AN DNL»UECBI»KXTKD HECOIIU. Ill the limited time proscribed for mo I can not begin to recount the tinancial achievements of this Democratic administration as embodied in its legislation and illustrated by the splendid ^service of its executive ollicors, at I lie head of whom stands the most courageous and resourceful Secretary of tlu? Trea.surv the country has had in a quarter of a century. hose uconiplishments, in their number and magnitude, surpass the record oI any other administration of which I have knowledge. THK M A ST ELL MIMI, As to the Federal reserve act itself there has been occasional speculation as to who most deserves credit for its conception and its enactment into law. Its paternity has curiously boon ascribed to men who were savagely hostile to the act; to men who never saw a sentence of the original draft; to men who could not write its title in a month's trial. I know very well that the chairman of the Banking and Currency Committee of the House has been given an undue part of the praise. Hut commendation so seldom is applied to a public man that I have never repelled the pleasant things said of me. With outward grnvitv and inward amusement 1 have heard myself accused of statesmanship, and—have liked it. Hut, gentlemen, the serious fact is that the master mind of the whole performance was Woodrow Wilson's. It was his infinite prescience and patience; it was his admirable courage and wisdom; it was his patriotism and power—his passion to serve mankind—that gave zest and inspiration to the battle for financial freedom. And when, on the evening of December '2:?, 11)13, lie allixod his signature and seal to House bill 7837, there was consummated in the otlicea of the White House the greatest legislative miracle of our time. It is because I realize now .is never before the inevitably dangerous as well as the tremendously beneficent potentialities of tlie Federal Reserve System that I earnestly pray for the reelection of the man who may most be rolled on to administer the law to the lasting good, and not to the Injury, of the American people. 37825—15517 o „
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