Full text of Statements and Speeches of Carter Glass : Truth about the Federal Reserve System : Speech in the Senate of the United States

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TRUTH ABOUT THE FEDERAL
RESERVE SYSTEM
These figures prove beyond all controversy
that, instead of
deflating credits and currency, the Federal reserve banks, during
the period of falling prices, enormously expanded hank credits
and increased the volume of circulating
notes.
This is especially hue with respect to credits in the agricultural
sections
of the United Stales.
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W h y not tell the f a r m e r the truth and advise him, if ho would
escape the consequences of anolher such disaster, he should
organize; organize, Mr. President, not to he the plaything or
the instrument of designing politicians, but organize for an intelligent investigation and pursuit of economics; organize for a
cooperative marketing of his product; organize, if it may seem
desirable, f o r the cooperative purchase of his requirements;
organize for an intelligent understanding of the source and
volume Of demand for farm products.
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Tf some Senators will go home and talk sense to bankers who
remain outside the p a l e of protection, instead of talking nonsense to farmers and arousing prejudice against the" Federal
reserve banking system, which has afforded them protection,
something worth while will be accomplished.

SPEECH
OP

HON. CARTER GLASS
OX'1

VIItGrUsTIA.
IN TIIE

SENATE OF THE UNITED STATES
M O N D A Y AND T U E S D A Y
JANUAHY

1G A N D

17,

V

WASHINGTON
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1922

1922'

S P E E C TI
OF

IION.

CAKTER
Monday,

January

GLASS.

16, 1022.

T h e Sonn(.0 had under consideration (ho kill ( S . 22G3) to amend
Federal r e s e r v e act, a p p r o v e d December 23, 1013.

the

Mr. G L A S S . Mr. President, the. distinguished Senator from
Nebraska [Mr. No:uus] a while ago said some things with which
I am heartily in accord, and I well could express the wish that
the discussion of the Federal reserve banking system might
generally be engaged in with the same apparent spirit of fairness as was manifested by the Senator from Nebraska.
15ut, Mr. President, I venture to think that the time has como
when some one should assume the task of combating in the
.Senate the many persistent and constantly recurring misrepresentations which for more than a year have streamed from
this,Chamber with respect to (he Federal reserve banking system and its administration. Aside f r o m a painful disinclination
to speak in any circumstances, I had hoped that this service to
a great Federal institution, and, indeed, to the country, would
he undertaken by some Senator whose long tenure would preclude any thought of a premature anxiety to project himself
into tiie important controversies of this body, and whose established reputation here would arrest the attention of the Senate
and command the confidence of the country.
I am not willing to believe that failure of any Senator of this
type to speak out in defense of (he Federal reserve system may
be ascribed to indifference to the success of the system or to any
Jack of pride in its notable achievements.
Many very grave
problems have claimed the attention of the Senate and to these
Senators have been devoting painstaking labor. Moreover, it
may be that Senators generally have thought, as I confessedly
have believed, that the hostile assaults on the Federal reserve
system and its administration have manifestly been so devoid
of the truth and so obviously saturated with ignorant prejudice
and injustice as to require no answer.
ItESEHVB SYSTEM SAVED THE NATION.

I?ut, Mr. President, the misconceptions and misrepresentations to which politicians at Washington have given vehement
expression have been eagerly seized upon by restless professional agitators and disseminated from one end to the other of
the country. Thus a large body of citizens has been induced to
believe that the Federal reserve banking system is a financial
juggernaut, crushing the life out of commerce and industry,
creating widespread depression, and putting an end to enterprising business activities. Instead of clearly apprehending, that
which the facts so amply attest, that this reserve banking sys-,
86409—22174

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tern saved their country from inconcclvnblc distress, from irromedial disaster, these people have been taught to believe that
ItH continued cxlHteuco would be a peril to the Nation. They,
In their present mood, literally would smite the hand that reeds
them and demolish the instrument of their salvation.
I would not have it imagined, Mr. President, that I purpose
to decry f a i r criticism; on the contrary, it is with mo a constant
prayer to be kept on guard against the streak of iconoclasm
which has too evident a place in my own nature. Neither am I
1 disposed to assert the perfection of any economic instrumentality
or the infallibility of any human agency. It would bo amazing
if the Federal reserve system had no imperfections, and foolish
to assert that its administration has been devoid of error,
W h a t I do say with all the emphasis of which I am capable is
that neither malignant nor ignorant misrepresentation will euro
the system's defects or render more efficient its administration.
WHAT

IS T i m

FTDKRAL, RES Kit VB

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SYSTEM?

T h a t wo may the more surely discover what are the deficiencies of the system, with a view to their abatement, and comprehend to better advantage the mistakes that have occurred in the
execution of the law, it might be profitable! to impure what
exactly is the Federal reserve banking system and.how it has
been administered. H a v i n g done this, wo may determine how
true or false are the charges made here, how f a i r or vicious the
criticism. I f the system is a curse or its execution a tragedy,
1 want to be convinced. I f the system is a benediction to this
Nation and an inspiration to the world, if its administration
has been sane and salutary, then I shall feel and express concern
f o r the integrity of this body if it shall appear that Senators
have disparaged the character and derided the personal honor of
public ollicials with no better sanction for such behavior than
their own peculiar antipathies or their own pitiful ignorance of
the financial transactions upon which they have assumed to
comment. For one I am not willing that the astonishing statements made here shall any longer go to the country unchallenged
and uncontradicted.
F o r half a century before the advent of the Wilson administration the United States was compelled to endure the handicap of the most unscientific banking and currency system of any
that prevailed on the earth. F o r a part of the time we seem',
to have been ignorant of our plight; for another part indifferent
to the situation, and f o r the remainder of the time a f r a i d to
apply the remedy lest we should wound the sensibilities or interf e r e with the profits of a privileged class. W e were during no
protracted stage without ample warning, f o r the malady manifested itself frequently and violently in disturbances which
swept the country like a hurricane from end to end. F i v e times
within .'!0 years, prior to l!)Ki, a financial catastrophe had overtaken us right in the midst of apparent business prosperity and
contentment. Each 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.

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S I A M E S E T W I N S OIT DISOIIDEK.

T h e old system had two fundamental defects. One was an
inelastic currency; the other a fictitious bank reserve. T h e y
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w e r e Siamese twins or disorder; and T am inclined to ascribo
the invariable failure of statesmen to reform flic tinancinl system of (lie country to their unwillingness to subline both of theso
evils at. the same time. W h i l e they repeatedly would tackle the
problem of an inelastic currency, which everybody wanted
solved, they seemed never in a mood to d e f y the powerful in-v
tcrests behind the 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
f o r use in the stimulation of speculative enterprises.
A MOID c u n n n x c Y .

T h e national currency was inelastic because based 011 the
bonded indebtedness of the United 'States, rather than upon
the sound, liquid business assets of the country. F o r 50 years
we proceeded upon the assumption that the country always
needed a volume of currency equal to ils 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 it: 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
curroncy 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, (he total
capitalization of the national banks of a given community in
time of stress, under the old system, measured the full capacity
of those banks to respond to the currency requirements of the
locality. I f the combined capital stock of the national hanks
of a city was $5,000,000, that exactly circumscribed tlie 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 1907, had these banks held
$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 delieieney and promptly respond to the requirements of business;
for practically all the banks were in the same desperate plight,
every one, with rare exceptions, looking out for itself, with 110
other source of supply.
A NOTAIU.B

ACHIEVEMENT.

W h a t was done by the Sixty-third Congress was to revolutionize this wretched currency system, the unhapply victims of
which are without number and the losses beyond human approximation. W e substituted for a rigid bond-secured circulating medium, unresponsive at any time to the commercial requirements of this great Nation, a perfectly elastic currency,
based 011 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.
T h e amount is
864G9—22174

ample when business is active and only enough when business is
lax. So rliat in n ease similar to the one cited a while ago,
where the banks of a given community, with $5,000,000 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 $">.000,000 of liquid assets
at j\ Federal reserve bank for $5,000,000 of the best currency
on earth, less a fair rate of discount. T h a t one reform represents the difference between disaster and success.
A Victors

RK.'KRVE

SYSTEM.

Another fundamental defect of the old system w a s its lictitious bank reserve, created by that provision of the nationalbank act which authorized a deposit or book credit of individual
country banks witli Imnks 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 banks 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 N e w Y o r k banks alone held $S3G,000,000
of tlie funds of outside banks, while they were loaning outside
banks only $192,000,000. A l r e a d y 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 W a l l 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 agricultural, 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.
W e talk about the law of supply and demand and pass laws to
punish combinations in restraint of t r a d e ; but. before the enactment of the Federal reserve act the banking community, under
11 IO sanction of the atrocious system of an inelastic currency
•and a fictitious reserve, was enabled to d e f y the law of supply
and demand both in the lax season and in the tense. F o r in the
season of lax trade and abundant currency local bankers feared
to relax the standard rate of interest. Instead of keeping the
money at home and giving the local agricultural, commercial,
and industrial interests the advantage to be derived from l o w
rates of discount, the surplus funds were sent to the money
centers for the accommodation of speculators.
A PANIC I1RKEDKR.

T h e 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 tin;
prospect was brightest; when men of ambition and energy
would press forward in pursuit of prosperity and the hum of
industry would literally be heard throughout the land, two
links in the chain would suddenly snap, tearing to shreds
the whole business fabric and carrying dismay to every community on the continent. I n plain terms, when the country
banks of the United States, trying to respond to the commercial
and industrial demands upon them in their respective localities,
8G400—22174

being unable In issue additional currency, would seek (o draw
in (hoir reserve balances from the congested centers, and
when the big banks of those con tors would, in turn, be compelled to call their loans on stock, thus contracting the credit
facilities of " t h e street," interest rates would quickly jump,
mounting higher and higher, until panic would ensue, banks
throughout (he country would stop payments across the 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
the financial institutions immediately involved, but the merchants whose credits were suspended; the industries whose
shops were closed; the railroads whose cars wore made idle;
(he farmers whose crops rotted in the Holds; the laborer who
was deprived of his wage. No business enterprise, if any individual, ever entirely escaped.
AXOTIIEK OR HAT ACHIEVEMENT.

It was another great achievement of the Sixty-third Congress
to remedy (his monstrous condition. No other legislative effort,
as I recall the history of events, was ever directed against this
bank-reserve evil. It required courage. It constituted a challenge to the dominating financial interests of America, and they
accepted the invitation to the contliet. Tt was a memorable
light, in which sound economic principles triumphed so completely
that many of jtlic great bankers who seemed once implacable
now concede that a tremendous advance has boon made in the
direction of scientific banking, and there is a general concurrence of belief that the Federal-reserve system saved this
country from financial convulsion when the World W a r raged
and after it ended.
W e corrected this vicious bank-reserve system by establishing regional reserve hanks and making them, instead of private
banks in the money centers, the custodians of the reserve funds
of (he United States; by making these regional banks, instead
of private correspondent banks, the great rediscount agencies
of the country; by requiring those regional bunks to minister
to commerce and industry rather than to the-schemes of speculative adventure. Under the old system the country banks were
subservient to (he money centers, for only there could they
resort for rediscount favors. Under tlie new system it is no
longer a question of f a v o r ; it is purely a question of business.
AN INSriRINO CONTRAST.

In 1007 Now York could not let a country bank have !?r>0,000
of bank currency to meet the ordinary requirements of commerce
or the pay rolls of industry. In the fateful year 1015 New York
let two European nations at war have SHOO,000,000.
The
new system enabled (he Government to lend §10,000,000,000
abroad and to iloat $21,000,000,000 at home for war purposes.
Under the old system about $60,000,000 measured the volume of
rediscounts; under this reserve system one of the smaller regional banks exceeds that amount in a single State.
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RURAL CREDITS.

Not in 50 years had any jarly written a provision into the
national bank act for as much as one dollar of rural
credits.
On the contrary, by the text of the law, by the rulinffs of the
Treasury, and by decisions of the courts, every semblance of
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farm credits was sedulously excluded.
The, Federal
reserve
system furnishes millions of dollars of farm-credit
facilities.
Xot a dollar of IIig funds of a national bank could be loanedunder the old system on improved farm lands.
Under the Federal reserve act, aeeordiuy to a computation
by the late Charles
A. Conant, $o~>V,000,000 are made available for loans on farm
morlyuycs
alone haviixj five years to run.
hi the matter of
current rediscounts every rational advantage is yiven to farm
credits over mercantile payer, and I shall show that billions of
dollars have been loaned to the farmers of the United
States.
In (he mutter of acceptances on the exportation of the groat
staple products of the f a r m infinite aid is extended to the
American farmers. In addition to this the Federal reserve system has had a powerful influence in lowering (he rate of inter*est, and in tins circumstance alone the farmers of the country
have been saved millions of dollars. Yet it. is at a system
which lias done this unprecedented service to American agriculture that professional " f r i e n d s " of the farmer are hacking
away. I t is to a system whitih has put hope in rural life that
caressing demagogues, f o r seltish purposes, falsely ascribe the
inevitable reaction f r o m the saturnalia of unparalleled expenditures.
W h a t are these regional banks?
There is no mystery about them. Tt. is not difficult to understand their organization or their processes. Each of them has
a defined territory. T h e y are operated by boards of directors,
just as any individual bank is. They are conducted with the
same banking instinct, with the same technique, with the same
mechanical and human appliances. T h e y are owned not by the
Government of the United States, as one would suppose, but
their stockholding member banks. T h e Government of the
United Sliiles never contributed a dollar to their capital; the
taxpayers are not assessed a penny f o r their maintenance; they
pay llie Government annually an enormous sum in franchise
fees—$(30.000,000 per annum—against the meager sum of
$.'3,000,000 per year paid by all the national banks in the United
States put together. They are banks of banks. T h e y do not
loan, can not loan, a dollar to any individual in the United
States nor to any concern or corporation in the United States,
bui: only to stockholding banks.
A member bank in Utah, f o r example, has accommodated
its customers to the full extent of its resources. It can loan
no more without violation of the National or State banking
acts.
It needs additional funds with which to make other
loans. H o w does it obtain them? I»y taking the note of a
borrower, with its collateral security, giving it the indorsement
of that individual bank.
It sends the note thus indorsed to
the reserve bank at Kansas City, the reserve bank rediscounts
the note at an inappreciable charge over the rate of interest
which the member bank charged its customers. That supplies
the member bank with additional funds to loan to other borrowers.
It: is very simple.
There should not be so much
ignorance about it here.
TIIB SUPERVISORY POWER.

A t the head of these 12 regional reserve banks we put a
supervising board. I t is not a central bank. I t can not loan
a penny to anybody, or to any concern, or to any corporation.
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It docs not engage in the mimiMro of hanking over llio counter.
II lias not a dollar, and never had a dollar, to loan to anybody.
It is a supervisory hoard. It has nothing to do with, and not
necessarily any knowledge of, (ho detailed discount operations
of the various regional reserve hanks, II can not command the
weakest or the strongest regional reserve hank in the district
lo discount to the extent of one dollar if that hank does not
care to do so. It can not prohibit a single regional reserve
hank from discounting millions of dollars if it has the eligible
paper and wants to do it.
Mr. P O M F K K N H .
Will not the Senator go a little further
and say it has not done it in the past?
Mr. ( . L A S S . It has not done it.
Mr. K I N O . Mr. President, if I may he pardoned, will the
Senator explain the origin of this heresy which some Senators
and a good many of the people have, that the Federal reserve
districts can draw upon N e w York whenever they please; that
it is the duty of the N e w York bank to loan to the people of
Utnli, to the people of California, to the people of Alabama
the money which belongs to the Federal reserve bank there, and
that it is the duty of the Federal reserve banks in the various
districts to loan whenever any person comes and desires money,
oxen though the bank does not have sutlicieut capital to j u s t i f y
the continuation of the enormous loans which it in the past
has made?
Mr. < I L A S S . T h e Senator has so stated his inrpiiry as that
it carries its own answer. N o banking system that would do
those things could survive in any country on earth.
Mr. S M I T H . Mr. President, if the Senator from Virginia
will allow me, perhaps I misunderstood the inquiry which the
Senator from Utah made when he said that the reserve bank of
one district could not be drawn upon for the benefit of another
reserve bank. W a s that what the Senator said?
Mr. K I N G . I did not put it that way. Of course, T appreciate that in a certain contingency, as has been explained by
the Senator from Virginia, there may he a crisis which may
warrant interregional discounts; but the heresy has grown up
tiiat: the people of Utah, or the people of Alabama, or the people
of any other district can demand of New York, or of some
other district, that it respond to the wishes and needs of any
State or any district.
Mr. G L A S S .
I will ask that Senators desist for the present
from (his argument. I do not object to being interrupted, but
I do want to finish this speech.
Mr. S M I T H . I just want to rend in that connection one
little paragraph of about 5 lines from the law.
Mr. G L A S S . I shall come to that, if the Senator will allow
me. I shall explain it fully. I have said that in certain extreme contingencies the law does permit the Federal Reserve
Board, by a vote, of live of the seven .members, to go to the
financial assistance of some weak Federal reserve bank to
avoid a crisis, not in ordinary course to loan it the funds
of some other region with which to do business. T h e textual
restriction of the statute on the Federal Reserve Hoard indicates what was contemplated. I f , perchance, the inability of a
weak Federal reserve bank to respond to the urgent requirements
of its member banks would threaten financial disaster in a
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great section of the country, then, in the judgment of the
Fedei'al Reserve Board, live members of which were required
to act aHirmativcly, one Federal reserve bank might go to the
assistance of another Federal reserve bank. T h a t is all there
is to that. The distinguished Senator from Ohio [Sir. POMKKK.N'K], who was a conferee with ine on the bill, knows I am
stating the case exactly.
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Sir. President, if my exposition of the Federal reserve act
has been accurate, it will he observed that the Federal Reserve
v
Hoard sitting at Washington is not a central bank; it is merely
a supervisory body, with certain clearly defined, limited powers.
I t can not establish a credit for any individual member bank at
a single one of the Federal reserve banks. It can not issue a
dollar of currency to any one of these regional banks, except
upon the specific application of the regional bank. It can not
w i t h d r a w or cancel one dollar of Federal reserve bank notes,
with a view to contracting the currency or f o r any other purpose, not a dollar.
I have sat here for a year and heard Senators denouncing tho
Federal Reserve Board for withdrawing circulating notes. It.,
has no particle of authority under tho law to withdraw ona
single dollar of currency f r o m circulation.
It may decline to issue currency upon request of a regional
reserve hank, but there is not one instance of record since tho
establishment of the system in which it has done that. It may
levy a tax on Federal reserve notes, so as to make their issuance
uninviting to the regional banks, but there is no instance of
record in which it has levied a penny of tax on note issues.
Sir. W A T S O N of Georgia. Sir. President
T h e P R E S I D I N G O F F I C E R (Sir. JONES of Washington in
the c h a i r ) . Does tho Senator yield to the Senator f r o m
Georgia?
Sir. G L A S S . I do.
Sir. W A T S O N of Georgia. Sir. President, I saw in fhe Washington papers yesterday a statement issued by the Federal Reserve Board which seemed to say that during the last 12 months
they had retired of their note circulation a thousand million
dollars.
Sir. G L A S S . I will say to the Senator that the Federal Reserve Board' has not retired a dollar. T h e various regional
reserve banks have retired their Federal reserve notes, for
which they made application when business was humming and
industry was at its height. N o w that: there is widespread business depression, these regional reserve banks, not the Federal
Reserve Board, have sent in certain notes f o r cancellation and
dost ruction.
Sir. O V E R M A N . Sir. President, I would like to ask tho
Senator, before ho leaves that question, who fixes the discount
rate?
Sir. G L A S S . T h e Federal reserve banks fix the rate, subject
to review and determination by the Federal Reserve Board. I
am coming to that.
Sir. J O N E S of New Slexico. Sir. President
The P R E S I D I N G O F F I C E R .
Does the Senator from Virginia yield to tho Senator from New Slexico?
Mr. G L A S S .
I do. 1 want to give all the information I
can, but Senators by interrupting are going to prolong my
v
speech.
80400—22174

Mr. .TONMS of Now Mexico. I do not understand that the
Federal Reserve Hoard, as such, has the power to restrict the
issuance of notes or enlarge the amount of an issue: hut inasmuch as one-third of the hoard of directors of each of the
regional hanks is appointed by the Federal Reserve Board in
Washington, does not the Senator believe that any recommendation of policy directed to these regional banks would be quite
effective, and is it not claimed that such policies have been
announced by the Federal Reserve Hoard, and that that has resulted in the dcilation of the currency in the country and in the
restriction of the amount of the currency; and does not that in
effect operate in the same way that it would if the board had
the direct power to make the restriction?
.Mr. G L A S S .
I say to the Senator from N e w Mexico that
every director of a Federal reserve bank must bo a resident of
his Federal reserve district. The appointment of three of these
directors by the Federal Reserve Hoard, as the Senator from
Ohio will recall, was resisted by the banking community of the
United States. They were put there to represent the interests
of the Government, because the Government, under the operations of the banks, would he one of! the largest depositors. in
the banks.
I have no doubt the banking community to-day
would gladly welcome an alteration to exclude these three appointed members f r o m the regional boards.
Answering the other part of the Senator's inquiry, I will say
that the Federal Reserve Hoard has never, since it was inaugurated, offered a suggestion to a Federal reserve bank that it
should or should not make rediscounts or apply for currency.
Mr. F L E T C H E R .
If I may interrupt the Senator just 011
that point, is it not true that the power to lix the rate of rediscount is the power to control circulation?
Mr. G L A S S . 1 said to another Senator that I would reach
that presently. I f Senators will just lot me get 011, I hope I
shall not leave any phase of the problem untouched.
Mr. F L E T C H E R .
1 did not know that the same question
had lieen presented. It, seems to me they do not need the power
to control circulation as long as they have the power to control
the rate of rediscount.
Mr. G L A S S . Of course, the power to fix the rate of rediscount; is a fundamental banking power of the system.
Mr. .TONES of New Mexico. Mr. President, I am sorry to
interrupt the Senator, but I saw the statement made by people who were supposed to know and he advised about it, that
the Federal Reserve Hoard in Washington had made a direct
request of the regional bunks in certain sections of the country,
as well as member banks, that 110 more loans of a certain character should he made; for instance, upon live stock. Personally,
I was 11 Over able to find out from any authoritative source that
such a thing had boon done, and I should like to know whether
or not the Senator has any information upon that subject.
Mr. G L A S S . I know it is not true, I will say to the Senator
from Now Mexico. T h e Federal Reserve Hoard at one time did
what Senator a f t e r Senator upon this floor did. In one of its
public outgivings it suggested that there ought to be a cessation of extravagance in this country; that the credits of the
country should bo devoted to taking care of the necessities of
the people rather than the luxuries of the people. W i l l anybody
80409—22174

12
Question the .Solomonic wisdom of a declaration of that sort?
T h e board has never at any time indicated to a bank that it
should not engage in lawful and proper rediscount activities,
and has never denied the application of a regional bank f o r one
dollar of Federal currency.
Air. P O M E K E N E . Mr. President, the Senator has already referred to the fact that only one-third of the directors of the
regional banks are appointed by the Federal Reserve Hoard.
T h e other two-thirds are divided into two classes, one representing the smaller banks and the other representing the larger
banks. T h e thought struck me that ordinarily two-thirds can
Control one-third.
Mr. G L A S S . There has never been any suggestion that the
one-third were in any degree out of sympathy with the agricultural, commercial, or industrial requirements of their particular
region. I t is not natural to suppose they ever are. They are
business men o f character and reputation, identified with the
particular region. Why should they wish it harm?
These powers, with the right to review and determine rediscount rates, are conferred by the law on the Federal Reserve
Hoard f o r the security of the bonking system of the United
States and to insure that any expansion of the currency shall
be upon safe and sane lines.
UKCKLKHS CIIAJIOB OIT HBFI.ATION.

Yet, Air. President, with these restricted powers unexercised to this day, the Federal Reserve Board, times without
number, has recklessly been charged with instituting and executing " d r a s t i c and cruel policies of deflation." One perfervid
Senator characterized it a " m u r d e r o u s " policy of discrimination against agricultural produce.' What, precisely, is meant by
this charge? It can signify but one thing, which is, in plain
terms, that the Federal Reserve Hoard at Washington, without
sanction of law, ordered Federal reserve banks, especially those
located in the agricultural regions, to curtail or stop rediscounts or that the board refused to issue currency upon application of the banks or that the board did both these things. The
actual truth is, Mr. I'rcnident,
the Federal Reserve Board did
neither of these things, and I challenge the production here or
clxcicticrc of (in// particle of evidence of anj/ such, action bji ihe
Federal I'eserve Hoard.
It issued no such order; it had no
right to issue any such order. And, as I have pointed out, while
the board is vested by law with explicit authority to refuse to
Issue currency or to tax that outstanding ! n order to influence
its redemption, the board has not exercised its lawful power in
either respect. Every dollar of bank credit denied was withheld by a local bank or regional bank. T h e Federal Reserve
lionrd had nothing to do with it. Every dollar of currency
retired was retired by a local bank or regional bank. T h e
board bad nothing to do with it.
B y whom, then, Air. President, was this wicked policy of deflation of the credits and currency of the system instituted and
what were the agencies employed in its execution? Each
regional bank of the system is master in its own domain, subject
only to the Federal statutes; it is operated by men, all citizens
of its territory. Two-thirds of its directors are selected by
the member banks in its territory. These men are presumed
to understand the' conditions and to know the requirements of
6G4G()—22174

every Interest in the territory, agricultural, connnercir.l or industrial. I f there was dellat.ion, " w i c k e d " or righteous, monstrous or sane, the directors of these respective Federal reserve
banks, in larger degree llian any other agency under the law,
should he. held responsible for it.
Hut / pointedly
deny that there icon deflation
of
cither
regional
reserre
haul: credits
or atu/ diminution
of
Federal
reserve currency
for the period of the appalliny
drop in prices
of uyricuUural
products.
INCONTROVKRTIIU.K I'ACTS AND I'lrilJItES.

I hope Senators will take particular note of that declaration
and convict mo here, if they can, of any inaccuracy that appertains to i(. Rhetoric, whether the mo ivo of it be harmless or
vile, is one thing. A cold, indisputable fact is something different.
In all this f a n f a r e of prejudice and vituperation
there has not been given one authenticated f a c t or ligure to
j u s t i f y the assertion that the Federal reserve banking system
was appreciably delinquent or in any degree oppressive. I shall
present proof to the Senate that, in the period of precipitated
prices of f a r m products, there was a constant expansion of
regional bank credits and an increase in the volume of F e d e r a l
reserve notes issued. A t this point 1 shall insert in Tlie RECORD
iigures furnished me by the Bureau of Statistics, Department of
Agriculture, g i v i n g the average seasonal price, by the month,
of cotton, wheat, corn, and oats f r o m July. 1919, to January,
HUM, inclusive:
•

1919.

Jul V
August
September
( ICIOIkt
November
December

1920.

January
July
August
September
< >elobe-r
November
1 >eecjuber

Jiimmry

1921.

Cotton.

Wheat.

Corn.

Oats.

$c.3ii
.32 r,
. 303
.313
. 30.')
.357

$2. 22
2.17
2.06
2. 10
2.13
2.15

$1.76
1-91
.K5
1.51
1.33
1.35

10. 71
.75
.72
.0.8
(19
.72

. 350
. 371
. SOS
.311
.255
. 191
.11

2.32
2. 54
2.32
2. 19
2 14
1.88
1.44

1.40
1.86
1.0-1
1.50
1.21
.87
.08

.78
1.01
.82
.70
.01
.54
47

. 115

1.49

.67

.46

.Mr. President, an examination of these figures discloses the
fact that cotton, quoted at 81.1 cents in July, 1919, is quoted at
,'<7.1 cents in July, 1920, when a sharp decline set in, until
f o r January. 1021, cotton was quoted at 11.5 cents, a decline
o f tiSU per cent f r o m July, 1920, to January, 1921.
It is seen that oats rose f r o m 71 cents f o r July, 1919, to $1.04
f o r July, 1920, and dropped to 40 cents f o r January, 1921, a decline of 55.8 per cent f r o m July, 1920, to January. 1921.
I t will be noted that wheat rose gradually f r o m $2.22 f o r July,
1919, to $2.54 f o r July, 1920, and fell to $1.49 for January,
1921, a decline of 41.4 per cent from July, 1920, to January. 1921.
H i tti'J—2217-1

13
Tt will ho observed that corn fluctuated from $1.70 for .Tidy,
10JO, to $1.S(! for July, 1020, and foil to 07 cents for January,
1021, a decline of 03.0 per cent from July, 1020, to January, 1021.
Thin shocking decline in the produce of American farmers, as
well as a less acute decline In the products of our mills, Is- a
f a m i l i a r story to every intelligent business man of the country.
I f it can be established that f o r this period from January i ,
1020. to January 1, 1021, the Federal reserve banks, severally
or in (he aggregate, contracted their credits and diminished
the volume of their note issues, those who charge them with " a
drastic and cruel policy of deflation " may j u s t i f y the accusation
with respect to these regional banks. But even in this event
they can get no sanction f o r their assaults upon the Federal
Reserve Board, which does not initiate bank credits nor issue
currency except upon application of the regional banks. N o w ,
let us see what the facts are. A t this point I shall place in the
RKCOHD an authenticated statement of paper held under discount for member hanks of I he Federal reserve system as of
January 1, 1020, and January 1, 1921; likewise a statement of
the volume of Federal reserve notes in circulation on January
1, 1920, and on January 1, 1021.
Paper held under rediscount
for member
district,
ulno Federal
rencrvo nutca in

11)21.

Federal rcservo bank.

hank* in each Federal
reserve
circulation
on Jan. 1, l$.!d and

Paper held under discount for mernbor
banks-

i
*
Federal reserve notes in
, .circulation—

Jan. 1,1920. Jail. 1,1021. Jan. 1,1020. Jan 1,1021.

Philadelphia
Atlanta
Chicago
SI. Louis
Minneapolis
Kansas City
Dallas
Total

$133,030
700,
237,300
104,617
114,772
HX, 052
207,63!)
77,07*)
73,857
110,380
28, 371
73,800
2,215,305

51.V., 203
£71,43!)
155.431.
122,1S2
125,473
100,040
475,503
114,033
05,001
130,402
07,302
107,593
2,087,383

$214,003
£07,610
237, a-, 1
204,733
145,705
155,511
500,130
145,203
87,187
KM, 0-10
74, ftW
242,102
3,008,878

$2^,730
«i7,481
273,322
318,051
155, 100
173, I'M
645,395
135,78 >
70,193
111,573
79,453
272,40i
-»

3,330,281

CREDITS INCREASE AS PRICES DROP.

An analysis of these statistics shows that the total amount of
rediseountcd
payer held by the t2 reyionat reserve banks on
January 1, 1020, vas $2,215,305,000. Instead of deflating
their
ercdits, as has been charyed, these banks as of January i, 1021,
had increased their accommodations
to member banks in the
ayyreyate to $2,687,393,000, an expansion of $',72,088,000 in the
12-month period.
I f any Senator can controvert this fact, I pausevto have him
do it.
On January I, 1020. the 12 regional reserve banks had notes
in circulation
to the amount of $3,008,878,000. Instead of reducing circulation,
these same banks on January 1, 1921, had outstanding circulation
aggregating
$3,336,281,000, a total
expan8G4G0—22174

15
sion of currency of $,1.!8,'iO,1,000 for the f 2-montli period of falling prices.
W i l l any Senator say flint that is not true?
'I'll us it vill tic noted Ihnt so fur from the truth, is the accusation that tlic Federal h'eserrv Hoard "hunl>lcd"
the prices
of farm products by a cruel policy of dcfUttlon, It
shown that
(luring the uholc period of falling prices the Federal
reserve
banks were supplying
largely increased credit facilities
and
issuing a eonstantlu increasing volume of Federal reserve notes.
Mr. I I E F L L N . Mr. President
The P R E S I D I N G O F F I C E R .
Does the Senator from Virginia yield to the Senator from Alabama?
Mr. C L A S S . I yield.
Mr. I I E F L I N .
I do not want the Senator to get the impression that 1 agree fo a good many of those things.
Mr. C L A S S . Oh, I do not get the impression that the Senator from Alabama agrees with a single one of those things.
Mr. H E F L I N . I localise I expect to reply to the Senator, and
1 want him to know that I disagree with him on several of
fhese propositions.
Mr. G L A S S . I would have assumed that without any statement. from the Senator.
Mr. H E F L I N . The Senator compliments my friendship for
the people of the country.
Mr. G L A S S . Oh, Mr. President, Uo friendship can intervene
where a great and vital interest of the country is concerned.
1 hclieve it; was the P u k e of Gnise who once was bitterly reprimanded by the Archbishop of Paris for exhibiting some degree
of acerbity toward a friend. The prelate asked how he could
reconcile Ins attitude with his professions as a churchman, and
the Duke of Guise responded, " I confess, your grace, that Christ
taught us to forgive our wiemics; but I think you will search
Scripture in vain to iiud that he anywhere admonished us to
forgive our friends." That is my reply to the Senator f r o m
Alabama when he appeals to friendship to avert dritieism of bis
misrepresentation of the Federal Reserve Board here in Washington.
Mr. 1 1 F F L I N . Mr. PresidentT h e P R E S I D I N G O F F I C E R . Does the Senator from Virginia yield to the Senator from Alabama?
Mr. G L A S S . I yield.
Mr. I I E F L I N . The Senator from Virginia misunderstood me.
I said that lie was complimenting my friendship for the people
of the country and my desire to have a f a i r deal for them, and
not my friendship for the Senator, which is great ; we are personal friends; but 1 am not appealing to that. 1 will take careof the Senator's arguments along that line.
Mr. G L A S S . Oh, 1 do not doubt that.
It; is significant, Mr. President—and I call the attention of my
distinguished friend from North Carolina [ M r . OVKKMAN] to
the fact—that these increased facilities
were applied for and
granted at the increased rate of rediscount put into effect by
the regional reserve banks and approved by the Federal
Reserve
Hoard.
This tremendous expansion of Federal reserve credits,
aggregating nearly $ 1,000,000,000 within the 12-month period of
falling prices, was not managed except by an alarming encroach80409—2217-1

1G
mont upon tlio gold roservos of the regional banks, one of them,
ns 1 recall, barely escaping the humiliating if not disastrous
experience of having its gold reserve wiped out of existence; it
had to resort to the expedient of largely rediscounting with
another Federal reserve bank at the North.
I .OA NS TO FARM KKS.

L e t me anticipate here a thought which may have place in tho
minds of some Senators. Doubtless they will want to know in
what sections of the country these extensions of credit prevailed, in order to determine whether one class of citizens was
discriminated against or another class granted peculiar privileges by the Federal reserve banks. W e shall s e e :
T h o regional bank at Richmond accommodates the grain,
fruit, tobacco, and cotton portions of the lifth district.
Were
Its credits detlated or its note issues reduced during the period
of falling prices? Not at a l l ; both credits and circulation wcro
extended. On January 1, 1920, the Richmond Federal Reserve
Rank held discounted paper to the amount of $111,772,000. On
January 1, 1021, its rediscounts had been increased to $125,473,000, or more than $10,000,000. On January 1, 3020, tho
Richmond bank's note issue amounted to $145,705,000; on January 1, 1021, the bank's note issue had been increased to $155,300.000, an expansion of nearly $10,000,000, the total expansion
in currency and credits being about $20,000,000 in the period
of falling prices.
The Atlanta Federal Reserve Rank, which is in the cotton
belt, as the Junior Senator from Georgia [ M r . HARKIS] may note,
held $88,052,000 of discount paper on January 1, 1020. W a s
there any dellation at the Atlanta bank? Not a b i t ; on January
1, 1021, its rediscounts bad about doubled, amounting to $100,040,000. Its note issues increased from $155,511,000 on January
1, 1020, to $173,400,000 on January 1, 1921, a total increase In
credits granted of $90,483,000 w i t h i i r t h e period of falling prices.
Tho Chicago Federal Reserve Rank, accommodating the grain
,nnd live-stoqk section of the country, on January 1, 1920, had a
volume of $207,039,000 in rediscounts, and during the period of
falling prices these credits had increased to $475,503,000 on January 1, 1921. It/ note issues for the same period increased f r o m
$500,139,000 to $545,395,000; total expansion, $253,178.
The St. Louis Federal Reserve Rank, accommodating the grain
and live-stock territory, on January 1, 1020, held rediscounts
aggregaI ing $77,07!),000.
These credits increased during the
period of falling prices to $.114,033,000. Its note issues were
reduced by the sum of $10,000,000; aggregate expansion of tho
bank's credit about $37,000,000.
T h e Kansas City Federal Reserve Rank, in the grain and stock
section, had $110,380,000 rediscounts on January 1, 1920. These
credits had expanded to $139,402,000 on January 1, 1921,.and
its Federal reserve note issue had increased in the same period
$7,500,000; total expansion, $30,522,000.
T h e Federal reserve bank at Dallas held $28,371,000 in discounted paper on January 1, 1920, which amount had been more
than trebled on January 1, 1921, totaling $97,392,0(H). For tho
same period its note issue increased about $5,000,000, aggregating $79,453,000; total expansion, $74,021,000.
T h e San Francisco Federal Reserve Rank, accommodating the
fruit, dairy, and other farm industries of the Paciilc States, held
8UIG0—22174

s

17
$73,SOfi,000 of eligible paper on January 1, 1020. This amount
had more Hum doubled on January 1, 1021, when it reached
$ 107,508,000. T h i s bank's note issue increased from $242,402,000
to #272,403,000, an increase of moro than .$1)3,000,000 in credits
and $30,000,000 in the volume of its notes.
Mr. President, while this expansion of credits was taking
place in the agricultural districts of the United States, the
notable fact is disclosed by the official figures that there were
scarcely any increases by the banks located in the great industrial centers of the country. Senators may easily examine the
table and ascertain f o r themselves the accuracy of this statement.
Mr. P O M E R E N E . Mr. President
T h e P R E S I D I N G O F F I C E R . Does the Senator from Virginia yield to the Senator f r o m Ohio?
Mr. G L A S S . I yield.
Mr. P O M E R E N E . Is it not true also that during this decline
of prices there was an advance by the Federal reserve banks
in the industrial districts to the banks in" the other sections of
about $207,000,000 ?
Mr. G L A S S . T h e Federal reserve bank of Cleveland, in the
Senator's own State, advanced, as I recall—and I will insert in
the RKCOKI) the exact figures—$150,000,000, and perhaps in excess of that, to the Federal reserve banks in the agricultural
regions of the country. I t did not have to be compelled to do
so by the Federal Reserve Board, but took the action on its
own initiative, or perhaps at the suggestion of the Federal
Reservo Board.
AMAZING R,INERAR,ITY OP RKSHRVH HANKS.

I shall anticipate another thought which doubtless arises in
the minds of Senators who may desire to know whether strictly
agricultural credits, as distinguished from mercantile and industrial credits, were diminished during the period of falling
prices. T h e figures show that loans on agricultural and livestock paper increased enormously within the period of price
precipitation. A t this point I will insert in the RECORD a table
giving the loans on agricultural and live-stock paper, as segregated, each month for the entire year of 1020, showing that these
loans by the hanks in the agricultural sections increased more
than fivefold, while prices f o r agricultural products were falling in a distressing degree:
Loans

of Federal

reserve

January
February
March ___
April
May
.1 vino
July

banks

on aprirultural

1920.

and Jive-stock

paper

for

$50, 905, ono
07, 11)5, 000
74, 0ii5, ODD
t o o , ns2, (loo
140, 001, (100
ION, O.'iN, ()00
2 0 2 , 5 2 0 , 000
210, 278, 000
224.424,000
2 4 0 , 0 4 0 , 000
2 4 1 , 5 0 1 , 000
240, 040, 000

August —
September
October__
November
December-

T h e figures in some detail show that at the Richmond Federal
Reserve Bank loans on this kind of paper increased from
$440,000 on January 1, 1020, to $0,251,000 on January 1, 1021.
80400—22174

3

18
T h e Ionns of the Atlanta Federal Reserve Rank on paper of
this character increased from $841,000 oil January 1, 1020, to
$10,831,000 on January 1, 1921.
Why, Mr. President, I am amazed at the broad liberality of
this regional reserve banking system In that distressing time.
H a d I any criticism to make of its administration it would bo
that it too far transgressed the requirements of safe banking.
T h e Federal reserve bank at Dallas on January 31, 1920, had
only $4,450,000 on agricultural and live-stock paper, which was
increased to $31,251,000 by January 1, 1921.
T h e Kansas City Federal Reserve IJanlc increased its loans on
this kind of paper from $20,022,000 on January 31, 1920, to $40,810.000 on January 1, 1921, during the period of falling prices.
T h e Federal reserve bank at St. Louis on January 31, 1920,
held but $291,000 of agricultural and live-stoclc paper, which
amount by January 1, 1921, had been increased to $4,800,000
during the period of falling prices.
T h e Federal reserve bank at Minneapolis held on January
31, 1920, only $0,855,000 of agricultural and live-stock paper.
On January 1, 1921, it held $53,890,000 of strictly agricultural
paper.
T h e Chicago Federal Reserve Bank on January 1, 1920, was
loaning but $12,783,000 on agricultural and live-stock paper,
whereas on January 1, 1921, it had increased these loans to
$52,095,000 during the period of falling prices.
I would call the attention of the Senate to this significant
fact in this connection:
These figures constitute loans made to the agricultural interests of the country on paper having a maturity of six months,
which paper may easily be segregated; but the figures are not an
index to the full volume of agricultural loans, because hundreds
of millions of dollars of commercial loans are made to tha
farmers of the country on paper of 90 days' maturity. Indeed,
by reference to page 17 of the last annual report of the Federal
Reserve Board it will be seen that 11 of the Federal reserve
banks, excluding the N e w York bank altogether, made loans for
f a r m and dairy purposes f o f the year 1920, comprising the
period of falling prices f o r f a r m products, aggregating $1,9S0,003,000 as against $729,2CG,000 f o r a like period of 1919; and
this great volume of credit does not include the large amounts
advanced on cotton, wool, and similar lines by tlie greater banks
of the system.
TUB

RtSTKM

NOT SUCTION A t».

Mr. President, I am not speaking f o r any section of the country or against any section of tho country. I am not speaking
f o r the Democratic P a r t y or f o r the Republican Party. I despise the conception of tho man who thinks that wo should
harass and corrupt this great Federal banking institution by introducing politics into Its administration or political henchmen
into its personnel. Once that is done, the system is gone beyond
reclamation.
I am speaking f o r the integrity of this great
Federal reserve banking system, which saved every section
of the country in a timo of unprecedented disturbance, when
all the world beside was going into financial chaos and
being wrecked almost beyond recovery. But it is a fact of
some significance that the Federal reserve banks of tho
North, without compulsion of any kind, went largely to tho
60409—22174

•

19
assistance of the agricultural interests of the South and West.
At one time, in October, 1920, in the crop-moving period of that
year, when the prices of agricultural products were going d o w n ,
the Federal Reserve Bank of Cleveland alone was loaning to tho
reserve banks in the West and South no less than $145,800,000,
Mark this: T h e loans of the Federal reserve hank at Cleveland in the South and West exceeded its total loans to member
banks of its own district, including the banks of the great
cities of Pittsburgh, Cleveland, and Cincinnati, the greatest
industrial district of the United States.
These funds were derived from the stockholding banks of that
district; they represented the vision, the enterprise, the activities of the men and industries of that territory.
Vet, in an
effort to save a distressing situation they were loaned to the
banks in the agricultural regions of the United States. And so
also did the Federal reserve banks at Boston and Philadelphia
and N e w York, by permission of tlie Federal Reserve Board,
loan from their funds to western and southern Federal reserve
banks f o r the relief of the agricultural situation in those sections. Indeed, the Dallas Federal Reserve Bank borrowed'continuously from the northern reserve banks from the spring of
1020 to December 15, 1921. Minneapolis just finished paying
out of debt to these banks last. November, and Richmond and
Atlanta last December.
Happily, all of the Federal reserve
banks are now above their reserve requirements, each standing
on its own resources, with the ability and the-willingness to
take care of all reasonable credit requirements.
It was the
palpable intent of the law that they should do this. I t was never
intended that interregional discounts should be a normal process
of this system.
NOT A CENTItAL RANK.

Some Senators seem to imagine that w e have a central banking system in this country. The amazing statement, is made
h< •re that Congress in 191.1 adopted a slightly modified form of
the A Id rich bill, which did provide a central banking institution.
No greater misconception was ever projected in this Senate
Chamber, and no man on earth knew better than Mr. Aldrich
himself that a statement of this kind involves a total misunderstanding either of the provisions of the Aldrich bill or the
essential provisions of the Federal reserve statute. We liavo
no central bank, and the Federal Reserve
Hoard sitting
at
Washington has no right, except in circumstances
threatening
the financial fabric, of the Nation, to eren order one Federal
reserve bank to rediscount
the discounted
paper of
another
regional bank. Fven, in a financial crisis, such as the lam content/dales, it requires the affirmative action of at least five of
tlic seven members of llie Federal Reserve Hoard to compel
one of these regional reserve banks to rediscount for the other.
Hence, when gentlemen talk about the great resources and earning assets of this or that Federal reserve bank and imagine
that these resources are available as a normal process for use
iu other regions, they simply display a lamentable
ignorance
of the Federal reserve banking system, both as to the text and
intent of the law.
When the junior Senator f r o m Alabama
assumes that the contemplated expenditure of a certain sum of
money f o r a regional reserve bank building in N e w York
operates to restrict the'banking credits of cotton planters in the
80409—22174

20
South, ho is talking pitiful nonsense. What have agricultural
credits in tho South to do, directly or Indirectly, with a bank
building in N e w York or Chicago or Cleveland or San Francisco?
I t might as well he said that the school children of Birmingham
or Richmond have their educational facilities wickedly impaired
because the school board at N e w Y o r k or Roston lias been or
contemplates spending more money for educational purposes
next year than all the Southern States combined. T h a t sort of
talk is not even specious; it is such arrant nonsense that I
should not like to believe it can deceive the very simplest
among those who are the accustomed victims of demagogy I
THE CASH CLEARLY l'ROVHn.

Presently, Mr. President, I shall briefly discuss (he question of
bank building and bank salaries.
For tho moment I desire
sharply to draw the attention of the Senate and the country
to (lie incontestable fact that (lie authentic figures which I have
presented prove beyond rout rovers 1/ that Ihe crashing decline in
the price* of farm products wax not caused by ihe
Federal
Reserve
Hoard at Washington
nor by any policy adopted or
. pursued by the Federal reserve banks throughout
the country.
These figures prove beyond all controversy
that, instead of
deflating credits and currency, the Federal reserve banks, during
the period of falling prices, enormously expanded hank credits
and increased the volume of circulating
notes.
This is especially true with respect to credits in the agricultural
sections
of the United States, for it appears from the official
figures
that while agricultural
credits
were expanding
commercial
credits were contracting.
Federal reserve banks in the great
money centers carrying an aggregate of $467,000,000 in bankers'
aeccptanccs this last summer ivere carrying less than $'t0,000,000
of these acceptances.
T h e figures show a decline in commercial credits secured by
Government securities of nearly $ 1.0(H),000,000 in that period.
What, then, becomes of this charge of " c r u e l and wicked and
m u r d e r o u s " deflation of farm credits by the Federal reservo
banks under orders from the Federal Reserve Roard?
Mr. President, any self-respecting board of directors of any
one of these Federal reservo banks would doubtless resent an
order from the Federal Reserve Roard to abandon its rediscounting operations. T h e board has 110 l a w f u l authority to
issue any such Order. These rediscounts frequently take place
without the immediate knowledge or consent of tiie Federal
Reserve Iloard. It is only when currency is desired, when application is made for the issuance of Federal reserve notes, or
when a regional bank depletes its gold reserve, that the intimate knowledge and supervisory power of the Federal Reserve
Hoard is brought into effect.
What, then, becomes of the charge of "murderous d o n a t i o n "
when it is examined? It takes its place in the limbo of discarded fiction. F o r my part, I fervently thank God that I have
no responsibility f o r its inception or i(s propagation or the dissemination of its vile odors. N o one will ever he able to compute the amount of damage done by this misrepresentation and
the harmful use made of it by erupting politicians. The truth
in one sentence is that falling prices caused the deflation of
credits and currency, such as we have icitnesscd since January
of last year, and not deflation of credits the fall in prices.
80100—22174

2L
WHY

rnicES

TUMULED.

Mr. President, Hie crash in commodity prices in the summer
and fall of 1!)20 is not a hidden mystery. It did not require a
Joint Commission of Inquiry to he ascertained, although I am
profoundly thankful that such a commission instituted a
thorough investigation of the subject. T h o storm w a s i n e v i t a b l e ;
discerning men saw it brewing and w e r e prepared when it
burst. It was not peculiar to this c o u n t r y ; its sweep was
through the whole world. First, it tore asunder economic conditions in Japan. T h e disaster there almost instantly reflected
itself by the break in the silk market in March of 1020. T h e
next manifestation of distress was in May, when the wool
industry utterly collapsed and we had presented the phenomena
of wool cheaper than cotton. Then came the break in hides
and leather; then in sugar, wheat, cotton, corn, oats—oil conspiring to create alarm and to occasion distress throughout the
count r.v.
Did deflation of credits by the Federal reserve banks, on order
of the Federal Reserve Hoard, cause the crisis in Japan?
Did
a restriction of credit cause the violent prostration of tlie wool
industry?
I>id the drop in sugar, which threatened a moratorium in Cuba and which came not f a r f r o m wrecking one of
the great hank ing institutions of this country because of a
satiety of credit, have its origin in any policy of the Federal
reserve hanking system?
If not, how ma// it rationally
be
contended that a restriction
of credit, which never took place,
by an order which iras never issued, is responsible for the crash
in prices of other
commodities?
Mr. President, we are accustomed to get periodically more or
less definite estimates of crop production, and then think we
have envisaged the entire problem of prices f o r a given time.
A s a matter of fact, w e have only half of the picture. It may
be told with a reasonable degree of certainty what will be the
(supply, but nobody can ever tell what w i l l he the demand f o r
the products of f a r m or factory. Senators know perfectly well
that all continental Europe, as well as the N e a r and F a r East,
has been embroiled in w a r and plagued by economic disasters
since the armistice was p r o c l a i m e d ; so that our foreign markets
were dislocated.
Moreover, the peak of extortionate prices in this country had
all but pierced the clouds in the early summer of 1020, exceeding actually the highest point of the w a r period.
I pause to remark that we arc a peculiar people in America.
F o r months and months Senators and newspapers throughout
the country w e r e denouncing profiteering in the prices of commodities and of all conceivable art icles of commerce. T h e y w e r e
eager to put the profiteers in j a i l . T h e y wanted to impeach the
Attorney General of the United States f o r not quickly putting
them in jail. Then, when the drop came, these impatient souls
denounced the F e d e r a l Reserve Hoard.
T U B SENATB oni)i:nr,D DEFLATION.

Mr. M c T i E A N .
I remind the Senator that in May, 1020, w e
passed a resolution for an investigation of the cause of high
prices, and at that time condemned the Federal Reserve Hoard
f o r not raising its rtxliscount rate.
Mr. G L A S S . Y e s ; and I shall show that you practically
undertook, without any authority of law, to compel tho Fed80409—22174

22
oral Reserve Board to raise its rediscount rate. The Semite
voted for (i resolution unanimously, offered by the
distinguished
Senator from Montana [ M r . M Y K K S ] , demanding to know what
the Federal Hcserre Hoard had done, or what it purposed to
do, to deflate the credits and currency of the country.
Senators
are making me anticipate my speech.
[ A t this point Mr. GLAUS yielded the floor for the day.]
Tltcsday, January 11, l'.)22.
Mr. G L A S S . Mr. President, when the Senate recessed on
yesterday 1 had covered those phases of the problem under discussion which related particularly to tho question of alleged
deflation of credits and currency in this country and was undertaking to describe the causes and course of the fall-in prices.
CONSUMERS

ON

STLTLKK.

T h e peak of extortionate prices in the United States, as I
said before, had all but pierced the clouds in the early summer
of 1020, exceeding actually the highest point of the war period,
and the people of the United States had become tired of being
profiteered and the people of Europe could no longer
pay the prices. A t home and abroad the people in their
righteous indignation went on strike, as it were, against the
profiteers. That vitally affected the situation, because when the
people once began to do without luxuries, by the very processes
of psychology they began to economize in tho more necessary
things of life. T h e demand for all products was (bus enormously diminished. Then railroad rates were skyrocketed, not
alone putting a tax on the things which the f a r m e r must transport to market, but likewise on everything which the farmer
was compelled to bring back to the farm. Building was reduced
to the minimum, road construction was stopped, furnaces from
one end of the country to the other were banked, unemployment
to a f r i g h t f u l extent ensued; and all this, Mr. President, for no
lack of credit facilities, but for lack of markets in which to sell
tho products of farm and mill and factory. T h e r e is the picture!
Why not tell the farmer and everybody else the truth
about the thing? W h y invent the wretched fiction about deflation of bank credits, and by this false predicate seek to impair
the usefulness and ultimately to destroy a banking system that
preserved this country from chaos ami that, if let alone, will
restore the financial equilibrium of tho world, if it be not
already beyond restoration?
WHY

FARMERS

SUFFERED

FIRST.

T h e consequences of this crash in commodity prices wore
more pitiful to the American farmer, because the pelting storm
found him defenseless and without shelter. T h e factory men
and mercantile interests, both jobbers and retailers, have better
insurance against sudden collapse. They are more compactly
organized; they may longer resist falling prices than tho fanner,
I do not charge that they are more acquisitive; but at least
they do not find themselves obliged to accept their losses as
promptly as the farmer. This is why the farmer was hit first,
and hit hardest and suffered most. W h y not toll the farmer tho
truth and advise him, if lie would escape the consequences of
another such disaster, he should organize j organize, Mr. President, not to be the plaything or the instrument of designing politicians, but organize f o r an intelligent investigation and pursuit
S04GU—22174

23
of economics; organize for a cooperative marketing of his product,; organize, if it may seem desirable, for the cooperative purchase of his requirements; organize f o r an intelligent understanding of tho source and volume of demand for farm products.
I commend to the consideration of every.Intelligent American
farmer the report of the Joint Commission of Inquiry upon the
Agricultural

Crisis

and

fts

Causes;

and

to

indicate

that

T

have not I " ->v in nnvwise misstated the situation. I v dl ' <n
quote a paragraph to be found on page .17 from the report ; »
question on—•
TUB BREAK IN I'HICES.
T h e eri.-ds w a s nnt confined to tills c o u n t r y .
T h o a v a l a n c h e of dec l i n i n g prices and its a t t e n d i n g hardships, sacrifices, and losses I n v o l v e d
the w h o l e w o r l d .
I t began In d i s t a n t .lapan w i t h the hrenk In the silk
m a r k e t and the Chinese boycott, of Japanese Roods.
It t r a v e l e d tho
circle of tho F a r East, A u s t r a l i a , I n d i a , .lava, K n j d a n d , F r a n c e , I t a l y ,
t h e w h o l e of Kurope, South A m e r i c a , Canada, and the United States.
It embraced all countries and all industries, though not to tho same
e x t e n t o r In the same w a y .

Mr. President, the difficulties of the farmers of the United
States can not be cured by listening to the sickening rhetoric
of politicians or professional agitators. Recurrent distress can
not be averted by indefensible assaults upon the integrity of the
Federal reserve system or defamatory-accusations against the
clean, courageous, trained men who are engaged in its administration. T h e farmers of the country can be helped in two practical ways, one of which involves the strengthening rather than
Impairment of the Federal reserve system itself.
NONMKMIUCK BANKERS roWEHI.ES.H.

I draw the attention of Senators from tho agricultural sections of the country to the fact that a large part of tlie banking
power of their States is wholly independent of the Federal
reserve banking system and refuses to avail itself of the tremendous advantages of tho system. In the South 412 per cent of
the banking power of that entire section is lodged with nonmember banks, institutions which had no access in the recent crisis .
to tho currency vaults or credit facilities of the Federal reserve
banks. They were powerless to help tho situation because they
could not avail themselves of the rediscount privileges of this
great banking institution.
Very likely, Mr. President, most of the State banks did what
they could in the circumstances; possibly they responded to the
limit of their facilities to the demand of the agricultural interests for hank credit; but they were not members of the Federal
r e s e r v e banking system and had no access to its advantages.
In the Middle Western States 39 per cent of the banking
power of all flint region is lodged with banks which do not
belong to the Federal reserve system; they likewise were powerless to help in this crisis which so afllicted not only the agricultural interests but every interest in this country.
In the f a r Western States, the great grain-growing section, 50
per cent of the banking power of that region is lodged in banks
that are not members of the Federal reserve system; they are
powerless, beyond their own restricted resources, to aid in any
national crisis. And In the Pacific States 30 per cent of the
banking power is lodged in banks outside the Federal reserve
system. These nonmember banks have total resources amounting to .$19,144,393,000, which were availed of in that crisis to
80409—22174

'

,,

_

only n limited extent beenn.se tbese bunks w e r e not members of
the F e d e r a l reserve system.
A STARTLING FACT.

I f some Senators will go home and talk sense to bankers w h o
remain outside the pale of protection, instead of talking nonsenso
to farmers and arousing prejudice against the F e d e r a l reservo
banking system, which has afforded them protection, something
worth w h i l e w i l l be accomplished.
W h y , Mr. President, on
August 22, 1007, when that great financial crash which started
in N e w Y o r k traversed this country, the total rediscounts and
bills payable of all national banks in the United States w a s
but $."0,177,000. I ask Senators particularly to note tins f a c t :
A l l (lie rediscounts and bills payable of all the national banks
of the United States on the 22d day of August, 1007, under tho
old bank system, w e r e but $50,177,000, ichorous in the month
of October, 1920, in the midst of fullinij prices, the Federal
Reserve H(ink of Kansas Citu atone advanced the member
hanks
of the single agricultural
Htalc of Nebraska over S-1S,000,000,
which was more than half the entire amount of rediscounts
and bills payable of all the national banks of the United States
when the great crash came in 1007.
T h e F e d e r a l reserve bank at Richmond during the recent
crisis loaned the member banks of the single State of South
Carolina $21,103,000, nearly as much as one-half of the total
rediscounts and bills payable of all the national banks in tho
United States under the old banking system in the panic of
1007. A n d so I might go f r o m State to State pointing out the
vast advantages of the system, the incomparable aid rendered by
it, and yet Senators, ignoring these great achievements, persist
in misrepresenting the operations of this institution to the f a r m ers of the country.
BANKS ALARMINGLY

EXTENDED.

T h e distinguished senior Senator f r o m South Carolina [ M r .
S M I T H ] , who is by no means a stranger to this system or tho
system to the Senator, w h o had something to do with its f a b r i cation, and who, I am glad to be told, has renounced his, suggestion to legislate out of ollice the Governor of the Federal Reserve Board
M r . S M I T H . Mr. President, will the Senator allow me to
m a k e a statement right there?
M r . G L A S S . I yield.
M r . S M I T H . I t was a coincidence that at that time section 2
of the proposed bill that I introduced under its terms would
have had the effect of legislating the governor of the system
out of office.
Mr. G L A S S . I accept that statement, I was merely ref e r r i n g to the effect of the proposed legislation.
Mr. S M I T H . I understand; but, inasmuch as the impression has gone abroad that that was the object of the legislation I want to state—and I know the Senator f r o m V i r g i n i a
is glad to correct that impression—that it was entirely erroneous.
M r . G L A S S . Absolutely so.
M r S M I T H . When that bill w a s d r a f t e d none of us, including myself who d r a f t e d it, had any knowledge w h a t e v e r as to
whom* it would effect. W e merely provided that the first vacancy should be availed of because we wanted to expedite the
80400—22174

25
presence on the board of a man identified with the agricultural
interests.
Mr. G L A S S . I accept tbat statement fully, Mr. President;
but I fear my friend may entertain a misconception as to what
wan done or loft undone in South Carolina by the Federal reserve bank of that district in the unprecedented crisis of lf>20.
1 do not know and do not undertake to say anything about tho
credit facilities afforded by nonineniber banks of South Carol i n a ; but the figures show there was scarcely a member bank in
that; great cotton State which was not amazingly expanded beyond its basic line of credit with the Federal reserve bank at
Richmond during the entire period of falling prices. I have the
list on my desk here now. I have the figures from other States.
There were not many borrowing banks in the State of the eminent Senator from Alabama, the basic credit of which was not
tremendously exceeded. There were some banks in Alabama national banks, member banks—entitled to a basic line of credit
of $8,000,000 in that period which did not borrow one dollar
f r o m the Federal reserve bank In order to assist the farmers of
that State and section? Why does not the Senator go home and
assail these local banks, not one of which borrowed as much as
one dollar from the Federal reserve banks, although they wero
entitled to a basic line of credit of $8,000,000; and had they followed the example of banks in Alabama and other States and
transcended their basic line ten times they might have borrowed many times $8,000,000 f r o m the Federal reserve bank in
order to help their farmers, whereas they did not borrow a
dime. W h y did they not borrow? T h e rediscount rate at that
time was but G per cent. T h e y had a margin of 2 per cent.
W h y did they not borrow if it would help tho farmer? W h y
come here and denounce the Federal reserve banking system
when the trouble, If there was really a deficiency of credit,
was inherent at home?
Mr. President, to give the laymen in the Senate—one of whom
I am—a concrete illustration of how the Federal reserve banks
went to tho rescue of business in tho cotton territory of tho
United States, let me present some facts and figures:
Hero is a South Carolina national bank entitled under tho
rule of basic credit to borrow $20,000 from (he Federal reserve
bank at Richmond. On June 80, 1920, when cotton was about
at its peak, it was borrowing $7-1,000, until by progressive stages
is was borrowing' on Juno 30, 1021, $212,000 from the Federal
reserve bank. Think of It! I t was entitled to borrow as its
f a i r quota, $20,000, and it borrowed $212,000. Hero is another
bank which was entitlod to borrow $37,000 from the Federal
reserve bank at Richmond. On June 30, 1020, it was borrowing
$01,000 when cotton was highest. On a falling market it managed to increase its loans at the Federal reserve bank to $200,000.
Here is another little bank with a basic line of credit at tho
Federal reserve bank of $23,000 in that period of stress; it borrowed from tho reserve system $111,000; and another little bank,
entitled to borrow $10,000, was loaned $233,000 by the Federal
reserve bank at Richmond.
These furnish a f a i r example of the operations of the smaller
banks of this State. H e r e is a larger bank, entitled to borrow
$578,000 from Its Federal reserve bank; it borrowed $1,-107,000,
H e r e is another entitled to borrow $108,000 as its quota of
, 80409—22174

2G
credits n( the Federal reserve hank; to meet emergency it was
loaned $2,022,000. All of (he member banks combined of South
Carolina were entitled to borrow $7,000,000; they borrowed
$21,1 or,,000 during (lie period of falling prices.
Mr. P O M E K E N E . Mr. President, does the Senator mean by
that statement that that amount of credits were out at one
time?
Mr. GLASS. I do; on each given dale.
Mr. P O M E R E N E . And I assume that that statement applies
lo each of the other illustrations which the Senator has Riven?
Mr. C L A S S . It does.
Mr. D I A L . Mr. President, do these figures apply to conditions generally over the country or simply to these particular
States or regions?
Mr. GLASS. They apply to the country; but the charge
here has been that there was discrimination in the agricultural sections, and I am undertaking to show that that is utterly groundless.
CURSE OF TOO J I H C I I

CREDIT.

Mr. President,' not infrequently too much credit is a worse
curse than too little. It allures individuals and corporations
into the morass of linanchil disaster. Attempts to make too
much money frequently result in losing all one has. Of course,
some of us can see now what we could not see 18 months ago;
but the one tiling that clearly stands out is the fact that, had
the banks of (he country curtailed loans just before the drop in
prices, as is mistakenly charged, instead of lavishly extending
loans, as authenticated figures attest, thousands of people who
are now in distress would be happy and content. For the good
of borrowers themselves, the member banks and the Federal
reserve banks too long delayed liquidation. They loaned too
much money rather than too little; at least, that would be my
criticism of their administration.
NEW

SYSTEM

NEEDED.

I quite agree, Mr. President, in the next place, that there is
need in this country for a strictly rural-credits system, adapted
to (lie peculiar wants and processes of the agricultural communities. Such a system conjoined with the existing Federal
land-bank system, extending long-time seasonal credits, embracing crop preparation and production as well as orderly and
advantageous marketing, wouM be of inestimable value to (ho
farmers of tiie United States. This matter was being meditated
when tiie advent of war diverted the attention and absorbed
the activities of statesmen at Washington. W e can not too soon
renew consideration of the subject with a purpose fo devise a
system that will do for (lie farming community of the United
States what the Federal reserve system immeasurably lins
done for the commercial and industrial interests of tiie country. But, Mr. President, you can not build up a long-time credit
system by picking to pieces or by impairing the liquidity and
tiie general efficiency of the existing commercial banking system.
The two systems may successfully operate side by side, sympathetically and helpful, but the moment you undertake to transform one halfway into the other you will produce a financial
prodigy, part fish and part fowl, which will neither swim nor
crow.
Mr. P O M E R E N E . Mr. President, In view of the statement
which (he Senator from Virginia has made witli regard to an
80400—Z2174

27
extension of the system of personal rural credits, T might add
that there is now a joint commission composed of Members of
tho Senate and of the House who are studying that question.
They have been talcing some testimony 011 this subject, and I
think next week they are to take testimony in the city of
Atlanta.
Mr. G L A S S . That, of course, I am glad to know.
WARNINGS

NOT

IIEEOKl).

Adverting, Mr. President, to the " cruel and murderous " policy of deflation which, as I have shown, never actually had any
existence outside the vivid imagination of perplexed politicians,
it lias been said here that the alleged policy would have been
sound in fact had it been applied gradually. I contend liiat no
policy of deflation was applied for the period indicated; but if
it be meant that ample warning was not given against a continuation of the wild orgy of speculation and of tho alarming inflation of credits and currency at an angle at one period of 45
degrees, it can clearly be demonstrated that warning a f t e r
warning was given. The Treasury, time and again, literally
implored people to desist from their inordinate extravagance,
and the public press was tilled with editorials of caution
against (lie riot of expenditure.
The very first official function I performed as Secretary of tho
Treasury was urgently to insist on the continuance of the Money
Com in it too, composed of patriotic, public-spirited New Y o r k
bankers, to administer a large fund designed to restrict the rato
of interest on commercial transactions to G per cent. Meanwhile call money was soaring as high as .'50 per cent 011 speculative transactions. Many bankers insisted that money was
worth what it would bring in a competitive market, and a distinguished ex-governor of N e w Jersey bitterly assailed tho restrictive policy of the Treasury, which was, of course, merely in
the nature of moral restraint and in no sense compulsory.
T h e members of this Money Committee served without compensation, submitting patiently to the violent condemnation of those
who selfishly desired to tax commerce with a high rate of interest. 011 borrowed money.
I cite this incident to show that as early
as in the fall of 15)18 the public had warning that interest rates
were being held in leash only by a resort to extraordinary
expedients.
coNonn.ss FAVORED I N F L A T I O N .
In the late fall of 1019 the governors of the larger Federal
reserve banks were invited to Washington, and were urged by
the Secretary of the Treasury to warn member banks that speculative credits must be curtailed or legitimate commerce would
soon be penalized and a condition presented which would shock
the country. Even then we were discussing the advisability of
increasing tho rediscount rates of the Federal reserve banks,
and House and Senate, impatient and peremptory, were sending
up resolutions demanding to know what steps the Federal Reserve Hoard was taking or contemplating to check the f r i g h t f u l
inflation of: credits and currency. One of these resolutions
barely missed being an explicit order. It was adopted unanimously by the Senate 011 May 17, 1020, and reads as f o l l o w s :
Heiohcif,
Thnt tho Federal Reserve Hoard he directed to advise tho
.Senate what steps It purposes to take or to recommend to the member
banks of the Federal reserve system to meet tho existing inflation of
804G9—22174

28
currency nnd credits nrnl consequent hiprh prices, and w h a t f u r t h e r stops
it purposes to take or recommend to m o b i l i z e c r e d i t s In o r d e r to move
tho 101I0 crop.

T h e Treasury experts, advised by some of the most eminent
bankers of the country, held tho view that any appreciable inc r e a s e In the rediscount rate of tho Federal reservo banks
would accentuate the didiculties of llouting tho Victory loans
and greatly impede the certificate borrowings of the Government, amounting to billions of dollars. My personal view also
was that speculative loans should first be curtailed before we
began assessing higher interest charges against legitimate
commerce.
A l l these things were conspicuously discussed in the public
press, particularly in the financial journals of the country. But
the various warnings went unbonded; speculation nourished;
credits in greater degree expanded. The country was aghast
at the range of prices and the high cost of living. England was
in worse plight. T h e Hank of England advanced its discount
rate to 0 per cent and in January, 11)120, the larger Federal
reserve banks, soon followed by other regional banks, advanced the rate here to 0 and later to 7 per cent. Did these
advances in the rediscount rates serve as a warning that a day
of reckoning soon must come? Did this action by the Federal
reserve banks, approved by the Federal Reserve Board, and
practically urged by resolutions of Senate and Mouse months
before, result in tightening the reins? One only has to examine
the figures I have presented here to see that the inllation of
credits slill persisted; that the volume of tho currency continued to increase; that even a f t e r commodity prices began to
topple the Federal reserve banks made a desperate effort to
impede the velocity of the fall. From January 1, 1020, to January 1, 1021, these reserve banks expanded loans to member
banks in an amount approaching $1,000,000,000. Yet, Mr. President, in the very face of this indisputable evidence, Senators
berate (he Federal Reserve Board and the Federal reserve banks
with the utterly false charge of ordering and executing a policy
of " murderous deflation." Such talk is wicked mummery.
rASStNO TIIK BUCK.

Mr. President, Senators may wonder how this misconception got abroad about " t h e deflation of credits and c u r r e n c y . "
One way in which it got abroad was the willingness, first, of
politicians, and then of local banks, to " pass the buck " — I believe
that is the phrase—to the Federal Reserve Board and b a n k s .
Agitators advised the cotton Interests of the South to hold
their cotton for HO cents. They held i t ; and instead of getting 50 cents it fell to 11 cents. When the slump came and disaster ensued, these evil advisers got from under their mistaken
advice by " laying it 011 tho Federal Reserve Board." I have in
mind now one of these agitators who advised the cotton planters of the Smith to hold their cotton for 50 cents. Ho has been
maligning the Federal Reserve Board, although his own bank
was extended nearly 300 per cent above its proper quota. Of
c o u r s e , ho tells his victims that " the Federal Reserve Board
did it."
In the fall of 1920, calnpalgning in Virginia, I learned that a
bonk in one of the counties where I was making a speech had
refused credits to its customers and had told these patrons
that it refused them credit because it " could not get any redis80409—22174

' -'

29
counts at the Federal reserve bank nt Richmond."
I t wns a
nonmemher hank. It had no right to rediscounts at the Federal
reserve bank. It had loaned $00,000 f o r the purchase of automobiles, and had no more money to l o a n ; and, not wanting to
admit its plight, it told its borrowers it could not loan money
because 1 In* Federal reserve b a n k — o f which it was not a member—would not rediscount its p a p e r !
I have here a f o r m of notice sent out by a bank In an agricultural district to many of its borrowers, which reads as follows :
Y o n r note f o r $
f a l l s due
Our Federal
llcsrrrti
Hank o w n s tills note, h a v i n g rediscounted It
f o r us.
AH It tins been renewed s e v e r a l times, tliey a r e in.iintin>i on a
pmuncut.
It is absolutely
inxesnary
to a r r a n g e this note on tiic J a y
of its m a t u r i t y .
Yours, truly,
,
C OK hi nr.

T h e r e w a s not a word of truth In t h a t ; and as soon as the
Federal Reserve Board found that notices of this sort w e r e
being disseminated throughout that district by member banks it
issued an order exposing the deception and expostulating
against It.
I have here a letter f r o m a business man of Tennessee, w r i t ten to the governor of the Federal R e s e r v e Board, s a y i n g :
On September 20 I offered to tlie F a r m e r s ' Hank of
$2,250
of third and f o u r t h L i b e r t y loftn bonds, ns c o l l a t e r a l f o r ii 30-day $1,000
loan ; this they refused to g r a n t , because they claimed they did not
h a v e the money and could not j;et it.

A n d he wants to know " why the Federal reserve bank is
restricting credits in that w a y . " Gov. H a r d i n g w r o t e him, in
acknowledgment of the letter, s a y i n g :
W l i l l o the Federal R e s e r v e B o a r d can not compel a F e d e r a l reserve
bank to rediscount paper f o r a member bank which, in tho opinion of
i t s discount c o m m i t t e e . Is undesirable, I feel certain t h a t the F e d e r a l
r e s e r v e bank would c h e e r f u l l y have rediscounted your note f o r tho
F a r m e r s ' N a t i o n a l Bank w i t h the bonds as security had It been o f f e r e d .

Of course, it would have done it. T h a t sort of deception by
banks that do not desire to make loans lias largely produced th'o
impression throughout the country to which I have referred.
Nonmemher banks finding an excuse f o r not accommodating
their patrons, and member banks not having the courage to
refuse a loan, " p a s s the b u c k " to the F e d e r a l reserve banks
of the country.
TUB ClIAnCH OP " EXTOaTION."

A great clatter has been raised about the alleged " e x t o r t i o n a t e " interest charges of the F e d e r a l reserve banks; but,
as in other respects, a half truth only is told. T h e real facts
are conveniently suppressed.
T h e " p r o g r e s s i v e " interest charge was not a f e a t u r e of the
original reserve a c t ; It. was put in about three years ago by
Congress. It was intended by Congress as a penal provision.
I t was not designed to aid borrowing banks; it w a s Intended '
to penalize any bank that should persist in borrowing more than
its f a i r quota of the funds of a reserve bank, thereby depriving
some other member bank of its f a i r basic line. I f Congress did
not want that done it should not have authorized it to be done.
But, Mr. President, this " p r o g r e s s i v e " interest charge w a s
put into effect by but <J of the 12 reserve banks. B y these it was
applied to comparatively f e w borrowing banks in their districts.
These banks w e r e incorrigible offenders against e v e r y ' requlre80109—22171

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merit of cautious and safe hanking. Tiioy wore perpetually exceeding their allotted line of credits; thov were incessantly appropriating more than their f a i r share of reserve hank funds.
But the assailants of the reserve system suppress these facts.
J hey fail III si) to tell those whom they mislaid thut tho aver aoo
rediscount
rate charged by the Federal reserve hanks against
the great body of borrowing banks in the four districts
where
progressive"
rales were very occasionally
applied was much
below the rate charged by these borrowing banks against
their
own customers.
T a k e the case of the one little hank in the Atlanta district
the evil fate of which has so lustily hecrt bewailed here and
elsewhere. This hank was f a r below its lawful reserve f o r 11
months out of 12. It exceeded its basic line of credit
nearly
ten times.
Ninety per cent of its capital was loaned on votes
indorsed by its president.
It seems to have outraged every rule
of sound hanking. I t was penalized under the act. of Congress
in order to restrain its excesses and to compel it to get hack
in line. It could not have complained fairly had it been put
in the hands of a receiver. When it had been forced to abate
its excesses the amount of the " p r o g r e s s i v e " rate was returned
to it. I doubt if this should have been done.
I?ut why pick out a f e w rare and extreme cases of offonding
banks like this and make it. appear that the Federal reserve
system is " e x t o r t i o n a t e , " when its general interest rate to
the great multitude of borrowing hanks was not only moderate
but f a r below the average rate charged business men by
these borrowing banks? W h y judge the system by the discipline
administered to a f e w banks which persisted in " r u n n i n g a m u c k " of sane banking practices, and ignore the generous
and beneficent treatment accorded the many thousands of
banks throughout the Nation? Does not this very t h i n " exhibit the enemies of the system in their nakedness?
What
evil motive could a reserve bank have to charge excessive rate*
when in no event can it pay its stockholding banks above 0 per
cent in dividends?
What unworthy prompting could the
Reserve Board have in sanctioning excessive charges, when the
board itself derives no single penny of profit from any transactions of the banks? Is not the utter foolishness of such talk
deplorable?
A DBSFO NINO rnnAsn.
I t has been asserted by Senators that if the Federal rcservo
banks bad extended as great a percentage of credits to the
" c o u n t r y " banks as were extended to the member banks in t h e "
great central reserve cities—New York, Chicago, and St. L o u i s there would have been a billion dollars more to loan on agricultural products. Mr. President, already I have pointed out
that credit was not the urgent need of any rationally operated
business interest in this country. T h e crying need was markets,
not greater banking facilities. But let me expose the specious
nature of this play upon the phrase " c o u n t r y banks," the evi*
dent purpose being to produce the impression that " c o u n t r y "
banks necessarily engage In financing agricultural products.
A s a matter of fact, every national hank in N e w England, outside of the city of Boston, is classed as a " c o u n t r y " bank
E v e r y bank in the great State of N e w York, outside New York
City, .Albany, and Buffalo is classed as a " c o u n t r y " bank; and
until recently all the banks in the great industrial city of Buf^
80409-2217-1

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fa la wore " c o u n t r y " banks. E v e r y bank in the State of N o w
Jersey is n " c o u n t r y " hank, and every hank in the great industrial Slate of Pennsylvania outside Philadelphia and Pittsburgh is a " c o u n t r y " bank. And so nearly all national banks
in the Industrial State of Ohio are " c o u n t r y " banks and all
In Illinois outside Chicago and Peoria and in Missouri outside
St. Louis and Kansas City. Most of these banks are engaged
in financing Industrial enterprises and not agricultural products
especially. Had they borrowed greater sums from their Federal reserve banks there is no assurance, indeed it Is Incredible
to believe, that such funds would have been devoted to the uso
of agriculture. Senators who use this Insinuating argument
fall to state that, because of their larger reserve requirements,
member banks In these great central reserve cities aro obliged
to borrow about twice as much to keep up their 18 per cent reserve as a country bank has to borrow to keep up Its less than
7 per cent reserve. These Senators, with design, simply invoke
the tyranny of a phraso to make it appear that farmers are the
victims of discrimination, when facts and figures show it is not
true.
RNINTINO rnE.su

ECONOMICS.

Mr. President, there Is one other aspect of this subject to
which I think allusion ought to be made.
I shall do that
very briefly, because I do not want to deprive other Senators of an opportunity to discuss this problem in detail and to
reply to anything I have said. I f , as it may be, I have said
anything that is inaccurate, I want to be corrected. If I have
drawn any deductions which aro not warranted, I want them
exposed.
It has been said in some quarters that the Federal Reserve
Board might have disregarded the reserve requirements of the
f e d e r a l resctwo bank act, and by doing so have Issued other
billions of dollars of notes and credits; and that is true. T h a t
is what England did, Mr. President, and her foreign exehango
became dislocated, her trade f o r a long time was gravely impaired, and In some directions destroyed; that is what Franco
did, and the currency of the nation was debased; that Is what
Germany did and Is doing to-day, and the mark is worth hardly
a half cent. T h a t is tho doctrine of Lenin—tho printing-press
doctrine—and look at tho plight of Russia, where it takes a million rubles to buy 10 pounds of butter I A t that rale It would
take a traluload of printing-press " money " to buy a bale of
col ton.
Yes, (he Federal Reserve Bonrd might have pursued the policy
which has been suggested; but had it done so, instead of our
country being the financial Gibraltar of the world, it would
have been drawn Into tho frightful maelstrom of currency depreciation and credit debasement. I can not conform my judgment
to that of men who advocate the " p r i n t i n g - p r e s s " doctrino
practiced bv Lenin and under which In Russia to-day the material upon which rubles are printed is worth more as waste paper
than it is as authenticated currency.
AN HISTORICAL

PARALt.KU

Coming from a center of culture and familiar with the epochal
events of history, you w i l l recall, Mr. President, that several
decades before the French Revolution the currency of Franco
was the product of the printing press; and tho business of tho
80409—22174

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kingdom was thereby depressed beyond the imagination of men.
Those in power enacted a law making it a penal offense f o r the
farmers of Fiance to discriminate against paper " m o n e y " in
f a v o r of coin of the realm.
T h e penalty was a heavy flno and long imprisonment in jail.
L a t e r the rulers, still thinking they might compel credit by
legislation, amended the law with a view to effective enforcement; they made it a capital crime to discriminate between
paper and metallic currency. Eventually the heads of many
of these economic jugglers dropped into the basket—a just recompense of their folly and profanation of power. That Is the
kind of currency with which some Senators would have us flood
this country; but I venture to think, if we should follow their
lead, that the farmers of tho South and West would soon shrink
from it as Ihey would f r o m the drippings of a pest house.
It is a wise man that considers the purchasing power of
money. There are superficial people who would rather receive
a wage of $5 a day, when it costs them $0 a day to live, than
to receive a wage of $2.50 a day, when it costs them $1.50 to
live. One signifies ruin and the other betokens t h r i f t ; yet
there are many people who f a i l to discriminate; who f a i l to
understand the purchasing power of the dollar.
3Mr. President, should we deplete our gold reserves and set
fhe printing press in motion we would literally ruin tho country. I know the junior Senator from Alabama thinks tho
printing press was invented to print " money."
AM.KOKD EXTRAVAGANCE

EXAMINED.

Mr. President, it has been a staple criticism in this Chamber
that the Federal reserve banks are being operated in an exorbitantly extravagant way in the payment of salaries and general
expenditures, and this charge has been amplified into the amazing statement that because the Government of tin*United States
is the residuary claimant of all earnings of the banks a f t e r tho
disbursement of 0 per cent of the capital, these excess salaries
and expenditures in building operations amounted to a theft by
the Federal Reserve Board from the United States Treasury.
I am no advocate of extravagant expenditures in either Government: or private institutions.
I think had I been a member of the Federal Reserve Board,
except in the direst necessity, I would not have agreed to expend one dollar In building operations at this time, because
of fhe enormous profiteering of the building trades both by
people who supply material and those who furnish labor. Investigations of the Lock wood committee in New York show
appalling g r a f t . They indicate a state of affairs which ought
to land In jail many persons who now aro going at large.
I hold no brief f o r the Federal Reserve Board on this point.
I t may be that some excessive salaries have been paid in tho
system. I t may bo that some expenditures have been too largo
I
and others may have been deferred. But we can arrive at a
•
correct conclusion in such matters only by comparing relative
facts.) Let us see, then, how the expenses of the Federal reserve
banking system appear In contrast with the expenses of tho
, ) great central bank of the most t h r i f t y nation on e a r t h . " ;

1M

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The last official report, of tho Bank of France shows ; total
v f . ; ' amount paid to the State out of the last year's profits i ap-

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proximately 101,000,000 francs, or, at.the old basis of exchange
parity, something like $21,000,000. A t tbo same time, there was
paid to stockholders by the Bank of France approximately
47,000,000 francs, or about the equivalent of $0,500,000. Tho
capital of the bank was 182,500,000 francs, or about $8(5,500,000.
In tho Federal reserve system for the year 1020, with a
capital of approximately $04,000,000, the payments to the Government amounted to something like $00,000,000, while tho balance was either paid to stockholders or carried to surplus account. In this way the stockholding banks received a total of
about $5,000,000, as against the $0,500,000 paid by the Bank of
France to its stockholders. It will'.easily be seen that the
amount obtained by the Government of France from the operations of its great central bank, now nearly a century and a
quarter old, was far less than obtained by the Government of tho
United States from the Federal reserve system, while the
amount paid by the Bank of France to its stockholders was
almost double what was paid by the Federal reserve system to
its stockholders, who are the constituent member banks.
Mr. President, the Bank of France states the total of its expenses of administration during tho year 1020, including depreciation, salaries, and pensions, at approximately 150,000,000
fra lies, or the equivalent, at old rates of exchange, of about
$80,000,000. For the year 1020 the expenses of administration
of the Federal reserve system weve imported in ;the annual report of the Federal Reserve Board as having been approximately $80,000,000. When it is remembered, Mr. President,
that-tho total loan and discount operations of the Federal reserve system, with 12 great banks and 28 branches, were in the
neighborhood of $85,000,000,000 in 1020, while the total discounts and advances, other than to the Government, of the
Bank of France amounted at old rates of exchange to roughly
$ 12,000,000,000, a comparison between the cost of operating the
two institutions may easily be drawn—by no means to the discredit of the Federal reserve system.
OFFICIAL SALARIES CONSIDERED.

Mr. president, I desire to supplement the foregoing general
comparison of expenses between tho Bank of France and tho
Federal reserve system with a brief reference in detail to tho
ollicial salaries prevailing in the various Federal reserve hanks
with tho ollicial salaries in individual member hanks of the
various Federal reserve districts. Let us note the case first of
the New York Federal Reserve Bank, against which criticism
has been most violent.
Its total annual salary account is
$500,800 for its 40 officers, an average of $12,745, contrasted
witji ! 1 » nnnual salary account of $708,200 f o r 07 officers of one
large member bank, an average of $11,4(50.
Another largo member bank in New York City with 82 officers
has a tolal annual salary account of $1,574,500, or an average
of $10,201 for each officer. The comparison with a kindred
result might be extended to other individual banks in New York
The governor.of the Now York Federal Besqrve Bank receives a
salary of $50,000, and I may say to the,Senate that before he
went with the Federal reserve system he was receiving a salarv
of $00,000.
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Mr. P O M E R E N E . May I add. in this connection, without
naming him, that'I know of one of these presidents who is get8(54(50—22174

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ting n salary of $25,000, and he has standing open now two
offers of $50,000.
Mr. R O R I N S O N . W h y does ho not tnlce one of (hem?
Mr. P O M E R E N E . Recause he wants to devote himself to (lie
public service.
Mr. N O R R I X . Mr. President, if the Senator from Virginia
will permit an interruption, docs the Senator think that a salary of $50,000 is too much, or is it f a i r ? Is the Senator in
f a v o r of paying a salary of $50,000, or permitting it to be paid
by the Federal reserve bank?
Mr. G L A S S .
I will say to the Senator that, in this particular time of stress, I would think it bad policy to pay tbo
president of even so great an institution as the Federal Reserve
Rank of N e w York as much as $50,000. Furthermore, when it
was first suggested to me, while I was chairman of the Banking
and Currency Committee of the other branch of Congress, to
fix the salary at that figure, I protested that the time was
inopportune to pay a salary that large. I thought it should bo
d e f e r r e d ; I believed the bank would incur the very sort of
criticism it has incurred.
Hut Senators must remember that a bank can not be conducted by hod carriers; you can not even run it with a Congressman in charge, or a newspaper publisher, as I am. You
have to get expert banking talent and technical skill of tho
highest description to run a great bank like the N e w Y o r k
Federal Reserve Ilank, and you have to get it in open competition with great individual banks. The Senate should remember this in considering the matter. T w o member banks in
N e w York City pay their president $100,000 per annum each; !$
member banks pay their president $75,000 per annum; 1 member
bank pays its vice president $75,000; I p a y s ' t h e chairman of
its board of directors $05,000; 4 member banks pay their vice
presidents $50,000; and 22 other member banks pay their vice
presidents all tho way from $25,000 to $40,000. So that by
contrast, Mr. President, the salary of the governor of the
Federal Reserve Rank of New York, greater in volume of business transacted than the Hank of England or the Hank of
France and of any five Federal reserve banks combined, is not
so astounding as one might be led to suppose without any
examination of tho facts.
T h e Hoston Federal Reserve Hank has a total annual salary
expenditure of $1:55,500 f o r 14 officers, an average of $0,070, as
contrasted with one member bahk having 25 officers with a total
salary expenditure of $411,200, an a v e r s e of $1(1,4-18; another
member bank with 21 officers has a salary account of $2!)8,000,
an average of $14,190. This comparison likewise might be extended to other member banks with a similar result.
The
governor of (lie Federal Reserve Hank of Hoston receives $25,000.
One member bank of the Hoston district pays its president
$75,000, another $50,000, and another $40,000. One member
bank pays its vice presidents $42,000. Many of them pay their
vice presidents salaries ranging from $25,000 to $42,000. So
that in Hoston, as in N e w York, officials of the Federal reserve
bank, doing vastly more business than any member bank, indeed vastly more business than many member banks combined,
receive very much smaller salaries than many individual banks
pay to their officers.
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T h e Federal Reserve Rank of Philadelphia pays i t s g o v e r n o r
$25,000. One individual member bank in Philadelphia pays itg
president $80,(100; one other pays .$45,000; another, $30,000;
another, $25,000; one pays its vice president $10,000.
The
official salary account of tins regional hank has an average
much lower than the individual member banks of the district.
T h e Federal reserve bank at Cleveland pays, it governor
$30,000. One individual member bank at Cleveland pays its
president $50,000; another pays its president $30,000; another
pays $35,000; the vice presidents of variotls other Cleveland
banks get in excess of $30,000. T h e general salary account of
this bank averages very much less than the salary account of
the individual banks of Philadelphia.
T h e governor of (lie Federal reserve bank at Richmond gets
$18,000. T h e president of one member bank at Richmond gets
$25,000; arid of another, $25,000. The general salary account
of the reserve bank at Richmond just about matches that of the
various member banks.
T h e governor of the Federal reserve bank at Atlanta gets
$18,000. The president of one member bank at Atlanta gets
$20,000; another, $1?/>00. T h e vice president of one bank there
gets $18,000. T h e salary account of the Atlanta Federal Reserve Rank averages very much less than the salary account of
the individual member banks.
T h e governor of the Federal reserve bank at Chicago gets
$35,000. T h e chairman of the board of directors of one Chicago
bank gets $75,000 and another $00,(KM), and the President of
one Chicago hank gets $50,000 and another $30,0(H).
Many
vice presidents of individual member banks at Chicago get
salaries running from $25,000 to $37,500. T h e average official
salary paid by the Chicago reserve bank is about one-half tho
average official salary of the individual member banks.
T h e governor of the Federal reserve bank at St. Louis gets
$25,000. T h e president of one member bank at St. l/ouis gets
$50,000 and another $15,000; one executive manager gets $10,000
and another $35,000. Several vice presidents get $25,000. The
average of official salaries for this reserve bank is much less
than the average f o r member banks.
T h e salary of the governor of the Federal Reserve Rank of
Minneapolis gets $10,000. One president of the Minneapolis
National Bank gets $15,000; another, $40,000; and several
executive chairmen and vice presidents get salaries of $25,000.
T h e average official salary for this bank is a little more than
half the average f o r member banks.
T h e governor of the Federal Reserve Bank of Kansas City
gets a salary of $20,000. T h e president of one individual member bank (here gets $20,000 and two $25,000 each. The average
salary at the St. Louis bank is very much less than at the IndU
vidua! member banks.
T h e salary of the governor of tho Dallas Federal Reserve
Bank is $18,000. T h e salary of a president of one member hunk
is $20,000 and the two vice presidents each $25,000. T h e average
oflicial salary at the reserve bank is very much less than the
average paid at member banks.
T h e Federal reserve bank at San Francisco pays it governor
$24,000. T h e president of two individual member banks gets
$50,000 and of another $30,000. T h e average official salary is
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loss Hum half at tho reservo hank than at the individual member
ba nlv's.
Mr. J O N E S of New Mexico. Mr. President
T h e P R E S I D E N T pro tempore. Does the Senator from Virginia yield to the Senator from New Mexico?
Mr. (SLASH. I hope Senators will let mo hurry through,
because il desire to conclude.
Mr. J O N E S of New Mexico. I f the Senator does not care to
be disturbed, I will not interrupt him.
Mr. G L A S S . I yield to the Senator.
Mr. J O N E S of New Mexico. I merely wanted to inquire of
the Senator if he thought there was any difference between the
responsibility of a bank which is dealing only with securities
coming through and indorsed by other banks and that of a
bank which is dealing with individual paper.
Mr. G L A S S . I think when we consider that tho president of
the N e w York Reserve Rank and the board of directors thereof
ore directly responsible for $5,000,000,000 In cash and securities,
the greatest gold reserve that ever was mobilized since the
world began to revolve on its axis, we must admit that the.
responsibility of those ofllcers is infinitely greater than that of
the officers of a dozen individual banks combined.
RAT.ARIKS

FIXED

BY

DIHKCTORS.

Tt must be understood, Mr. President, that those salaries are
fixed by the board of directors of these respective Federal reserve banks, two-tldrds of which directors are selected by the
stockholding banks of each district and all of (hem citizens of
the district. The Federal Reserve Hoard has the right of review with respect to these salaries, but it, must be admitted
that the regional board of directors, f a m i l i a r with all the condition.^ circumstances, and extent of labor involved, knows
belter than the Federal Reserve Hoard—knows vastly better,
than Congress—what are the actual requirements and what is a
f a i r average compensation. At all events the Federal Reserve
Hoard does not initiate these salaries, and to soy tlmt honorable
men who constitute this board should be indicted by a Federal
grand jury because they approve the considered Judgment of the
boards of directors of these regional banks is to make a declaration that should not enhance the reputation of a Senator f o r
sanity or for temperate speech.
The salary of Gov. Strong, one-half that of several officials
of individual banks in N e w York, was approved by the Federal
Reserve Hoard on motion of the Secretary of the Treasury, Mr.
McAdoo, concurred in by every other member of the board,
the vote being unanimous. I realize that gentlemen may differ
upon questions of.expenditures, particularly with reference to
ollicial salaries, but it is monstrous to charge high-minded,
patriotic men with (heft from the Treasury when we disagree
with their judgments.
ASTOUNDING

MISCONCF.I'TIONS.

In this connection, Mr. President, let me show the Senate to
what extent misconception and ignorance on these questions
may go. Several weeks ago a Senator on this side in a burst
of indignation exclaimed:
f f the governor of the'Federal Reserve Hoard Is worth $i>0,000, wlmt
Is the value to the country of the President of the United States?
W h a t IN the value of the Vice President?
RfltWD—22174 ,

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(!ov.
Ilnrillncr e n j o y s the l u x u r i a n t and luxurious p r i v i l e g e
of
f i x i n g Ills own salary.
T h a t I* a p r i v i l e g e which tho P r e s i d e n t does
not e n j o y .
I t Is a p r i v i l e g e that the V i c e P r e s i d e n t docs not e n j o y .
It Is a p r i v i l e g e t h a t no S e n a t o r e n j o y s , n o ' C o n g r e s s m a n e n j o y s , no
a d m i r a l in the N a v y , no general In tho A r m y , no member of the
Supremo C o u r t .
W . I\ G. H a r d i n g Is the only man t h a t I know of that has been
irlven tho p o w e r to lix his o w n s a l a r y and to fix the salaries of his
subordinates.

Mr. President, T have not the remotest idea that (he Senator
who made this remarkable deliverance had the faintest purpose
to misrepresent the Federal reserve banking system or to treat
the governor of the Federal Reserve Board with derision. The
Senator thought his premise was correct, hence the emphasis
and feeling with which he denounced what seemed to him an
extraordinary situation. As a matter of fact, a glance at the
Federal reserve act would have shown him that Gov. Harding has no power to fix his own salary or the salaries of any of
his subordinates. H e can not, except In conjunction with other
members of (he board, fix (he salary of a typist in his olliee [
A glance at the law would have shown this indignant Senator
that (he salary of (he governor of the Federal Reserve Board
is definitely fixed by Congress and may not be altered by
anything that Gov. Harding or the Federal Reserve Board
may do. H e would have seen that Gov, Harding's salary
is not $50,000. It is but $12,000, so fixed by Congress, not a
dollar greater (ban that of any other member of the board.
Seeing these things, the Senator would not have tripped into the
mistake of moralizing about evils lliat do not exist.
I have no intimate personal relations with tho governor of
the Federal Reserve B o a r d ; in no sense or degree am I his
spokesman here. But out of my actual observation and knowledge I feel, In very decency, obliged to say to the Senate that I
have seen this honorable public official during a fateful period
work himself (o the bono for his country. I have seen him do
the Government's work night and day until his very l i f e was in
peril by reason of physical exhaustion and nervous prostration.
I myself have driven him from the Treasury Building for a f e w
hours of rest to avert utter collapse.
DKKAM A T I O N

OF R U B I . I C

OFFICIALS.

T now ask (he Senate's attention to a statement even more
astonishing (ban that which I have just confuted.
Indeed,
Mr. President, it is a declaration made In this Chamber which
should engage tho very gravest attention; for, notwithstanding
tlie ludicrous misrepresentations which It comprises, It carries
an implication which, if true, affects (he integrity of a great
Government institution, and which, if false, affects the Integrity
of the Senate. I am one of those who can not conceive that tho
constitutional immunity granted Senators and Representatives
in Congress was ever intended as a shelter for libel of public
men or private citizens, leaving them no means of redress.
Some time back the distinguished junior Senator from Alabama,
according to (he RECORD, said In this Chamber:
M r . P r e s i d e n t , I am not advised as to w h e t h e r or not any of tho
f r i e n d s of the F e d e r a l R e s e r v e Hoard w e r e speculating In cotton a t
t h s t time. T h e Senator f r o m G e o r g i a [ M r . WATSON | reminded us t h e
other day t h a t they loaned to t h e m s e l v e s iu tho system tlie eum o f
IS.OOO.OOO.

80101)—22174

38
T h i n k of il—n hoard that ran not. loan a dollar to an Individual or concern or corporation charged with having loaned
to its own members $18,000,000!
I continue reading f r o m the statement of the junior Senator
from Alabama:
1 want to say Just here, Mr. President, that If thov Invested nnv of
that. $18,000,000 In speculating on the hear side of the cotton market in
the month of August last year, they made a lot of money.
Do you know, Mr. President, how much money the man made who
sold on tho exchange 1,000 hales of cotton for the month of August.
1020?
lie made on that 1,000 hales $45,000 In cash. The Federal
Reserve Hoard knew what effect Its deflation policy would have upon
tho cotton market. Those who knew that that policy was going to run
wild In August last year made millions of dollars to the distress and
great injury of the cotton farmers of tho country. Between the months
of June and December that policy cost the cotton farmers more thrtn
$200,000,000 a month. Think of that. Senators!
The deliberate and
premeditated deflation policy of the Federal Reserve Board cost the
cotton farmers more than $200,000,000 a month between June and
December of last year.

W h a t w a s the value of the entire cotton crop of the country
in 1920, may I ask the Junior Senator f r o m South Carolina
[ M r . I)rAi,] ? H o w much was it in the aggregate, approximately
or roughly?
Mr. D I A L . I would say about $2,000,000,000.
Mr. G L A S S . I wanted to know, because a multiplication of
the sum given by the Senator f r o m A l a b a m a by the number of
months will make it appear that the cotton g r o w e r s lost pretty
nearly the entire crop.
Mr. President, the plain implication here is that members of
Ihe Federal Reserve Board had prostituted their sacred trust
by using their positions f o r the purpose of speculating in
cotton with the funds of the Federal reserve banks. I f the
charge is true, these public officials should not only be put in
j a i l but they should bo kept there. T h e alleged act would constitute a crime little short of treason. I f the charge is not true,
then the Senate should contemplate the injurious effect of such
accusations upon its own reputation.
In the period to which reference Is made by the Senator f r o m
A l a b a m a the members of the Federal Reserve Board were
D a v i d F. Houston, Secretary of the T r e a s u r y in President W i l son's C a b i n e t ; John Skelton Williams, of Virginia, Comptroller
of tho Currency by appointment of Mr. W i l s o n ; Charles S.
H a m l i n , Assistant Secretary of the T r e a s u r y under President
C l e v e l a n d ; W . P. O. H a r d i n g , governor of the board by designation of Mr. W i l s o n ; Adolph S. Miller, a university president
of distinction in C a l i f o r n i a ; and Edmund Piatt, f o r m e r .Representative in Congress and member of the Banking and Currency Committee of the House f r o m N e w Y o r k — a l l appointees
of M r . W i l s o n . T h e implication of crime is leveled by the
Senator from Alabama against every one of these men without
exception. Is there a Senator here who believes tho implication
that would impute crime to these honorable public servants?
I f the Senator from Alabama believes that the accusation which
he suggests is not a libel against their names and character, If
lie thinks he can Justify Ids amazing insinuations, it is his duty
to the country to ask f o r a grand Jury investigation of these:
gentlemen, who have a l w a y s borne and now sustain a reputation among men f o r probity and integrity.
80400—22174

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But, Mr. President, wo do not have to await tho verdict of tho
courts'or the-findings of a committed to see clearly the utter absurditv of some of these statements. T h e Federal Reserve Board,
it is charged, loaned its own members $18,000,000, which vast sum
it Is suggested they used to gamble in cotton after deliberately
using their official powers to depress the price for their own
profit. Perhaps there are cotton pickers on plantations of tho
South who may be deceived by such trumpery, but surely there
is no Member of the Senate who does not understand how absolutely preposterous these accusations are.
The Federal Reserve Hoard, under the lair, could not loan the
Vresident of Ihe United States 25 cents; it could not loan the
Chief Justice of the Supreme Court <* dollar; it could not loan
John /). •Rockefeller a dime; it could not loan the United States
Sled Corporation
or the Standard Oil Co. a penny.
The Federal Reserve Hoard has not a dollar to loan and never had a
dollar to loan.
N o Federal reserve bank in the system can loan any individual
or corporation in the United States a penny. The Federal reserve banks neither receive deposits from nor make loans to
individuals or concerns or corporations. These banks are banks
of hanks and do business only with banks; so that if John I).
Rockefeller, with all bis millions, should desire to borrow
money lie would bo compelled to borrow it from a local bank;
and the only way that the local bank could get a dollar from
the Federal reserve bank in Rockefeller's district would be to
indorse Mr. Rockefeller's collateral note, as that of any othei?
person, and put It up as security f o r a credit at the reserve bank.
T h o Federal Reserve Board would not necessarily have any
part in or knowledge of the transaction.
Aside from this, Mr. President, no member of tho I<ederal
Keservo Board is permitted by law to owfi one dollar of bank
stock or to have any pecuniary interest whatsoever or connection with the operation or profits of any banking institut i o n ; and every member of the board has to take a solemn
oath to this effect. Moreover, under the law, the Federal reserve
banks are strictly prohibited from loaning one dollar to member
banks f o r speculative purposes. Thus tho whole charge Is so
literally without foundation in fact, and So saturated with misunderstanding of Federal reserve banking processes and*of tho
Federal reserve act itself as to render it comic If it were not
pitiful.
IONOHANCB

ntTM

MAPI

X venture to invito the attention of Senators and the country
to another interesting discovery by the distinguished .junior
Senator from Alabama. On Friday of last week, in Speaking to
the N e w b e r r y case, the'Senator s a i d :

Tin- F e d e r a l R e s e r v e P o a r d g o t nil a m e n d m e n t f o »Jio F e d e r a l r c s e r v o
net through a Republican C o n f e s s p e r m i t t i n g them to set asldo ft
certain p e r c e n t a g e of e a r n i n g s to be used In p r o v i d i n g InilldlnRS and
establishments f o r use In the service. T h e y a c c u m u l a t e d $100 000,000
in a y e a r .
W h a t do you suppose they d i d ?
W i t h o u t aslt ng Cpngresa
lie F e d e r a l R e s e r v e Hoard a p p r o p r i a t e d $20,000,000 or t h e r e a b o u t s - to do w h a t ?
T o build a bank building in the c i t y of N e w Y o r k in
Wall Street.

Mr. President, that statement comprises a paragraph of eight
printed lines in the HKCOKO. I t contains six distinctive assertions; all of it is true except the six distinctive assertions,
tLaughter.] A l l of it is true except ( 1 ) the amendment to tho
80100—22174

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Fodernl reserve net wns passed by a Democratic Congress,
votod for by the Senator from Alabama, then a Member of the
other H o u s e — —
Mr. H F F L I N .
T should like to see the RKCOKP.
Mr. C L A S S . 1 have the RKCOHII. And was approved by
Woodrow Wilson. So we can not make any Democratic politics out of that.' T h e Senator's statement is true except ( 2 )
that the Federal Reserve Hoard did not accumulate $100,000,000
or any other amount; except ( 3 ) that the Federal Reserve
Board did not appropriate $20,000,000 or any other amount;
except ( 4 ) that the Federal Reserve Board can not under the
law or the operation of tho system appropriate one dime f o r
any purpose; except ( 5 ) that no Federal reserve bank to cost
$20,000,000 is to be built anywhere; except ( 0 ) that the proposed new Federal reserve bank building in New York is not to
be erected in Wall Street.
Mr. W A D S W O I t T H . Aside from that, the statement is all
right.
Mr. C L A S S . It is nil right with those six exceptions.
Mr. 1 I F F L I N . I should expect the Senator from the State
where the big bank building is being erected to agree with tho
speech of the Senator from Virginia.
Mr. G L A S S . With these six exceptions tho Senator's statement is true; and this sigidties how much reliance may be put
in the accuracy of statements made by the Senator from Alabama with respect to tho Federal reserve banking system. H i s
assaults are made up of fiction and are almost entirely devoid
of facts.
CONGRESS SANCTIONED IUJILDINOS.

It, is true—and I hope Senators will mark this—that tho
Federal Reserve Board respectfully asked Congress to permit
the Federal reserve banks to increase the amount of their surplus out of their earnings to an amount equal to 300 per cent
of their paid capital. Congress exceeded the expectations of
the board by having tho increase apply to subscribed capital
plus 10 per cent permanently to surplus. T h e board openly and
frankly stated that the purpose of the request was, among other
things, to provide the various regional reserve banks with better
building facilities. Representative Phelan, a Democrat of Massachusetts, chairman of tho Banking and Currency Committee
of the House, presented and explained the amendment in that
body. It was voted for unanimously.
The amendment was presented to the Senate by Mr. HITCHCOCK, a Democrat of Nebraska, acting for the Banking and
Currency Committee of the Senate, and was unanimously agreed
to here. T h e bill as passed was approved by Woodrow Wilson,
President of the United States. I t is now a law and has been
f o r nearly three years.
MORE MISINFORMATION.

A f t e r first charging the reputable gentlemen who constitute
the board of directors of the New York Federal Reserve Bank
with being criminals, the Senator from Alabama proceeds:
M r . President, I can not get a w a y f r o m these figures w i t h o u t
at them once more. A bank building in W a l l Street, ordered to
structed by the Federal Reserve Hoard of seven men, Is t o cost
$20,000,000
*
*
*.
I t seems to me to be surrounded and
o v e r w i t h the atmosphere of g r a f t .
80400—22174
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be conaround
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A t fliis point the Senator f r o m A l a b a m a w a s interrupted by
the distinguished senior Senator f r o m Georgia [ M r . HARRIS],
who said:
I w a n t to rail the a t t e n t i o n of tho S e n a t o r to the f a c t that t h i s
$ 2 0 000,000 b u i l d i n g in N e w York will a c c o m m o d a t e o n l y about 5 0 0 employees w h i l e the S l a t e , W a r , and N a v y n u i l d i n g , w h i c h cost one-third
t h a t amount, accommodates several thousand employees.

Mr. H A R R I S . M r . President
Mr. G L A S S . I w i l l ask the Senator to w a i t f o r a moment.
T h i s opportune interruption of the Senator f r o m Alabama by
the Senator f r o m Georgia, and tho line piece of information
conveyed by the latter to the f o r m e r , was an inspiring contribution to the discussion; and tho Senator f r o m A l a b a m a w i t h
renewed zest e x c l a i m e d :

a

T h a t Is a good point t h a t mv f r i e n d f r o m Georgia made. T h e t h i n s
gets worse, the more you look into It.
F i v e hundred c orks and stenograph rrs and coin c a r r i e r s In W a l l Street, whose god Is g o l d !
'1 his
building w i l l a c c o m m o d a t e 500 people, as a g a i n s t buildings of less cost
t h a t a c c o m m o d a t e thousands.

M r President, it fills me with wonder that Senators seek to
discredit the greatest banking institution on earth by giving
currency to statements having no more semblance of f a c t in
their justification. 1 now yield to the Senator from Georgia, in
order that be may tell me where he gets sanction f o r bis statement to the Senator f r o m Alabama that Hie proposed new bank
building in N e w Y o r k will accommodate but 500 employees.
Mr H A R R I S .
Mr. President, I wish to state that in reading
the report of the F e d e r a l Reserve Hoard I observed the statement that in this building there w e r e 512 men, as I remember,
but a f t e r w a r d s in reading the letter from tho governor of the
Federal Reserve Hoard, which on yesterday was printed in tho
RECORD I ascertained that there are 512 in one building, but
there arc more than 2,0t)0 in all the buildings. T h a t is how I
made tho error.
. ,
.
M r ( J L A S S . T h e Senator does not f o r a moment imagine
that I am suggesting intentional misrepresentation on bis part?
I do not believe he Is capable of i t ; and, f o r that matter, I <lo
not believe the Senator f r o m Alabama has intended to misrepresent these things; he docs not Just know anything about them.
I do not say that in any spirit of acerbity. I t is not remarkable that Senators know little about this complex matter. I t is
a problem repellent in its very nature, and f e w men have the
patience or the foolhardiness to bother with i t ; but I say
that either Senator might have found simply by reference to the
letter of Ihe Federal Reserve Hoard, w r i t t e n in response to a
resolution of the Senate, that the woman's caf6 alone in this
building will scat 530 persons; that the men's caf6 alone wi 1
seat 530 persons; that tho c a f e facilities alone of this new building designed to g i v e the men and women employees decent ; ccommodations and meals at cost, w i l l take care of 1,000 people,
or twice as many as these two Senators gave as the measure
of the facilities of the entire bank building. E i t h e r of these
Senators might have easily ascertained that this bank building
is designed and planned to accommodate 5,000 employees, ten
times the number they told the Senate and the country it would
accommodate.
•
80460—22174
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42
Mr. S I M M O N S . Mr. President, does the Senator from VIr- )'
ginia mean that flint number of people are employed in the
Federal Reservo Hunk of New York?
Mr. G L A S S . Will be.
Mr. W A D S W O R T H . They are.
NO "

MANM.B

PAI-ACB."

Mr. G L A S S . I would like to be told by either of tho Senators
what sanction ho has f o r the statement that this bank building
Is to cost $2(5,000,000, and I would like to ask the Senator from
Alabama what proof be has that the honorable men selected by
tho N e w York banks as their members of the board of directors
of the reserve bank are In conspiracy with tho honorable memhers of the Federal Reserve Board In Washington to commit
4 the crime of g r a f t ?
,
,
M r H A R R I S : Mr. President, the Senator hns referred to tho
" t w o Senators, and, as I am one of those whom he has In mind
in making that statement, I desire to say that I read to the
Senate yesterday the exact cost of the building as set. forth
in a letter from the governor of the Federal Reserve Board,
T h e building will cost over $22,000,000, as I remember, and the
furnishings will bring the total up to $23,000,000. I think that
is accurate
Mr. G L A S S . Oh, no; the Senator, I am sure, is mistaken,
and I think I can show that lie has misread the letter of the
governor of tho Federal Reserve Board.
Mr. President, has the Senate of the United States become a
body in which the character of private citizens may thus be
assailed without proof of wrongdoing; in which astounding
Charges may wantonly be directed against public officials who
all their lives have enjoyed a reputation as honest men?
Mr President, I should like to put in tho RKCOUO—I will not
w e a r y the Senate by a recital of the figures—statistics showing the unimaginable volume of business transacted by the
Federal Reserve Bank of New York. That institution, as I.Indicated a while ago houses $0,000,000,000 of gold and securit es.
I t moves every working-day in tho year an average of $180,000 000 In cash and $1,010,000,000 in securities. Its discounts
and' advances aggregate $50,000,000,000, and so on.
T h o P R E S I D E N T pro tempore. Without objection, the mattor referred to by the Senator f r o m Virginia will be printed
in

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T h e matter referred to Is as f o l l o w s :

T h e F e d e r a l Kcflerve Bunk of N e w l ' o r k Is the l a r g e s t bank In the >
c o u n t r y In resources, in size of Its staff, and in daily t u r n o v e r .
Itd o e " about one-third of the e n t i r e transactions of
he F e d e r a l r e s e r v e
nvsteni
I t s present staff Is .Iff ofllcers and P.7/.T clerks, reclusive
of
tha
i i u f f X !, . c
W o v o l u m e of its o p e r a t i o n s f o r 1020 w a s a s i f o h o w , : " Discounts and advances. 180,402 items, a g g r e g a t i n g $50,530,428,847.,
'' A c ce p t lineo s purchase,I f o r N e w York a n d - o t h e r f e d e r a l r e s e r v e .
^ f l " ' P , 1 o r n i 2 r e s e r v I f n o t offa°nd ot fi e r p n p er^ mI>riey h a n d l e d a n d
'

"Checks
" Notes

collected, 87,036,424
and

"^"'Telegraphic
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drafts

Items,

collected,

aggregating

503,^14 I t e m s ,

counted,,

325 112 8„7

r

$55.325.112 827.

aggregating

$1,004,-

t r a n s f e r s o f f u n d s , 147,302 t r a n s f e r s , a g g r e g a t i n g

v17,-1

02

" , n n H . n c e s settled t h r o u g h gold s e t t l e m e n t f u n d , $.48,840 000 000
'
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8
0
4
0
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2
2
1
7
4
J t c m s , a g g r e g a t i n g $ 2 , 4 3 7 , 7 5 0 , 1 4 8 .:-Yf
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" G o v e r n m e n t bond d e p a r t m e n t transactions, 47,707,417 pieces, aggreg a t i n g $0,955,101,000.
" T o t a l c e r t i f i c a t e s of Indebtedness d e p a r t m e n t transactions, including Issues nnd redemptions, $4,807,841,000.
" S e c u r i t i e s bandied In custody f o r United S t a t e s T r e a s u r y nnd member banks. $100,750,404,785."
T h e cost of o p e r a t i n g d e p a r t m e n t s h a n d l i n g U n i t e d S t a t e s G o v e r n merit transactions Is about $800,000 per annum, a l a r g e p a r t of w h i c h
used to bo nald bv the T r e a s u r y , but since J u l y 1, 1921, it Is all nbsorbed by tho bank.
T h e bank holds about $5,000,000,000 in cash and securities stored In
11 v a u l t s located in f i v e s e p a r a t e buildings.
Some of these v a u l t s do
not ntTord sufllclent p r o t e c t i o n but no others are a v a i l a b l e .
Tho average value of cash and securities w i t h d r a w n and replaced in the various scattered v a u l t s d a i l v Is, cash $180,000,000, securities $1,940,oooooo.
A d a i l y a v e r a g e of HOS t r a n s f e r s of cash nnd securities are
made through the s t r e e t s and tho c o r r i d o r s of oillee buildings at g r e a t
lisk of loss.
ltKIA'ING ON OI.D ESTIMATES.

.

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Mr. G L A S S . N o w ns to tho cost of this building: I have
horn an official statement which shows that Senators have been
misled by estimates prepared a year ago, in March, 1021. I t
was tin outside estimate of cost.
Some Senators absurdly
think that the " e s t i m a t e d " cost of a bank building in N e w
York curtails rural credits in the State of Alabama. T h e estimated cost in March,-1021, of the building at New York was,
$17,090,000. f r o m which must be subtracted the price that the'
bank will receive for its annex building, now being temporarily
occupied, and which will be abandoned and sold when the bank
goes into the completed building. From this extreme estimate,
over a million dollars has been saved on one item and hundreds
of thousands of dollars on other items. Over a half-million
dollars alone has been saved on tho estimated cost of vaults;
by the expenditure of $75,000 in expert engineering investigations, half a million dollars was saved by these " g r a f t e r s " on
the board of directors of tho Federal Reserve Bank of N e w
York.
,
I might dotaln the Senate b y , a description of this building (
which lias been spoken of as a " marble palace."
.,
Mr. C A L D E R . Mr. President, will the Senator yield?
T h e P R E S I D E N T pro tempore. Does the Senator from Virginia yield to the Senator f r o m N e w York?
Mr. G L A S S . I do.
Mr. C A L D E R , Just to permit me to say that if the same
savings are obtained in the other departments of the building, it
will mean that the building will cost less than $13,000,000 instead of $20,000,000.
Mr. G L A S S . Precisely.
Now, let us look at this thing relatively. Let us determine
the reasonableness of it by contrast.
The bank building of the Illinois Merchants' Trust Co. in
Chicago, exclusive of real estate, under contract, is to cost
$10,781,000; and if the contract had been let when these estimates of cost were made for the N e w York building, it is estimated that the cost of this Chicago building for nn individual
bank, doing not one tithe of tho business of this great reserve
bank in New York, would have been over $14,000,000.
'
<
T h e cost of the reserve bank at Richmond, measured by tho
resources of the bank, is less than that of the combined individual bank buildings of Charlotte, N. C., or of Lynchburg, V a „
my town, of 40,000 inhabitants.
'
80409—22174

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T h e N e w Y o r k Federal Reserve Bnnk, even nt this outside
estimate per cubic foot, would cost but $1.00, whereas the
United States Assay Building Just constructed In New York
under authorization of the Congress of the United States w i l l
cost $2.0-1 per eubic foot.
T h e charge to the Government of the architect for the New
York Federal Reserve Bank, covering his services f o r a liveyear period with all of his multitude of assistants, was the same
as his charge to the Government for the assay building in New
York.
Senators know perfectly well that nearly all, if not all, the
eminent professional architects of this country belong to the
American Institute of Architects. They have a standard charge,
and any man who goes below that charge will be turned out
of the Institute. T h e N e w York Reserve Bank paid the standard charge.
It could not have gotten a competent architect
f o r any less money. Tho plans were competitive. W h i l e the
bank is not to be built In Wall Street, as Senators blatantly declaim, it can not he built in a sage field or a Long Island
swamp. I t must be located in a business center, and accessible
sites in N e w York cost more than vacant lots in Virginia or
Alabama.
The latest estimate of the cost of this building, if the percentage of saving.^ in other Items is as great as the savings
already made, will be $12,8:50,000 and not $20,000,000; and tho
plans show that very little marble will be used in its construction. T h e description of it as " a marble palace " is mere
distortion and in no degree approaches the truth. T h o construction is very plain, and to my personal knowledge tljo
present N o w York bank building is f r i g h t f u l l y inadequate; any
N Senator who will go through that enormous establishment and
see its congested condition, in rented quarters, with the gold
reserves and the securities of the member banks of that great
district and of the Government located in five insecure buildings must admit the exigent need of a now building, for of
the 3,700 employees 1,200 reacted to tuberculosis tests.
Mr. W A D S W O R T H .
On account of overcrowding?
Mr. G L A S S . On account of overcrowding. T h o business of,
the bank is being conducted to-day in open and flagrant violation of the health requirements of the State of New York.
'

{

Q

WIIOSK

MONEY

IS

IT?

Some Senators say, with the best intent on earth, that if
tills had been the money of the New York bank it would
have been a different thing, but it was " t h e money of the
people." So was the money expended by this Illinois bank f o r
a new building derived from the people; and the money to be
expended on tills N e w York bank by sanction of Congress
Itself is no more " the money of the p e o p l e " than the money to
be expended on the Chicago bank. The funds of neither bank
belong to " the p e o p l e " in tho sense that they are common
property.
Senators should wnnt to be fair. I am sure the Senator from
Nebraska [ M r . NORRIS] does. H e spoke more of real sense on
the pending proposition here yesterday in five minutes than
some Senators have spoken on It in five months. Let us sec to
whom this money belongs.
88400—22174

As previously said, tho board recommended to Congress that
the reserve bank be. permitted to increase their surplus f o r the
express purpose of providing these building facilities. T h e Congress, as I have said, not only granted the request of the board,
but it went much further than the board asked. I t is this surplus
fund which is being invested in this bank building. ' T o whom
does it belong? B y act of Congress, by authority of law, it belongs to the Federal Reserve Dank of N e w York, which is owned
by the stockholding banks of N e w York. It is the usufruct of
the enterprise, the industry, the thrift, and labor of the business
men of that Federal reserve district. I f this money were not
applied to this purpose it would be invested in some other way.
Not a dollar of it could go to Alabama or to Virginia or to any
other State. Not a dollar of it could be taken by the people
of any other section of the country for any purpose* because tho
people of no other section contributed a dollar to this fund. I t
does not affect credits anywhere on earth. I t does not withhold f r o m agriculture or commerce or industry or any enterprise one dollar. On the contrary, it gives work to unemployed;
it puts money in circulation f o r materials; it gives a decent,
necessary building to house the greatest bank 011 earth.
Whose money is it?
,
I will say to the distinguished Senator from Nebraska [ M r .
NOUKIS] in no event could one dollar of this surplus go into tho
Treasury of the United States. Even if it were to go there it
could not bo loaned out; it could not be used to erect public
buildings f o r the Government a n y w h e r e ; it could not be used to
prevent wild mismanagers of banks f r o m committing suicide.
I t could only be used, under the division of profits provision of
t he act, to increase tho gold reserve behind Treasury notes or to
liquidate an inappreciable part of tho public debt. What a fiction
it is to imagine that rural credits have been restricted by mero
estimates of what this great bank building will cost I
A FINAL

MISnErnESENTATIO.V.

Mr. President, there is one other item of tho speech delivered
by < ho eminent Senator from Alabama which is more or loss
personal and with which I did not care to have anything to do.
I t is a quarrel primarily between him and the governor of tho
Federal Reserve Roard. It does not concern m e ; it does not
concern this problem, except that the statement made by the
Senator may intluenco tho prejudices, if not the reason, of
some Senators here.
On Friday of week before last the Senator s a i d :
\V. 1'. 0 . H a r d i n g v o t e d 11)0 Republican ticket in 1920. as I h a v e
said here b e f o r e
B e f o r e S e n a t o r W a r r e n G. H a r d i n g w a s elected P r e s i dent. h e — G o v , H a r d i n g — w a s b o w i n g and s m i l i n g like a D e m o c r a t , and
a f t e r .Senator H a r d i n g w a s elected P r e s i d e n t he bowed and smiled like,
a Republican.

W h a t difference does It make, in tho discussion of this question, how Gov. Harding voted? I have a faint idea, recalling
the election returns, that a f e w other Democrats voted the
Republican ticket in the last presidential election—a f e w .
air. C A R A W A Y . And have been ashamed of it ever since.
Mr. G L A S S . Mr. President, I would like to leave my friend
f r o m Alabama with one accurate statement to sustain his position, but I take leave to read into tho RECOKO a letter written
80109—22174

4G
mo on January 7 by the governor of the Federal Reserve Board,
In which he s a y s :
My

DKAU

SKNATOR

GLASS :

I have

just

road

In

tho

CONGRESSIONAL.

IJKCOUD of this m o r n i n g tho r e m a r k s made liy S e n a t o r 11 BIN, IN on Hie
lloor of (lie .Senate y e s t e r d a y concerning me.
I feel t h a t it is h a r d l y
necessary to assure you t h a t the slurs upon me, stated m i l d l y , a r e false.
I do not claim to lie i n f a l l i b l e , as f a r as j u d g m e n t is concerned, hut I
do assert that I n e v e r made any Improper use of my official position.
1 did not g o home to v o t e In N o v e m b e r , 1020, f o r the reason that I
could not s p a r e the time.
T h e election occurred j u s t at the t i m e w h e n
tlit! s t r a i n on the F e d e r a l reserve banks w a s g r e a t e s t and I w a s tied
d o w n to my desk a r r a n g i n g Interbank rediscounts.
*
*
* - I knew
t h a t there was not the remotest possibility of my f a i l u r e to v o t e havi n g tho s l i g h t e s t e f f e c t upon tho election results in A l a b a m a .
•
»
•
Sincerely, yours,
W.

1'. G .

HARDING.

Mr. HI'JFLTN. I f the Senator will permit me, I will state
that under the laws you do not have to go home to vote. You
can vote by mail.
Mr. G L A S S . Y e s ; that is true, and thus I am prompted to
say that there was one paragraph in this letter f r o m Gov. H a r ding I purposely omitted to read and did not care to read.
I
would not now state it hut f o r tho provocation offered by the
Senator from Alabama. Gov. I larding states in his letter that lie
was not particularly eager to go home to vote or to send a
ballot by mail, because he would have had to vote f o r the Senator, and lie did not want to vote f o r the Senator.
Mr. I I F F L I N .
I am not surprised at that statement or the
statement of the Senator who is defending his record.
Mr. G L A S S . I am not defending Gov. Harding's vote or failure to vote. I am not defending anybody's record. I am correcting misconceptions and combating misrepresentations concerning the greatest banking system on earth.
A

ffAUMKK

ON T I I B

IlKSHItVI]

BOARD.

W i t h respect to the pending measure, I have no objection to a
trained, resourceful farmer on the Federal Reserve Board, and
never had any. I myself am a farmer. T h e original Federal
reserve bill as presented by me to the House of Representatives
provided that the Secretary of Agriculture should lie ex officio
a member of the Federal Reserve Board. W e r e w e to eliminate
f r o m the g a l a x y of great statesmen the names of those who
tilled the soil there would not be l e f t enough outstanding figures
to make us proud of the country. In my own State, f o r example,
w e would eliminate George Washington, Thomas Jefferson,
Patrick Henry, John Marshall, Madison, Monroe, and other
great men of the f a r m .
When w e provided that the Secretary of Agriculture should,
ex officio, lie a member of t lie Federal Reserve Board w e had
t w o sound reasons f o r the requirement. W e thought a political
element should he introduced into the organization of the syst e m — I do not mean a partisan political element; I use tho term
in its broad sense.
W e did not want to erect a
financial
Frankenstein which might never be reached by the people f o r
correction of evil policies or tho arrest of financial tyranny.
W e f e l t also that the Secretary of Agriculture would be a man
of exceptional force, acquainted witli the requirements of scientific agriculture, and might exercise a wholesome inlluence in
the deliberations of the board.
80400—22174

47
- T h a t was (lie House hill; hut (he Senate in its wisdom excluded tho Secretary of Agriculture. I think now it might ho
a good thing to substitute the Secretary of Agriculture on tho
hoard f o r the Comptroller of the Currency. T h a t would preclude the expense of an additional member; but I shall not be
intractable about the proposition to increase Hie membership
with a view to getting a farmer on tho board.
Frankly, however, 1 find myself in agreement with the Senator from Nebraska [ M r . N o m a s ] , who in his opening remarks
said, in effect, that anyone who is simple enough to suppose
that this proposed legislation is going to create a revolution in
the policies of (lie Federal reserve banking system—that putting
on a farmer is going to bring the millennium to the agricultural interests of the country—will find himself sadly deceived.
CONCLUSION'.

Mr. President, T know perfectly well that, compared with the
great men from my own State who have adorned high positions in the service of tho country, I do not rank as much of a
figure in public l i f e ; but I fervently thank Heaven that no man
may truthfully say I ever misrepresented things to my constituents or practiced the arts of a deceiver. I have tried to
render service in the 20 years I have been in Congress. I f I
have failed, it is my f a u l t ; and never shall I undertake to
excuse my delinquency hv telling the people of Virginia things
that are not true about measures upon which I have been called
to pass. 1 try to inform myself and to act with intelligence and
composure. I am not a f r a i d of consequences, because I would
rather retain my self-respect than to occupy a seat in this or ^
any other body for tho balance of the limited time I have to
live.
In this connection T may recall that in the comedy by Eupolis, called " T h e Demi," all the demagogues in hell, one by
one, are made to come up and pass in review. A t last, when
Pericles is named, a character in the play exclaims:
And here, by way of summary, now wo've done,
Heboid, in brief, tbo beads of all in one I

(

Cod knows I would rather in the day of judgment take my
place with outcasts than to have any honest person say of mo
in respect of a vital and pregnant problem of government what
was here said of this Athenian palterer. Any Senator who discovers his own likeness in tho picture is at liberty J.o appropriate the analogy.
SO 109—2217-1

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