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·i.:42
REI.EASED FOR PUBLI CATI ON
AFTERNOON T>J\'·ERS WEDNESD-'Y FEBRUARY llth, 1920
I
AN ADDRE S S
.bY
HENRY A. MOEHLENP.AH ,
W.embe r, Federal Reserve Doard .
Del~vered
at the Convention
of the
Dal las Group
of the
TEXAS STATE BANKERS ASSOCI AT ION
Februar y 11th, 1920
1.43
-1-
The story of Texas g rips me .
its rren sti r the p ride
c ontemplates t hem.
an~
excite the
ima~inati vn
of every .American who ,
The i{!.o:·:r of: the tone Star State bas be en written into
the history of the nation.
..
I ts trruiiti ons and the achieverr£nts of
The spirit of Texas 1 wi th its vigorous optimism,
is congenial, and its atmosphere of wholesuir.e franlmess is one in which the
average American should be able to breathe free l y and deeply.
a t home among you.
You speaj{ a
langu~e
I understand.
Frankly I f eel
The ref ore 1 may I
exp res& the hope that I will be ab le to speak the l anguage you will unde rstand. .
I cl.es ire to sit with you as a banker and citizen, to confer with you in a
fran k , ordinary way concerning the p r oblems conf renting our Republic,
f'/.P.y I
ask you to f orget for the time the supe rvi sory relations:lip I occupy, that we
may take counsel t<..ESether to t.he e.1d that we rr.ay se rve better
our eoun try and the
oi.,~r
cor.ir.•uni ties ,
w orld~
Texas is a State of big things .
You boast of c territ ory g r ea t e r thi=m the
Sta t es of Massachusetts, J>Tew York, llennsyJ.vania ) Vj r ginia, North Ca rolina , end
Georgia - the a r ea of which totals
256,919 square miles - and of a territory
which is two hundred wd twelye times g r eater tben t hat of the smallest State
of the Union - Rhod.e I s land.
In
You have a posinl ati on es tima t ed. at five millions .
1919 you p roduced crops of cotton wo r th
$l~75,ooo,oco; of co~ ·~2 4o , OOG,OOO;
of wheat ~63 , 000 ,000; of oats ~6o , 000 , 000 and of hay ~2) , 000 ,000.
horses , mules , cattle , and sheep of a value of
~57 2,COO, OOO ,
You possess
and who can estimate
t.he va lue of your oil, your sulphur and coal and. o':.he!'" so\.\rces of wealth 7
In the value of your crops, for the first time you n ow head the nati on, for
in
1919 you had a "billion dollar crop".
You a re also the secoLd State in the Unlon in tne value of you r livestock.
These things are of outstanding material i mrortance , but when I come to
Texas I am raminaed of other things of no l ess importance .
Your illustrious
Sam Houston and Colonel Bowi e, and Dave y Crocket t, that hero of every American
..2-
:144
X-1822
lad, speak of a spirit that is more than the spirit of Texas, that is the
spirit of Ame rica, the spirit that is in my heart today and i n the heart of
every true American who is permitted to live in these momentous times .
A statement recently issued by the Comptroller of the Currency indicates
.
that the three lea.ding States whose National Banks have shown the greatest
actu~l
increase, proport~onately, in resources in the last twenty years are
Oklahoma , $357,72~ ,000, or 6537 per cent; California, $1,0uo,214.ouo, or 16~5%;
and Texas, $869,611,000 , or 1013 per cent.
in the banking resources of your State.
This will indicate the i ncrease
'
Truly indeed, "Westward ~he course of
empire takes its way. "
Your war recor d is only another evidence of the greatness of you r
Sta~e ..
ftsked to subscribe a quota of $362 , 695,550 towards the various issues uf liberty
bonds, you did far better than that, you• subscriptions in all amounting to
~4o5 ,772,ooo , or t 4o,OOO ,OOO more than your 1uota.
in the military service,
And of the
3,441,000 men
155 1000 ef those who answered to the call of their
country were from Texas&
fts
we felicitate our selves on the greatness of our achievements of the
past, let us not f ail to r ec ognize that they
co~st i tu te
a challenge to us for
the future.
J..s citizens we are proud and happy indeed to know that while our sons
were baring their b r easts to the enemy,
. we, their elders, in the conmon,
ordinary pursuits of life , made some contribution .to their support.
indeed we would be today i f we had not done our best.
Chagrined
Pr oud we are of the fact
tha t, under the leadership of just such patriots as sit here today. we who
stayed at hon:e raised twenty- two billions of dollars to equip and maintain our
military forces, and ten billions of <lOllars to lend to the a l.Lied
se emed :like an impos s ible task.
na:ioi~::>.
This
In fact you will remembe r that the l eading
financiers of our count r y thought ,a sum in excess of one-half billion
on the firs t loan wou ld be more than our nation could absorb.
The
c:~
dollars
resp~nse
to
-3-
:i45
.h-1822
the call of the Sec re tar .f of the Treasury was ove r four b i lli ons of dollars ..
This p r oof of the s:piri t that :possessed. our pe.0 ple is only an ind.ex of what
our country may do in the d.s>.ys Le!'ore us.
I.et us rememoe r that at me be-
ginning of this war we o·ned tha nat i ons of Eur oi:;e a trade balance of 4oO
millions of dollars , and besides that they held a.'1d controlled our b onds and
securities in the sum of over four billions of d.ollars , representing a s i gnal
portion of the r a ilroad,
co;nrr~rci al
ana industrial capital of our country.
Just as our sons ass isted in forcing back the enemy who believed that
"might makes ri ?,ht 11 , ·so ·ve d id our par t , citizens anct ban~:ers, a splend i d part
of which we may a l wa1s be :9roud , a magnificent achievement in fint:ulce equalled.
by no othe r n a ti on i n c.ll ilicto!>y.
I would bring t.o you a r..:essege ,
3
spirjt of oi;tirr.isrr., of endeavor, like
unto that carried by our so.•s to t he d istractda. natioris vf Europe in their hour
·of periL
I s it possible , m;,• fellow baru:ers tnat, after s uch sac rifice
am
such
an example , .ve can go back t o the old days of iso j.ati cn , of se lfi shnes s , to the
olci narrow program as b u:::;iness rren,?
Shall we not in the econ omi c s trife and
strain Just ahead. go to our sec tors, as our boys went to th€- lrs 1 in t he first
line ,
and
there lib.e true .~meric3ns
11
Carry on ??1
::>ome of us may have f elt at the
beginning of this war tnut from a military point vf vi ew we were not e-i_u al to
the Job confronting us, but we knew where our duty l ay, an:;.
i s peculiarly
f'11le ric2~
we ·took t he shor test way to the JOb.
or ganizea to accele r ate prcxiuction.
plan of
The An::e ric<:n
camp~ i gn
peer: l e
was und.er way.
th the spiri t which
Every indus try was
The ener5ies of the nati on we re c oorc.Linatea,
Labor unselfishly cooperated with capital.
in every home.
Wl
Economy am thrift were enforced
or gani zed for team wor k , ana. ove rnight a
'.:e had a 1-vi ll to win.
T'n i s p roves to rr.e that
we a.re a ci.emoc ratic people , that this is a goverrui.;ent of the :f.ieapl e comple t e ly
· capable of se lf gove rnment under the g reatest strain•
.A
write r says of Pe rshing that nothing typifies his character so vividly
-4-
:1t46
X....1622
as th~ driving force he put into his carcpaign !rem beginning to end ..
(
He hadWl.
defin i t e plan, an:l he stuck to it through thick ani thin, letting nothi~g get
in t he way.
Gene ral Pershing only reflects the traditions of our ·Pmerican spirit - the
sp iri t of Ge o rge Washington at Vall~y Forge,· General Jackson at New Orleans, ani
Genera l Scott, upon your own soil and in UE>xico. - the spirit of Grant and Lee,.
of Stonewall Jackson and Phil Sheridan.
That is the spirit of .America and that
is what I would like to in t erpret to you today in terms <Jf present day problems.
This is a migh~y State with a long history of great things done .
can only make big men.
These
And right here~ with all the v i gor of my soul, gentlemen,
I wish to say we have a big job ahead of us - a world job.
No great task can be
performed unless we have the impulse and dynamic force of the heart behind it.
When men liJce Hoover bring to us t he news that two million, five ·hundrP-d. thnusand
children are being f.ed daily iri Eu;.·ope 1 that fifteen to twenty million families are
receiving unemployment allowances, and as we read the news the travelers bring
that the ft rmenians are eating grass beside the roadways like d:;;r;.b
beasts
, and
Nhen we re-read the stori es of the devast ated cities in Eu~ope and have a picture
of the d emolished factories and the deserted fa.rms 1 it drives us to our knees and
we are humbled in our pride, and we cry aloud .
The first need over there is f ood.
yes> credit ..
The next, raw material, and the third ,
r1'here else can our brothers get it?
Let me remind you, my country-
men, tha t the kind of men to whom we shall extend credit is the peasantry of
France and Belgium, the kind of men who ha~e mad~ those col.mtries great and who
stood with the spirit expressed in the words
11
THEY SHALL Nar PASS11
back the hordes of Ge~:r and stood be tween us and de\;potism.
pay their debts for we know of what stuff they are n:ade.
our own country, sprang from their loins.
Can we returning from these heroi1a.
·~asks
,
who kept
These pe0ple will
The ci thenship
Dare we forget them in their
c..i.
t'1.i s:
e.Y.t :·1.111i t.y ~
which we per:fot"msd as a.'1 ui .:,.;..:..;::i. ..... n.::l ·.,:. u..,
go back to the ord i nary pur.s ui ts of life , the ·same kind of men we once
WC\!~e,
to
-5-
..
X-1822
live again the same narrow, uneventful, uninspired livest
147
I will not believe it .
All ·human r elati onship in these days is being spiritualized.
Re can understand
why our boys were made sold iers over night better now than we could before the
war.
I love to think of you."1g America, the white-faced doughboy inexperienced
in war, with no military
tra~ing,
but with all the traditions of .Ai:r:erican life,
the initiative which c ame to him from the baseball diamond and the
fo~tball
field -
I love to think of him with th at democracy imbibed in the public schools, with
that Justice and honesty cmd right of the .4rrerican home, and I run sure these
things J.rneriqan found most elo~uent expression when they were confronted with
false ideals of the giant autocracy.
So we must be loyal to this heritage they have given to us and take our
place in the economic strife before us.
Shall we be an.J les~ loyal?
My country-
men , it is our privilege in. the Providence of God to t ake our place forever with
the nations of the Earth.
The Gi:eat Teacher s <iid "He t h<.: t shall lose
for my sake shall find it."
unto but to minister."·
It was said of Hirn
11
h ~s
life
He e ·ame not to be ministered
The g reat expounder of wisdom, Solomon, also said
11
0ut of
the heart are the iS SUeS Of life.IT
: I would bring you p.ot a n9w message but an old. one. alon6 thi s· line; that
we can never do our full measure of service as business men. as bankers, or as
.Americans only as we try to do it by the heart impulse.
axiomatic.
~rinciple
This
is
If you a re he re today as bankers. thinking in te nns of service to
your communities as before the war, get out of the >Ray for your other b rather.
You are too small for the Job.
A new day is here.
This is my appeal to you as
big men, to do the big thing with a big spirit.
There are roany economists and lea.d.ets and. statesmen whv are devising plans
for solving the many problems arising out of this un?rerlede nted world upheaval..
While we wait we do well to recall the tried virtues of our f athe rs.
Time is needed to heal the wounds, economically speaking.
remedies can be applied.
let us be steady in our thinking.
Sume artificial
'let us be generous
:148
X-ll:22
,.
and helpful to those in authority.
J udgrr.en t.
ar e
let u.s be fre e from political bias and.
Let us set a good e:.<:ample as leade rs in the new day 1s program.
s~p
We
certain
of a fev1 things,
This nation must p roduce more if those i:e t>ple
over there are not to starve , and i f fe eble anO. new gove rnments a re to be made
stab l e.
As we get deepe r int o the winter, adequate description cannot depict cozrt.
ditions that exist in Europe.
Orte writer gives one pnase which tells the story!
''. For months past the reports of the health cond.itivns in the Central ~mpirea have
been of such character that the imagination i s dulled, and one almost seems guilty
of sentimentality in quoting them.
~ut thei r general veracity iS not disputed.
In the last years of the war, In Austria alone at least 35,000 people died of
t ube rculosis .
In. Vienna alone 12,000.
Today we have to r eckon with a number of
at leas t 350 ,OUO to 4oO,OvO people who require treatrre nt for tuberculosis. .~.s
blood l ess
the r esult of malnut rition a · - ·
generation is gr owing up with undeveloped
muscles , undeveloped joints, and .undevel oped brains .
Tuberculosis is nearly
always fatal now among· adults.
"Not hing can be ddme against it owing to lack of f oodstuffs . 'You se e this
child he re
an
1
.,
incredib~e
the physician in charge of one of th~ hospitals said:
amount of bread, and yet did not ge t any stronger.
i t consumed
1
I found out
thet it hid al l the bread it received unde rneath its straw matvress.
The fear
of hu• 6e r was so deeply rooted in the child that it collected stor es instead of
eating the food , a misguided animal instinct made the dread of hunger worse than
the actual pangs. •
11
t..1 r . He rbert C. Hoover in a recent statement said:
"One of the first acts of the Gennans was to den\rle the pe0ple of ?.elgium
to a very large extent , and t he north of France almost wholly, of their cattle.
In consequence, it has been necessary to maintain a stream of condensed milk and
other food especially for children for the whole of the last four years.
Th ~
European r aces a re absolutely dependent for the rearing of their young on
th3~. r
Jl49
-7-
..
.
cat t 1e.
Th
ere is no cruelty to the populacion greater than to roo tnem of
dairy ·stock.
Nor can the herd. be r '3 stored overnit;ht.
the .
It taKt:s four years. to
rebuild the herd by breeding up t'rom a few f ounda.ti or. animals . 11
"The big problem is th.:: chHd problem.
Just as 10lgium was in danger of
losing h:; r next g.:mer:ition by nv.:nb e :-less cas<)s of tn.l...erculosis brought on by
malnutrition. so are thc8e naHons e;oing th.rough a period where
·~h~
child forces
are being steadily and incre a.singly d imini shed and wipad out."
"Things 1 how3ver, . are as bc..d. as they are painted., or more truly, things ar0n 1 t
.paint.e d as bad as they are.
Starvati.on in war is to be expected , but starvation
in peace means one thing only. th<:<
b1~eeding
of anarchy."
1wbassador Morgdnthau seys, "Nothing on earth .;;2'.cc:pt a
mir~ le
from heaven
can prevent the death by fr0c z:ng and starvation of from f .i.ve to t :m million
people · in Eurepe and tho near e<'l~t this winter."
Do you ,vonder, ge"1tlen·. en, the
f.lames of .1olshevisrr: arise ir. E\;.rope 7 This is om· first task, .1.":lerica· alone must
lead 't.oe way to succor E'urope.
How?
It is an outs tano..ing privilege for
~
to me Jt with you ban.kB rs be cc:. use you
have to do with the g;:-eat est pro·iucing class of our couutry - th"3 farmer.
are producing the essentials most in demand: by •ot:'ie r cour.tl'ies.
~hey
It has beGn my
privilege to serve as a court try banker for twenty- .five ·years , a cofll!'.1unity similar
to that which most of you serve here.
producers of livestock.
You hc.ve in
the g,r eat cotton industry.
These were ;:,h e fc..rmers, o..airymen and the
add~tion,
becouse of your soil and climate,
You will become more than ever tne cocnsellors, the
leaders, in the large new program Jt.'S t ahead.
Te.;-:as occupied a uniy_ue position at
one time of being the greatest livestock district of the world.
You are without
doubt the largest natural livestock breeding district of our· nation.
You he.Ve had
the setbacks of seasons, disease, and market conditi0ns similar to all other
sections, but at no. time in the history of the world l:ave the demands been so
great for the staple products which you produce here.
It is gratifyh:g to know
that out of the dist ress and strain of youl," serious drough.t of three and four years
:150
X-1&?2
,.
ago you have eu:erged to nearly as strong a position as formerly.
As Mr. Paul M. Warb1.1.rg, a former reember of the Federal Reserve Eoard, in a.
recent speech said: "We are living in merawhere the production uf money. and
credit has increased and the ~_r..cC.i;ct~on of goods has deqreased.
In order to
e?:erge we must produ~e less credit and money and produce more goods."
V!e do we ll to take
n ame ly , the beef supply.
pound.s.
1
inventory at this time on the q'..:ei>tion of fir~t im;.""' ! ta.,..,r;a:
The t0tal exports for the year 1914 we re 33 , 000 , 000
Four years later, in 191~, during the
war
·they were increased to
700,0CO,OuO pounds, ani theh in 1919 , approximately 2 ~0,ooc ,OGO pounds, or nearly
nine times that of the last normal pre-war year.
This increase in five years
means that our beef supplies have been cut to the bone.
Inf otmation from the
dairy districts would indicate marked enc r oachrr.ent upon dairy he r ds fo r beef
s le.ugh te r.
At the close of your dry seas on, in the spring of 1919, i t was indicated that
your breeding stock has been reduced to less than
5o%
of nOllilal.
At the close of
1919 the sarr.e condition prevailed in the Mountain States of V/yoming , Idaho, Mon-
tana. and Coloitado , and .for the san:e reas.on their herds wer.e :reduced. and thin
cows, heifers and unfinished beef came to . the markets in um.isual vojume.
During the fir st eleven months of the year 1919 . the total receipts of ca.ttle
at the six principal markets , Chicago, Kansas City, Omaha , St.Louis, St . J o~ e1)h ,
ar.d Sioux City, were
9 962,ouo head, as against
1
10, 751 , 000 cattle during the
corresponding period of 1918, showing a dec rease of 789,000 cattle ..
1.51
X-1&?2
As you well know, the big r anges in Texas have been cut up so that the
livestock p roposition has become mor e intensive and means that every f armer
mus t heve a f ew
head~
This i s well, for the waste f eed on every f enced
f arm is of irmnense value.
Nhen a country i s short of fema l e breeding
cattle as the United States is today, the vital neces s ities of grow th
r equire at least seven years to replenish the ranks of breeding f emales and
prodt\ce a normal crop of beef steers ready for slaughter ...
For the f i rst time i n the history of our country a good milch cow i s
now wor th more than a horse .
In :i.690 , we had 26 cows per hundred population; in 1900 - 23 ; in 1910 22; and in
1919 -
22 .
If you will bear in mind the increase in population
during this thirty year period and that this
populat i on has been centered
in the cities, you will r ead ily gr asp the importance of an enlarged progre.m
if we do our part as a producer of milk produc ts as well as meat in this
time of world
•¢t'
need~
:152
-9-
X-1822
Se rious cons i de rati on should b e given as t o l egi s l a ti ve a ction prohibiting
for a pe ri od of year s the s l aughte r of al l f emal e ca lve s f it for breeding purp ose s .
rte p r o t ect our wild
g3W8
t ut we sh ould. give more th ough t to the p r o-
t e cti on and pe rpe tua ti on cf our domes tic l i ve s t ock , p a rticula rly of the beef
s trai ns .
The r e cord at the live stock ma r ke t s d uring. the p as t four years s hows the
The following t able
volume of veal calve s be i n g slaught0r ed, which i s oppa lling .
s ho-1s the s l a ughte r of c c.lve s for
1916
1917
1916, 1917, 19!.S
c.nd
1919.
1918
1919
(Es t i rr:<:: t ed )
5,773,900
Heads
7 ,030 ,700 Beads
7, 767,175 HnDJ.s
S,3 19 ,0vO He'1ds
Las t year you h~ nn l:rrtusu.a.l precipi t &t iun which lins had it s inf luence on
your p a s tures
~.nd
your contl i ti ons are aga in n onnnl.
The he r d s f r om the No rthwes t
ond We s t h ~ve be en rei1..irr..ed in a mn r keci. way t o y0u r St n t e .
During t he thre e ye ar s p t·ec '3eding 19: 9 whe:1 you h ad a d r ou t h ove r the Texa s
It wr>.~ ie s t imc-.ted t.'ia t there was
countr y the numbe r of s bee:i_.) :ieclined g r e a t l y..
a decreas e of o.b out
300,000 :!lends
h<.v e come and you h o.ve had ab out
un to J:mua ry
1919.
Sinc e thr.t time the rains
300,000 h ead s of l amb come into
Te:xa~ from the
drouth s tric~n a r eas of Mlmtc:..na, Wyoming , Utah an d pnrts of N~w lv'Iexico ~d it is
said tha t a ll of Wes t e rn Texa s to dat e has been l a r ge l y r e st oc ked in its lambs
to t ha p r e-drouth nuni>e r .
Your sha ep now tota l
ne ~rly
3 mill ion hend.
VThen t h e compoct or I.e ngue of Nati ona or T.reaty i:ms bet?n c omple ted and the
cred it prog r am r econs true t ed ::md. when the na tions of
E\~ r ope
c ome to buy in this
c ountry to r e pleni s h the ir c e ::-ds; f or thi !> i s t he on ly c ountry they
you will r eudi1y unde rstnncl who t t h is menn s .
C['.11
c orr.e to,
Oux- ~xp ort s const;mtly ir1creasing
i.53
-10-
wi 11 make he c.vy draft upon the prcduc ti on, which i s the r ef ore related directly
to the h ome supply and the price levels .
Anothe r important phase of this question is related to the labor problem.
labor was never so well paid and was never in si.\Ch demand as now.
This must
continu"! f nr ma':1y years in th::.s c ou..."ltry because cf t~e gl--eat need fo r building
operations of all kinds, construction of highways 1 the rehab ilitation of the
r a ilroads , the increase of the plants necessary f or increased production an:i
manUfacturing of all kinds ani it can be safely said without contradiction in
view of past history that when labor is well employed, meat consumption increases
in p r oportion .
The ratio_~. of slaughter h as exceeded that vf p roducti on during the last five
year s.
The excessive marketing during the war period is n o indication of ove r-
p r oductiort , but r athe r of depleti on .
A cattle increase during the past four
years at the seven principal markets of 6,000 , 000 heads or ove r ~3 per cent,
means rapid dest ruction.
It is predicted that the coming census will demons trate
that the annual cattle estimates will show a grossly exaggerated condition in
the number of cattle in this covntry and particularly the b r eeding stock.
It is claimed by the best informed statisticians of our country that the
nati ons supply of fe male cattle is way below nonnal; that it will take
t wo_whole. g~ne rations of livestoc.k
.
. before
. . H will be poss:ib)e t.o S'.lpp ly tb':l
country with a normal supply of beef f or the bl ock.
Thi s is the time to take stock and make ou r p lans f or the future _ This is
a mess age of prime importance to the bankers ani leaders of livestock interests
of Texas .
W
iay
I sugge s t therefore
two outstanding needs to which e very banker must
relate himself during the next few years:
First, .Adequa te financing of the fanne r for purchase ef tractors and all
machinery, seeds and labor necessary for increased ac r eage to take up the slack
X-1622
- 11-
154
of av aqab le lab or .
•
Second, •ro provide ample funds wherever character and ability are in
evidence to carry over for the necessary peri od. all female stock for breeding
.,
purposes.
.And right here let JLe state, gentlemen, the Federal Reserve System
was established for the purpose of stabilizing agriccltural as well as the
industrial and comrr.e1·cial
act~.vities
of our country.
No paper will come to
the Federal Reserve System that will be more acceptable and more eligible for
rediscount than thet of your f&rmers an:l livestock producers ..
The orderly marketing of cotton, both in domestic ani foreign comrr.erce,
.'
is highly es·sential to the nation, and especially to you of the South..
Your
whole civilization is based. uyon the profi tabJ.eness of cotton production.
tofore, the marketing of cottcm has been anything but orderly, in
been positively diso1·der·ly.
This hos been
d1~e
adel!uate credit faci lities end. of sufficient
difficulty, that of
in~.eqt>ate
~act
Here-
it has
to two things - the lack of
warebot~ sir..g facilities~
The first
credit facilit5.es, b a s been almost, if not
entirely, overcome by tbe pe.ssage of the Federal Rese rve .Act, under whose provisions every r.ember bank is authorized to "accept draftl:l or bills of exchange
drawn upon it
** * * *
whic/.1 a.re secured at the ti.ri.e of o.cr.eptance by a ware-
house receipt or other such document conveying or sec ..iring title covering
1
readily marketable staples."
Here is authority for the open disco'lmt mark.et anci for the use of barurers
acce'Ptances.
Hitherto the financing of cot ton was largely localized.
t
Its
burden rested upon the southern banks, with only small assistance from outside
s uurces.
Credi ts on cotton were extended by the ·ordinary promissory note, which
had no entree into the open market.
The Federal Reserve Act throws wide open
the door to the money markets of tlie world, and. the only requirement for entrance therein is that the seeker after credit shall come properly clothed.
Under the
~ct
and the regulations of the Fed.e·r al Reserve Board this dress
consists of a warehouse receipt, cove ring cotton or other staple end. nonperishat>le
•
i55
X-1022
-12-
agricultural prod\:cts, is.sued under such saf~gttards as to guarantee at all
times tbe ab s olute integrity of its statement of fact.
Pde~ua.te warehousing facilitie~ for cotton wculd, therefore, seem to be
the most pr-es sing necessi t/ in the sane and economic distribqtion ot' your great
crop.
. '
The warehouse r eceipt to be of the highest credit value should be ur.iform
in its character, Just as are bills of lading and othe r instrumentalities upon
which credit is extended.
Cotton, when sa!eg1larded against weather, fire ani
theft, is practically indestri.;.ctibJ..e, and should furnish the basis of the very
best collateral upon which to borrow money .
Credit only desires to be assured
that this commodity is thus p rotected. This assur~1ce can be made absolute only
s tandaniized
through
a sy~tem of
warehousing issuing a uniform receipt.
If, as everyone agrees is the ~ase , the lack of credit is the chief reas on
for t he present 1.Ai1S o'Ul·ui and unec 0;1omic sys tern cf mar!<".e cing cot ten, and if the
uniform wareh,)use receipt, as eve1·yone agrE>es, is the k~y which unloc.ks credit,·
then it must follow that th'3 providing of a0.e civ.a t e , s t '.l:l.d a1·e1. we..re h ouses is by al. l
odd.s the uppermost thing to be done by cott on pro~.\.:~~• ~.nd 1J1.l5 i:-l~)ss man to bring
• <
about the solut i on of the difficulties un1er wl:iGh y0u. of t?..ie
r.0 ..1.th
ha.;re been
A proposit;.on of setting Ul:J a :-;_1rnf:" e:-ential ~:ate
handicapped for so .many years.
on paper secured by warehouse receipts issued und.er
;ir::>p~r
c !;ate or federal
regulation and inspection should have the fullest c onsideration.
The farmer ne eds your help.
Give it to him alor>g these linesA
I have only
briefly hinted at this question of in~reasing productivity. · May I suggest the
need f c,r a larger ca1lpaign of eC.\1ce.ti on to stop the people in the ir debauch, their
spree, their extravagant ii·1ing a-id spending?
people since the war.
was universal.
A great reacti on bas come over our
Ecor.omy ar1d even sac!'if:i.ce when the boys were at the f rent
Every unit of our country was organized under the county councils
of defense to encour age thrift, prod\\C ti on and saving:
armistice a r eaction set in.
coming more
serious~
After the
s~.gning
Signs are appearing that the people are now
of tile
oe. .
In some industrial centers they are beginning to re.aliae
-13-
156
X-1022
that in this hour of need for greater production is their opportunity to save
from their earnings f or the rainy day.
We should encourage our customers and
our people by example and precept that we mean what we say...
We should take
the message to them emphatically that no bank can encourage speculation whether
upon the stock markets> in t.he handling of commodities, or in land.
The time
has come when we must shift all of our reserves to the point of attack,
are the outstanding officers of the line.
You
The war, financially, has Just beglim •
This less~~ must be cartied with emphasis ani must be put into practice behind
j
the counters of every bank.
Every loan should be analyzed and criticiied to
the end that every dollar should count for prodv.ction and not a cent for
speculation.
To wHhhold prodt'l.C ts from the ms.rket for pure speculation is
unwise and hurtful.
A reg•llar, ot<derly market;.ng is part of your problem"
We hear much these days about the necessity of
deflat~on
of credit. Some
economists lay it to the expansion of currency, others to preva.i ling price
levels, others to conclition of foreign exchan5e, and so on~
Whatever may be the
cause for abnonnal conditions in our credit struct1.ire \ve a!'e confident of two
essential necessities for approach to solution.
First, we must increase our
production and from our prod\l.Ction save more and spend less.
We all fe e l sure
that these are the .·· foundatiQn stones in these days of rec 0nstr:1ction.
So
instead of talking of the inflation or expansion of cur1·ency or of credit, or
its def lat ion or contraction, let us, ai:; I have indicated, be steady in our
thinking and doing.
I.£t us conservatively regulate our credits ani apply OU\-
selves to this new great task with all our energy and
pow~r,
but with that
power under absolute and complete control.
The Edge Act, now a law upon the statute books, will furnish the
machiner~·
with private capital and control, but with Government supervision·, which wil.l
pro.vide in large measure means for financing the
oper~tivns
governing the eXp\)rt.$
and imports of our country so that credit may be extended and rationed in orcle!:l:r
fashion~
It is another great piece of constructive legislation
in'~
to
157
X-1822
provide credit ~pon long time, and offering a good investment for the savings
of
O'.lr
people ..
The Federal Reserve System is now the reservoir of strength to the financial,
indus tria l , comnercial and· agricultural interests of our country.
As bankers we
are beginning to understand. that this law was put upon th~ statute books, not
for bankers only, that they miglit profit more, or for
any
one class, but for the
interest of all our people; if you please the financial traffic regulator.
There
is not a man in this room today but who wi 11 admit that the Federai Reserve System
saved, not only our country, but the world from financial chaos arki distress.
We c ould not have won the war without .American men "ani money.
participated i.n its benefits.
made more sec1,4re and valuable.
Ever~ citizen has
Every stockholder in a bank has had his holdings
Does it mean anything to you, my fellow bankers ,
as a t r~s tee for your depositors to be a participant in a System the capita~ of
which is $o7,5v9,000 and the sur~lus of which is $120,120,000, and the resources
$6", 171, 7 47 ,000 and in control of over two billion dollars of gold~
I.et us take for example the case of a strong state bank in one of our
largest States.
T~ President stated that his bank entered the System during the
war as a patriotic duty but ~ it haJ. never borrowed or re-discounted the directors were discussing, now that the war is over, the advisability of withdrawing
from the System.
This bank had paid in $9, COO on capital suoscription and carried an average
reserve of $162,ooo - or a total of $ 171,000.00 - which under the terms of the
Federa l Reserve Act was paid in gold.
The withdrawal of this bank would take
that much gold from t he system.
As the gold held 'by the Federal Reserve Banks forms a forty per cent basis
for loaning power the withdrawal of this bank's ~ 171,000. of gold would red 1\ce
the ~oaning capacity of the Federal Reserve Bank by,$427,500.
withdrawal of capital or reserve reduces the ability of the
to protect the credit situation of the country by two
an~
Therefore ar1y
Fe~eral
Re-c:,e..rv-e bank
one-half ti:mes the
158
-15.~
amo·,. mt of such withdrawal.
A-1622
Every State member bank has the privilege of with-
drawing from the system and as app:tiXirnately 3'fp of the capital and reserve
conr~t ry
deposits of the Federal Rcse:.-ve I3a..1ks of the
banks you can see wh£...t the
e:ffe~t
belongs to Stc;. te n:ember
to oti.r credit stj:ucture would be if the
privilege were taken ad.va:.1tage of, especially :luring these days of reconstruc ti.on .
The aggregate resou:.·c13s of
half billions.
t~\e
Gtate men;ber banks appro:.cimate:s nine an::l one-
The eHgible r...on-·rnember banks have resources of about
billions.
b
The effectiveness of the FedB:ral Re serve Syste;n would be increased from twenty
to .twenty five per cent ii' these eligible non-merr:oe r banks entered the Sys tern.
ftnd when you stop to consider. that the Federal fieserve
maintain confidence arid
i.ns~ ·:e
Syste~ 1 ~
task is to
corra:erc:5.al solver:.cy don't you think membership
worth while ?
It is highly i.m:pol'."ta"'.'.t that the eligfb}.e non-member State banks in Texc:.s,
to the ~umber of 3L~1, wit!1 a capital of tv1:e;.1.ty·one a.id a haJ.f millions and a
surplus of nine mi U.ions and reso1-.rces of
1-:~5
m:U.lio.ns, M.d their strength to
the great structvre.
Is it fair for you as badre rs to s t m::l on tha side J.iues and participate
in the benefits of tr,.is gr-eat fir:ancial Sys ~.:;:n c.:rrl not 02.ke any cont:ri.b1-1tion7
Is it safe for you to assnr.e that in the day of str·e ss or str.;i.in that your
•
correspondent in the city will be ab le to care for you regardless c.f his own
needs?
Have you the rl.ght to put this burden ui;on hire?
It is my six.e re
Judgment that your elder brother, your real re:-erve, will be yotff f i.i.H
proteci~. on :
keeping youiin full control of your i ndependent reJ.atJof1s as a ba'!"\ker in · the
indep~ndent
bank:i.ng System of onr country.
You owe i t to your communl.ty.
You
owe it to this large r prograr.i as a banker and as a pr·od.1Acer to rr.ake S\'.re of yo1J.r
ability to serve.
Why should. yo\.~ be dependent?
We hear a good deal th'3Se a.ays
about the possibility of Branch :Eanks being establishecl. in this co\mtry.
hostile to my sense as an indepenclent banker
a.~Q citi~n.
This is
and yet I am convinced
,,
a need for ~his can only come when the local b~nker cannot or will not serve
his community and it becomes necessary for outside capital to come in-
· 159
You
do we ll my fri ends to consider this independent r e l ati onship and y ou should make
safe your position as a financial l eade r of yout
May
COIIIIluni ty.
·
I assure you I am n ot making this statement with a view to· solici .trng
membe r shi p.
1ut as I s t ated at the beginning. to be of service atxl to make those
suggestions that I would like to have made to me if I were in your place.
·'
~~Y
I Qriefly
recapitu1at~ what
I consider ·the outstanding benefits of
mernbe!shi p in tho Fede ral Reserve System:
1.
It is an insurance policy. assuring to you cornplete · confidence in. your
ability to serve your communities and to care for yo~r depositors · under every
stress and st rain.
2.
It is a guarantee to your community that any program for developnent
or produ~ ti on can be safely and cont inuously carried out.
3.
It is a guar antee to you as a conse rvative ban.Ker in the d istric"t of
your bus iness that you can take these deposits with the assurance of securi ty
and continuous se rvice.
4.
It insures the independent r e l ati onship of your bank as to its dependence
upon any other bank.
5.
It is not a fictiti ous reserve but a r eal reserve.
For the first tl.roe
in the histor y of our country we are able to assemble the wealth of our · p~ople
into t he credit s truc ture.
6. You are able to transfer fonds without cost. You are able to collect
checks at par ·1M.ther going or coming r
Y:ou a re ab l e to· ship currency eithe r way)
insured and all charges paid. without any expense to your bank.
7-
You have the benefit of t he ad.Vice of business experts of the count~y
n ot onl y on financial matters but upon the conduct C1f your bus iness in
-·
.
You have 'th~ p rivileges of rediscounting eligible pape r.
partic~lar .
This is particu.1.arly
important at this time bee a.use of the need of increasod prodite t ion of the ar.t:i r.. ).< s
160 .
. X-1522
-17you produce in this section.
~.
J
Tha System has in the sh•.)rt period of its ex i~te nc e brought ab out better
banking methods .
You have heard c~iticism as to the necess ity for rr~king r eports,
e tc., but let me rerr.ind yvu Gzntleruen that it .vas well for your country that
I
unde r the National l:anking law a careful examination of banks \ius adhered to;
that when the strass of war
upcn us we had little to clean up or remove but
w::is
we could go imrr.edie t c ly at our job.
trus t eg. guardic1ns of the
9.
I
~eoples
Bankers now
ar~
bt: coming real bankers and
money.
It has given to every bank, a m<;;mb9r of the sys t ern , the prestige be c ause
of the things I have
enu.~er~ ted
~11
depositor, which is ab ove
and it is reflected in the confidence of the
absolutely neces sary.
Have you und.a rtDken to suc\.tre the viawpoint of your depos i to r, very se lei om
expr essed , as to how he f eels?
r e flect
If there is <my doub t in your m:nd?as to this
upon the four yea~s or more since the World War began.
Instead of
appr ehension or fri ?;}1t our peopl e for the fi rs t time in the hi story of our
country unde r stood that the Goverru-nent was behind tLo tanks; that somehow , someway:
their interests we r e fully
pr ote~ted .
i:a:ik failures we r -a t·he lowest in the
h is tory of the country du r ing this pe riod.
paid l arge dividends,
lar~er
t,han e ve r
to finance the Gove rnment in e ll .its
LCJD.a! depos!. t s inc.re nsec., bank stock
befor~.
ope r~ tions
ani in opite of all we we1e ab le
ns I have i ndic ated bef o re in
the sum of approximate l y thirty-five billion dollars .
1
v7hen I say "we" I do not
mean bankers b ut I mewi tile i;:eoplG , our depositors , uncier your leatler&hip.
r ut this could r.ot have been done AS you will
Federal Reserve System i n ope ration.
fr~c ly
admi t without the
May I emphas i ze t hi s again because it is
my though t t o get into your minds first things so tha t the petty, smalle r thing
will take its right F l ace, and t hat you
accomplishments of
th~
w~ll
h nve p roper r espect because of the
System during this great pe riod.
I am consci ous of t h e fact tha t there a r e critics eve rywhe r e.
the r e a r e some he re toda y
~ho
fail to app r eciat e t he fact tha t the
No doubt
Fe~e ral
-1~
X-1822
Re se rve System stands as the great insurcnc e policy, past, present and future,
.vh o still cling to the ir idea and chi!'p and whistle because of their pet,t y losses
on e xchange a'ld their losses upon reserves a year afte r the war is over, ani
with the memory of past panics fresh in the ir minds 1 an:l with their deposits
doubled and the ir profits greatly increased, having the comple te confidence of
the pe ople .
In spite of all this wonde rful record the re arc still sorr~ men left
who would take us back to the da rk alle y of narrow thinking .and small doing•
. Do you realize, my friends, what it moans to be a citizen of a country, and
the only country on the face of the earth with a stabilhed money standard.
How would you like to live in a cotmtry where the mark, in tel'TllP of gold, is today
only equal to one twenty-second of what it wa s before the war, or where the .frallC
in
exchange for g old is equal to l a ss than half its fonrer value, and the lire
one-third of its fonoor v.alue ?
.And what sha U we <;;aJ Of the previous standard
of the world , the pound ste rling? Ch, I Jmow th~ r~ are nen here who will be gin
to talk about the p urchasing pow.3r of the dolla r, b ut l e t m~ r emind you tnat :i.n
spite of th~ pre sent price l~vels our dolla r still he ads the l ist.
undispute d cre6.i tor n.;. ti on of the world.
We are t he
Not a national ba.ru.. failure of any
conse quence during all the se .y-aars of stre ss.
Il:?t me r efre sh your mind. as to how you p eople in Texas h ave participated
in the Fede r a l Res e rve System.
RediscoW'lts
1917
$52 ,052 .(lOO
l9lb
$' ?-:>7,677,7 66
19 19
$1,224,94._, 345
Is that any contribut ion to the State of Texas 1
I.r e you as a banker a debtor?
Vlbat will b e the r ecord. for 1920?
,
I
In the old days when the stock gamblers would plan tn8ir little :partie s and
set the whee ls of speculation
goin~.
when the 5arn0 g ot be yond the ir c .ontrol . :JOU
will remember, they were playing with the funds the producing people had en O.Jpos it
-19-
1-62
X-k22
and wken we deSir-ed t.he&e- :t•.:.nd.c f o:t the it· use, and. for legitimate purposes
to increase. praduc ticn and. care for our communities, v;e were told that vr,e
could not have tb.em and. we we re c Ji1~ lled to r e sort to one device and ;.1otl'..e r
to care f e r our need .
One centralized power controlled. How different t.cday .
.A l'em:Jc:. rati~ed System responding to needs of every sectiun of our country.
IB t us get it into &ur minds if we have forgot t:Jn i t , that the Fede re.l
Reserve System is a great G:>vP.mrcent institution , and i s, a.s I have stated., tor
the benefit of all the p~cple.
-. l~J.cination
There are sorre bankers who labor under the ~~l-
that the d eposits in their instituti on are their pr~perty.
rrc
do well occasionally to r~~ind ourselves that the fWlds belong to the people,
and. that the Sys tern i~ f\;.nQ-ti oning ~ot primari ly for the banker bt.' t for the
:pecple •
That is what we have the Governmc:nt for , end after all you and 1 are
the Goverr.ment.
Ras thP saf~ty and securi ty that the Federal Reserve System
has brought t o you ~ a be.nk".:.r meant anytping to your custome r ?
tried to. get his "iewp,J int?
Have you ref l:ect eJ on how he felt during the war?
This Sys t em has be.en the great insurance poi icy for all of us
membe r s o.r non- members.
service .
wh~ther VIC!
were
Y0ur whole district i s now on the :par b?.sis, .wd. by
the way, is this not in ms.ny wd.yc "' goQd thing?
conveni enc ~ s
Have you eYe r
Woul d you
n~t
suffer rnany
ir~
and possible iezs i f you were to go back. to the old days 0f tat"iy.
I n a short tin:e now, the whole country wi ll be upon a par basi:; .
use an old i llus trat ion, whi ch to my mind i s
old davs , who h auled bis. produce
~Y
~uite
clear,
wagon, f orced to go
~f
the
~rod.~c~r
~O\'-ll str~a.E
to find a bri dge to de l iver his goods, of course putting th!'?. co:;t of
ti on as to time , labor and all upon the '1:UStomer.
The
Stat~1\lr; r
To
in the
ten miles
transt;'lrt~
Government came
a l ong more recently and put a bridge across this r i ve r right Bt the d.01J r of tae
producer and the cunsumer ond have told them to use i t to expedite trade, ant\
save tima , labor ani money.
the us. e of the ol d bridge?
Do Y:Ou want to be one of
thos~-
men who ir1si st upon
Think it. ove r , and again le t me remi nd. y',Ju , always
X-1 ~22
-20•
1.63
remember that these deposits belong to the people ani that the Federal Reserve
System is functioning in thei r int~rest primarily.
~ay I have the ear of the State bankers pres ent who are not members of
thd System, to urge upon you the :prime i mportance of st?·engthening the System
for t he job ahead as I have outlined briefly.
T.he d ay has come when if you
expect to use the System directly or indirectly you must make your !ai.r con· tribution to its r eserves in eve ry way.
In this brief, plain way I have
undertaken to t alk to you in a language you wov.ld understand, without technique
or any effort to give
advice~
I WOt\ld like to do to ani for you as I would like to be done by if I were
in your place .
The time has come for us to relate ourselves as citizens, not
only to the financial system but to the country
am
to the world in terms of
sacrifice a nd se rvice-for you to put first things first.
You may discover that
this principle when once worked out will be not unlike the tides of the ocean.
The y come in with unfailing regularity and when the y go out the y t ake with them
not only the grea~ war vessels and rrerchantman, but the little clory and c_a noe are
lift ed alike upon the bosom of the tide.
A well known philosopher put the
idea something like this: "Just as in religious hyste ria a single text becomes
a whole creed, to the exc lusion of e very othe r text, and instead of being
its e lf s ubJ ect to rational tests is made the sole test of the rationality of
e verything e l se ."
small doing.
That is the mistake of small thinking, which results in
May I urge you again to use your privilege as leaders in the new
day of opportunity4
How proud we are of our country and our civili~ati on~
unmindful of this:
l e t you be not
That our country in the days to come will be JV.St as g reat
and strong according to our own contribution.
have paid the pric e .
~ut
It has cost u·3 much, the father s
We will not tolerate on our shores the anarchist or the
bolshevist 1 but we propose, methodically> steadily, conscientiously to go at ou1·
job of r econst·ruc ti on, having full r espec t for the blood
am
treasure that has
.. . .
:164
- 21-
'been spent to make our country what i t is, a"lei hand down to our children the
heritage unsullied a:1d p ro'1e
~o
an
the world thR.t this is a Democrocy where
people know bow to perform the task of se lf
I'
gove~-nment~
@FedFRASER