respect and confidence. We believe neither in the people with whom we deal, nor in the banks you have created. Our revenues, however derived, must come to us in actual money. The device of checks and drafts, so convenient and economical to the people in their other affairs, does not appeal to us. Having the power in our relation to do so, we dictate the conditions. Our money, when received, we will lock up; and, in the natural financial intimacies of life, we will stand separate, apart and independent. We justify this action on the ground that your banking system is unsafe."

Now, if it were excusable on this ground for these great corporations to take this arbitrary position-which nobody will affirm-it were inexcusable for the Government to do so, since the Government itself determined and decreed all the qualifications for safety and efficiency which its own creatures should possess.

Was this course of action on the part of the Government necessary for just prudence as to the safety of its funds, or proper economy in administration of its affairs? In answer to the first half of this question, I affirm it to be the fact, demonstrated by careful and thorough examination, that had the Government employed the national banks in centres known as the "reserve cities," depositing with them its revenues, with some just proportion to or regard for the relative capital of those various institutions, with no security from them whatever other than a first lien upon their assets, respectively, there would never have been a dollar of loss to the Government. If, on the other hand, the Government had required, in consideration for these moneys so deposited, an interest return by the banks of, say, two per cent. per annum, the Government would have realized from this source, up to the present time, a total revenue of something more than $70,000,000.

As to economy of administration of the Treasury funds, there would also have been an enormous saving, since the elaborate machinery of the Sub-Treasury and Sub-Treasuries

need not have been employed. Nevertheless, the creator has steadily refused to employ its own agencies, while the rest of the business world, obedient to the law of economic advantage, has employed in its multifarious affairs the useful machine of banking-credit which the Government has thus rejected. To add piquancy to this contrast, it might be truthfully said that were the aforesaid large financial corporations to abandon their present methods and adopt instead the example of the Government, and install, each for itself, an "independent treasury" a cry of indignant protest would resound through the length and breadth of the land-and rightly so, unless it be that our modern system of credit and credit machinery for the transfer of property and payment of accounts, etc., is a delusion and a snare.

If the credit system can be thus characterized, the Government is, no doubt, justified in maintaining its own private purse independent of all things else. It is in that case equally true that every one controlling money values should adopt the same rules. In short, the National Banking Act should be repealed. We are not, however, ready to return to a method closely allied to primitive barter. Concede this, and then the Government is wrong-economically and logically wrong-in its independent Treasury. The disturbing influence on general financial affairs of excessive moneyhoarding by the Government has been too often described to require any detailed notice here. If, then, a vote were to be taken among those who have capacity to judge of things in their true relationships, I do not doubt that the proposition to abolish the independent Treasury and substitute for it the use of banking agencies as they now exist would receive a preponderating vote. I may be wrong in this opinion. I myself would hesitate, however, to vote in the affirmative on that proposition. I should much prefer that the motion be "laid upon the table" until our banking system can be so amended that it shall be free, or comparatively free, from the perturbations which periodically beset us, bringing in as

a consequence a partial or complete suspension of the banking function upon which society depends for the regular ongoing of its business affairs.

I need hardly say that the amendments to which I refer must be in the line of unification or centralization of power. The banking units, whose weakness as they now exist has been so often demonstrated, must receive strength by association together or with some superior commanding agency able both to exercise control and furnish effective support. A central bank or a Government bank of adequate capital properly organized for safety and efficiency is the sort of an agency to which I refer. Great Britain, France and Germany offer good models which we may profitably study.

I would maintain the independent Treasury until such time as our banking system is so re-enforced; because, in spite of the lack of logical reasons for its existence, it has been, and is now, in our imperfect condition, the only agency which can, or theoretically can, regulate and give to some extent a degree of steadiness to the erratic movement incidental to our financial and banking system as now operated.

By its intervention, the Treasury on many occasions in the past, has averted threatened financial disaster. Given an always plethoric Treasury, directed by an infallibly wise administrator (one who has never yet appeared), it could, by timely deposits of these hoarded moneys, and by timely withdrawals of the same, in part or in whole, give steadiness and regularity where otherwise there would be irregularity, dislocation and panic. In these regards, the independent Treasury, when endowed with the needful power in money, can, and in my opinion has, to a degree served the purpose and discharged in a crude way the functions of a great Government or central bank. This service, crude as it has been, often entirely lacking through want of power, often badly directed through lack of wisdom, is a development not anticipated nor foreseen in the laws establishing the independent Treasury. It illustrates an old truth often recognized that even out of evil good may incidentally come. Be the service

to which I have referred worth little or much, it cannot safely be counted upon as a valuable factor in the future. The present overflowing Treasury, through changed conditions, may, at no distant date, be in a state of exhaustion. A perfect system of Government finance would, indeed, bring in each day from its sources of revenue a sum exactly adequate to meet its daily expenditures. We ought not, then, to retain permanently the independent Treasury for the sake of its ambiguous and uncertain control as an intermediary in our financial life, with which it should by right interfere to the smallest degree possible.

My conclusion, then, is, first, that the independent Treasury should be abolished whenever and as soon as our present banking system, which has been demonstrated to be faulty, is corrected in the direction I have pointed out rather than described; second, that the perfecting of our banking and currency system so that it may at all times perform its important function in a safe and effective manner both for the Government and for all the people-is an end demanding the best thought and the most intelligent effort of financial students and political economists, and of all patriotic people who desire for their country what will best make for its economic welfare.


Financial crises have occurred from time to time in the United States with almost periodic regularity. Some have been more disastrous than others. But whatever the character of the causes that produce them or their effect upon business generally, they must in the very nature of the case bear an especial relation to the banking system of the country. In the following selection Mr. Wm. B. Ridgely, Comptroller of the Currency, shows how in the crisis of 1907 our National Banks failed to meet the emergency: [1908].

There has been no lack of warning indications of financial troubles. For the last ten or twelve years there has been an era of advancing prices and of great industrial, commercial and speculative activity, in all countries of the world. Cred

its were increased till the limit was reached in the amount of reserve money on which they must be based. For two or three years, it has been constantly more evident that there must be a slackening of the pace if we would avoid a general crisis in commercial affairs. As is always the case, when there is a demand for liquidation, it first manifests itself in the stock-market. For months, there has been a more or less steady decline in quotations. The difficulty in selling bonds became so great that many of the railways have had to raise money for their necessary expenditures through short-time notes instead of by the regular bond issues. Merchants and manufacturers of the highest credit have found it harder and harder to renew loans, and the rates have risen, steadily, for months.

It was under such conditions that we approached the autumn crop-moving period, when there are always withdrawals of balances from the reserve cities. For a time, there was reason to hope that there might be no more than a gradual liquidation of credits which would not develop into a bank or commercial crisis. But, in October, the collapse of a highly speculative corner in stocks dealt in on the "curb" in New York-not even listed on any regular exchange-brought suspicion upon an old and well-established national bank. Examination showed this bank to be entirely solvent; but public interest had been aroused to such an extent that runs developed in New York city on several other banks and trust companies. Some of them were not prepared for co-operation and protection against the sudden demands, and a number of failures followed.

In this emergency the Clearing-house banks of New York issued Clearing-house certificates for use in the payment of balances, and decided to suspend the shipment of currency to out-of-town banks. This example was followed by the central reserve banks and most of the other reserve cities, of necessity precipitating a famine of currency and a serious bank crisis. The means of remittance and collection were almost entirely suspended. Individuals, corporations and even the

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