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THE CHICAGO BANKER
August 29, 1908}
to be done. The Fowler bill is simply a lot of ill-digested theorizing strung loosely together. We would be fools to abandon our present system of finance, which with all its imperfections is the best (for us) at least in the world and has in itself the making of the very best— for a bastard system, such as the Fowler bill proposes.
The bill proposed by the American Bankers Association deserves more consideration than the Aldrich and Fowler bills. Being practical men, the bankers do not recommend anything either impossible or absurd. But, I for one, do not favor any issue by banks not covered by collateral. It is not business. The propositions to make the notes legal tender and a prior lien are hardly to be taken seriously. Such notes would be a purely first issue thinly disguised. They would expand and weaken an already inflated circulation. As an emergency issue they would be a failure. The legal tender quality would force them out, and the profit on them would encourage their issue and reissue. The small tax against them would not discourage them in ordinary times, but would enable them to displace the more secure and equally elastic national bank notes.
As I have before stated the crucial question in a currency is one of reserves. Let us first strengthen and properly distribute our reserves, and then take measures at proper times to defend them. But if danger becomes imminent clearing house certificates and a clearing house currency will be effectual. This remedy affects immediately the reserves as no other can. It has been tried and approved and is capable of almost unlimited possibilities. Note issues by independent banks are a back number. The deposit and clearings system is equal to all ordinary uses, and it can be made to cover ali extraordinary demands.
Our United States Treasury can be made to take the place largely of a great central bank. The government issues can be supplemented by clearing house issues. Above all, our system of banking can be improved till the question of currency will cut but a small figure instead of being the "whole thing,” as some have tried to make it appear.
our own circulation is habitually deficient, but there are many, on the other hand, w־ho claim that it is redundant. The main point at issue is this: bankers and others have said that our currency is not responsive to the demands put upon it—that it is now deficient and again overfull. In all the measures which are now being advocated it is proposed to give the banks large powers of note issue either to supplement the present paper issues or to supersede them or both. Why, may I ask, if the banks have the power to issue demand credit up to the safe limit (and beyond) of their reserves, why should they be allowed to further force this credit by putting it in the form of money? i answer: Only as an emergency measure, that is, to prevent somewhat the consequences of an evil which has been done and to forestall a greater evil.
We have now to examine the measures pending before Congress.
The Aldrich bill has absolutely nothing to recommend it. Bonds are not a proper asset for a commercial bank to any large extent, how much less a good basis for its note issues. The whole tendency of the measure is not only dangerous but vicious. It would be adding an unsrghtly and rotten patch to our already nondescript currency.
No measure of the radical nature of the Fowler bill should be considered for an instant, unless it has been thoroughly digested beforehand by a competent commission after a long and exhaustive inquiry. In the first place," the bill would destroy the independent United States Treasury, and this, it seems to me, our people would object to. They certainly ought to do so. Nor does it even provided substitute. Our financial system now-lacks organic unity and consistency; under the Fowler bill it would be worse, no head, no organization, no progress, no central. In one respect the bill is absolutely vicious, that is, in providing that the national banks may do a savings " bank business. If experience has taught bankers one thing above others, it is that a commercial bank must adhere strictly to commercial business. It is idle to speak of keeping the accounts separate when the two interests are so closely allied as the bill allows
and there is always danger that the remedy may prove worse than the disease. The coinage will bear only a certain amount of debasement, the paper money only a certain expansion-then there must be a contraction of some kind.
The whole question then of a paper currency resolves itself primarily into a question of reserves, and not only as to reserves against notes, but against deposits. If the reserves in the banks are subject to check—as they are —how in time of stress is the noteholder any better off than the depositor? It is somewhat easier to float a bank bill, it is true, than a check, especially in time of stringency, but not a whit easier to redeem it—and this is the essential point. The only need, then, that a bank has for power to issue notes is to gain time in which to turn its readily available assets into cash, and for the sharpness of panic to subside its creditors. At all times checks, bank drafts, certificates of deposit, and other negotiable instruments should suffice much better than notes.
This, on the supposition that the ordinary requirements for circulation have been fully met by government issues. It is customary in modern times for the government to supply directly or indirectly the permanent vacuum for both coin and note issues, leaving the banks to supply the increasing demands of trade and of any extraordinary conditions that may arise. These additional issues are in England made only against an equal amount of gold, except under suspension of the bank act: in the United States, against government bonds; in Germany against mixed assets, but under a tax which forces their quick withdrawal. But in spite of these and other precautionary measures there is a growing disparity all over the world between bank liabilities and bank reserves—and this with a rising-rate of discount—and the strain falls first upon the subsidiary coin, and then upon the gold, according as" the demands are from internal commerce or foreign trade. So it all comes back to the question whether we in common with other nations need more gold or less of credit issues.
There is, perhaps, no one who claims that
New Bond House for Cleveland
A new Cleveland brokerage and bond house with capital and financial prestige sufficient to give it rank with the strongest investment houses outside of New York and Boston has been announced. The house will comprise two firms, the principals in which are Myron fl . Herrick, James Parmelee, W. J. Crawford. Niles B. Hasbrouck, and Parmely A7. Herrick.
The firm of Herrick, Parmelee & Crawford is to open a bond department with correspondents among some of the largest banking and investment houses in New York. An affiliated brokerage partnership has also been formed between Niles B. Hasbrouck and Parmely Herrick, under the firm name of Hasbrouck & Herrick, They will be represented on the Cleveland stock exchange through the seat now held by Hasbrouck and will also have the active management of the new bond department to be opened by Herrick, Parmelee & Crawford.
Niles R. Hasbrouck is the brokerage expert of the new bond house. His partner, Parmely W. Herrick, is a son of Myron T. Herrick, and has been in the offices of Herrick, Parmelee & Crawford for some time.
V
Down Off the Fence
The New York World, after balking at the ford for several weeks—aye, for twelve years —has "crossed the Rubicon,” and declared unequivocally for William J. Bryan.
San Francisco National’s New Building
San Francisco, August 24.—Burnham & Co. of Chicago have completed the plans for a five-story and basement class-A building for the San" Francisco National. This structure will be erected on Northeast California and Leides-dorff streets, the present temporary site of the Bank of California. The ground floor will be allotted to the banking institution and will be one of the most elaborate in the city. The upper floors will be divided into office rooms, all of which will be equipped with the most modern conveniences. Burnham & Co. have agreed to complete this building within six months after beginning it. Steel contracts amounting to $25,000 have been let to the American Bridge Company of New York, and all other contracts will be given out at an earl}׳ date. The cost of the new bank building is estimated at $175.000.
“The Circular Staircase”
The newest Bobbs-Merrill book is out. It :s “The Circular Staircase" and as a mystery story has two exceptional features. The first is the singular circumstance that the detective is not the intellectual marvel to whom we have grown accustomed. He is simply a man of good capacity, and has only a share in the credit of unraveling the mystery. The second is the light humor which pervades the book and constitutes one of its principal charms. The author has no desire to pile horror on horror. And the plan she has adopted of having the tale told by a sprightly spinster long after the event, which had no serious consequences for her, at least, lends itself naturally to her mode of treatment.
'Fhe book is said to be the first novel of the author. Mary Roberts Hinehart. A first production is frequently more interesting for its promise than its performance. From "The Circular Staircase” it is difficult to form even a surmise as to how deep or howr high this writer will go. But of the book itself it may be said that it is an interesting and satisfying production.
Bobbs-Merrill Company, Indianapolis, at Si.50. Fully illustrated.
V*
Vice-President P. E. Sweeney was elected president of the Champlain Trust Company of Burlington, Vt., succeeding George E. Whitney. The first year of this company was most prosperous, the assets exceeding $100,000.