[ Volume XXV
THE CHICAGO BANKER
44
Organized 1810
Commercial and Farmers National
Bank of Baltimore
and Municipal Depositary
Federal, State
Bankers are invited to open reserve or active accounts on liberal terms Extensive banking connections enable us to render effective service Correspondence invited
FRANK V. BALDWIN, Cashier
JAMES M. EASTER, President
HARRY M. MASON, Vice-President
bank or to be enjoyed by banks under state or federal charters as indicated below:
“Any bank with a paid-up capital of $1,000,-000 or over, to be allowed to issue notes, say to the extent of 75 per cent of the paid-up capital, secured only by being a prior lien on the assets of the bank, including the double liability of stockholders, and by an insurance fund of say 5 per cent, and to be free from the 10 per cent tax. Such banks to be allowed to establish branches within the state in which the head office is situated. If the franchise is granted by' a state the federal government to approve of the regulations securing the note issues, and to hold the insurance fund. I do not enter upon the question of what the minimum paid-up capital should be in the case of banks desiring to avail of such bank issues but not to open branches. I hope, however, it might be practicable to make it as high as $500,000.”
“Any bank with a capital of say $5,000,000 or over, to have the same privileges as to note issues and to be allowed to establish branches throughout the United States, limited, if thought necessary, to cities of national and not local importance. Such a franchise would, I suppose, be granted by the federal government. In view of all that has happened since the war, I presume it would not be too great a stretch of federal power to grant such a franchise.”
In the light of later experience I should think that banks having power to establish branches throughout the whole of the United States and its oversea possessions should have a larger minimum capital than $5,000,000. This, of course, proposes asset currency', and I am aware of the arguments which have been made against it. But no effective argument has been made other than the difficulty of applying it to thousands of relatively small banks, and effecting that daily redemption which is indispensable. That it can safely be applied to all individual banks with
I happen to regard as a more reasonable solution than can be found in any' other direction.
I11 order that reform may be permanent and effective the new species of bank should be able to create:
(1)	A sound credit currency with effective daily redemption.
(2)	A distribution of capital available for lending, so that it shall not be idle and congested in one locality and scarce or non-existent and proportionately' dear in another.
(3)	A condition where the gold and other cash reserves of the country may be made more effective and doubtless be minimized in quantity.
(4)	Where in time of trouble the capital of the country may be mobile and capable of being centralized when necessary.
(5)	Where there may be banks capable of doing the entire lending business of your merchants and manufacturers, except where these are unusually large, when they could be divided bv arrangement between two or three banks.
(6)	Where a great international banking business may be created and you may do justice to your oversea possessions, to the great ports of export and import, to y־our mercantile marine, and to your position among the great nations of the earth.
This state of things can, I think, only be brought about by y'our permitting the creation of banks in the United States similar to the banks of other countries. As I have tried to show, the mere creation of one central bank will not change the defective character of the eight or ten thousand other banks. The suggestion I ventured to make in 1895,* and which I give below unaltered, was based upon the national banking system and the ten per cent tax on state bank issues being allowed to remain as they are, and the new powers to be added to those enjoyed bv a national
*B. E. Walker. Address New York State Bankers Association, 1895.
main objection to a central bank in the following significant words:* “In my judgment our currency', like our other evils, is to be remedied by greater freedom and greater distribution of choice and discretion, rather than by a greater centralization or unequal distribution of power. It is a fair question to ask, therefore, whether conceding, as I do, that there is not sufficient elasticity of the currency, I can suggest no remedy, ■but would prefer present evils to those resulting from the creation of too centralized a power; and the answer, to my mind, is obvious. The true remedy must be found, not in placing our dependence upon the discretion of any one, but of every one,—that is, again, upon liberty', rather than upon power and restraint.” Without regard to whether this is in the abstract a wise view, or not, I think we must adimt that it is distinctly the American view, and those who have carefully' read the history of early American banking will recognize that each attempt to depart from it has aroused most passionate opposition.
So far as my own opinion is concerned, I do not find that it has changed materially since I had the honor of addressing the New York State Bankers Association in 1895. I felt doubtful then as to the probability' of the necessary reform being acceptable to the existing bankers, and I am not much more hopeful now. But if the people are willing to create a central bank, with the monopoly of banking which would be involved, they should be much more willing to create a series of large banks which could perform every good feature of centralized banking, and still preserve that chief safeguard of the people in industrial matters, viz., competition. And even if the people and the bankers are not willing, I need not, I suppose, on that account hesitate to state what
*George H. Earle, Jr.: “ A Central Bank as a Menace to Liberty.”—Ann ah Am. Acad. Pol. and Soc. Science, March, 1908.