056_080_04.pdf

STARTDigitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Collectionle e Papers

e /50r7

Aldrich

Series/Volume

Shelf/Accession Norill L511. 73

Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Aldrich, Nelson Wilmarth, 1841-1915.Papers, 1777-1930. 58 ft. (ca. 42,500 items)U.S. Representative and Senator from Rhode

Island, financier, and philanthropist. Corres-pondence, diaries and notebooks, material relatingto tariff rates and legislation (1880-1915) andthe National Monetary Commission (1907-12),financial papers, speech file, and printed matter,chiefly relating to Aldrich's career as U.S.Senator (1881-1911). Papers also include a

group of biographer's research materials con-taining correspondence and notes of Nathaniel W.

(Continued on next card)

Aldrich, Nelson Wilmarth, 1841-1915. (Card 2)

Stephenson and Jeannette P. Nichols, and some

diaries and engagement books kept by Aldrich's

wife, Abby Chapman Aldrich. Correspondents

include Joshua M. Addeman, Edward B. Aldrich,

William B. Allison, Abram Piatt Andrew, Henry B.

Anthony, George E. Barnard, Jr., Robert W.

Bonynge, Jonathan Bourne, Jr., Charles R. Brayton,

Theodore E. Burton, Adin B. Capron, Jonathan Chace,

William E. Chandler, LePnron B. Colt, Samuel P.

Colt, Charles A. Conant, George B. Cortelyou,

Henry P. Davison, Elisha Dyer, Jr., Henry W.

(Continued on next card)

Aldrich, Nelson Wilmarth, 1841-1915. (Card 3)Gardner, Eugene Hale, John E. Kendrick, PhilanderC. Knox, Charles Warren Lippitt, Henry CabotLodge, Stephen B. Luce, Orville H. Platt, Aram J.Pothier, Theodore Roosevelt, John P. Sanborn,William Howard Taft, Henry M. Teller, Edward B.Vreeland, Paul M. Warburg, George Peabody Wetmore,William Whitman, and Nathan M. Wright.

Finding aid and index in the Library.Information on literary rights available in

the Library.

Gift of the Aldrich family, 1944; John D.(Continued on next card)

Aldrich, Nelson Wilmarth, 1841-1915. (Card )4)Rockefeller, Jr., 1955-56; and the Seminary of

Our Lady of Providence (Rhode Island), 1970.

Formerly NUCMC Ms 6o-464

MICROFILMED 1972

LIBRARY OF CONGRESS

PHOTODUPLICATION SERVICE


EEL

56

CONININER

131) ICONT. 811


Collection Title

Nelson W. Aldrich

Series/Volume

Shelf/Accession No. LC 77-38 (1/70)


NELSON =ICH Monetary Corifitszt;za MISCELLANY


2-1C

The central banks fix from time to time the rate of die-

count which governs their transactions. This bank rate undex.

usual trade conditions is higher than the market rate. It is not

thought desirable that the central banks should fix their rate of

discount at a point which would enable them in ordinary times to

enter into competition with the banks of discount and deposit for

commercial business. The—teiterent-y—crf—et-i-1---meel-ern—lePri-VrrThrm -14.as

b e ,,,,,,,,,,,,, t thef,1kuci.,t.i alas and-

porea-s—telenging to banks of issue. The changes in the bank rates„.

of the great European banks are ,e..1-1-ewOd with the keenest interest

throughout the financial world. The mon-ey reports of these

institutions showing their stock of gold and the r4ductio of

their gold holdings to their note issues and other liabilities

are looked upon as furnishing a reliable index of existing

business and banking conditions.


2-2

An advance in the bank rate has been found to be the

most effective agency to check tendencies to over-expansion of

credit. In times of stress the joint stock banks usually co-

operate with the central banks in making the bank rate effective.

At times, however, the central banks have been oblided to borrow

money in the street or take other means to make the market rate

J.

conform to the bank rate.


18

governments and are bound by an obligation which, if not ex-

pressed is nevertheless recognized, to sustain at all times the

public credit. I think that it may be said that these banks,

without exception, by the wisdom of their management and the

character and extent of their resources, have commanded univer-

eal confidence in their stability and solvency as the conserva-

tors of public and private interests. It is the wise policy of

these central banks to keep their assets, aside from their gold

A.Nreserves and

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The features of these foreign systems which have perhaps

the greatest interest for us , aside from those that relate to

the orLanization and functions of the central banks are;-

(1), The methods by which panics are prevented or by which their

disastrous effects are averted in those countries. (2). Those that

fix either by law or custom a standard form and character of

commercial bills of exchange or acceptances which are available

for discount or rediscount at central banks and the banks of

discount and deposit. (3). Those that fix the terms and conditions

of note issue.


I ie,

. 1 L

The effective methods by which panics are avoided and

i‘by which wiirets* srar44411-8 excitementy,4x-e allayed and public confi-

dence restored in times when serious trouble is threatened are

well understood. At such times the central banks as the respons-

ible custodians of the gold reserves of the country are relied

40-t-trp-upon to strengthen 1-A..e.s4 reserves E;nd replenish them whenever

necessary. The central banks control the movements of gold,

ai4e1.- secure the ad.equacy of their reserves. (1). By an advance

'es) Vs., • 1, 4,V

in the benk rate. La_tha—taao—ef serious trouble this

44w advance must be rapid zAta, substantial in chari,cter.

(2) By their holdings of foreign bills of frequent maturity.

(3). By borrowing gold from or accepting assistance from cther

central banks. At times , oth7.- means arc taken for encouraging

Gold imports and discouraring gold exports but the main reliances

37777-7of the banks r.e upon the methods I have sugcested and those

methods have been found effective in all eanes.

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The jdlrit stock banks whose cooperation is necessary

in this scheme of relief replenish their own reserves,whenever

1.4doz._

y in such emergencies by rediscounting commercial paper

at the central banks. With adequate gold reserves maintained,

the central banks and joint stock banks establish confidence

in business circles by discounting freely all legitimate

offerings of paper upon t,he credit or securities which are

accepted in ordinary times. T4Lrapid advance in the bank

rate i timeo of trouble is at once a restraint on speculative

Eg_ct4~ventures and a warning to .6011—L44-1-Aees representa ives that they

should exercise the greatest care es to the nature of their new

engagements.


• LI 5.

simultaneous strenEtheninc of reserves and the

ranting of liberal extension of credit to all deserving bor-

rowers have not failed for fifty years to produce the desired

result of establishing confidence and avoiding the disastrous

results of acute financial crises.


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AA- d 4 6-0"'--4- Z4,7,-.174(reserves can be replenished, tiTeir loaning power increased, W aA

rediscount cf their standard commercial paper by the central or-

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Statutes at large, v.13 pp. 106-109

... which notes shall express upon their face that they

are secured by United States bonds, deposited with the

treasurer of the United States by the written or engraved

signatures of the treasurer and register, and by the imprint

of the seal of the treasury; and shall also express upon

their face the promise of the association receiving the

same to pay on demand , attested by the signatures of the

president or vice-president and cashier. ...

That the bonds transferred to and deposited with the

treasurer of the United States, as hereinbefore provided,

by any banking association for the security of its circula-

ting notes, shall be held exclusively for that purpose...

... Whenever the market or cash value of any bonds deposited

with the treasurer of the United States, as aforesaid, shall

be reduced below the amount of the circulation issued for the

same, the comptroller of the currency is hereby authorized to

demand and receive the amount of such depreciation in other

United States bonds at cash value, or in money, from the

association receiving said bills, to be deposited with the

treasurer of the United States as long as such depreciation

continues.

... Every association in the cities hereinafter named shall,

at all times, have on hand, in lawful money of the United

States, an amount equal to at least twenty-five per centum

of the aggregate amount of its notes in circulation, and of

its deposits.


From Mr. Benton's Speech, in Senate,Jan.13, 1642

(Cong. Globe, v.10, p.65)

The report which.accompanies this plan is profuse in/1

its recommendatfons, and in protestations of its safety and excel-

lence,all the phrases of the bank parlor are here rehearsed, and

set out to the best advantage, to delight and captivate us. Safe

and solidi.specie basis- sound and uniform currency- better than

gold- convertible at the will of the holder- always good.such are

the holyday phrases which accompany the plan, and recommend it to

our favor. Why, sir, does the writer of the report not know that

this is the very jargon of banking? that it is the cant of Change

Alley, Cheapside, Threadneedle, and Wall street ? Does he not

know that it is the slang upon which every Bank charter is obtained.

- that it is the old worn out , used up, dead and gone, slang -z

upon which every red dog, wild cat, owl creek, coon box, and

Cairo, swindling shop which has disgraced our country, obtained

their charters ? and that all these paid specie till they

stopped ?


Statutes at large, v.13, p.106--sec. 23

And be it further enacted, That after any such associ-

ation shall have caused its promise to pay such notes on de-

mand to be signed by the president or vice-president and

cashier thereof, in such manner as to make them obligatory

promissory notes, payable on demand, at its place of busi-

ness, such association is hereby authorized to issue and

circulate the same as money; and the same shall be received

at par in all parts of the United States in payment of taxes,

excises, public lands, and all other dues to the United

States, except for duties on imports; and also for all

salaries and other debts and demands owing by the United

States to individuals, corporations, and associations with-

in the United States, except interest on the public (4,:bt,

and in redemption of the national currency.


...Each association organized in any of the cities named in

the foregoing section shall select, subject to the approval

of the comptroller of the currency, an association in the

city of New York, at which it will redeem its circulating

notes at par.... That nothing in this section shall relieve

any association from its liability to redeem its circulating

notes at its own counter, at par, in lawful money,on Gemand.

. a

L. (.7)1,\ CL-C;- t '4' V-,


The banking systems of tI4ese countries consist of joint stock

atbanks of discount and depo 't, which do very much the larger

part of the commercial bu ness of their respective countries,

and of a central bank in efch country with adequate capital

and resources and importiint duties and functions. Each

country has also a variety of other financial institutions created

for special purposes and with special functions. These include,

among others, savings banks of several kinds, cooperative

banks, and agricultural mortgage banks.

The central organization is, from a national standpoint, the

most important element in each of these systems. The assign-

ment of duties and recognised functions to these central banks,

whether prescribed by statute or exacted by public opinion,

has resulted from a process of evolution covering generations

of practical experience. It has not been found possible to

secure an effective credit organization in any country without

this important factor. For my present purposes of comparison

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posed to change the national banking law, and there is no relief

from the rigidity of reserves except through the power of sus-

pension improvidently given to the Federal Reserve Board.

The national banks now hold somethqg over 12% of their net

deposits in actual cash. The bill reduces the requirements for

cash holdings to about 6%. It is vcr evident that if 6% is to

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cibe accepted by the banks as an adequat basis for their trans..

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actions, a large expansion of credit will ensue. If, on the

other hand, the 12 1/2% basis is to be' maintained it is apparent

ti

Itthat, with the withdrawals and restric ed use of sums new profit-

ably employed, a considerable contraction would take place. It

is much easier to take individual case for the purpose of com-

parison of conditions now and after the\ law goes fully into ef-

1 fect, than to work out a statement of r sults based upon hypo-.


IfAthe sActes can be kept in circulation indefinitely , as I believe

they can and will be under ordinary circumstances, then there is

no reason why the loans should ever be paid or the currency re-

tired. It is apparent o4 the organization of the central bank

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/States could/be sold eit er at private or public sate at a/Price

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above par r, and this la-o undoubiedly true autil

,emta-bitv-iirS7Z,4"bailimor°- The Treasury, lindar aziatizig, 14MIMMIWalW4lo redeem

/4. 1— • --tA'41„1,7; 0'*" /national bank notes aa-tbe agent.of the banks, a& the Geweernment

takes as security fo, any failure of the banks to respond, United

, -States bonds equal in amount to the total amount of notes issued

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nder governmental super-/

/ '"-...vision, Vie amqunt notes issued can never exceed the 14fit of-.0 7

/United/States bo ds deposited./I

The Gove nment, Ustaing ossession/f the bonds, Imia a 7ght

to sell them at Ilic or private st4e to recoup itself Or advan-i

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fcep made for redemption purposes In addition, the )tior requires/ /

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the banks deposit in the TilAasury a redemption itund of 5% ofI

f I/1 -1.- ----

outstanding notes. It wapi assumed when the aci was pas , and, t,

in all subsequet legislatio that the bonds of the nited

:

up to witthin the last few weeks. The Governmeilt also/ as the

11hol4r of nationAl bank notes, would have a paiamouny lien upon

all the assets of the bank for further security.

I have also been reminde that the act of 1908 providingfor

the use of emergency currenc under certain circumstances, au-


lfnite6 tutt mate,

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Wilson - - -2.

radically. pp. i and 6.

It (the constitution) absolutely forbade the States to

issue bills of credit, did not give the federal government itself

power to do so, and was meant practically to prohibit the use of

any currency which was not at least based directly upon gold

and silver. p. 46.

Only a great commanding bank, everywhere known, whose

notes really and always represented gold could supply paper

worth its face value in all places or keep exchanges from

chaos.

Such an agency of adjustment and control the Bank of the

United States had proved itself to be. It had not only served

its purpose as a fiscal agent of the government to the satisfac-

tion of the Treasury, but had also steadied and facilitated

every legitimate business transaction and rid the money market

of its worst dangers. But many of the men to whom General

Jackson was accustomed to listen believed, or affected to be-

lieve, that it had done much more: that its power was used to

serve a party and to keep men who were no friends of the people

or of popular rights in a position to manage and corrupt the

whole politics of the nation. p. 47.

General Jackson had said that the Bank of the United States

did not give the country a stable currency. The country had an

opportunity to see for itself what service it had rendered when


Senator Woodbury, in the Senate.

Congressional Globe, Jan. 6, 1842.

No doubt the exchange value of irredeemable bank paper, con-

trasted with specie, was large---particularly on such a currency

as Wild Cat money. But there was no excessive exchange on specie

or bank paper truly representing spikcie. The only real exchange

that existed was the cost of transmitting specie. The great fal-

lacy consisted in supposing the paper money of suspended banks of

the same value as specie. Specie could be transported from New

Orleans to New York for less thah two per cent, and the cost of

transmission was the only true basis for ascertaining the rate

of exchanges.

-But L7 was a greet panic the whole of the specie would

be taken, and nothing left to redeem the ten millions outstand-

ing. This Exchequer Institution would then be as complete a rag

wpaper bank as any ever established on Owl Creek, or elsewhere.

There was no fancy in this; it was all fact: it would have been

the effect reiterated half a dozen times within the last half

dozen years, if this plan had been in existence as a Government

institution? p.98.

Senator Walk r, in the Senate, Jan. 11, 1842.

He would not vote for any Bank, or Government circulation,

that was not based, dollar for dollar, on specie. p.116.


Contest for Sound Money, Hepburn.

Page 415.

A general review of the monetary history of the entire

period of our national existence shows that each generation had t

learn for itself and at its own expense the evils of unsound

money. The costly experiences of the preceding generation were

generally forgotten, and legislators, following rather than lead- (

ing the people, failed to correct the evils except After long

and disastrous delays. So intolerable were the conditions at

times that only the unlimited recuperative powers of our rapidly//

developing and expanding country prevented the overthrow of that (,

standard of value and honor which is recognized by the world as

highest and best.

The problem of f„irilis ,.1 1 a sound and stable medium for a

country of such large area, of such diverse interests, develop-

ing at an unprecedented rate, presents unusual difficulties, and

no precedent is furnished by any other country with kindred con-

ditions and analagous experience. Principles remain the same,

however, and the obstacles could have been overcome and all

questions properly solved had not political ambitions and party

advantage exercised such a controlling influence. The questions

confronting us today are in msny respects the same that have ex-

isted throughout our history, nemely,the establishment of 4

coinage and currency system which will assure stability as to

metallic money, security and flexibility to paper currency, etc.


Benton---4.

And, finally, because it is right in itself that we should

take up the old continentals before we begin to make new ones.

For these, and other reasons, I am bold to declare that if we

must have a Congress paper-money, I prefer the paper of the

Congress of 1776 to that of 1842.

Sir, the Senate must pardon me. It is not my custom to

speak irreverently of official matters; but there are some things

too light for argument---too grave for ridicule---and which it

is difficult to treat in a becoming manner. This cabinet plan

of a Federal Exchequer if one of those subjects; and to its

strange and novel character, part tragic and part farcical, must

be attributed my more than usually defective mode of speaking.

I plead the subject itself for the imperfection of my mode of

treating it.


Cushings Report---2.

said board of exchequer and each of its several agencies at all

times so to limit the amount of certificates so issued that _ts

gold and silver on hand shall be equal to the amount thereof

outstanding. p.408.


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account of the_ua.1.4.4114,1Atwit declarations of a party platform.

The bill can be made strong and efficacious by a few important

changes which I venture to suggest. Assum4ner-as-4-4114mk-we-mu8t,

4iteve-san-be-me-seasuve- I venture to assume that any plan for

banking reform in the United States in order to be successful

must include provisions for an organization or association which

shall embrace the whole country , with a capital and resources

that will contain universal confidence, a certain portion of

its capital might be assigned to branches in districts for dis-

count purposes. It is immaterial by what name this organization

should be called. It should be under the joint control of the

government and its shareholders. Its management

should bb given to men with expert knowledge and with a tenure

of service which would make them independent of political or

local banking influences.


Y-9

It might borrow an amount which would be equal or greater

than the amount of its deposits in the reserve bank ,if it

should be desirable to increase its loaning power. It must be

evident, however, that if all the banks should borrow from the

reserve bank of any district to its full capacity, the reserves

of the national banks would be invested in commercial paper and

not available for use for reserve purposes at any time. It

might happen and probably would happen that the bank which should

not avail itself of the opportunity would find itself in this

condition;(1); This bank could not withdraw its deposits for any


h-6

The most important difference in the two plans proposed is

found in their treatment of note issues. The Commission plan

authorizes the National Reserve Association to issue its own

notes, which must be always convertible into lawful money on de-

mand, convertibility and safety being secured by a reserve of not

less than 50 of its total liabilities, by limitations, and by a

system of taxation, removing practically any possibility of fail-

ure or suspension. The Reserve Association is required to pur-

chase the bonds of national banks and to relieve the Government

from its responsibility for the redemption of ourstanding bank

notes. All the efficient safeguards which the experiences of

other commercial nations have found to be necessary to insure

prompt redemption and ultimate security are provided by the terms

of the Commission plan. The bill authorizes the issue of United


•

rc c


Extracts from A History of the American People, by

Woodrow Wilson.

Volume IV.

Mr. Jefferson, indeed, expressed the greatest alarm "at the

prospect of seeing General Jackson President." "He is," he

said, "one of the most unfit men I know of for the place. He has

had very little raspect for laws or constitutions, and is, in

fact,an able military chief. His passions are terrible. He

has been much tried since I knew him, but he is a dangerous man."

And had Mr. Jefferson lived to witness the result, he would

hardly have altered his judgment. He had stood, for all he was

so full of democratic doctrine, for sonservative ways of political

growth. General Jackson stood, it turned out, for personal

government, party proscriptions, and the self-willed choices of

personal power. p• 5•

Everywhere it was proclaimed that the people had come into

possession of the government; that the domination of profession-

al statesmen and politicians had been thrown off; that the rank

and file were victors, and that to the victors belonged "the

spoils of the enemy".

That was unquestionable GeneralJackson's creed. Men who

undlrstood him could play upon him. He had allowed ill-informedn

men who believed it, and designing men who pretended to believe

it, to persuade him that the government had not only been mono-

polized but also captured by the politicians and statesmen who

had hitherto controlled it; and he meant to purify it very


Wilson-.''3.

its check was withdrawn. It was no sooner discredited than the

old inflation of bank issues came again, with wider range and ply

play of force than ever. The "pet banks", as they were prompt-

ly dubbed, to which the deposits of the government had been

transferred, were selected upon party principles,---were one and

all "Democratic" banks in the South and West, whose directors

were of the President's party. There number was fixed by no

law or principle, and began from the outset to be added to from

time to time, as this, that, or the other influence of interest

or persuasion obtained the patronage of the government for banks

not at first favored with a place on the list. pp. 57 and 58.

The imperious old man must have looked back with not a

little satisfaction upon the long series of personal triumphs he

had won, against trained statesmen and old parties intrenched

against him. He moved straight

and openly upon every object he desired, and his very direct-

ness seemed to add dignity and scope to the government over

which he presided. He had created a party and put subtle

revolution into affairs by sheer force of individual quality,

and left his great place and office before either he or the

men who loved and followea him were aware what mischief he had

unwittingly done,---how the whole framework of settled politics

had been shaken and loosened at every joint by his wilful su.•

premacy. pp. 61 and 62.


In defense of the grants of power by Congress to the Federal

Reserve Board, it is asserted that similar powers are conferred p

uplin the secretary of the treasury and the comptroller of thecur-

rency by existing law, and that the organization of the Interstate

Commerce Commission and its power are analogous to those conferred

by the bill on the Federal Board. The powers given to the secre-

tary of the treasury and the comptroller of the cutrency are with

reference to the operations of the Treasury itself, or in connec-

tion with the issue of national bank notes or the provisions of

national banking law. It is not only the unquestioned right but

the duty of Congress to supervise the issue and fix the condition

under which national bank notes can be used as currency. It has

properly adopted legislation to insure the safe and wise business

management of banking institutions of its own creation, but in all

these cases, Concress has by law established the rules and imposedDigitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

c-2

the conditions, and h o left their enforcement to executive

ht 4,4•-kt ot-4- !AAA. cti„. €L 2-n

officials. In the case of the power given the secretary of the

treasury to decide whether the public interest demanded an issue

of national bank notes in emergencies cited as a precedent for

the grants th the central board, all the conditions under which

national bank notes could be issued in emergencies were clearly

defined by Congress itself, and the secretary of the treasury was

to ascertain whether the public interests at the time required tie

the issue.

I am not sure wLether the friends of tie measure 21ean to

assert that the power of Congress c,ver the business of banking is

co-extensive with the plenary power of Congress over interstELte

commerce. The Interstate Commerce Commision have been given

power, by progressive le6is1isn, to decide upon the ressonable-

ness of rates, to declare what an t-he-i-r- opinion is a reasonable


c-3

rate in any particular case, to establish methods of accounting,

to determine the character of reports, to make investigations

to ascertain the value of railroad properties and other similar

powers, but ther—hare not as yet, in any case, been given actual

management of railroad properties nor, beval granted any of the

lec i 81 t ive powers conferred.Q.ft.theboar=4,44a*--44,3,1i:

exercised at their discretJon. The Interstcte Commerce Coanission

is v9of differently constituted from the proposed Board,-it has

no ex-officio members, the appointments are made for seven years,

and neither in composition nor its authorized functions, does it

furnish any precedent for the creation of the Federal Reserve

Board.


The Federal R'eserTe Banks, by section 4,

are given all the powers and privileges of national banks, ex-

cept so far as the same might be limited by the provisions of the

bill uade*—eorie444zatlaa. Shareholders in national banks, by the

provisions of existing law, are liable for debts and obligations

•I7o 7Vof the banks to an amount equal to the amount of their stock,.

It is uncertain whether the authors of the bill intended that this

additional liability should apply to shareholders in the Federal

Reserve banks. As it stands there is no exemption provided eig*,

and it seems ae-4hrugh the subscribing banks • establish a ha

bility equal to 40% of their capital stock by becoming share-

holders in the Federal Reserve Banks.



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Even the Filipinos, whom our rot-stuffed chumus have beer led. tothink are unfit for self government, if they were situated as eith2r01;188 of the chumps above mentioned, would tney not have the littlesere necessary to get ar POcling of the truth that cheaper money--nothiLner prtces--1.9, the cause of its tak.ing for the purchase of necessi-ties (ninety per cent of which are much more plentiful .,or capita thanthey ever were before, -1/1(1 therelOre much cheaper than formorly) fullytittY per cmrt more money than formerly? Of course, to neitherof chumpm--ror to anybody else—do old, fixed, roney obitations callfor more dcilars thar formerly. So thP, chumps—and others—whe aregetting no more money than formerly, are losing rothing in ayin theseobligatiors; while chumos—and others--who aro rece'ving 7:ore mcreythan formerly, are really getting uprosperity"--as far as these pay-ments are concerned. But bow about the victims who are obliged to 7:.o-cept the cheap money, dollar for dollar, in payment of obligations con-tracted prior to the course of crazy inflation?

9th--Would it not be well for the inflaters—Republicars especially--to look up and read William PcKinley's financial speech about thefleecing effect cf cheapeninF-T the money by inflation? That speech waswritten twelve year: ago, just prior to the presidential election, andwas ,ublished in all the Republican and. Democrat-republican papers ofthe country. It wag written for the MgW71Cia1 iAlrp080 (so McKinleyclaimed) of lhowinF7 hew Inflation—whether brought about by free silvercoinage or otherwise—would. fiece the pensioners, the holdors of life-irsurarom .dolicins, and the savir71-bark depositors; and the wage earn-ers too, whose wages would rot be raised to make Up for the cheapnessof the dollars they would recAsjve under inflation.

After she0.iing crocodile trA ovPr 'inlat would happen to the poorpensiorerl, and tc other cre(jcitcrs, if the dollars should get cheapenedunder a Bryar-administratIon—after all their tears and pitiful pleas,the opponertA of Inflation. themselvs, commenced to inflate tb:o moneysoon atter the eLection of McXinley; and they have kept on inflating itever since. Thlis, knowingly and irte/Alonally, they have been doingwhat they themselv-prior to McKini%),,3 claiminq wouldbe one of the most nefarious thirs a great and glorious nation could

ibly do; and, they have been doing it With no more sign of compunc-tion, and with no p;reater manifestatior of sympathy for their victimsof cheap money, than 1.14. shown by the rattlesrOr" for the victims of itsvenomous fangs.

10th--Al it naturally follows that the uurdhaA1no; power of the dol-lar (:.epreciates to correspond with the degree or amount of inflation,so it also folicws that—whiln it does not require any more of the de-preciated dollars to pay old dobts—it requires a greater number forthe purchase anr, the handling of merchandise. How, then, are the mon-97/ :trinr:encies to be remedied, or be warded off, by issuing the pro-posed elastic currency? Is it not evident that such financiering willfurther inflate and depreciate the already over-inflated and dereciat-r)d money? and to such an extent that all the money will have Ao cheap-ened In purchasing power WA to require Alch a greater number cf thecheaper dollars to purchase and handle any given anount of merchandise,that the money stringencies will occur just the AaLie as before?

lith—What cecent country on the face of the earth—especiaily intime of peace--has been guilty of upsetting the purchasing pCWOT of itsmoney; first inflating it by the issue of millions of rag money, thencontracting it bY withdrawing the same from clreu lation?--by the formercoure over-ercouragin,7 and stimulatire; Importations, the manufacturingcf goods, the ra1317-47 of crops, spc)culation and gambling, and causing amerciless fleecing of all who have fixed AIMS due them in dollars; bythe latter course blocking the whoels of business, and fleecing thosewho have fixed sums to Li:v in dollars?

LCcrtinued on pa.(70 3)


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more. The House committee assiEned the amount of paper which

would be available for rediscount as the bill now stands at

tout t6,noo,000. As the rightto fix the character of lcans

available for rediscount is given to the Central Reserve Board,

1this amount is liable to be iricrensed largely in any event,

whether the amount available is 6,000,000 or 16,000,000,when

we consider that we have at ipresent tut 3,000,000 of currency

of (-ill kinds, T think it is pafe to describe the power Eiver to


I look forward to the time, as the result of our labors,

'hen bills drawn upon Chicago or New York and accepted by your

leadinG banks or merchants, shall have equal value and currency

in the markets of tut: world with stcrlinG bills drawn upon London.

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removal by the Board without notice, and reports to it. His

salary is fixed by the Federal deserve Board but paid by the

Federal Reserve bank. The branch offices of the Federal Reserve

banks are authorized and fixed and under the management of am

agent of the Federal Reserve Board. The number of branch offices

in the United States under the bill, if all the national banks

should become members, might be four hundred. The districts in

which Federal Reserve banks are 'to be located are determined and

may be changed and rearranged alnd new districts created by the

Federal Reserve Board.

The Board is authorized, throOgh its agent, to classify

the banks in each district for voting purposes.Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

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the conduct of business of such savings departments. It may

make and publish, at its discretion, lists of securities, papers,

bonds, and other forms of investments, which the savings depart-

ments of national banks are permitted to buy, and it need not be

uniform throughout the United States and shall be adapted to the

business conditions of different sections of the country.

It has the power to authorize national banks to establish

branches in foreign countries, and to fix the terms and con-

ditions under which the business of such branches shall be

transacted. The Board may, in its discretion, reject any ap-

plication for the establishment of such branches.


It is authorized to make regulations with re-


It is authorized to exempt the savings de-

partment of national banks from any and every restriction upon

classes and kinds of business laid down in the national banking

act. It may, within one year, prepare and publish rules for


banks to deposit in the Treasury of the United States a sum

equal to of the Federal Reserve notes which may be issued to

them. It is authorized to make and promulgate the transfer of

notes at par among the Federal Reserve banks, and may, at ijts

discretion, exercise the powers of a clearing house for such

banks, or may designate a Federal Reserve bank to exercise these

functions. It may also require each such bank to exercise the

functions of a clearing house for its shareholdLng members.


c-4

or State banks who are shareholders in the Federal Reserve bank,

and the reserve requirements of the Federal Reserve banks, ex-

cepting reserve requirements which are made with reference to

Federal Reserve notes. It is authorized to tax Federal Reserve

banks, national banks, and State banks,who are members, upon the

amounts by which the reserve requirements of the act may be per-

mitted to fall below the specified level.

It is given the power to add to the number of cities clas-

sified as reserve or central reserve cities under existing law,

to reclassify reserve or central reserve cities, and to des-

ignate the banks therein situated as country banks at its dis-

cretion. In other words, it may require one bank in the city

of New York to hold twelve or fifteen per cent reserves and

another twenty or twent.-five per cent, or it may suspend the


c-5

whole or a portion of the reserves required from any of these.

It is authorized to suspend the officials of Reserve banks

and to require the removal of said officials if incompetent, etc.

It may suspend, for cause relating to violation of any of the

provisions of the bill, the operations of any Federal Reserve

bank and appoint a receiver therefor. It is authorized to de-

termine each week, or as much oftener as required, the rate of

discount to be charged Is by each Felderal Reserve bank for each

class of paper as fixed by the Boar, and there is no requirement

for any uniformity of rates, eithexl as between districts or for

the same class of paper. It is authorized to apportion the

Government notes among the Federal banks, and to fix the rate

of interes Mich shall be paid by the banks to the United States.

It Say, at its discretion, require any of the Federal Reserve


3.

The desire to promote selfish intercsts is quite as active

and controlling in corporations as in individuals and when we

consider that a Federal Reserve Bank crcti borrow money from the

Federel Reserve Board , paying 1/2 of]. per cent per annum

for it, and can loan 2/3 of the amount for say from four to

six per cent , this fact , rather khan the public interest,

11is quite likely to control their' applications for loans. The

AdA,...z_ •

/ Xa,c- ,6-Jerkrr-ck

4•U 01PN %-tsir'414eng."-ett-ltfre-tftie. Tli44 laper---fs deposited

ye is Jr* commercial p

759


4.

and of the regional bank that if the Board in control of the

former should believethat there'was a lecitimate de-

mand for more money that their ac,ent, the management of the

Federal Reserve banks would see to it that the necessary appli-

cations were made. It is further claimed that even if applica4

tions should be made and there were 6 disposition on the part of

the Central Bank to Erant them thatthere would be a practical

limitation, crowing out of the fee% that the amount of the corn-

mercial paper that a Federal Resertte bank might have was

was necessarily limited. To this it can be answered, that

there is no li!(iitation in the bill; of the amount of commercial

paper which a Federal Reserve bank !E12/ rediscount. The loans and

discounts of all the 1.)&nks in the United States amount in round

numbers to t15,000,000. The securities held by banks which could

,be used as a bureau for authorizing paper are about 5,000,000


9

, sentiment in both parties was strong enough to Lee04,to the pas-

sage of thr act increasing the limit of United States notes frown

4.40.14ons, and the veto of this measure by General

47-444,a7

Grant was an effective check to the first 2ost-bel1um attempt et-A

inflation the increased use of Government money.

While the opponents of resumption and the friends of further

inflation and of the free coinage of silver included members of

both political parties, they were not strong enough in the early

stages to induce either of the great parties to openly espouse

their cause in national platforms. It-it-true-that the- demo-

cratic platform of 1868 contained a clause advocating the payment

of Government bolids in United States notes. The democratic plat-

form of 1872 was _emphatic in its pronouncement for

quote


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If;71`11-itThe failure to secure ther support of either of the great

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parties to their peculiar views orlutt,ary QUeationa led to

et,k. 0the formation,successively, of the greenback mod—people's

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Mr. Cushing's Currency Report to the House.

Niles' National Register, February 26, 1842.

4. That it is no part of the proper business of the federal

government to carry on (directly or indirectly) the business of

discounting notes or bills, or otherwise lending money, or to

furnish funds to be so lent. p.407.

3. It makes and can make no excessive issues, and cannot

t suspend cash payments. For every paper eagle on the wing, it has

a gold eagle in hand. p.4C7.

Be it enacted, etc., That there shall be, and hereby is

created and established in the treasury department at the seat

of government of the United States, a board to be called the

Exchequer Board of the United States, to be composed of the sec-

rctary of the treasury for the time 4eing, and the treasurer of

the United States for the time beini, and one c issioner, to

be appointed by the president of Ile United States, ith the ad-

vice and consent of the senate; the said commissioner to be ap-

pointed for four years; and neither he nor the treasurer of the

United States shall be removed f*om office, except for physical

disability, incompetency, or neglect or violation of duty; and,

?in case of any such removal, i shall be the duty of the president

to lay the reasons thereof befire the senate; and the said cora-

(missioner shall receive a sal7 ry of three thousand dollars; and

the secretary of the treasury shall preside over the board.

Sec. 6. # # #1 And it shall be the duty of the

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