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Outlooklic Library


JANUARY 3, 1914


Contributing Editor R. D. TOWNSEND

Managing Editor


again in 1907, many of the richest and bigThe Currency Bill is now passed, signed, gest National banks in the country practically and is a part of the law of the land. The suspended payment—that is to say, were sensible business men of the country will not technically bankrupts—because they could not want to waste time discussing its theoretical get the bank-note currency necessary to pay possibilities, but will begin at once to pre- their depositors' demands. During those pare themselves to conduct their business panics practically every bank in New York under its provisions. It is not, however, adopted the rule not to pay out more than a a waste of time briefly to review its history very limited amount in bank notes to any one and the forces which brought it into being, customer, no matter what the customer's and to consider what, if any, changes it will credit and assets were. These banks adopted make in the daily work of the merchant, this rule because they themselves could not manufacturer, banker, and farmer.

get the currency.

Under the new law no To the average man or woman who has a such currency panic will be possible. A bank balance or a check-book there will be merchant who has tangible assets and unno visible changes whatever in the banking shaken credit may go to his local bank system of the country, except such as may at any time and borrow money on his perpossibly appear in the form or typography of sonal note properly indorsed. If the local the five-dollar National bank note. Receiving bank has not the currency to give him, tellers will go on accepting deposits, paying it may go to the Federal Reserve Bank in tellers will cash checks, and presidents, its district and presenting the borrower's vice-presidents, cashiers, and boards of di- note as security, it may get bank notes for rectors will continue to make loans under the him which will circulate all over the country. new Currency Law just as they do to-day If the Federal Reserve Bank has not the under the National Bank Act.

The daily

necessary bank notes, it can go to the United operations of the National banks will be States Treasury and get them, provided the unmodified; the depositor or borrower will original borrower's assets or credit have no new window to go to, no new officer good. to see, no different kind of a signature to make to his check or his note, and no new A CONSTRUCTIVE formulas or red tape to understand. The MEASURE man who will feel the immediate difference is This is a simple statement, shorn of all techthe merchant or the manufacturer or the nicalities, of the fundamental and important farmer who is a legitimate borrower of money operation of the law in commercial and finanand who has assets or credit which entitle cial transactions. It will be no easier than him to borrow money.

before for the man with poor assets or bad

credit to borrow, but it will be immeasurably HOW THE BILL

easier for the man engaged in a legitimate OPERATES

and profitable business to turn his wealth or There is another type of man who will his credit into a form which will be accepted welcome the operation of the law, and that is without question throughout the country. the banker of moderate capital in a moderate- The Outlook Company will probably never sized city or town who knows his customers again have to pay its employees in checks personally and wishes to take care of their because its bank has not the bank notes legitimate needs, and who has been prevented with which to meet The Outlook's legitimate from doing so in times of stress under the demand on its weekly pay day for the money old National banking act. In 1893, and which it has deposited in the bank during the





This may


week. The technical statement of the mat- opinion rolling in the direction of elastic curter is that at last we have an elastic bank-note rency, the bankers then made the mistake of currency, the volume of which expands as trying to deflect its course in the direction of the number of the trade transactions through- private banking control of that elastic curout the country increases and which contracts rency. The Monetary Commission of 1908 as the number of Nation-wide trade transac- was formed and the Aldrich Bill was framed. tions decreases. We do not wonder that providing for an elastic currency, but for President Wilson, who signed the bill on the almost rock-ribbed private control. The night of December 23, expressed “a very Aldrich Bill failed. Public opinion was de. deep gratification” at being able to sign termined to have elastic currency with parait. He was entirely justified, by the provis- mount Government control. The Glassions of the bill itself, by its history, and by Owen Bill was written and introduced into the spirit with which both houses of Con- Congress in deference to this public opinion. gress have treated it, in calling it a great The bankers as a class, although there were constructive measure.

many honorable exceptions, fought for private control to the last ditch. But they had created a Frankenstein monster which they could not

manage. Thus we have had during the last To what body of men is the country most six months of 1913 the anomalous condition indebted for the enactment of this great of the bankers of the United States banded constructive measure ? To the bankers. together to fight a reform which they them

seem paradoxical in view of selves had instituted. Their very opposithe vigorous, united, and

of the tion, however, simply served to clarify public time bitter opposition of the bankers to opinion. It is for these reasons that we say the bill during the past calendar year, but that the country owes the new law first of it is nevertheless true. For ten years the all to the bankers. bankers of the country, aided by the It also owes much to the Monetary Comeconomists and the scientific students of mission and Senator Aldrich, who collected finance, have been urging the people to the statistics, figures, and opinions regarding adopt a system of “elastic currency,” based the best currency practice from all over the upon assets, in place of the fixed system world. It owes much to President Wilson, based upon Government bonds. When this who, although not a financier, quickly saw, as idea was first preached by the bankers, it was a student of history and economics, the great regarded with surprise, not to say with dis- human importance of the reform. To his may, by the average man who had been combination of authority and patience is due taught to believe that the National bank note, the fact that Congress persisted in the face fortified by a Government bond, was the best of many difficulties until the bill was passed. bank note in the world. But the bankers Much is due to Congress itself, of course, persisted with their campaign of education. and especially to its spirit in laying aside to so One of the earliest advocates of an " elastic

large a degree the ordinary considerations of currency was Lyman J. Gage, who often political partisanship. The Currency Bill was spoke in public on the subject ten years ago. the favorite measure of a Democratic AdminMr. Gage was then the president of one of istration ; its passage will redound to the the great trust companies of New York political credit of the Democratic party; and City, and had only recently retired from the yet all the l'rogressives in Congress and honorable post of Secretary of the Treasury many Republicans voted for the bill. Perin the Cabinets of Presidents McKinley and haps the most marked instance of patriotRoosevelt. He was an ardent and accom- ism rising above political partisanship or D'ished advocate of an elastic currency, and class consciousness is found in the example ne knew how to make its advantages and its of Senator Weeks, of Massachusetts, a Repuboperations clear to the layman by simple lan- lican and a banker, who advocated the bill guage and concrete illustration. Such public- and voted for it. We take off our hat to him. spirited bankers as Mr. Gage finally created Credit is also due to Senator Owen, of a common knowledge in the country of the Oklahoma, whose name is attached to the meaning of the term “ elastic currency bill, and who followed its fortunes in the a common desire to enjoy its benefits.

Senate with assiduity and loyalty. But, having set the great ball of public But the one man of all who should have

" and


the statue, if a statue were ever to be raised to commemorate the new financial epoch which it is hoped and believed the bill introduces into this country, is Carter Glass, of Virginia. Representative Glass was, until the introduction into Congress of the new Currency Bill, unknown outside of his own State, and was certainly not the most widely known man in his own State. He is not a banker ; he is not even a lawyer. He learned the printing trade and became a newspaper man, and is now the owner of a daily paper in Lynchburg, Virginia. But he has studied night and day both the scientific and the practical bases of currency reform. He learned both the theory and practice of banking, and he was able in debate to meet the strongest bankers on their own ground. He has been frank, sincere, and open-minded, and he has been actuated by his own almost passionate belief, not that the Democratic party or the bankers or the borrowers or the lenders should be considered in framing the bill, but that the United States of America should be considered. He has won the confidence of his colleagues and the respect of his opponents, and by his course has contributed to the reputation of his native State of Virginia, as mother of statesmen.”


ground for concern when men of inexperience face those same difficulties. The speeches at this dinner consisted mainly in statements of what those difficulties in the islands were and of what had been done towards overcoming them.

Mr. Dean C. Worcest who has cently been displaced as Secretary of the Interior of the islands. dealt especially with the problems of the non-civilized tribes—in particular, the Moros. The point which he emphasized was the necessity of giving to the Moros our civilization not by word of mouth so much as by example.

The principal speech of course was that by Mr. Forbes himself. He told how political discussion by the native agitator had been met by providing those material things that will supply the economic independence on which political independence must rest-improvements in ports, roads, buildings, wells, bridges, and the like. He dwelt at some length upon the importance of the question of land titles, pointing out the fact that the settlement of the land title question lies at the foundation of citizenship. He recounted also the work that had been done against unusual obstacles in providing adequate titles for land. He told of what had been done in training Filipinos on the financial side of government. He expressed regret that those who had been chiefly instrumental in dealing with the problems of land titles and of the education of young Filipinos in finance had been displaced under the present Administration. He contrasted the primitive means of transportation that prevailed about Manila when he went there with the hundreds of miles of road and of railway that

run in all directions. He contrasted the former polluted water supply that carried death with the artesian wells that are now in operation. He contrasted the former disinclination of the well-bred Filipino to soil his hands or to make physical exertion with the present vogue of baseball. He likened the turning of the present Filipino government over into the hands of the Filipinos, with their undeveloped capacity for self-government, to the turning of a high-powered automobile, which may be safely driven by a trained chauffeur, loose in the street with the throttle wide open.

Even the most prejudiced against what they call the imperialist policy would, we think, acknowledge the sincerity of the speakers at this dinner in their concern for the future of the islands. We believe that a



“ We are not guardians of the small portions of the educated and the wealthy in the Philippines. We are guardians especially of the poor, the ignorant, and the weak, and we cannot discharge our duties as such guardians unless we remain there long enough to give to the poor, the weak, and the humble a consciousness of their rights and a certainty that they will be preserved under any government to which we may transfer sovereign power."

These words of ex-President Taft were spoken at a dinner given a week ago last Friday in New York City in honor of the man who has just retired as Governor-General of the Philippines, Mr. W. Cameron Forbes. They might be taken as an expression of the principal article of faith of those who up to the present Administration have been responsible for the Philippine policy of the United States. In these words there is also implied a warning. Naturally at this dinner there was a tone of concern for the Filipino, inasmuch as men who have become experienced in facing certain difficulties have some

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