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Reply to Prof. Laughlin on the Banking Bill.

Prof. Laughlin's article in The Record replying to my article on the McCleary bank bill is remarkable for some things it says — more remarkable for things it omits and thus concedes, and is astonishing for its perversions.

He says the McCleary bill "follows the recommendations of the monetary commission appointed by the non-partisan business men of the country." By this he evidently means the Indianapolis convention, composed of self-appointed and for the most part unknown delegates, who represented nobody but themselves and posed as being "non-partisan." This term has been greatly abused. In recent years, when some schemers without any following wanted to get office or to foist something on the public they started a non-partisan movement. This disarmed criticism and prevented scrutiny, and in nearly every case these movements have been so disappointing that the term non-partisan" has become almost synonymous with hypocrisy and fraud.

But that Indianapolis convention was not even honestly non-partisan. There was not a man in it that belongs to the great Democratic party. Nine-tenths of the men in that convention supported McKinley, and the other one-tenth allowed themselves to be used as decoy ducks — used as mere wooden blocks set in the water to deceive such Democrats as might be floating in the air and were unwilling to fly over to the McKinley blind.


If the professor is right in regard to the parentage of this bill, then the bill can have no pride of ancestry.

2. There is a class of $5 lawyers and advocates who, when they find that the facts are all against them, resort to a loud and coarse abuse of the opposing counsel. Some of the professor's friends must have been surprised to see him place himself in this class, because the clients for whom he so incessantly talks, in season and out of season, are rich and can afford to pay more. The insolence and coarse charge of ignorance, etc., contained in the article must satisfy any fair man that the professor had just had an altercation with his conscience.

3. The professor says: "While being just to the banks the McCleary bill is framed in the interest of the borrowers among the people and of the innocent holders of notes, and not in the interest of the banks, large or small. * * * In short, the McCleary bill favors the borrower as against the banks, the small banker against the large banker of the cities." Hear this, O Israel! A new era is upon us. The morning stars are getting up a new song. We have Prof. Laughlin's word for it. In all the past the moneyed interests have controlled government to their own advantage. In all the past the strong have devoured the weak. In our country the great banks have shaped the policy of our government entirely in their own interest. But now all is to be changed. For years they have wanted a new law. They have toiled, they have spent vast sums of money, they have practiced corruption right and left, and all this for the beneficent purpose of getting a law that shall favor the borrower as against the banks, and the small banks as against the big ones. The present Congress is a corporation Congress — it is absolutely controlled by the great banks and trusts — and through this Congress the great banks are going to revolutionize all the past — going to reverse the present — going to give up all the advantage they now have and hand the borrower their purse.

Reader, do you ask why, if this is such a good measure, the Republicans did not pass it and thus make themselves so popular with the people that they could have remained in power for a century? Candidly, I do not know. Speaker Reed could have passed it through the house in an hour. But they were afraid. They feared that the American people might rise up and destroy them for placing upon the statute books such a beneficent measure. So they simply put it on the calendar ready for passage and then adjourned without saying a word about it.

Do you ask why the Republican leaders are not now explaining to the country what a great blessing they are about to confer upon it


and thus insure success at the election? Candidly, I do not know. The fact is they have maintained an organized silence about it. Not one has mentioned it. Mr. McCleary, the reputed father of this bill, went to the Omaha monetary discussion on purpose to discuss the general subject of paper money, but he never referred to this bill. He was asked twenty-six specific questions about it and he declined to answer every one of them. Nothing is to be said before election, and then it is to be rushed through. Do you say this determined silence looks suspicious? Yes, it shows there is something they wish to conceal from the American people and this alone should defeat the bill. The fact is the idea that this bill is got up for the special interest of the small banks, the borrowers and the common people generally is too absurd to be discussed. There is not a line in the bill that supports this talk.

Let us give a few of the provisions of the bill, in order to make the subsequent discussion plainer:

1. It creates a bureau in the national treasury to be known as the division of issue and redemption, and it places a board of three comptrollers in charge of it. Each member is to hold office for twelve years, and to be removable only on specific charges, tried by the Senate. As the comptrollers in the past have always been mere conveniences for the great banks, the evident purpose now is to get themselves so established in the treasury department that no change of administration can affect their power or control. This division is to have absolute control of the issuing and redemption of money by the treasury department, and is to redeem silver dollars in gold.

2. The bill provides for issuing three kinds of notes by the government to banks — "national reserve notes," "national bank notes" and "national currency notes." A bank can present to this division an amount of United States notes or greenbacks equal to its paid-up capital and receive in return an equal amount of national reserve notes. These national reserve notes are to circulate as money, and are a legal tender for most purposes, and by accepting them the banks agree to redeem them or pay them in gold whenever presented, but the bill provides that they are ultimately to be paid by the government. The United States notes or greenbacks given to the treasury in lieu of these reserve notes are to be canceled, and thus wiped out.

Having gone thus far, the bank can deposit with this division of the treasury an amount of United States bonds equal to its paid-up capital and the national reserve notes it has taken, and shall receive from the treasury an amount of national bank notes to the full par value of the bonds, instead of 90 per cent. as at present. These


national bank notes are substantially of the character of the national bank notes now in circulation, and their redemption is secured by the United States bonds deposited.

After having taken these two steps, then the bank may issue notes against its capital. The bill says: "That any national banking association having deposited in the treasury of the United States United States notes and received in exchange therefor national reserve notes shall be entitled to receive and issue in addition thereto an amount of national currency notes equal to the amount of national reserve notes received, as aforesaid, provided, however, that the amount of national currency notes shall not exceed the amount of its national bank notes outstanding, and provided further that the notes thus issued shall not exceed 40 per cent. of the paid-up and unimpaired capital of the bank, but an additional amount of national currency notes may be issued, subject to the tax on circulation provided in Section 29," etc.

It will be seen that one clause authorizes the issuing of national bank notes to the full amount of the paid-up capital and the par value of the bonds deposited, and under another clause the bank can issue currency notes to the full amount of the national reserve notes it has taken out — that is, to the full amount of its capital; but still another clause in the same section provides that in no case shall the sum of the bank notes and currency notes exceed the amount of the paid-up and unimpaired capital. This seems to conflict with the other two provisions relating to the amount of notes that can be issued. The two other clauses named are specific and clear; this clause is not.

The currency notes are made a paramount lien upon all the assets of the bank issuing them. In addition to this, each bank issuing currency notes is to deposit an amount in gold in the treasury equal to 5 per cent. of the currency notes issued by it, to constitute a guaranty fund for the ultimate payment of all such currency notes; and when any bank fails to redeem its currency notes they are paid out of this guaranty fund. Thus to a certain extent the banks guarantee the payment of each other's currency notes, and the amount taken out of this fund for the payment of such notes shall be made good out of the assets of any defaulting bank, in preference to any and all other claims whatsoever, excepting the costs of administration. In other words, the deposits or other assets of a bank shall be first used toward paying off or making good the currency notes, so that even if the depositors do not get a cent in return for their deposits, the currency notes issued by the bank will still be good. While the government does not specifically guarantee their payment, it makes such provisions as will insure their payment.


The bill next provides that the country shall be divided into clearing-house districts, and every bank issuing notes shall have an agent — that is, some other bank — in each clearing-house district, which shall redeem or pay such notes and take them up on presentation.

I stated in my article that while each country bank was expected to be prepared and must be prepared to take up its notes as they are presented in the ordinary course of business, yet that no bank would be safe for a day if there were a number of banks especially appointed to take up its notes, which could present a large amount of notes at any moment and demand payment, and which would be almost certain to make such presentation in times of depression or when there was a demand for gold, and therefore it would be impossible for country banks long to do a legitimate business under this bill. Prof. Laughlin takes exception to this and says that I am arguing in favor of the banker as against the innocent holder of the bank notes, and then he lifts his hands and weeps over the condition of the innocent holder of the bank notes, and he says: "No poor man should ever be unable to fill his dinner pail because a bank was permitted to put out notes which might depreciate in the laborer's hands before he could get to the grocery." Why the professor indulges in this lamentation, unless it is for the purpose of diversion and deception, it is difficult to comprehend. As already shown under the provisions of the bill the government makes the notes which the bank issues absolutely good. First, the government itself agrees to pay in gold the reserve notes of the bank. The United States bonds deposited make the national bank notes good; to make the currency notes good the guaranty fund kept in the United States treasury is to be used, and in addition the entire assets of the bank, to the exclusion of even the depositor, are to be used, so far as necessary, for this purpose. The noteholder is absolutely protected against any possible loss, but the depositor has no protection whatever. Now, if the professor ever read the bill he knew this was so, and he knew that all his talk about the poor laborer losing because he held one of the bank notes was a cheap effort at deception — was a trick which, while in perfect harmony with everything which the gold standard people say and do relating to this money question, was unworthy of a man holding a high position in one of the great universities of the land. If he never had read the bill, then he should not have been quite so glib in charging other people with ignorance.

It is amazing to note what a great convenience "the poor laborer" and "the widows and orphans" have been in recent years to those


interests which use the government to enable them to devour the fruits of other men's toil.

I stated in my article that under this bill all the greenbacks or United States notes and treasury notes would be canceled, and ultimately the government would have to issue bonds or interest-bearing paper that would not circulate as money in their stead, thus increasing the annual burden of the American people without getting anything in return. Prof. Laughlin says that this shows inexcusable ignorance, and is the opposite of the truth; that under the McCleary bill the greenbacks will be retired without reducing the volume of money and without issuing any bonds whatever; that the government will take in the greenbacks by issuing an equivalent sum of national-reserve notes, which it pledges the national banks, who receive them, to be ready to redeem in gold. Here the professor stops. There is another line and a half in the paragraph from which he quotes, and in that line and a half it is provided that the government of the United States shall ultimately pay these national-reserve notes in gold. That is, in the first instance the holder of a note will present it to the bank and get gold, but ultimately the note will be presented to the United States, and the United States must pay it in gold. Why did the professor omit this line and a half? Has his work for the gold standard people so trained his mind that he unconsciously tries to make a false impression, or did he do this deliberately?

At present the treasury issues bonds, gets gold and redeems greenbacks. Under the new bill the treasury issues reserve notes to banks in exchange for greenbacks, which it cancels and thus wipes out, and then the reserve notes are ultimately to be paid by the government in gold. Where is the government to get this gold?

Section 4 of the bill provides: "That it shall be the duty of the Secretary of the Treasury to maintain the gold reserve in the division of issue and redemption at such sum as shall secure the certain and immediate payment of all notes and exchange of all silver dollars presented, as herein provided for, and for this purpose he may from time to time transfer to the division of issue and redemption any funds in the treasury not otherwise appropriated in excess of an actual cash balance of $50,000,000, and in addition thereto he is hereby authorized to issue and sell for gold, whenever it is in his judgment necessary to the ends aforesaid and for no other purpose, certificates of indebtedness of the United States, bearing interest at a rate not exceeding 3 per centum per annum, payable in gold coin at the end of five years, but redeemable in gold coin at the option of the United States


after one year, and the proceeds of all such sales shall be paid into the division of issue and redemption for the purpose aforesaid."

Will the professor explain what is the ultimate difference between issuing bonds to get gold with which to redeem United States notes and having the Secretary of the Treasury issue certificates payable in gold and bearing 3 per cent. interest for the purpose of getting gold with which to pay reserve notes that have been issued in exchange for greenbacks? The former method has the merit at least of being direct. The latter is circuitous and has about it an element of hoodwinking.

Further, under the law as it now stands, the treasury need not redeem United States notes in gold, but can exercise its option to redeem them in silver, and this option was exercised by the treasury department until the year 1891, when, under the administration of President Harrison, while Mr. Foster was Secretary of the Treasury, the government for the first time decided to waive its rights in the matter and pay the greenbacks in gold. The bankers understood that under the law greenbacks could be redeemed in silver, and from the year 1879 to Jan. 1, 1891, only about $34,000,000 of greenbacks were presented for payment, an average of a little over $2,500,000 per year. But after the bankers got the government to redeem greenbacks in gold $351,000,000 were presented for payment in four years. This McCleary bill destroys the option which the law gives the government in the premises and makes everything redeemable in gold, even silver dollars, and it provides for getting gold into the treasury by practically the same methods that have been employed in the past — that is, by issuing interest-bearing paper payable in gold, thus increasing the debt of the country and the annual burden of the people.

I stated in my article to which Prof. Laughlin made a reply that under the McCleary bill the banks could issue their notes and then could call in their notes, at pleasure; that in this way they could increase the volume of money in the country, and reduce the volume of money in the country, and could thus raise prices and lower prices; could, whenever it suited their purpose, in fact, produce a panic. Prof. Laughlin says that this is not so, and that such talk proves entire ignorance of the nature and operation of a bank. Why he claims that they could not do this passes all comprehension, for the bill expressly gives them power to call in their notes or to issue them. This certainly must affect the volume of currency in circulation. Whether you call them money or call them merely bank credits is immaterial. He now says that this "could not affect prices, for prices are fixed by comparing goods with a standard, like gold. If the standard is lowered, of course prices will be lowered." Then he says: "But increasing


the media of exchange will not raise prices; increasing bank notes will not raise prices, any more than increasing bank checks." These are remarkable statements when we consider their source.

The professor has talked on this subject before. Not being willing to keep his knowledge under a bushel he gave to the world a book, over ten years ago, in which he enlightened mankind on this subject, and on page 153 of that book, in discussing credits, he says:

"To any one who can get credit, it is purchasing power. The amount of goods a man can purchase is represented not only by the sum of money he has, but by his money together with his credit. An increased demand increases prices, and as an increased use of credit increases demand, an increased use of credit raises prices. Credit, therefore, can influence prices as much as the offer of money. * * * In short, an increase of credit affects prices in the same way as an increase of money."

Now, in this instance, the bank notes stand on a higher plane than mere bank credits, and if the increase or extension of credits to individuals on a bank's books has the same effect on prices that money has, it follows that an increase of the number of the bank's notes in the pockets of the people must also have this effect; because, as we have seen, the notes are so protected by the government as to make them absolutely good, while the bank credits might not continue to be good. Has the professor changed his mind during the last ten years, or does his last article simply show nimbleness in shifting position when exigency requires it?

Again, on Dec. 6, 1894, the professor delivered an address before the Sunset club in which he said: "The government should not issue notes because it puts it in the dangerous position of influencing and controlling prices and the money market." If government notes influence and control prices and the money market, will not bank notes which are protected by the government do the same?

The idea that the great or speculative banks of the country might abuse the power, if they had it, of increasing their issues or credits and raising prices, then contracting their issues or credits and lowering prices, thus producing depression and occasionally a panic, he scouts as the height of absurdity. He says "as well might sailors at sea burn the ship that carries them." This sounds plausible, but we are not left to theory. The world has had experience in this matter and that experience has cost it very dearly. The banking power has, during our whole history, tried to control legislation, and for its purposes has repeatedly given the country what it called an object lesson, to show its power, and for the purpose of frightening and coercing Congress


has repeatedly contracted its notes and its credits and produced not only a depression but an actual panic. Of the large number of instances that should be cited I have space for only a few.

Prof. Sumner, in his "History of American Currency," says:

"In 1832 the national bank petitioned for a renewal of its charter. The bill passed both houses and was vetoed by the President. It being now evident that the bank must expire unless some influence could be brought to bear to change the President or win two-thirds of Congress, a violent warfare was begun by the bank. It is certain that the bank paid no more heed to the laws of the State than it did to the laws of prudence or of banking science, and that they paid very little heed to either. The motion to sell out the public shares in the bank was lost, through the influence of the bank, which, as they afterward discovered, had a large number of debtors, attorneys and stockholders in the House. In August, 1833, the bank altered its policy. It rapidly contracted its loans, giving as a reason the necessity for providing for the transfer of the deposits, a reason which the facts did not warrant. On the assembling of Congress December, 1833, the message of the President charged the bank with creating an artificial stringency in order to make itself appear necessary to the community."

The evidence at that time showed conclusively that the bank had thrown the country into distress for the sole purpose of forcing Congress to recharter it.

General Jackson, in his message, said:

"Events have satisfied my mind, and I think the minds of the American people, that the mischief and dangers which flow from the National bank far overbalance all its advantages. The bold effort the present bank has made to control the government, the distress it has wantonly produced, the violence of which it has been the cause in one of our cities famed for its observance of law and order, are but premonitions of the fate that awaits the American people should they be deluded into the perpetuation of this institution or the establishment of another like it. It is fervently hoped that, thus admonished, those who heretofore favored the establishment of a substitute for the present bank will be induced to abandon it, as it is evidently better to incur any inconvenience that may reasonably be expected than to concentrate the whole money power of the republic in any form whatsoever, under any restrictions."

In the fall of 1877 the House of Representatives at Washington, by a two-thirds majority, suspended the rules and passed a bill which the banks did not favor. They combined against it, produced a money stringency, and defeated it in the Senate. On Jan. 11, 1878, the New


York Tribune, commenting on this action of the banks, said: "The machinery is now furnished by which in any emergency the financial corporations of the East can act together at a single day's notice, and with such power that no act of Congress can overcome or resist their decision."

In 1881 Congress passed a bill which the banks opposed, and for the purpose of frightening Congress they contracted their credits and withdrew $18,000,000 from circulation and deposited it with the treasury, and in order to avoid a panic the treasury called in and paid for a large amount of bonds, so as to keep money in circulation. Commenting on this fact, Secretary Windom in his annual report recommended that the national banks be prohibited from withdrawing their circulation, except after giving timely notice, and President Arthur in his annual message concurred in the recommendation, saying: "Such legislation would seem to be justified by the recent action of certain banks." In giving an account of this proceeding, Appleton's Annual for 1881 says:

"The national banks of New York City, acting in concert, brought Wall street to the extreme verge of a panic. The tone of the money market was only partially restored by an order by the Secretary of the Treasury for the redemption of $25,000,000 of bonds on presentation."

In 1884 the banks again acted in concert and produced a panic in the money market for the purpose of influencing Congress, and they succeeded in defeating certain legislation that was then contemplated.

Immediately after the last election of Mr. Cleveland the banks of New York determined to force Congress to repeal the Sherman law under which about $50,000,000 of treasury notes were issued yearly against silver bullion, and which were added to the currency in circulation. In March, 1893, the Bankers' Magazine of New York published an article giving the opinion of leading financiers and bankers of that city, to the effect that "The quickest, if not the only way to repeal the silver-purchasing law is to precipitate a panic upon the country, as nothing short of this will convince the silver men of their error and arouse public opinion to a point which will compel the next Congress to repeal the Sherman law, whether it wants to or not."

When President Cleveland, in February, 1895, sent his message to Congress asking for the retirement of the greenbacks, the big speculative bankers of New York co-operated with him and made a run on the gold reserve and deliberately produced such a depression that, according to the editor of Bradstreet's Review, on the day that the message was read "the treasury was confronted by an actual crisis and the country by another and worse panic than that which had just


subsided." All this for the sole purpose of frightening and coercing Congress into giving the bankers such legislation as they wanted. This open assault tailed, so they are now trying to sneak a worse measure through. Mr. Cornwell, president of the New York State Bankers' Association, in a speech before the Bankers' Club of Chicago on April 27, 1895, in which he strongly urged concert of action in order to control politics and thus secure legislation, said, among other things:

"What ought bankers to do about legislation? This is the most important thing for any body of bankers in this country to consider at once. * * * It is time to tear off disguise. International bimetallism is a traitor in the camp. It is a false fraud. The fight is on. * * * All disguise should be thrown off. It is time for aggressive action. The banker has a large influence. He is a confidential adviser of thousands of business men."

He then pointed out how powerful the bankers could make themselves in politics, and in order to show what they had already done he said: "The politician, high or low, who to-day turns from * * * the gold standard stabs dead once for all his every chance for political success, especially if he wants to be President."

Acting on Mr. Cornwell's advice, the bankers started out in 1896 to control both of the great political parties, and they sent out the following letter:

"The American Bankers' Association, 2 Wall Street and 90 and 94 Broadway, New York, March 23, 1896. To the bankers of the United States: At a meeting of the executive council of the American Bankers' Association, held in this city on March 11, 1896, the following declaration was made by unanimous vote:

"The executive council of the American Bankers' Association declares unequivocally in favor of the maintenance of the existing gold standard of value (prices) and recommend to all bankers and to the customers of all banks the exercise of all of their influence as citizens in their various States to select delegates to the political conventions of both the great parties who will declare unequivocally in favor of the maintenance of the existing gold standard of value (prices).

"Your influence is earnestly requested to give practical effect to this action.

"EUGENE H. PULLEN, President.
"JAMES R. BRANCH, Secretary.
"Chairman Executive Council."


While there are banks which do a legitimate banking business and do not profit by panics or arbitrary contraction of credit, but on the contrary are injured by panics, there have in our history been enough of the speculative banks and political banks, which apparently do profit by panics, to control the situation. The fact is when a few great banks pursue a particular course, with respect to reducing circulation and also reducing credits, other banks are almost obliged to pursue the same course.

The trouble with Prof. Laughlin is that the great schemers of the world never take their handy hired men into their confidence. They give each his work and expect him to do it quickly and thoroughly, and under no circumstances to hesitate on account of any question of ethics or morals that may be involved. Prof. Laughlin has never been taken into full confidence. He does his work without hesitation, and he writes about banks from his rear room as he finds them in the books; but the American people have to deal with them as they are, and in many cases they find them in the control of thoroughly unscrupulous men. In fact, our institutions are now in a life and death struggle with a corrupt moneyed power.

Prof. Laughlin says: "Under our present system the maximum of free competition exists in banking, and combination is rendered impossible." In view of the fact that banks are being consolidated everywhere, that only recently we read the report that in Boston nine different banks are going to consolidate and form one, the professor should have explained what he meant by saying that combination was impossible.

I stated that every time the government guaranteed the circulating notes of a private corporation it became interested in the business with that corporation, even though it got none of the profits, and further that it is the action of the government which makes the notes of private corporations circulate extensively; that if it were not for its action these notes would stand on the same basis on which the old "wild cat" bank notes stood — some would be good and some utterly worthless. In short, our whole national bank system depends on the assistance of the government, and this being so, it is inaccurate to say that the issuing of circulating notes by private corporations is purely a private business.

The fact, therefore, is that instead of the McCleary bill taking the government out of the banking business it will place the government in a position where it becomes more and more deeply interested in the success of the banks, because it practically has to stand behind them so far as their circulating notes are concerned, and the fact that


it may be reasonably well secured against any loss does not change the principle that is involved.

Under a correct policy the government itself would issue everything: that should circulate as money, and confine the banks to a loan and discount business. Then the banks would not be so directly interested in running the government, or doing a governing business.

I stated that the bill authorized the establishment of a limitless number of branch banks, there being no limitation as to the number nor as to the place where they could be established, and that this must ultimately result in driving out the small banks that are now doing business over the country and in establishing a great banking trust, consisting either of one or of a small number of great banks and their branches, and that the whole country would be at its mercy. The professor says on this point that if a branch bank did drive out the little banks it would be because it would give better accommodations. I answer that is certainly the way in which it would drive them out, but, having driven them out and having the business community at its mercy, what would be its course then? What is the attitude of the great trusts toward the public? Would the business men be better off by having only one bank to go to than they were when they had several? But the professor turns and loftily says that this talk of a financial octopus "is the venerable and familiar old stalking horse of 1896. It may do to catch mossbacks, but not an alert and modern nation." Inasmuch as he accuses me of being densely and elaborately ignorant, and intimates with a sly wink that a professor's den in some rear room is the place to acquire practical business knowledge, I will not argue the point as to what effect branch banks will have, but I will quote from the utterances of a man who is entitled to a hearing, Mr. Walker of Massachusetts, who is chairman of the committee on banking and currency from which the McCleary bill was reported, Mr. McCleary having been chairman of a sub-committee which drafted the bill. Mr. Walker was appointed to this position by Speaker Reed, and he is regarded as one of the ablest men that the Republican party has in Congress, especially with respect to the subjects of banking and currency.

Mr. Walker does not approve of this McCleary bill, and he made a minority report against it, the whole of which report makes interesting reading. For want of space I will quote only a few lines. He says:

"A bill authorizing branch banks is very bad economics as compared with encouraging the local independent bank, and is still worse statesmanship. It finds no justification in the policy of our free banking system, or in any amendment of it proposed in this bill. It is


unwise to permit powerful city banks to establish branches. * * * Putting a local agent in a place with no interest in it other than the money he can make out of it for his non-resident employer means that no independent local bank, managed by its citizens, can be established in the town, and if one is already there it must go out of business. In nine cases out of ten local banks in towns are formed by public-spirited citizens to get a fair return on the capital they put in the bank, but still more to build up the town by assisting other citizens to capital with which to do other business. The agent of the city bank may for a time loan money, in good times, at rates to drive out the country bank, and in times of stringency the funds with this country agent will be sure to be immediately returned to support the city bank. The customers of the country agency will be sacrificed to the necessities of the parent bank. Generally there are two stores in a town. In times of excitement each is the headquarters of one political party. The agent of the parent bank knows the politics of its city employer, and again the bestowal of his favors is likely to be influenced by his own politics. Our choice must be made between one great United States bank with 10,000 branches, and, on the other hand, 10,000 independent local banks, united together, that all may support each, and thus all together may give each security in times of stringency or in threatened or actual panic."

Prof. Laughlin may denominate Mr. Walker as a "mossback," and charge him with unparalleled ignorance — this is always convenient when there is nothing else to say — but Mr. Walker stands before the American people as a leader of his party, and even if he has not written on both sides of the money question he is by that party regarded as a statesman. They look upon him as a learned and able man, of practical experience, who is dealing with facts and endeavoring to solve a great problem. Possibly the schoolmaster of the deserted village could have beaten him arguing — for e'en though vanquished he could argue still — and of course if he could have done this then Prof. Laughlin can do it, for the professor has never yet admitted that he was inferior to Goldsmith's famous schoolmaster.

Speaking of the formation of a monetary or banking trust, Prof. Laughlin says: "How would it be possible to corner all capital? Money is not all of the country's capital. To monopolize capital one must monopolize all wealth engaged in production. To corner capital implies cornering all the instruments of production. It is the wild vagary of a doctrinaire. It is unthinkable."

Look at this for a moment. The Standard Oil Trust is one of the most iron-handed trusts or monopolies on earth, crushing out every


competitor. Did it corner all the country's capital? Did it monopolize all wealth engaged in production? Certainly not. It simply got absolute control of all the facilities necessary to carry on the oil business. It did not attempt to corner all the instruments of production. It confined itself to one line, and so with all of the other great trusts that crush out their competitors and force them either to become clerks or go out on the highway and look for a job. Now, to have a banking trust means to get the absolute control of banking facilities to such an extent as to be able to crush out the smaller and weaker institutions. In order to do this it is not necessary to monopolize all wealth engaged in production. It is not necessary to corner all the instruments of production. I will not retort in the professor's own language by saying, "Was there ever greater ignorance of the facts of our own history," for I do not believe the professor was ignorant when he wrote his article. I believe this was simply one of those reckless statements, intended to mislead and deceive, which he has been making so long in this community that he does not expect any of them to be challenged. If he made this statement through ignorance, then his employer should raise his salary a little, in order that he may brush up.

Again, the professor says that branch banks can be formed only by and with the consent of the Secretary of the Treasury. And he is again astonished at my ignorance in having made the statement that there was no limitation upon the number that could be established. This whole question is covered by Section 35 of the McCleary bill, and it reads as follows:

"Section 35. That it shall be lawful for any national banking association to establish branches, under such rules and regulations as may be prescribed by the comptrollers of the currency."

It will be seen that it is not necessary to get anybody's consent. The law gives the power to establish the branch bank. The comptrollers of the currency — not the Secretary of the Treasury — are to make some rules and regulations on the subject. These rules and regulations can only prescribe the manner of establishing. They cannot take away the unlimited power to establish, and when these rules and regulations have once been made and published, then it is not necessary to get anybody's consent. It is only necessary to comply with these rules as to the manner of procedure. But even if the consent of the comptrollers of the currency were required, that would signify nothing. The comptrollers of the currency have been mere Washington conveniences for the national bankers, and have done in the main what the banks wanted done. They are a species of clerk for the banks, but the government pays their salary. Their chief duty seems to be to attend


bankers' dinners; so that if a comptroller's consent were necessary it could easily be had. But it is not necessary.

When Mr. Walker says that a branch bank would try to control the politics of the town in which it was situated according to the wishes of its parent, and that every merchant and manufacturer needing banking accommodations would have to submit or be ruined — and when he further says that in times of stringency the big banks would draw their funds back to the city, in order to take care of their important customers, and would thus leave their little country customers to their fate — he states two vital truths either one of which should defeat the bill.

I stated in my article that this bill furnished no protection whatever to depositors; that it created a bubble which after deceiving the public would burst and spread ruin; that at present, when a bank broke, whatever assets it had went to depositors and other creditors, but under the proposed bill all the assets must first be applied to the payment of the circulating currency notes the concern had in circulation. The professor does not deny this. He weeps over the fate of the poor laborer who might hold a $5 bank note that would not be redeemed (a fact which, as we have seen, could not happen), but if the same laborer had $100 on deposit in the same bank and loses it all, the professor leaves him coldly to his fate. Why this difference of attitude? The reason is apparent. The bill is framed in the interest of a small class. For a private corporation to be able to issue circulating notes against nearly the whole of its assets will be a great advantage to scheming men. They would prefer issuing notes without securing them at all, but as these would not circulate, and as something must be set apart to secure them in order to make them circulate, these men are willing to have their depositors' money thus used. It is a scheme to help a class make money at the risk of the business men and the common people. Being the champion of favored-class interests, the professor was obliged to defend this bill. The sight of thousands of poor and despairing people shivering around a broken bank through which they have lost all their savings does not interest the professor. Let them shiver, is his motto then.

Several years ago the humane people of Chicago tried to end the inhuman and debasing conditions existing in what were called the sweatshops of the city — so named because children, poor women and even men were "sweated" — that is, slowly crushed with slavish labor amid conditions so filthy as to spread disease, and were paid what were even less than starvation wages. The class which the professor serves was profiting by these inhuman conditions, and opposed any change;


so instead of helping this movement he was reported to have said with a disdainful air: "Let them sweat."

The class in whose favor this bill is being pushed is the class which has helped to create the conditions which have ruined the poor laborer and the small farmers and producers of the South and West, and when this class sheds tears over the poor laborer and small farmer one is reminded of these lines:

"On the banks of the Nile lay the crocodile;
Tears streamed from his eyes and sad were his cries.
‘I am weeping,’ he said, ‘o'er the terrible fate
Of that dear little fish I just now ate.’"

Again, in speaking of what the professor calls "sound money" — that is, gold — he says: "Indeed, the best is none too good for the hardworking people, who have no time to watch the political money-makers in all their tricks."

Here the professor is sublimely unconscious of the fact that the present status of the gold dollar was created by the political moneymakers, and that this McCleary bill is another effort on the part of the political money-makers to tinker the monetary system of this country. But he does not state the dear-dollar argument as well as I have frequently heard it stated. Generally the would-be deceivers of the poor man state it this way: "When the laboring man has toiled all day and returns at night, weary and worn, he should be paid in the dearest dollar known, the dollar of the greatest purchasing power, that will get him as much for his day's work as possible." This is a plausible argument, and as the professor has introduced this subject we will notice it for just a moment. Why is a dollar said to be dear, and to possess great purchasing power? It is because it takes a great deal of property to get one. This makes the dear dollar. Now, what does labor create, whether it works in the field, in the mine or in the shop? Why, it creates property, and if this property has to be sold cheap, in proportion to cost of production, if it takes a great deal to get one of these dear dollars, then it follows that the laborer has to accept cheap wages. No farmer or manufacturer or mine-owner can pay high wages to have property created, and sell that property very cheap, without going into bankruptcy. Therefore the dear dollar first means low wages; but it does not stop there. One-half of the American people are farmers, and when the dollar is so dear, as is now the case, that it takes twice as much of the products of the farm to get one of these dollars as it formerly did, then the farmer's purchasing power is destroyed. He can get together barely money enough to pay the taxes, the interest on the mortgages and such other charges as must be


paid in money. Indeed, in thousands of cases he cannot do that. He can no longer buy for his family the hundred things that he formerly did, and when his purchasing power is thus reduced or destroyed the small merchant sells less goods, and if the consumption of the country is thus reduced, the factory soon finds that there is no market for what it produces; so it first cuts wages in order to reduce expenses, and it gradually reduces its working force, and in many cases has to shut down entirely. Why? Because the purchasing power of one-half of the American people has been reduced or partially destroyed, and when it for this reason discharges men or shuts down the mill the laborer is thrown out of a job and his family out of bread.

It produces that dead circle that we have seen in our country for a number of years — farmers helpless, business paralyzed, factories partially idle, the laborer seeking work and his children begging bread. So that the dear dollar means not simply low wages, but it means loss of work and starvation, and the fact that there is to-day not an intelligent workman or laborer in the United States but that denounces this dear dollar as his worst enemy speaks volumes for the intelligence of the American laborer. The deception of the dear dollar misleads them no more. Some new tricks must be invented. The old ones will no longer answer.

I stated that all the banks of America held scarcely $200,000,000 of gold, and that even the balance of trade brought us little or no gold. To this the professor replies: "Is it possible he knows nothing of the recent imports of gold, and that the gold due us for our enormous excess of exports is owned by the holders of foreign exchange, and that the treasury now holds more gold than ever before?" Now, I did not speak of gold in the treasury. I spoke of gold in the banks, and if my statement was not correct, why not give the figures? Why quibble away from the banks over to the treasury and talk about the gold there? And how did this gold get into the treasury? Why, it came from the sale of $200,000,000 of bonds, which it was first alleged had been sold to the great common people of this country, but which, as a matter of fact, were monopolized by the bankers, who used their clerks and customers as conveniences through which to get them, and a very large portion of these bonds ultimately went to Europeans, so that the gold we recently got came chiefly from selling bonds.

In answer to his statement that the gold due us for our enormous excess of exports is owned by the holders of foreign exchange, I will say that if by "the holders of foreign exchange" he means the holders of our securities, the holders of the billions and billions of debt that we owe, then the answer is correct, because for quite a number of years


it has taken practically the whole of the excess of our exports over imports to pay the interest on American securities held abroad. So that gold does not flow naturally to our country. We have to make a desperate effort to get it, and a still greater effort to keep it any length of time.

The professor says: "Instead of costing the country anything, the McCleary bill will save the country the expense of maintaining the troublesome gold reserve, and will put the cost of it on the banks." Let us see about this. While the silver certificates are to be gradually reduced to the denominations of $5 and less under this bill, they are all to remain in circulation. The amount of silver certificates and silver dollars is between $500,000,000 and $600,000,000. The silver dollars are expressly to be redeemed in gold. A bank can at any time gather up $1,000,000 of silver certificates, go to the treasury and get $1,000,000 of silver, take these silver dollars to the next window and get $1,000,000 of gold. The silver certificates are to be paid out again by the treasury. The bank can gather up not only one, but a number of millions, at any time, go over to the treasury, get silver dollars, take the silver dollars around to the next window and get gold dollars for them, and keep this up as long as it wishes to. At present the bankers can only do this with United States notes and treasury notes, amounting to in the neighborhood of $400,000,000. Under the proposed new bill the facilities for working the endless chain will be increased by over $100,000,000.

In addition to the silver which is to be redeemed in gold, the "national reserve notes" issued to the banks are also to be redeemed in gold by the government, as we have already seen. Thus the government will soon be in a position where the endless chain will be working with twice the power that it is working now. Upon this subject let me again quote from the minority report of Mr. Walker, the chairman of the committee:

"To provide that our 500,000,000 of legal-tender silver dollars shall be redeemable in gold dollars by the government and for keeping an additional gold reserve for that purpose is one of the most unnecessary, inconsistent and remarkable, not to say ridiculous, provisions that could well be incorporated in a banking bill. The reason given for proposing the destruction of $346,000,000 of greenbacks is that they menace our whole financial system in their power to extract gold from the treasury. But this bill, which would destroy the greenbacks, proceeds to add 500,000,000 of silver dollars to the national reserve bank notes and other bank notes as abstractors of gold from the treasury, and would have us believe that this is a cure for all our financial and


banking ills. Having experienced the delights of the vision of seeing the United States notes destroyed and of resurrecting a bank note from their ashes in the proposed national reserve note, and having exercised the supreme power of making this national reserve note the equal of gold as a legal tender, the power grows on what it feeds upon. Then they proceed to destroy the 500,000,000 of silver dollars as such and to resurrect them as abstractors of gold from the treasury. * * * Where are the country branch banks to get their gold? Out of the United States treasury? How is the treasury to get this gold? Of course the city banks will kindly hand it over to the government in pleasant times when everything is balmy. How when it storms? How about 1893? How about another Cleveland-Carlisle administration? It is as sure to come as history is to repeat itself. Sell bonds, of course. * * * This bill leaves the United States treasury absolutely unprotected, the sport of the most unscrupulous money changers and gold brokers that can be found anywhere in the world. A cablegram costs but little. The door of the United States treasury opens for the delivery of gold into every European broker's office, Israelite or Christian."

In view of these facts, why did the professor state that it would relieve the United States treasury of maintaining the troublesome gold reserve, when, as a matter of fact, the gold reserve under this bill will have to be larger than ever before, and the facilities for brokers to draw gold out of the treasury will be greater than ever before? The professor claims to have read the bill. If so, his mind must have been a little weary when he passed over these sections, and, while it may be a little impertinent, I would again suggest a raise of salary for the professor in order to stimulate and brighten him up.