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In this connection attention should be directed to the exceptional difficulty of the task. There is no branch of legislation so difficult as that pertaining to banking and currency. There are more fantastical ideas on this subject than on any other and a constant clash of selfish interests. Senator Sherman said that he had helped to frame many financial measures, but that not a single one of them had ever met with his entire approval. This was true, he said, because it was necessary to make concessions to popular prejudices and to compromise with those who were actuated by local and personal reasons. He once stated that there never was a time after the enactment of the Silver Purchase Act of 1890, when he would not have been ready to vote for its repeal. It is no easy task which confronts Congress and the Monetary Commission, when they seek to frame wise and adequate financial legislation for this country. The very serious loss which has resulted from unwise and unjust laws in the past, warns us to proceed with great caution in whatever changes are to be made in the future.

The laws relating to currency in this country should be revised. There is no intelligent excuse for the issuance of paper money by the government. The natural basis for currency issues is the demands of trade. If there is a time when a very large volume of discounts based upon substantial assets is presented to a bank, that is the time

when additional currency ought to be issued. More is needed in the fall than in the spring. English writers term this seasonal demand the "autumn drain." Government currency on the other hand must be absolutely rigid or it will inevitably be issued to meet demands at a time when money should be obtained by the exercise of the taxing or borrowing power. The issue of currency is naturally a banking function, since demands for currency respond to changing business conditions. Neither the greenbacks nor the silver dollars afford any elasticity whatever, and it may prove advisable that the whole amount of greenbacks be withdrawn from circulation and some other form of currency substituted.

All considerations point to one conclusion, that the most natural foundation upon which to base currency issues is the assets of banking institutions, but that privilege, if it is granted, must be safeguarded with the utmost care. This country has already seen too many failures of banks, too many widespread disasters, because some banking institution failed to meet its obligations. The time should never come when, if a man reads that a bank has failed, he will look anxiously to his pocketbook to see if he has any of its bills.

Adequate and satisfactory security cannot be maintained by a mere safety fund. It is asserted that a fund amounting to 3 per cent. of all issues could be provided, and that all losses on bank notes

could never exceed that amount. If this is true, why should not all banks or great associations of banks unite in the guaranty? No issue of individual banks can be justified unless there is that degree of security which will afford the nearest possible approach to absolute assurance that every bill circulating through the country will be paid.

Provision for diminishing the circulation when it is redundant is quite as necessary as for increasing it when it is scarce. Under a perfect currency system, if there is a slack demand for money, notes would be canceled, and the quantity in circulation diminished. Legislation should direct that the right and the obligation to decrease must be joined with the right to increase.

CHAPTER V

CORPORATIONS AND THE PUBLIC WELFARE

ASSOCIATION or co-operation is a necessary condition of human progress, and manifests itself in many forms, political, religious, commercial, or industrial. The modern corporation as one form of association is the latest and most perfect agency for the accomplishment of results on a large scale. It renders available the collective capital and effort of many under one control. It occupies the very center of the stage in industry, finance, and commerce. Indeed it comprises the vast majority of operations in banking, insurance, transportation, and manufacture, not to mention other forms of activity. Thus, the operations of the corporation must have the most far-reaching influence upon public welfare.

The extent to which the business of the country is performed by corporations is well illustrated in a recent report summarizing the returns made for the levy of the corporation tax imposed by the Act of August 5, 1909. This shows that in 1910 there were in the United States 262,490 corporations with a capital stock of $52,371,000,000, and having a bonded indebtedness of $31,333,000,000. The net

income of all these corporations after paying fixed charges, including interest on their bonds, was $3,125,000,000. The total wealth of the United States, as estimated in 1904, aggregated $107,000,000,000. According to the rate of increase at the date of the last computation it may be estimated at $130,000,000,000 in 1910. The head of the Bureau of Statistics gives that as a conservative estimate. Very likely it is somewhat greater than that, or about $135,000,000,000, averaging between $1,400 and $1,500 per inhabitant.

It thus appears that the property owned by corporations is between three-fifths and two-thirds of the total wealth of the United States. The statement has sometimes been rather loosely made that the property of corporations comprehends as much as four-fifths. It is true that the stocks of many corporations are not remunerative, but in spite of this the income derived, $3,125,000,000, is slightly more than 6 per cent. on the whole $52,000,000,000, and in addition interest must be paid on $31,000,000,000 of bonds. This would indicate that the capitalization plus the amount of bonds correctly measures the value of their property as a whole. It must be remembered that while some stocks pay no dividends at all, others pay dividends even as high as 40 per cent. Not only is this the case, but most of the colossal fortunes acquired in this country have been gained by those interested in or associated with corporations. The corporation

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