CHAPTER IX. A CONFIDENCE GAME. Ninety Per Cent of All Banks the Victims. State Banks and Judged by the cold facts plainly stated in the "Revised Aldrich Plan," Wall Street is playing upon the banks of the country wholesale a successful and clever confidence game. As in "three-card monte," "green goods," and other "sure thing" games, it is made to appear a cinch for the banks; but, as usual, the victims will get nothing but "experience" for their pains and money. What Banks Will Get. Under the "Aldrich Plan" a given bank will get: 1. National Reserve Association stock equal to 20 per cent of its own capital stock. It must pay par. Dividends, if earned, will be 4 per cent, or at most 5 per cent. If there are no profits it gets no dividends. There is no guaranty by anybody. A supply of currency by paying for it dollar for dollar. This currency, like any lawful money, can be put into bank's reserve. A bank could buy gold or treasury notes just as cheap. 3. A "mere hope" that the bank can "rediscount" some of its commercial paper at the Central Bank. But this will not be an enforcible legal right. It is entirely within the discretion of the Central Bank whether it will take any certain piece of commercial paper or rediscount at all for a particular bank. It is a one-sided option. A bank can only hope, and pray-and beg. 4. Consolidation of all bank reserves in one financial "jack-pot" under the absolute control of a mere private corporation? No, but perhaps later by its "regulations" the association will require this to be done. It may at times then be as impossible for banks to get their reserve money 164 WALL STREET:-THIS IS THE FAMOUS "SHELL GAME" UNDER WHICH SHELL IS HE PEA? YOU CATCH THE PEOPLE AND I'LL SKIN 'EM AND THEN WE'LL WHACK UP PERHAPS COUNTRY BANKER:- BUT THE PEOPLE YOU WANT TO SKIN ARE MY NEIGHBORS AND FRIENDS. EXCUSE ME! out of this "one reservoir" as it was during the panic of 1907 from New York banks that repudiated their obligations and loaned the money to insiders to buy securities cheap from the public. 5. A mere promise that the Central Bank will perform a miracle and stop panics, or at least perhaps help the bank save itself in case of a “run." But the bank cannot compel the Central Bank to do so. And as was done when the big New York trust companies were put in a hole by "runs" purposely started or stimulated, permanent control of the bank may be demanded by the interests behind the Central Bank as the price of Central Bank aid, even in a panic. 6. Participation in the boasted "town-meeting-republicanform-of-government" monarchy control of one of the local twigs of one of the branches of the big Central Bank tree, to the extent of the proportion of the total $300,000,000 National Reserve Association stock held by the local bank. In round figures, the capital of 24,392 reporting national and state banks is $2,000,000,000. The pending bill makes the association's authorized capital 20 per cent of the combined capital stock of the "eligible" banks, say $400,000,000. But to be safe call it $300,000,000. The following shows the per cent of the total control enjoyed by any given bank having the capital indicated, the smallest outside national or state bank or trust company, with $25,000 capital, would own $5,000 of the $300,000,000 Central Bank stock and have the magnificent although indirect and remote power over the management and operations of the National Reserve Association obtained by owning and voting one and two-thirds one-thousandths of one per cent of the total three hundred million stock! Just one Wall Street institution, the National City Bank, with $25,000,000,000 capital will own one thousand times as much Central Bank stock, or as much as a thousand such sized banks. Don't laugh! It's the truth. Figure it out yourself— then get someone to kick you for consenting to be a mere pimple on the face of the other fellow's moon. What Banks Must Give. The "revised version" of Aldrich's New Testament plays up as an afterthought and a generous "concession" the proposal to "allow" state banks and trust companies to "participate in and enjoy" the manifold blessing vouchsafed to those financial institutions contritely approaching the Wall Street "Mercy Seat" and espousing "out-of-sight-andunseen" the cleansing Aldrich plan. The records, however, of the New York Chamber of Commerce show that that program was decided on long before the Aldrich tag was tied on to the predetermined "plan." It may have been left out of the "original Aldrich plan" so it could be made to appear "a concession to popular demand.” But there is no more danger of state banks and trust companies being "left out in the cold" when Wall Street sets out to form for its use a universal money trust than there is chance for a lone 'possum to escape from a hungry colored camp-meeting crowd. All banks and trust companies look alike to "high finance." They are all "Jonahs" and Wall Street is the "whale." Aldrich was only trawling, with his "plan" as the "spoon." Every state bank and trust company making a grab for the shining, whirling "spoon," too late will discover that all it has got is a hook in its jaw, the other end of the line being firmly and permanently attached to the reel on Wall Street great Central Bank pleasure yacht. When high finance sets out to promote a trust it takes in enough concerns to stifle all serious competition. A successful Central Bank trust for eliminating all vexatious competition that might increase the rate of interest paid depositors or decrease the rate charged borrowers, and for combining under one central control the entire money supply of the people, could not be formed if state banks and trust companies are left out. Such state institutions hardly would allow Congress to grant to a private confederation of national banks a monopoly of the entire public currency that they might win away the deposits of state institutions by publicly boasting that only national banks had been made "panic proof" by the National Government. What "easy" fish the people and the outside bankers must seem to the "insiders" who plan the "sport" and will feast on the "catch"! Under the Aldrich plan a bank must give: 1. Twenty per cent of its capital to be permanently employed at not over 5 per cent, invested in Central Bank stock that it can never sell. 2. Ultimately it will lose its present currency issuing power. It assumes its share of a serious and increasing burden of maintaining the gold standard and reserve and of keeping at par an enormous and increasing volume of currency without the aid of the Government credit now behind the public currency and gold standard. The Reserve Association will have power and means by which it could financially wreck any or all banks if it so desires; and this may happen in spite of the association because of a wild inflation of its currency and injudicious rediscounting. 4. By joining this private association, it incurs an indefinite and almost unlimited liability by staking everything on a new experiment that it cannot guide or control and from which it never can escape. It takes the chance of the most reckless of gamblers. 5. Voluntarily it surrenders to the power of a single corporation that vital and large portion of its resources represented by its deposited reserves (the association having legal power to require this by "regulations"), without getting for its use even the customary 2 per cent now allowed by reserve banks. In return, there is no legally enforcible obligation on the central bank to grant currency in time of need or re-discount a single dollar of paper. Everything done by the central bank legally is only a "favor." Such favors may be granted to the big banks that will control the central bank and be withheld from the unimportant small banks and trust companies. 6. Morally and legally it becomes responsible for the policy and every act of a private institution in which it has but an insignificant interest and over which it can exercise not the slightest effective control. It will have responsibility without power. 7. It is surrendering its independence by irrevocably joining a financial combine or trust absolutely controlled by outsiders and strangers having nothing in common with he local customers or depositors of the bank. The bank's |