CHAPTER III.

FOOLING THE PEOPLE.

Bank Reserves to Be Left in Wall Street, Not Put in Central Reservoir?

Mr. Frank A. Vanderlip, president of the National City Bank of New York, on February 25, 1911, delivered an address on "The Aldrich Plan for Banking Legislation," before the Commercial Club of Chicago, praising the plan without qualification. He has been a consistent advocate of a central bank for ten years, ever since he retired as Assistant Secretary of the Treasury, and became vice-president of the great "Standard Oil" Bank. He was one of the five members of the "Special Committee of the New York Chamber of Commerce" that originated and devised the first plan for a central bank, adopted by that body on October 4, 1906, hereinafter fully described. And that first plan and the present Aldrich plan are practically identical as to their functions and powers.

The plan of 1906 called it a "Central Bank," the plan of 1912 a "National Reserve Association;" but a pickle by any other name is just as sour. The said report of 1906, signed by Mr. Vanderlip, says on page 9:

"In our opinion the best method of providing an elastic credit currency, the volume of which could never be excessive, would be the creation of a central bank of issue under the control of the Government. This central bank should have branches in the leading cities, and should have dealings only with banks, although its capital stock might be privately owned or distributed among the banking institutions of the country, it should be under the direct control of a board of governors appointed, at least in part, by the President of the United States, for it should perform some of the functions now imposed upon the United States Treasury, and should at the same time be managed not exclusively for private gain, but for the public good as

well." On page 24 the report says: "In its management representatives of the government shall be supreme."

That report was a reasonable, logical, statesmanlike utterance. We take it as the guide in the plan hereinafter suggested, accepting in detail practically all of its provisions. Will the gentlemen who originated that plan join us now on that basis? Or will they insist on blocking all legislation unless they can put through the Aldrich plan for a Private Central Bank or association controlled by the banks instead of the Government?

Were those gentlemen insincere, not frank, in 1906, or have they backslid since? We prefer to believe that they have changed their minds, perhaps due to the fact that since 1906 the riches and power of Wall Street have grown so enormously that they now seem to consider Wall Street and its banks of more consequence than the United States Government and its 94,000,000 people.

Mr. Vanderlip in his Chicago address strongly urges the present Aldrich plan. He reverses his 1906 position. In that speech, which is being sent out by the banks as a campaign document, on page 8 he says: "We are now more than amply supplied with reserves. The difficulty is not in amount, but in mobility.

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Today the secondary reserves of the banks of the whole nation flow to one center and must of necessity be employed in one way. Such part of our banking funds as experience has taught may be needed on instant notice can be loaned in just one place in the United States where the lender can get them back with substantial certainty on demand. That place is Wall Street."

This foremost of Wall Street's bankers thus confesses that under the reserve law the country's cash goes to New York and is loaned in Wall Street. And he says the greatest danger is this lack of mobility of bank reserves. And yet he is urging the Aldrich bill that leaves the reserve law as it is and the country's money in Wall Street. It seems strange that the 24,000 banks are unwilling for the safety of the public and depositors, who furnish them most of the money, to hold $1,500,000,000 in their vaults or in a central "reservoir" and out of Wall Street when by law they have been given a monopoly of the rich privilege under which on a total capital stock of two billions they have loaned to the people at 6 per cent or other going rate a total of twentythree billions, most of it being mere credit, inflated financial

wind, that costs the banks nothing. The fact is the banks hope that by getting control of the public currency they can print money enough to protect the banks in emergencies without taking the reserves away from Wall Street. Instead of using their own capital and consolidating their reserves for mutual protection, they are going to keep their own money busy making profits in Wall Street and let the private central reservoir be filled with a billion dollars of public currency furnished free by act of Congress. Mr. Vanderlip adds: “I would, then, say that the four things we must seek to accomplish by a properly designed financial measure are, first, mobility of reserves; second, elasticity of note issue; third, certainty that solvent banks can rediscount; and, fourth, the creation of a discount market."

The first, enforced mobility of ordinary cash reserves, has been abandoned. The third, rediscount, and fourth, a discount market, can easily be furnished under the present law by the banks themselves without any action by Congress. They can without new legislation incorporate a big central bank to rediscount for other banks. And no one in the United States would object. The second, issuing of currency, is the only thing left. It is the one important thing in the pending bill that can not now be done by the banks without new legislation. Therefore, it is the sole object of the Aldrich plan and of the entire campaign being waged by Wall Street and the banks. It is the one thing that should not be done. The main thing that should be accomplished is to reform the reserve system; but that is left out entirely. And this is called "reform"!

Writer foresaw that this would be the program when, at the National Civic Federation meeting in New York on December 17, 1907, he forced from the Wall Street bankers present, through Mr. Seligman, chairman of the committee on resolutions, a public admission that they sought private control of the public currency, when they opposed writer's amendment which read:

"PROVIDED, THAT POWER TO ISSUE AND REGULATE THE

VOLUME OF THE PUBLIC CURRENCY SHALL NOT BE TAKEN AWAY FROM THE FEDERAL GOVERNMENT AND BE PUT INTO PRIVATE HANDS.'

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With all the dense dust kicked up by Aldrich, the banks and Wall Street to hide the real issue now blown away, and the actual bill brought out of hiding and into the spot-light of public congressional scrutiny, investigation and criticism,

the Aldrich plan, stripped of "tentativeness" and mystery, is found to seek just one new thing, namely, PRIVATE CONTROL

OF THE PUBLIC CURRENCY.

In "The Magnet," written in 1906 and 1907 to combat this measure, we warned the country that private control of the public currency was to be attempted. Writer gave the same warning on December 17, 1907, at the National Civic Federation meeting when a majority present were Wall Street bankers and their friends, and in his petition read to the Senate and printed in the Congressional Record February 10, 1908, in his address on "Wall Street and Its Currency Measures" before the Boston City Club March 5, 1908, in his argument against the Aldrich emergency currency bill, a measure paving the way for the central bank scheme, delivered on invitation before the House Banking and Currency Committee in Washington, on April 16, 1908, in his speech, on "Panics, Their Causes and Cure," before the National Reform Association at Wilmington, Del., on June 4, 1908, in many articles and interviews on the subject sent over news association wires and printed throughout the country in the public press, and in personal interviews with and letters to President Roosevelt and President Taft, judges of the Supreme Court, senators, congressmen, governors and many other public men.

That author's fears were justified and his early informa tion accurate, the pending Aldrich bill is convincing and conclusive evidence. It is just a private grab at the public currency. The warnings that at the time to many seemed over-radical, now are found to have been rational and conservative.

Whatever sentiment there may be favorable to the Aldrich plan among the masses of the people has been almost wholly created by the plausible and convincing argument that all bank reserves should be taken out of Wall Street and merged into one central reservoir, to be drawn upon for adequate relief in an emergency by any bank located any place in the United States.

For years this has been heralded broadcast through the public press by the Monetary Commission (specifically stated in their report to Congress) by high government officials, in the speeches of President Aldrich and many leading bankers and by letters and literature now being circulated throughout the country by the big banks and the American Bankers' Association. The very name "National