Charles N. Fowler

“ Merchant: Now, gentlemen, why all this frightful agony, this terrific straining, this ever-recurring tragedy and universal ruin, simply because we persist in being utterly ignorant of the simplest economic truths which our own actions on every such occasion have demonstrated—that there is absolutely no difference between a bank book credit and a bank note credit, except that the people want something that passes current in greatly increased quantities, when loaning stops or credit is checked. ”

“ Is it necessary to incur all the unquestionable evils of inconvertible paper, forced into circulation by an Act of Congress—to suffer the stain upon our national faith—to bear the stigma of a seeming repudiation—to lose for the present that credit which in itself is a treasury—and to teach debtors everywhere that contracts may be varied at the will of the stronger? ”

“ Comment:—If there is one evil that should be crushed out in this country more than any other it is the practice of carrying debts as reserves. No bank should be allowed to carry any other bank's notes, any more than any other check or draft which it thinks is good. It has been this abuse of bank credit that has led to more trouble than almost any other single thing. It was the requirement of coin reserves and current coin redemption that made the banks of Virginia, Louisiana, Kentucky, Ohio, Indiana, Iowa, Missouri and the Suffolk System such perfect successes. ”

“ Gentlemen, I am convinced that it is the natural right and present opportunity of the United States to become the financial centre of the world; but no country can ever become the financial centre of the world, unless it is a free market for gold. No country can be a free market for gold, unless its entire credit system is based upon gold, and gold alone, thereby guaranteeing unquestioned bills of exchange. ”

“ Can you imagine anything easier than for the National City Bank with this complete banking organization all over the United States to name every man practically that went into this organization from top to bottom? This would not be done by holding a majority of the stock in all the twenty-five thousand banks; they don't care about that; because it is a matter of no consequence to them, and if they attempted to do anything so crude, it would spoil their whole game. They attain their ends in more subtle but no less certain and powerful ways. They get influences to work. ”

“ Mutual credit societies or credit unions are organized to furnish capital for production; that is, it is commercial capital, or credit for commercial purposes, not for investment purposes at all. Not a single dollar of a credit union should ever be loaned upon real estate. Not a single dollar! Not a single cent!! Such a practice would literally destroy the principle upon which they are founded; mutual aid to assist in production, not investment. ”

“ Will anybody deny that checks and drafts and bills of exchange are property?
Will anybody deny that a bank has property, although it may be the owner of one million dollars' worth of promissory notes?
Will anybody declare that a bank has no property when it has a million dollars' worth of gold coin in its vaults? ”

“ I know we've all had the insane idea that the right of note issue was some kind of a special privilege to the bank out of which it would make some enormous profit; when, as a matter of fact, it is nothing of the kind; but on the contrary, only a great convenience and accommodation to the people themselves. Furthermore, in as much as it will enable the bank to protect its reserves, by paying out its notes, instead of paying out its reserves, it will reduce the expense of the bank to that extent and so reduce the interest rates upon its loans. ”

“ We must remember that since gold is our standard of value, gold alone is the touchstone of all credit, acceptances as well as deposits and bank notes.
Mr. Banker: There is no question whatever about that. If we want an absolutely sound and impregnable financial and banking system, we must meet checks and acceptances with gold just as well as bank notes, for they are all identical and the same thing—only in different forms—bank credit. Gentlemen, if you place our banks in a position where they can pay gold no one will ever ask for gold, except for some special purpose like that of export. ”

“ Will anyone deny that the sale and shipment by note brokers of billions upon billions of promissory notes from one state to another every year is not interstate commerce, but that to ship eggs, apples, potatoes, chickens, grain, cotton and live stock is interstate commerce?
I assert that it is just as proper and important that the National Government inspect this paper, and the banks that create it, or ship it, or buy it, as it is to inspect the sheep, hogs, cattle, slaughterhouses and the meat they turn out in order that it can protect the people of the United States. ”

“ Comment:—If we hope for our share of profit upon our foreign trade and if we hope to secure for the American merchant an equal opportunity in securing that foreign trade, we must prepare here two aids: one is banking facilities and the other is shipping facilities. Is it not perfectly clear that a foreign banker would do anything in his power to divert all the traffic he could over the shipping lines of his country? We shall find in the end then that our foreign trade will be aided not by our foreign bank alone but by American shipping as well. ”

“ These men who have the intelligence, ambition, perseverance and moral courage to pinch and save, even if they have to starve to get a start for themselves, constitute the true and the greatest ultimate source of wealth of this nation. They are the chaps that make two blades of grass grow where only one grew before. You don't want to forget that. They are not only the hope of every community in which they live, but they are a constant inspiration to the young. ”

“ If we transfer the Active Capital, or commercial fund of the country, to the Passive Capital, or investment fund, or what is still more serious, convert it into Fixed Capital, we can no more keep the people working and producing new wealth than you can keep a steam engine producing power without coal and water.
What invariably happens in the so-called good times but almost invariably what, by experience, proves "boom" times, is that business men and in fact everybody, not only take all of their spare money, and go into speculations, but they exhaust their credit as well ”

“ I have used and suggest the name "American Reserve Bank," because we are known the world over as "The Americans," and, therefore, I think it peculiarly fit to use the name "American Reserve Bank."
This institution, with the specific powers granted to the individual banks as outlined, will be able not only to protect each individual bank, but to protect the reserves of all the banks; that is, the reserves of the United States against the drafts of the world, precisely as the Bank of England protects her gold, or adds to it by a rate of discount; that is, by fixing a price for the use of gold. ”

“ The wisdom of man, in my humble opinion, cannot at this time devise a plan, by which the credit of paper money would be long supported; consequently, depreciation keeps pace with the quantity of the emission, and articles for which it is exchanged rise in a greater ratio than the sinking value of the money. Wherein then is the farmer, the planter, the artisan benefited? An evil equally great is the door it immediately opens for speculation, by which the least designing, and perhaps most valuable part of the community are preyed upon by the more knowing and crafty speculators. ”

“ Too much reserves only means a small loss of profit, but too small a reserve may mean ruin. Credit may be at once shaken, and if some terrifying accident happens to supervene, there may be a run on the banking department, that may be too much for it, as in 1857 and 1866, and may make it unable to pay its way without assistance, as it was in those years." And again he writes: "Why should a bank keep any reserve? Because it may be called upon to pay certain liabilities at once and in a moment." ”

“ Why should not a bank act just like any other merchant or trader, and adjust its stock of goods to the ever-changing conditions of its business? Of course I am fully aware that there is one element entering into a bank's business that is not common to other mercantile houses, and that is the question of its credit. It must keep itself in such a position at all times as to preclude the chance of suspicion arising about its ability to meet its demand obligations. ”

“ Certainly the National Government could compel every bank to carry certain specified reserves, and failing to do so to pay a tax of 10 or 20 per cent per annum upon all deposits not so protected; that is, upon all deposits in excess of the required reserve. This could be done under the taxing power of the Government, precisely as a tax of 10 per cent was put upon all bank notes. Would any patriotic banker refuse to coöperate with his fellow bankers in such a reform, unless he wanted some unfair advantage by compelling the other bankers to carry his load for him? ”

“ Has any banker over fifty years of age forgotten the silver struggle from 1879 to 1894, when, because of the silver purchase act by which we only added $50,000,000 a year to our reserve money, we came to the very precipice of repudiation and national dishonor? ”

“ There is no doubt whatever about the imperative necessity of our relieving the United States Treasury from the load it is now carrying, and placing the United States Government in the same position precisely that every state and municipality is in, so far as its credit is concerned; for the treasury of the Government, when filling its normal and proper functions, is no more fit to carry on the banking business than a man who may be wealthy in land, but has no cash assets ”

“ Not only have they left the banking business to just "grow up" like Topsy in Uncle Tom's Cabin; but the Government itself has been one of the greatest obstructionists to the national growth of our banking business in its interference with the natural movement of the money of the country which by every economic law, and business right, belongs in the channels of trade, and not in the strong boxes of the Government. ”

“ Under these circumstances, with what suspicion and jealousy will every act of the central bank be watched! Localities will become envious of localities. Cities will bitterly attack their neighboring cities. Nine-tenths, if, indeed, not ninety-nine out of every hundred, of the banks will imagine spears in needlecases, and, right or wrong, fling their accusations upon the wings of the wind; and we will be living in a commercial world of unrest and constant controversy surpassing in suspicion, envy, jealousy and bitterness anything this Republic has ever witnessed. ”

“ Now when you say a banker is ready for a run, you mean, as I now understand it, that he has all his deposits on hand in cash, or has all his deposits invested in something that he can turn into cash: good notes that have been taken in the course of business, that is, in the production and transportation of consumable commodities, the necessaries of life. Of course, anybody must understand that if a bank bought a lot of farms or a lot of farm mortgages (and it might be worse off if it bought city mortgages with our deposits) , he could not convert them or turn them into money on demand. ”

“ There must be kept before the business eye, the people's eye, the national eye, such a vast horde of gold concentrated for the purpose as to compel even the most timorous to feel safe, beyond a peradventure. There must be a conviction everywhere that the system cannot break down or fail. ”

“ Every one of the checks, notes or drafts taken in the transaction is property, just as much as the note taken for a single sale of the goods would have been property. Indeed, every one of the five notes or drafts was just as much property as the goods themselves were, and could be bought and sold just as well as the goods themselves could be bought and sold. Now it must be evident to all of you that in the production, transportation and distribution of commodities, credit performs exactly the same function as money. ”

“ In eighteen States no bank reserves are now required by law, and in many States there is no supervision whatever of State banking institutions by the State. Is it possible that the National Government has no power to act in the light of these facts when the banking business of the country is essentially not only one kind of a business, but, indeed, one single business, each one being a wheel in the great credit machine? ”

“ A merchant brings his notes or debts, that are payable some time in the future, to the banker for sale, and the banker buys them for credits in the form of deposits, or debts payable instantly, which have precisely the same effect in commerce as so much gold. He reaps exactly the same profit by creating a credit in favor of his depositor as if he gave him the actual cash. The checks drawn against these credits so created by the banker circulate commodities in trade precisely in the same way that bank notes do which circulate commodities precisely in the same way that gold coin does. ”

“ In May of the same year, the famous traveler, John Ledyard, and twenty-five other merchants of Connecticut caught up the theme, and in a petition to their legislature said: "The medium of trade whereby our dealings are valued and weighed, ought to be esteemed as sacred as any weights and measures whatever, and, to maintain justice, must be kept as stable, for as a false weight and a false dollar is an abomination to the Lord, a false and unstable medium is equally so, as it occasions as much iniquity, and is at least as injurious." ”

“ How much more important, then, gentlemen, must it be that we, when you consider the extent of our country, our vast and varied banking interests which are being carried on by 25,000 or 30,000 individual or independent banks, should require everyone of these banks to be in a position to test its credits with the touchstone of gold, and at the same time take the precaution of protecting itself by a central reserve of gold far beyond any possible demand that may be made upon it. ”

“ Can anyone tell why a bank, under such circumstances, should not meet the peculiar demands of its customers, and furnish bank notes at a cost of one-sixth of what it must be, if the bank is compelled, as it is today, to rediscount its promissory notes, and buy gold certificates or United States notes to be used as currency, when its own bank notes would answer every purpose of currency just as well? ”

“ It is easy to imagine how complicated and powerful these forces might become, and how essential it is that we should be ready to combat them, when the tide turns against us. We must be in a position to buy and sell gold bullion, and to buy and sell domestic and foreign exchange, and to loan a large sum of money, gold, I mean, quickly, through a board of control to stop a panic in some financial centre, and last—and above all, we must hold the chief key to the situation. ”

“ Farmer: Since we have been discussing this feature of publicity and independence, I have become so deeply impressed with the fact that every bank will be set free, will be able to act so independently, and that every commercial zone will be such a complete, such a perfect democratic republic in itself, that I have been wondering whether each zone could not create and carry its own reserve. ”

“ Let us hope that if it is possible for us so to solve the financial and banking problem as to recognize the best traditions of the Republic and the highest aspirations of the American people, keeping steadily in view every economic law involved, we shall then save our beloved country from the tragic consequence of political controversies directly affecting our commercial credit and indirectly affecting every day's labor and every dollar of capital until the question is settled right. ”

“ Will any man assert that any country in the world has a better banking system than Canada has today? If so, let him name it. All the Canadian people, and all the Canadian bankers, so far as I have been able to learn, are completely satisfied, indeed, proud of their system. ”

“ Merchant: Mr. Banker, in every form of credit granted so far and debts created, we have certainly been dealing only in a legitimate way with consumable commodities, the necessities of life, and ordinarily, if not always, this kind of credit will take care of itself. And yet the marvelous facility and power of credit has been illustrated so vividly, that I am sure all of us appreciate it and can readily see how it might be abused and lead to disaster if not confined to the actual production of articles of food, clothing and daily use, or, in a word, to the production of the necessities of life. ”