Financial center

“ Wall Street being not only a local but a national and international financial center, the whole world, not only the whole country, is tributary to it, and it is indispensable to the whole country. Yet it is made the target at present for all sorts of political abuse, and various schemes have been urged for suppressing trading in stocks, all of which are of course chimerical, for as long as we have securities, there must, in justice to the millions of holders, be a market for them. ”

“ These extremely high and highly fluctuating rates are, it is true, peculiar to the New York Stock Exchange, but they are none the less a great evil, and they acquire national and even international importance from the fact that New York is the financial center of the country and the New York Stock Exchange the barometer of financial values for the whole United States. ”

“ So pessimistic is public opinion that the worse the charges the more numerous the believers. No one looks on the other side; no one is told of the manifold services and advantages of Wall Street as a financial center. ”

“ It does not create values, but it reflects everything affecting securities and commodities, and represents all material interests. It is an unfailing barometer of values and the times. So those who say a heavy fall, or a panic, in stocks only affects Wall Street speculators shoot very wide of the 894mark. Wall Street radiates its influence over the whole country, and to a large and growing extent over the whole world, and it, or I should say New York, is destined, within no very long time, to become the financial center of the world. ”

“ To take this step in New York, which is one of the four preeminent financial centers of the world, involved a responsibility of a magnitude difficult adequately to estimate. Upon the continuity of this market rest the vast money loans secured by the pledge of listed securities; numberless individuals depend upon it in times of crisis to enable them to raise money rapidly by realizing on security investments and thus safeguarding other property that may be unsaleable ”

“ The medium of exchange will, by the competition of commerce, be distributed in such proportions among the different parts of the United States, by natural laws, as to accommodate itself to the number of transactions which would take place if no such medium existed. For this reason, we find more money in the so-called great financial centers, because there are more exchanges of goods there. In sparsely settled parts of the West there will be less money precisely because there are fewer transactions than in the older and more settled districts. ”

“ There are more than 14,855 establishments, with arteries in more than 20,000 large business savings and investments. National and state banks and trust companies are located in all your large and small cities. Many of them are members of the Federal Reserve Banks. Your 300 large life insurance companies and all other lesser ones, your great number of private bankers, your financial investment, loan, and mortgage companies, your pawn and stock brokers, and your many other financiers control the loans of money. ”

“ The sceptre of financial power has crossed the Atlantic from Europe to the New World. We are gradually acquiring command of the world’s markets, and in time we shall see our banks—ever the handmaids of commerce—extending their operations to the most distant quarters of the earth and carrying everywhere the beneficent influences of modern civilization.
New York as a financial centre has been growing with astonishing rapidity in recent years. ”

“ All bank reserves should consist of gold or gold certificates, as soon as the United States notes can be converted into gold certificates.
Sixth: Every bank in the United States should be brought under national control, because banking is essentially Interstate Commerce.
Seventh: Every natural financial centre in the United States should become the clearing centre for all the checks, drafts and bank notes that are payable in the territory that is economically and naturally tributary to that Financial centre; such territory should constitute a commercial zone. ”

“ The gain of having the small local banks in out-of-the-way places possess all the stability of branches of a great central house is obvious, both in the increase of security to depositors in time of financial stress and also in the ability of such a house to lend money at lower rates of interest than is possible to the poorer institution with its smaller capital which has no connections and no resources beyond what are locally in evidence. ”

“ One great cause of the concentration of banking and financial power into a few hands has been the consolidation of banking resources into a few great units and the friendly affiliations of these units. But these units have not grown big merely because their managers or owners willed it so. The banking and currency laws of the country have forced money into a few centres. The banks of New York City employ—mainly in financial or stock market loans—about $600,000,000 which belongs to banks in other parts of the country. ”

“ At any rate, if New York aspires to a position of financial independence and to become, in the broadest possible sense, the financial centre of the vast and growing exchanges of this continent and of its transactions with other nations, there should be no delay in giving this greater breadth and scope to its banking institutions. Our merchants, I am satisfied, are ready to respond to a movement of this character; are the bankers and the capitalists equally prepared to provide the facilities? ”

“ A large part of this money is deposited with them by local banks in all parts of the country, which recognize New York City as the financial centre of the Union, and are content with interest of from one to two per cent upon the funds which they are unwilling or unable to use safely at home. The stock exchange is also in a condition of quietude. The public are neither buying nor selling stocks in any large amount. ”

“ The small capital with which we have permitted banks to be established also has undoubtedly been a contributing factor to our rapid economic development, as well as to the promotion of the banking habit among our people.
In the next place, the density of population is, of course, an important factor for the growth of credit exchanges. A larger volume of business is settled by bank paper in a commercial center than in an agricultural community, even though the proportion of total business thus settled may not be larger. ”

“ And the amount of the funds held by commercial banks is very large indeed; demand deposits alone represent approximately three-fourths of the money supply in the United States. [49] Since a bank's assets must be sufficiently liquid to accommodate demand withdrawals, short-term commercial and industrial loans are the major element in bank portfolios, thus making commercial banks the principal source of short-term business credit. Many other services are also provided by banks, but in these more or less collateral areas they receive more active competition from other financial institutions. ”

“ There is a network of relationship between banks through which each local community and market is connected with all other communities and markets.... No locality is so remote as to be outside of the circle and no community's sales and purchases are so scattered but that they can be brought together in the settlements. Each bank is the center of a circle of which it is the clearing agent; all payments between its own customers may be made by a transfer of credit upon its books. ”

“ The unique powers of commercial banks to accept demand deposits, provide checking account services, and lend against fractional reserves permit the banking system as a whole to create a supply of 'money,' a function which is indispensable to the maintenance of the structure of our national economy. ”

“ The minimum required capital of a bank is $500,000, of which all must be subscribed and one-half paid in before a new bank can open. At least five men of integrity and good financial standing must agree to act as provisional directors and secure a favorable report on their project from the parliamentary committee on banking and commerce. These men must agree to subscribe for fairly large blocks of stock, otherwise the committee will be inclined to reject their application. They must convince the committee that their project is a well considered one, that there is need for the new bank. ”

“ A clear, succinct statement of the banking conditions which have revived this question, with explanations of what it involves, appears in the following, borrowed from a monthly financial letter sent out in November by the National City Bank of Chicago: "The creation of a Central Bank of Issue as a cure for the defects of our financial system is of such importance that a brief review of the proposition may be of interest to our clients: "The business of banking is probably as sound in this country as in any other. Our individual banks are, as a rule, prudently, honestly and capably managed. ”

“ Where the bank has no branches, the financial institutions may take root and develop among a population which appreciates their services. Their profits come largely, it appears, from small towns, where competition is less keen. We have already said enough concerning the service of these institutions in the development of French credit to show the danger of inflicting upon them fresh injury. ”

“ 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. ”

“ What is needed to enable this metropolis to reach the financial status to which it is entitled is a class of banking institutions possessing facilities and functions much broader and freer than those conferred by the national charters. ”

“ That each commercial zone shall maintain and keep in operation at its financial centre a clearing house where all the bank notes, checks, drafts, bills of exchange, and other instruments of credit, drawn upon any bank located in the zone, may be cleared, and for any other purpose that may come within the purview of this Act; and all such instruments of credit shall be accepted and settled for at par at such clearing house, under and in accordance with such rules and regulations as may be established from time to time by the board of directors of the American Reserve Bank. ”

“ The final resting-place of the statesman was chosen under the sycamore shades of the sacred inclosure at the head of Wall Street, but a step from where his achievements had been concentrated, and an amount of difficult and laborious service compressed into a short, busy life, affecting all the future of this great monetary center—such service as few men ever rendered to any nation in the longest term of human existence. ”

“ Clearly, then, the natural development of national production 579of commerce is to build up independent financial centres at the interior, the effect of which can only be to check in some measure the growing ascendancy of New York. ”

“ Turning now to the vast system of banks throughout the country, if the separate reserves of all the banks were gathered into one mass, available to meet the demands of depositors for payment in money, whether made in Maine or Texas, New York or California, the banks of the whole system would be able to operate with the highest degree of safety by having a total sum of money equal to only a small percentage of the aggregate amount owing to depositors, and consequently would be able to lend for use in the commerce of the country the greater proportion of the funds deposited. ”

“ At this very time, in January, 1920, one huge speculative bank in New York City was borrowing of the New York Federal Reserve Bank $130,000,000! This one New York Bank—catering to speculators, to money masters, to "corner" builders and to "high financiers," not even remotely connected with the real production of [Pg 52] real wealth—was borrowing more money from the New York Federal Reserve Bank than the Federal Reserve Bank of Atlanta or of St. Louis or of Kansas City or of Dallas was lending to their member banks in their huge areas of real production of real wealth! ”

“ Since the incorporation of the Bank of New York, at the corner of Wall and Williams Streets, the banking capital of New York has increased more than sixtyfold, of which more than one-half is held and used in and around Wall Street, and the aggregation of deposited and loanable capital has grown from a few millions to over half a billion. If this has been the result during one century, what will take place in the same direction during the next century? The ratio of increase will not be kept up. ”

“ Some States should have several financial centres; some none. To attempt to make a commercial zone conform to State lines would be absurd. Bank credit flows to centres as [Pg 420] water rushes to the ocean, and we should not violate a great economic law to the irreparable injury of commerce. Sense and not sentiment should control our action.
St. Louis and Kansas City are natural financial centres, but Jefferson City is not. St. Louis draws its bank credits from eastern Missouri, southeastern Iowa, northeastern Arkansas and southern Illinois. ”

“ Every district has its local bank, of a size to suit its wants, the stock of which is owned by the small capitalists of the neighbourhood, and managed by themselves; the consequence of which is, that in no part of the world is the system of banking so perfect—so little liable to vibration in the amount of loans—the necessary effect of which is, that in none is the value of property so little affected by changes in the amount or value of the currency resulting from the movements of their own banking institutions. ”