February 1, 1912.] 



THE INDIA RUBBER WORLD 



219 



Aldrich, its chairman, issued what is known as the Aliirich plan. 

 It was a plan providing for a readjustment of these various con- 

 ditions which 1 have outlined, and during tlic past year we have 

 been giving hearmgs. We have been discussing the question 

 before banking associations and before business associations. 

 We have tried as far as possible to get the judgment of the very 

 best minds on this subject the world over, and tried to apply to 

 our system a system which, without upsetting it, would make our 

 banking and currency system as modern and up-to-date and use- 

 ful as are the systems of European countries. 



The plan which was issued at that time, and which has been 

 changed somewhat, and has finally been adopted in the report of 

 the Monetary Commission, which was made to Congress last 

 Tuesday with a Bill and Report, is an embodiment of the views 

 of all of these people and the views of the si.xteen members of the 

 commission. 



Now, I want to say for the commission, that we commenced 

 the consideration of this subject without any very clear ideas, as 

 individuals, as to what we ought to do ; but we have been study- 

 ing and studying, and reading and listening, until the si.xteen 

 men, coming from all sections of the country — three from the 

 Rocky Mountain section, five from the South, three from the 

 Middle West and five from the East — have come to exactly the 

 same conclusion, and, for the first time in the history of the 

 Government, we have a Monetary Report, a matter of the first 

 importance to all classes of citizens, signed by every man on 

 the commission. Democrat and Republican. Whatever may have 

 been his views before, we have come to a uniform result. (Ap- 

 plause.) 



And, furthermore, I want to say that there has been no politics 

 whatever in the consideration of this question. (Applause.) 



It is too big, it is too important to all elements of our people 

 to allow politics to interfere in any degree with its solution. I 

 think we have practically tlie uniform support of the bankers of 

 this country of all shades and all locations in favor of this report. 

 The American Bankers' Association has, and perhaps with 

 reason, voted, with one dissenting vote, at its great meeting in 

 New Orleans, in favor of the adoption of this plan. Business 

 men throughout the country who have given it consideration have 

 endorsed it. Financial students, and all other classes of men who 

 have considered it from every standpoint, have given it unquali- 

 fied endorsement, until we can practically say that the opposition 

 to it which appears to-day is negligible. Therefore, the only 

 thing to do is to get it on the statute books, and that is what 

 we have before us, and that is the thing which I particularly 

 want to call to your consideration ; because it is up to you, and 

 those you represent, and those that other representative bodies 

 like yourselves represent, to see that legislation, which is of the 

 greatest importance to you and all kindred business interests, 

 and all other classes of interests, is enacted into law. 



I have not the time, in the twenty or twenty-five or thirty 

 minutes which I am going to talk, to go into any considerable 

 detail in regard to this plan. But it provides for what is known 

 as the National Reserve .Association. Some people have said it 

 is the United States Bank over again. I say it is distinctly dif- 

 ferent from the United States Bank, which was centralizing in 

 its effect, while this is decentralizing in its effect. But I want to 

 say of the United States Bank — and I say this carefully weigh- 

 ing my words — that if President Jackson could be credited with 

 all of the good things which all of his friends claimed for him, 

 and there is set against that the destruction of the second United 

 States Bank. I think it would be a fair offset ; for the United 

 States Bank, if it had continued to exist, and had been modified 

 and changed and brought dow-n to date, we would have today, in 

 my judgment, a banking system which would be as useful for 

 our needs as are the banking systems of Europe, every country 

 of which has a better banking and currency system than we 

 have. 



This central reserve organization is based on local associations 

 similar to clearing house associations. There must be ten banks 

 in each clearing house association, having at least five millions 

 of capital, and twenty per cent, surplus, and so forth. I won't 

 go into those details. But in electing directors of these local as- 

 sociations, each bank has one vote in electing two-thirds of 

 the directors, and in electing the other third, the banks vote the 

 number of shares which they hold. Every bank which is a sub- 

 scriber to the National Reserve .Association subscribes for twenty 

 per cent, of its capital. The capital of the reserve association is 

 to be twenty per cent, of the total capital of the banks of the 

 country, which would be something like four hundred millions. 

 Supposing all of the banks come in, it would mean — and we call 

 fifty per cent, of this capital — it would mean one hundred mil- 

 lions of dollars, and w-e provide that the bank shall not be started 

 until one hundred millions of dollars have been subscribed and 

 paid in as fifty per cent, of the total capital subscribed. 



Now, we have adopted the Federal system of electing directors. 

 We recognized the fact that politics must be kept out of this bank, 



as it was not kept out of the second United States Bank, and 

 that it must be beyond the possibility that any interest or any 

 set of men shall obtain control of it. That has been the most 

 important thing we have had to consider in connection with this 

 whole subject, because it is a thing that the demagogue will seize 

 to criticize, and it is a thing that the thinking man would seize 

 to criticize, if we left anything for him to seize. And, therefore, 

 we brought about this method of electing directors — that the local 

 associations shall elect directors as I have instanced. And then 

 we divide the country into fifteen districts, and we elect directors 

 in those fifteen districts by electing one-half of them, each local 

 association in that district having one vote ; then, the stock owned 

 by the hanks m those local associations electing two-thirds as 

 many directors as the banks voting individually, and then the 

 other si.x of the directors shall be elected from the business, the 

 commercial, the agricultural interests of the country by those 

 directors who have been elected. And then, when we come to 

 electing the forty-six directors of the National Reserve Associ- 

 ation itself, we provide that the Government shall have an in- 

 terest in it ; because the Government has to do all of its business 

 with this central organization. We provide that the Secretary 

 of the Treasury, the Secretary of Agriculture, the Secretary of 

 Commerce and Labor, and the Comptroller of the Currency, shall 

 all be directors of this bank, giving the Government four direct- 

 ors. And then there shall be three more governmental directors 

 — the Governor of the Bank and the two Deputy Governors of 

 the Bank. The only politics that there can possibly be in this is 

 that the President of the United States appoints the Governor 

 of the Bank. But he appoints the Governor of the Bank from 

 a list submitted by the Directors of the National Reserve Asso- 

 ciation, which list shall consist of at least three men. And if 

 for any reason he removes the Governor of the Bank — as he 

 might do — he must supply his place from a list submitted by the 

 Directors of the Association. That is all the politics there is 

 in it. 



Now, we provided that the banks wdiich subscribed to its stock 

 shall hold this stock, but it is to belong to the association ; it 

 is not transferable to anybody. Therefore, in order to get control 

 of the association it would be necessary to try to control all of the 

 banks of the country, state as well as national. Of course, it is a 

 perfect piece of folly to say that anybody would attempt the entire 

 control of them, because they would not know what to do with 

 them if they had control. And then it would involve more capital 

 than would be possible for any combination of men to control, 

 and W'Ould create a sentiment which would bring about the prob- 

 able repeal of the charter. Therefore, we believe that we have ab- 

 solutely eliminated both politics and the possibility of control by 

 any such set of men from this organization. 



Now, let me call your attention to one or two facts, which will 

 directly affect the business interests which you represent, one of 

 which is that we provide for a new kind of paper transaction; 

 that is, a bank accepted bill. 



Now, in the present system, you, as business men, go to your 

 own bank and borrow money on your notes; or, if your credit is 

 good enough, you sell your note to some other bank, but that 

 note has only a circulation as far as yon are known personally as 

 a business man. It has not even a country-wide circulation. You 

 could not sell your note, for instance, in the far West, unless you 

 have a very big and very broad credit. In Europe they do things 

 better, and we have provided for a similar method in this bill. 

 For instance, once you establish the credit that you can get from 

 your bank, you can go to your bank and by depositing collateral, 

 or securing the bank in some other way, you draw a draft on 

 your bank, the bank accepts the draft, and then that draft be- 

 comes current throughout the country : not because your name 

 is on it, but because the bank has accepted it, and the bank is 

 known not only in the country where it is located, but, quite 

 likely, in other countries. The result of that is that in Ger- 

 many, for instance, there is a vast amount of bank accepted paper 

 of French origin and English origin. In France there is more 

 commercial paper of this character of English and German 

 origin. In England there is more or less French and German 

 paper disseminated, the result being that when any business 

 man wishes to extend his credit he gets his bank to accept his 

 note, and then that note becomes current throughout not only his 

 own country, but in other countries. It has another effect in 

 Europe. When the balance of trade is against one of those 

 countries, instead of sending gold to pay the balance of trade, 

 as we would have to do, they send back some of this paper which 

 originated in the country in whose favor the balance of trade 

 happens to be, and save the shipping of gold back and forth. 

 The net result of that is that every business man who has a good 

 credit, would have a broader credit than todav, or than would 

 be possible for him to have under present conditions; because he 

 not only has the credit of his own bank, but he has his name on 

 a piece of paper wdiich is accepted by his bank, or which quite 

 likely will go to any part of the world. If. for instance, you 



