Financial Legislation and its Limitations. 



when the facts are once known, the hardest parts of the task 

 have already been accompHshed. 



What is known as "theory" and often condemned as such, is 

 really but an attempt to arrive at the facts. To a person that 

 has not made this attempt, it appears to be unnecessary, because 

 they are supposed to be self-evident or to depend simply upon 

 observation. On the contrary, facts are not self-evident; and 

 they depend upon an observation, which, to say the least, cannot 

 be made with the outer eye. The facts once agreed upon, the 

 measures of government to be taken will depend upon abuses that 

 have been experienced, but also upon the popular conception of 

 what the facts are. The regulations adopted to remedy imper- 

 fections or cover abuses connected with a particular form of 

 social service, such as banking, are never the same as they would 

 be, if the people at large had a different or a more correct idea 

 of what the facts were. A law is a compromise between the 

 popular error as to what the facts are and what would otherwise 

 be the logical conclusion from the facts themselves. 



Misconception as to the organic nature of credit afforded 

 ground for discussion concerning the elasticity of the circulating 

 medium, and especially of bank money. The clearing up of this 

 situation has depended upon the working out and popularizing 

 of the idea that " business makes money." In England, William 

 Dunning McLeod, and in the United States, Professors Charles 

 Franklin Dunbar and James Laurence Laughlin are chiefly to 

 be thanked for the prominence they have given to this principle. 

 It has been, however, extremely difficult to bring it into a clean- 

 cut form, even with the help of catchy phrases. The supposed 

 distinction between notes and deposits has been the stumbling 

 block in the way of a clear conclusion, for the theory of banking 

 does not contrast them with each other, but both with reserves. 

 The popular materialistic preference for notes and the perverted 

 term " deposit " have led to endless confusions. 



§ 9. Originally, a banker was a dealer in coin. He sat behind 

 a table or " bank " guarding his treasure, and was little more than 

 a money changer. It became easy, however, for him to do busi- 

 ness in exchange, in other works, to buy and sell money for future 



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Government 

 control should 

 presuppose 

 acquaintance 

 with the facts 

 of industry 

 and finance, 

 and also with 

 public mis- 

 apprehensions 

 as to them. 



Legislation 

 for control 

 must make 

 some conces- 

 sion to those 

 misapprehen- 

 sions, since 

 the public is 

 the power 

 behind the 

 throne. 



The ques- 

 tion of bank- 

 ing laws is 

 really one of 

 the education 

 of legislator 

 and constitu- 

 ent upon or- 

 ganic banking. 



Confusion of 

 promises with 

 guaranty fund 

 arose at the 

 very beginning 

 of the practice 

 of banking, 



