or banking reform a dangerous undertaking one that should be carefully considered and not entered upon lightly from motives of political expediency. During the last two decades currency and banking questions have been prominent in the councils of the nation, and many radical changes have been proposed. Every sudden institutional or social change must of necessity be accompanied by disturbances due to breaking bonds of custom and to the introduction of certain elements of the unknown as premises for judgments concerning the future. This fact, together with the known sensitiveness of the credit structure, suggests that whatever the financial reforms to be undertaken, we break with the present no further than is necessary to accommodate immediate needs. Sweeping changes would amount to financial revolution, and proposals of this kind should be peremptorily dismissed. The suggestion that we should at once abolish one of the pillars upon which the national-credit superstructure rests (the United States Sub-Treasury) brings with it nothing but a picture of national distress. No change of this kind could safely be undertaken till the present burden of credit-money had been removed from the capital; there must first have been a complete revision of the monetary system a system that we have labored a century to bring to its present state of "soundness" and which in its architectural plan is yet scarcely completed. The proposition to throw the whole financial burden on the commercial bank, and to strengthen this by a scheme of centralization, carries with it the same certainty of disaster, unless the change be gradual, and unless also every shift of stress be made after a careful calculation of probable results. And this calculation should be something more than philosophical conjecture. It should be based on experience. In the preparation of this work it has been the constant endeavor to measure carefully every salient point of the present financial structure, to take into account the monetary and banking experience of the past, and, having in view this experience, to suggest certain results that may be attained in the direction of increased soundness and elasticity by slight changes in the organic relations of the system with which we are now working and which in all its details we may understand. Making these suggestions it has been the underlying belief that experience is the only safe guide to judgment— that evolution and not revolution should be the principle of financial reform. NEW YORK, January 15, 1908. CHAPTER CONTENTS I. COMMERCIAL BANKING AND SPECULATION II. THE USE OF COMMERCIAL BANK-CREDIT IN III. THE AMERICAN SYSTEM OF CURRENCY AND PAGE I 13 BANKING 29 IV. CREDIT-MONEY AND THE NATIONAL BANK. 4I V. THE DEMAND FOR A "SOUND" AND "ELASTIC” 54 VI. THE RELATION OF BANK CAPITALIZATION TO 67 VII. THE Public Control of CommeRCIAL BANKS 77 VIII. AN ELEMENT OF CONTROL NOT ADEQUATELY 99 IX. CHARACTER OF ASSETS THAT MAY BE SAFELY X. PUBLIC DANGERS IN THE PRESENT EQUIPMENT 127 |