gation. It is doubtful whether such an institution could be managed less selfishly and more in the interest of the people generally than the Treasury Department has been conducted even under the most unfortunate management to which it ever has been subjected. The Treasury has always been the bloody angle of criticism of an administration, but no critic has ever charged the head of this Department with cupidity or with operations having selfish ends in view. Possibly a central bank could be kept forever free from operations having for their end larger dividends, but there is little justification for such a hope. Cooperation. If some method could be devised by which the national banks of the country could be made to cooperate, the major portion of legitimate criticism to which our present system is now subjected would soon vanish. That the banks do not now cooperate in the slightest degree is self-evident. New York City, for instance, has the only call money market in the world, but so impossible is it to secure cooperation between the financial institutions of that great city that the current rate on call money, as I have already shown, on the morning of a certain day was 12 per cent, with some loans as high as 14 per cent, while in the afternoon it dropt to 5 per cent. During a part of the previous season millions were loaned at 1 per cent and some below, and later in the season the rate touched 100 per cent. It must be manifest to laymen even, as well as to financiers, that such want of cooperation, resulting in such fluctuation in interest rates, offers little encouragement to the hope that international balances in the near future will be kept in this country. I do not criticise these banks for failing to cooperate, for I have been repeatedly assured that cooperation is impossible. Another indication of the want of cooperation, not only in New York City but quite as much throughout the country generally, is discoverable in reserves. Admittedly, conditions have been no worse in New York than elsewhere, though the weekly statement reveals conditions only in that city. Repeatedly within the last five years surplus reserves have been practically exhausted in midsummer, and sometimes the aggregate surplus reserve of the associated banks in New York City has only equaled that reported by a single institution. I must not be understood as expressing an opinion that this condition indicates any want of conservatism, but I do know that if there were the slightest measure of cooperation between the national banks of the country a very large reserve would be gathered in midsummer to provide for increased business operations incident to the crop-moving season and the revival of commercial activity annually witnessed during the autumn and winter months. Can cooperation be enforced by law? Whether cooperation can be secured by statute is a question on which students of the situation will of course differ. I suggest for the consideration of Congress two possible plans: First, a graduated reserve, determined by statute. The objection to this plan is that conditions vary with different seasons. Sometimes the crisis is deferred, and occasionally the most stringent season is during the spring. Second, a better plan, in my judgment, would be to clothe the Secretary of the Treasury with authority to require all banks, at certain times fixed by him, to slightly and gradually increase their reserves and hold the same within their own vaults, with corresponding authority to release the same from time to time as in his judgment will best serve the business interests of the country. In quarantining against yellow fever, the Government grants great latitude and well-nigh unlimited discretion to the Secretary of the Treasury through the Marine-Hospital Bureau. Actual experience justifies the statement that the American people hold the Secretary of the Treasury quite largely responsible for financial conditions. This being true, he should have that measure of discretion and authority requisite to enable him to fulfill this expectation. Can he not be trusted as a financier as well as in the capacity of an expert health officer? An illustration. Suppose the national banks were required either by statute or by direction of the Secretary of the Treasury to increase their reserve, and to carry the same in their own vaults, in an amount equal to 1 per cent of their capital stock every fifteen days from the first day of April to the first day of September. This contraction under ordinary conditions prevailing in these months would work no hardship upon any institution, and would result in the collection of $80,000,000 of reserve money with which to meet the demands of increased business. It is probable, and under ordinary circumstances well-nigh certain, that the banks would find such a contraction profitable, for interest rates during the summer would not be likely then to drop excessively low, and it is equally certain that the rates would not be dangerously high in the fall and winter. It may be said that the banks can now strengthen their reserve during the summer on their own motion. The best answer to this is the admitted fact that they do not do it to any considerable extent, and for the reason already pointed out-want of cooperation. No one bank, nor the banks of any one city, will contract their reserve when all other banks are loaning the last available dollar at the best rate obtainable, however low that rate may be. National-bank circulation might be made the basis of contraction instead of reserve. Suppose the Secretary of the Treasury had authority to order the national banks to make deposit to the credit of the redemption fund of an amount equal to 1 per cent of their circulation every fifteen days during the above-mentioned period. This would result in a contraction of national-bank circulation amounting to sixty millions, and by requiring the bonds to remain on deposit this amount could again be issued during the fall and winter as necessity required. If the Secretary of the Treasury were given $100,000,000 to be deposited with the banks or withdrawn as he might deem expedient, and if in addition he were clothed with authority over the reserves of the several banks, with power to contract the national-bank circulation at pleasure, in my judgment no panic as distinguished from industrial stagnation could threaten either the United States or Europe that he could not avert. No central or Government bank in the world can so readily influence financial conditions throughout the world as can the Secretary of the Treasury under the authority with which he is now clothed. If it be said that such power, augmented with the authority which I have outlined would be dangerous, I reply that no man has yet been at the head of the Treasury Department, and no man is likely to occupy that position, in whose hands such authority would not be safe. The best financial advice on earth is at his command, and the selfishness or the unselfishness of the advice tendered, and, therefore, the value thereof, can be readily weighed. The advice which he can thus obtain is, in my judgment, far better and would prove far safer than would be the direction which might be given by a board of governors of a large centralized bank. In all administrative matters large authority, and therefore great responsibility, with strict accountability, is the better policy. A public officer, spending the best years of his time at a salary grossly inadequate to pay living expenses, naturally looks for no reward but the inner consciousness of having fulfilled the requirements of his position. Finally. It is hoped that the discussion of several ways by which the muchdesired end may be accomplished will not tend to bewilder, but rather to make clear that the adoption of any one or more of them will work much good, while the failure to provide some prompt means of relief will most certainly invite disaster.. Under the Constitution it does not lie with an administrative officer to urge any one plan to the exclusion of all others. It is the duty of the head of this Department to point to defects, and he may suggest ways in which, in his opinion, they can be cured. The legislative branch of the Government must, in the nature of things, have credit for whatever laws are passed, and it must likewise bear alone the responsibility if it fail to act after threatened dangers have been clearly defined. FORMER RECOMMENDATIONS RENEWED. I desire to repeat, and emphasize if possible, several of my recommendations of previous years. First. A law giving trust companies of large capitalization in large cities the privilege of incorporating under national law with corresponding supervision, but with no authority to issue circulation. Second. The establishment of a Department savings bank in Washington upon the mutual plan prevalent in most of the New England States, in the hope of encouraging the habit of saving among Government clerks. Third. A law licensing customs brokers, or some other provision by which the customs department can protect itself from the few disreputable practitioners before it. Fourth. A provision for a nominal filing fee for entering protests and appeals in customs cases, recoverable should the case be successfully prosecuted. Fifth. The abolition of all fees and perquisites of collectors and other customs officers. Sixth. A liberalization of our drawback laws. Any provision that will assist in securing a foreign market for the product of American labor has the unqualified indorsement of the present head of this Department. For Seventh. Legislation which will insure a merchant marine. years I have urged this in season and out of season. The next twenty years will witness as intense commercial contests for trade expansion as were ever prosecuted for territorial expansion. It is idle to suppose the United States can attain any considerable measure of success without as favorable equipment as its commercial competitors. Eighth. The establishment of a pneumatic tube system between the several Executive Departments within the District of Columbia. Ninth. The early erection of a Hall of Records on the site already purchased. The saving in rent would more than pay interest on its cost, and its erection would result in greater efficiency in all the Departments. LESLIE M. SHAW, Secretary. To the SPEAKER OF THE HOUSE OF REPRESENTATIVES. |