THE BANKING AND CURRENCY BILL ADDRESS IN THE SENATE OF THE UNITED STATES 66 At the second session of the Sixty-third Congress there was passed an act to provide for the establishment of federal reserve banks, to furnish an elastic currency, to afford means of rediscounting commercial paper, to establish a more effective supervision of banking in the United States, and for other purposes." This act was approved December 23, 1913. While it was under consideration in the Senate, Mr. Root addressed himself at length to an amendment to section 16 of the bill, which he had previously offered, and which was as follows: In section 16 (Owen print of December first) strike out lines twenty-four and twenty-five, on page 37, and lines one to nine, inclusive, on page 38, and insert in lieu thereof the following: The Federal reserve banks may from time to time, with the consent and approval of the Federal reserve board, issue notes to meet business requirements. The said notes shall be obligations of the Federal reserve bank issuing the same and shall be receivable for all taxes, customs, and other public dues. They shall be redeemable in gold on demand at the Treasury Department of the United States in the city of Washington, D. C., or in gold or lawful money at the bank of issue. All note issues of the Federal reserve banks shall at all times be covered by legal reserves to the extent required by this section and by notes or bills of exchange arising out of commercial transactions, or obligations of the United States. All demand liabilities, including deposits and note issues, of the Federal reserve banks shall be covered to the extent of fifty per cent by a reserve of gold or other money of the United States which the national banks are now authorized to hold as a part of their legal reserve: Provided, That whenever and so long as such reserve shall fall and remain below fifty per cent the Federal reserve bank shall pay a special tax upon the deficiency of reserve at a rate increasing in proportion to such deficiency, as follows: For each two and one-half per cent or fraction thereof that the reserve falls below fifty per cent a tax shall be levied of one and one-half per cent: Provided further, That no additional circulating notes shall be issued whenever and so long as the amount of reserve held by any Federal reserve bank falls below thirty-three and one-third per cent of its outstanding notes. Any notes of the Federal reserve banks in circulation at any time in excess of an aggregate of $900,000,000 for all of said banks, which are not covered by an equal amount of lawful money, gold bullion, or foreign gold coin, held by said banks shall pay a special tax at the rate of one and one-half per cent per annum, and any notes in excess of an aggregate of $1,200,000,000 for all said banks, not so covered, shall pay a special tax at the rate of five per cent per annum: Provided, That in computing said amounts of $900,000,000 and of $1,200,000,000 the aggregate amount of any national bank notes then outstanding shall be included. The notes issued by the respective Federal reserve banks shall constitute a first lien upon all the assets of the bank issuing the same. It shall be the duty of the Federal reserve board to require the Federal reserve banks to maintain at all times the parity of value of the notes issued by said banks with the standard established by the first section of the act of March 14, 1900, entitled "An act to define and fix the standard of value, to maintain the parity of all forms of money issued or coined by the United States, to refund the public debt, and for other purposes." This amendment was intended to safeguard the country against an inflation of the currency, which Mr. Root deemed likely to occur under the provisions of the bill as it then stood, and which he proposed to prevent by means of a special tax, whenever and as long as a legal reserve of fifty per cent of gold or other money of the United States in any reserve bank should fall and remain below that percentage, such tax to be progressive in character. Other safeguards were provided in Mr. Root's amendment. Several replies were made to Mr. Root's speech, and he himself made an elaborate answer to these replies. When Mr. Root's amendment was brought to a vote, it was defeated: yeas 22, nays 49. It will be observed, however, that the bill before the Senate when Mr. Root spoke provided for a gold reserve of thirty-three and one-third per cent, as in the House bill. Mr. Root insisted that this gold reserve should be increased to fifty per cent, and the bill as finally passed raised the reserve to forty per cent, which the House conferees accepted. It will also be observed that Mr. Root's proposition to impose a tax or penalty for deficient reserves, which proposition, although it had been in the House bill, was not in the draft of the Senate bill at the time Mr. Root spoke and was opposed by the Chairman of the Senate Committee, was restored to the bill as it finally passed. EFORE proceeding to point out the specific effect of prep has wish to repeat an acknowledgment which I have already made in the Senate of grateful appreciation for the devoted and sincere labors of the members of the Senate Committee on Banking and Currency. This acknowledgment applies to all the members of that committee, however their conclusions differ, as represented by the different forms of the bill which are before us. I wish also to say that I think this bill has in it many very excellent and useful features which will be beneficial to the commerce of our country, and which ought to be enacted. I regret that the circumstances under which the measure comes before the Senate are not more favorable to real discussion. I am not one of those who denounce caucuses and attempts to secure united party action. Under my own conception of a government by political parties, membership in a party involves certain obligations to attempt agreement upon that united party action which is necessary to discharge party responsibilities. I do not think that the declaration of affiliation with a political party should be regarded as merely a means of obtaining office, to be forgotten after office is obtained. I think that when by declaring himself a member of a political party a man has secured an election to office by his fellow-citizens, he has assumed toward them an obligation to seek to do his part toward discharging the responsibility of his party in putting into effect the policies which it declares. So, sir, I do not regard with the animosity and great disfavor which have been expressed with great sincerity by some of my colleagues the attempt of the Democratic party to secure effective action along the line of their party declarations and principles. But, sir, I think it is very unfortunate that the Democrats of the Senate have taken their caucus action in advance of discussion on this bill in the Senate rather than after discussion. I think it would have been much better if the bill had been reported to the Senate so that we all could have discussed it, so that differing opinions from different points of view could have been expressed, and then after the benefit of that discussion the dominant party had assembled and determined its course of action. There would then have been more zest and life and sense of opportunity on the part of the members of the minority in discussing the bill. Certainly, sir, one of the chief advantages in our system of representative government is that it does give to those who hold the power by virtue of being in the majority the benefit of the differing points of view of the minority. Discussion is most valuable when it involves an expression of those who differ, and not when it is a mere presentation of the views of those who agree. As it is, all of us on this side of the chamber labor under the great discouragement of feeling that whatever we may say the fate of the bill and of every part of the bill is already determined. While there is a little hope, it is rather slight, because, as the Senator from Iowa [Mr. Cummins] pointed out yesterday, the burden is not to produce an effect upon individual members of the majority, but it is to convince a majority of the majority that they ought to reverse the conclusions which have already been reached a very difficult thing to do. I am grateful to my friends upon the other side for permitting me to address myself to a task which is not, at least theoretically, impossible, however practically improbable its accomplishment may be. The point toward which the amendment just read, is directed is the sixteenth section of the currency bill. Let me read the provision which I ask to have stricken out, under the head of "Note issues": SEC. 16. Federal reserve notes, to be issued at the discretion of the Federal reserve board for the purpose of making advances to Federal reserve banks through the Federal reserve agents as hereinafter set forth and for no other purpose, are hereby authorized. The said notes shall be obligations of the United States and shall be receivable for all taxes, customs, and other public dues. They shall be redeemed in gold on demand at the Treasury Department of the United States, in the city of Washington, D. C., or in gold or lawful money at any Federal reserve bank. You will perceive that that provision contains in its terms no limit whatever upon the quantity of notes that may be issued: Federal reserve notes, to be issued at the discretion of the Federal reserve board for the purpose of making advances to Federal reserve banks. .. The said notes shall be obligations of the United States. |