Mr. Farmer: Well, do you know, I am of the opinion that there is nothing so important in these days as to have someone going around and compelling these fellows to pull in their horns. They will never interfere with anyone as long as he keeps in sight of the shore. It's a good thing and will do more than anything I know of to keep our business ship on an even keel.
Mr. Manufacturer: When Mr. Farmer talked about pulling in their horns, I thought he was perfectly at home, and talked about something that he was familiar with; but when he gets to talking about a ship and keeping close to shore, it strikes me that he's getting out to sea. However, this proposed supervision and checking scheme strikes me just as it does him, as the most desirable, wholesome and healthy process by which we can go on in the future far more steadily, and in the end far more rapidly than we do now, with our ups and downs, and I am heartily in favor of it.
But, Mr. Banker, it occurs to me that if these thirty or forty zones you speak of are going to work so closely together, as you think, and have outlined, there will be sooner or later a tremendous business going on between them.
Mr. Banker: Of course there will; and that suggestion brings me naturally to the fourth point I raised in connection with the development of our American Clearing Houses which was a combination of a part of their reserves for their own convenience.
You will remember that I called your attention to the fact that it was estimated by high authority that the banks belonging to the Clearing House Associations were now carrying upwards of two hundred million dollars of their reserves at the various Clearing Houses. It does not seem to me as though it was taxing the imagination very much to see how very easy it would be to apply the same principle to the thirty or forty financial centers that is now being applied to all the banks included in the Clearing Houses. Of course I realize that the reserves will have to be upon a correspondingly increased scale, ranging from one billion to one billion and a half, as things now stand, and that they will all have to be actually combined, and perfectly mobilized, precisely as the reserves are, when a Clearing House Association fortifies itself, to protect all of its banks, and the commercial interests of any community in times of danger and panic.
Mr. Laboringman: What do you mean by Clearing House certificates? I have seen these things mentioned time and time again in the papers, and I must say I could not get on to them. I supposed it was just some huggery-muggery of Mr. Banker, over there, for the purpose of getting the best of the dear people.
Mr. Banker: On the contrary, just the reverse is true. Clearing House certificates, commonly so called, are issued only to protect the people's interest. They are issued for the common good, and are thoroughly appreciated by all those who understand their use, and the circumstances under which they are issued. Mr. Laboringman, you have just asked what a Clearing House certificate is. We all know what a gold certificate is. It certifies that there are deposited in the Treasury of the United States as many gold dollars as its face calls for, and the holder can go and get the gold dollars by presenting the certificate. In the early part of this evening, we learned that a Clearing House certificate was issued by a Clearing House whenever some bank deposited with it gold coin, gold certificates, silver certificates, or United States Notes; that is, such a Clearing House certificate is for such a deposit as is made, and entitles the holder to what it calls for, as was then stated. Now, the popular name, Clearing House certificate, is applied to something quite different from the exact, or technical, definition above given.
When we say that a Clearing House has issued Clearing House certificates, in ordinary, or popular, language we mean "Clearing House Loan Certificates," because the public never have any occasion for discussing the usual Clearing House certificates. The Clearing House loan certificates are issued by a Clearing House upon commercial paper, bonds, stocks or any satisfactory security. In 1907, collateral security amounting to $453,000,000 passed through the hands of the New York Clearing House Committee, of which $330,000,000, or 72.92 per cent, was commercial paper and $123,000,000, or 27.08 per cent, was bonds, stocks and short-time railroad paper.
Mr. Lawyer: Mr. Banker, if you will allow me, I think that Mr. Cannon has stated this phase of the question so well that I should like to read it right here. He says:
"Clearing House certificates are of two kinds, those issued upon the deposit of gold coin (and in New York City and Boston on gold and silver certificates and legal tender notes) and those issued upon the deposit of collateral securities. The former are employed in ordinary times solely as a method of economizing time and labor and reducing risk in handling large sums of money. The latter are employed in times of financial disturbance or panic, and although both are intended for use solely in the settlement of balances at the Clearing House, the circumstances that call them forth, the results effected by their use, and the part they play in banking economy have little or nothing in common. The certificates issued upon the deposit of gold, etc., are termed 'Clearing House Certificates,' and those issued upon the deposit of collateral security are very properly termed 'Clearing House Loan Certificates,' with which latter only are we here concerned.