"I was told of one loan to one of the largest banks in Berlin, running for a whole year at 7 per cent.
"Think of it! What would the condition in our country have to be before The National City, The Bank of Commerce and the First National of New York, and the First National and Continental Commercial of Chicago, were scouring all quarters of the globe for gold and paying from 15 to 20 per cent for the loans?
"The Imperial Bank of Germany could not save the few great banks of Germany. What would the same kind of an institution in the United States do for 25,000 independent banks under the same circumstances, all pulling at the skirts of this proposed financial balloon? The Imperial Bank could not make real money out of paper credit when the crisis came.
"Let me ask the 25,000 individual independent banks of America, what they would do when the day of contraction and refusal came? Where would you go for gold with your comparatively small capital and limited credit?
"The financial situation in Germany is by far the weakest of all the great nations of Europe and the cause is not far to find nor difficult to detect.
"Their notes, which are based upon only 33 per cent of gold and 66 per cent of commercial credits, are used as reserves and made the basis of additional credits. Economically speaking, whenever a bank puts anything into its reserves it makes that thing a legal tender and exactly to that extent displaces that much gold, if gold is the standard of value.
"During the ten years from 1900 to 1910 the gold accumulated by Russia amounted to upward of $200,000,000; that accumulated by France, upward of $300,000,000; that accumulated by England, where nothing but gold is treated as reserves and where there has been comparatively little growth in business, $32,000,000. The United States accumulated $1,100,000,000, while Germany, with all her development of trade during the last ten years, accumulated only $40,000,000 of gold when it ought to have been ten times as much, all things considered, or $400,000,000. If she had done this she would not have been compelled to send her great financial institutions all over the globe in search of gold and been compelled to pay 15 per cent and 20 per cent for it."
Gentlemen, within sixty days after those words were uttered, this conversation was reported to have taken place. The German Emperor asked Herr Havenstein, the President of the Imperial Bank of Germany, whether Germany was prepared, financially, to carry on a war with a first-class power. Herr Havenstein said: "No." To this the German Emperor replied, "I do not want that answer to that question when I ask it again."
Herr Havenstein immediately called the managers of the thirty great banks together, and told them that they must collect at least a 15 per cent reserve. To this they protested, saying that it meant the accumulation of at least $250,000,000 in gold; but Havenstein persisted and insisted upon his demand. Now, gentlemen, if you add the $40,000,000 they had accumulated, to what Havenstein insisted that they should accumulate, or $250,000,000, you have $300,000,000 as a minimum. It is altogether probable that $400,000,000 was nearer what they should have accumulated.
It should be noted in this very connection, that Germany recently appointed a commission to investigate her banking system, and that this commission reported that the individual banks of Germany should carry their own reserves, precisely as Congressman Fowler has always contended, declaring that it is especially important in the case of our individual, independent banking system. From what has been said, it has been demonstrated that every criticism that he has made of the German system, has been confirmed by their own subsequent action.