Mr. Merchant: Have you any doubt about the people taking your bank notes, as you suggest?
Mr. Banker: None, whatever. You see, in the first place, they do not come to the bank because they fear the bank cannot pay them; but, because when one of these shocks to credit comes, there is a tremendous demand for cash of some kind. You will remember, that in 1893 and 1907, when currency was sold in New York, it did not make any difference what it was: gold or gold certificates, silver or silver certificates, United States notes or bank notes—anything that was cash brought the same premium. But, suppose the question should arise and a man should ask, are these notes good? He would not hesitate long after I gave him these facts:
First: That they were a first lien upon all my assets.
Second: That there was a gold guarantee fund amounting to $60,000,000 in the treasury of the American Reserve Bank, to redeem them if my bank failed.
Third: That the American Reserve Bank with $1,250,000,000 would redeem the notes in case my bank failed.
Mr. Laboringman: Well, Mr. Banker, do you know what I would do, if I had a deposit in your bank, under those circumstances, and got scared of you? I would give you a check for my deposit, take your notes, and hold them until the storm blew over. That's what I would do.
Uncle Sam: There, can you beat that as a precaution against accidents? Mr. Laboringman never will get left, if you will give him half a chance.
Mr. Manufacturer: Under those circumstances, of course, the question of goodness of the notes would never arise. The people would soon think only of the great central gold reserve, which would always be before their eyes.
Mr. Banker: In addition to my note issue, I would have the same recourse to my bank correspondent in New York that I have today, and he would then be in a far better position to assist me than he is now, because of his additional resources. Besides, I could fall in my required cash reserves, which would be about $100,000 down to $25,000, without any danger to my bank; because of my greatest, final, and practically inexhaustible resource, The Board of Control, which has examined my bank, knows my assets, and will give me any amount of gold to protect me in case of necessity.
Mr. Merchant: I see, your exact condition is known to the Board of Control; and the Board of Control has access to the gold in the American Reserve Bank, and could get fifty or one hundred million dollars to protect itself, if necessary.