I think in the organization of the commercial zone, that we have taken such steps to emphasize and secure publicity of action, and so much pains to guarantee representation from every section of every zone, that the people as well as the bankers will be kept advised all the while of all that is being done. I think that the matter of the subsequent selection of members, both to the Board of Control and to the Board of the Bankers' Council, will always be a subject of general discussion and newspaper comment. This is true more particularly, because every bank has one vote, and because only one member will be elected to the Board of Control each year, and only two members will be elected to the Board of the Bankers' Council each year.
Publicity and direct representation are the two distinct ends sought, as we believe that in this way alone can a true and proper sense of responsibility be imposed upon the members of the two boards.
Mr. Merchant: I agree with you absolutely. It is precisely as President-elect Wilson said: "Publicity, pitiless publicity, is the only sure protection to the people."
Mr. Manufacturer: Just another word upon that point. Samuel J. Tilden I think it was who said: "Publicity is the only safeguard of republican institutions." How well we have guaranteed publicity in the organization of our commercial zone the public will have to judge. However, if our method for securing publicity can be improved upon, we will all welcome it.
Mr. Farmer: Since we have been discussing this feature of publicity and independence, I have become so deeply impressed with the fact that every bank will be set free, will be able to act so independently, and that every commercial zone will be such a complete, such a perfect democratic republic in itself, that I have been wondering whether each zone could not create and carry its own reserve.
Listen! This is my idea. Some one has mentioned St. Louis as a financial centre. Now, why could not St. Louis carry the central reserve for that commercial zone, and so each of the forty-two financial centers of the zones carry their own central reserves, precisely as we have learned the Clearing Houses are carrying the reserves of their banks today. You have extended the approved Clearing House practices to the entire zone—you have complete, absolute, local self-government; you have your supervision and control of all the banks in the zone; you have your Central Reserve—you have a free check zone. Now, what more do you want? Why should not every zone stand upon its own bottom, just as the banks of Virginia, Louisiana, Kentucky, Missouri, and Ohio did; and as the Bank of the State of Indiana and the State Bank of Iowa did? That's what I want to know.
Mr. Banker: I must say that is a very pertinent, a very interesting, and very important question. There is one point upon which everybody now agrees, however much they may differ upon other points. That one point of common agreement is this—that the real source of weakness, from the standpoint of organization today, is the fact that whenever there is fear or apprehension in the country, every bank begins to fight for reserves, fight for some kind of cash; because there is no actual or real protection as matters now stand, unless a bank has practically as much cash as its deposits amount to. In other words, it is really a run of the banks upon the banks. It is "Everyone for himself, and the devil take the hind-most."
Now, it must be apparent to you that each of your forty-two zones would be fighting each other for reserves, just as all the individual banks fight each other today when the danger comes, and the whole situation proves no stronger than the weakest link; hence, our exchanges break down.
St. Louis, for instance, might have a Central Reserve of $50,000,000; but would St. Louis be satisfied that that was enough to protect her against any accident? She is confident that she has some strength, but is not sure of unlimited strength and absolute protection. Therefore, the struggle for reserves would begin between the zones, with the first appearance of danger, just as it does today between the banks.
On the other hand, if the banks in the St. Louis zone should send their $50,000,000 to Washington, and send along with it their representative of that zone, and in like manner every zone should send its Central Reserve and representative to Washington, it would make a total reserve of $1,250,000,000 of gold in one mass, and a board of forty-two members to manage it. The result would be precisely the same as that now attained by having a Federal army, a Federal navy, a National Government, for a "Common Defense." If each zone should be left to stand upon its own bottom, as you say, we would be repeating, economically, identically the same mistake that we made politically when we formed the Confederation of States in 1781. The confederation was too weak to be an efficient government, and so we formed a "Stronger Union," the present Federal Government in 1789.