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Former Director of the Mint Explains the Useful Pur= poses Such an Institution Would Serve. By James B. Morrow. occurred in 1905 or 1906-the conditions in all three years were identical. Chicago, Jan. 1.-A quick book on a live "We were sound industrially. Business subject-it was written in six dayswas booming as never before in our histurned George Evan Roberts, an Iowa edtory. There had been no overspeculation; itor, into a financier of repute. no money had been put into large enterThe book helped to elect McKinley and prises that didn't pay. In 1873 railways to beat Bryan, and McKinley appointed its had been built that were much ahead of author Director of the Mint. Two years the time. Immense sums of money had ago Mr. Roberts was elected president of been poured into properties from which one of the strongest banks in the United there were no returns. A panic was the States, the Commercial National Bank of natural and unpreventable result of the Chicago, with $70,000,000 of deposits and conditions of that period. $10,300,000 of resources, otherwise capital, "Notwithstanding the seeming strength surplus and undivided profits. of our position in 1907, every dollar of our The son of a potter, who began to learn currency was in use. Pressed by their custhe printer's trade at the age of sixteen, tomers for money with which legitimately has become more than a practical banker. to expand their business, some banks had He is also a great teacher of the fundaeven loaned part of their lawful reserves. mentals of finance and an international There was not a single reason in the world authority on money. for the panic, except the insufficient stock "Will business in this country continue of money." to be good for a long time to come?" I "But the national banks," I said, "could asked. have gone into the market, bought govern"It seems so to me," said Mr. Roberts. ment bonds and, on depositing the bonds "Business was never on a sounder or betwith the Secretary of the Treasury, could ter basis. Our unscientific currency syshave obtained new money?" tem is the only thing we have to fear." "And they would have had less money "What is the matter with the currency than when they started the transaction," system?" I inquired. Mr. Roberts answered. "Government bonds "We bankers say that it hasn't any elaswere then at a premium of 6 per cent. I ticity, which means that the supply of know of a bank that could have issued money is practically the same one season $2,000,000 under the law in addition to its with another and year after year. In the circulation then outstanding, but bonds at autumn, when crops are to be sent to mar$106 meant that it would have paid $2,000,000 ket-wheat, corn, cotton and so on-there in cash for the privilege of getting $1,880,000 is no more money than during midsummer. of new money. Agricultural products are bought for cash. "There was no practical way at the time Railway freights ordinarily must be paid of increasing the supply of currency," Mr. for in advance. It happens, therefore, Roberts went on to say, "and consequentthat the East is drained each fall of money ly all through the years 1905, 1906 and 1907 that it may be paid in the West for harconditions were right for a scare that vested crops. Thus merchants find some would bring on a panic. If some great difficulty in getting money for debts comhouse had stubbed its toe in 1905 the finaning due, and manufacturers are inconvencial crisis would have occurred then inienced and are often prevented from enstead of two years later. We lived through larging their plants. To put the situation 1905 and 1906 in a state of mind when all in another way, the country tips to the the facts were against us. West and all the water runs to the East. "Finally, F. Augustus Heinze failed, and It is an unhealthy, an unscientific and unone of his New York banks went down necessary condition and contains the elewith him. He was the man to stub his toe. ments of danger and disaster. Another of his banks became involved in "We do more business than any country his personal disaster. An incipient panic in the world with bank checks, paying started. Depositors began quietly to withthem out in large and small transactions draw their money from other New York in place of currency. Such business is banks, and, as I have said, there was none principally a matter of confidence. Checks too much in the first place. Almost before are accepted in the belief that there are we realized it, ten or twelve banks in New funds in the banks : make them good. York closed their doors in the faces of However, if banks having funds with their excited depositors. In every case the which to meet the checks decline to pay bank under a proper currency system could them because of a scarcity of money, there have kept on making payments, and there is a panic. The ban' as we all rememwould not have been a single failure. ber. suspended payment in 1907. The "Saturday, October 26, 1907, was a terrinanic of that year might just as well have ble day all over the country. The panio