Charles Lindbergh
Banking and Currency


APPENDIX B.


I insert “Appendix B” because many people have requested me to do so.  It consists of quotations taken from my arguments made before the Rules Committee for the purpose of securing the appointment of a special committee to investigate the Money Trust.  I have also inserted some of my remarks on the same subject which were made before the House when the same subject was up for its consideration.  I do not insert my remarks in full, because that would make this volume more bulky than I wish it to be, and it would also delay its issue somewhat.  The matter inserted may not be as connected as the reader might wish, but under the circumstances I cannot avoid that.  The reader will, however, be able to determine from the context which inserts were delivered before the House and which before the Rules Committee.  They are as follows :


Mr. Lindbergh said :—

Mr. Speaker, it is difficult for those who have given the amount of time to the study of the Money Trust problem that it justifies to be able to understand how serious-minded men can temporize in the way that many of the Members have done in this particular case.  To allow personalities or politics to influence one’s action is an indication that the importance has escaped such persons as do.  I do not believe that there is a Member who would neglect his duty in this particular matter if he really comprehended the situation.  The only thing that I would feel like criticizing the majority membership for is the way in which it seeks to deceive the public by having time to waste on unimportant and transient matters, but when real momentous problems are up for consideration the “previous question” is ordered and Members prevented from explaining important measures.  Not since the Emancipation Proclamation has so important a subject as this Money Trust been before the people for their consideration, but it is slighted by the leaders by their calling to their aid those who believe that it is more important for them to work to stand in well with the special interests than it is for them to endeavor to promote the general welfare of all of the people, and as a result having the House set aside days for the discussion of political differences and personalities, while the discussions on this important matter are limited to 5 and 12 minutes, with all discussion to be dropped at the end of two hours.

The Emancipation Proclamation freed 4,000,000 slaves.  A proper treatment of the Money Trust resolution would emancipate over 90,000,000 industrial slaves, and yet the Money Trust investigation is treated with kindergarten methods.

There is unrest in this country.  If I alone were to expose, and give emphasis in adequate terms, to the actual feeling of the people, I might be called a radical, but it does not occur to anyone to apply such terms to judge Gary, President of the great Steel Trust.  Let me quote from some remarks he made on February 14th, 1912, at the New York Lehigh Club, the following :

“Unless capitalists, corporations, rich men, powerful men, themselves take a leading part in trying to improve conditions of humanity, great changes will come.  They will come mighty quickly, and the mob will bring them.”

Judge Gary, made it very evident that the people generally are “evincing a readiness to take things into their own hands.”  He also stated that the “spirit of unrest” is not confined to the United States, but is world-wide.  “Things are being said,” he declared, “very similar to things said just before the French Revolution.  I tell you the spark may yet make a flame, and that soon.  I have an especial reason for saying this and a reason that affects you and me.  Men of great power and influence in the forces of the country have not all of them done the fair thing.”

Judge Gary thinks the unrest referred to to be of so serious a nature that it threatens revolution.  No honest student doubts the seriousness of the unrest, nor does he doubt that there is a real cause for it.  The cause is supplied by the Money Trust, and its allied interests, but in the face of its supreme importance we, here in this House, are kept from giving the matter the proper consideration because of petty politics and personalities.

I share Judge Gary’s views that there is “unrest.”  We all know that there is unrest.  But those of us who have had the time and desire to study the actual conditions and search for a remedy, know that a revolution is not the remedy.  We do not believe in violence, and while there may at times be an excuse for violence, it is never justified.  There are no conditions now that should lead to violence, but there are conditions that should enlist a more serious consideration of this Money Trust problem, and the economic problems, than the House gives to them.  The failure of the Members to take a sufficiently statesmanlike view of the existing conditions might even furnish the cause for the very thing that Judge Gary fears.  It was a similar indifference that caused the French Revolution, and even a revolution would be better than decay.

It is indeed a misfortune that the best opportunity that has been presented to Congress in a half century for the meeting of a great common demand has, to a certain extent, had politics injected into it.  To accomplish all of the good of which it is capable no politics should have been allowed to enter into the consideration.  It is of the most vital importance to this country at this time that the public in general should understand the meaning of the manner in which its own finances are manipulated by the great financiers.  That understanding could be secured by the appointment of a special committee, selected with a view to their fitness for making an investigation and the importance of using the information obtained in such a manner as to create the least disturbance, for it is already known that business methods have been adopted by the financial kings that are not consistent with the interests of the plain producers and consumers.  There can be no justification for using facts that might be obtainsult of the investigation for any other purpose than for the correction of the present evils.  They should not be used for political purposes, but simply to bring about justice in a consistent and orderly way.

When the subject was first approached Wall Streeters saw that the resolution was loaded with powder and lead, and that it would reach to the very heart of their practices.  There was an attempt to smother it, and so prevent the public from realizing its importance.

I was astounded a few weeks ago to have an emissary of Wall Street call upon me and direct my attention to the fact that I was taking an immense responsibility upon myself by pressing such a resolution far consideration, and that if I continued a panic would be brought on which would be worse than any this country had previously known.  He admonished me to withdraw the resolution.  To this I suggested that if there was a condition existing among the greater business interests of this country that was so rotten that an investigation revealing those conditions would cause a panic, then it was better that those conditions should be known now, in order that the future of the country might be assured at least.  It is not possible to come to any conclusion other than that if the business is being dishonestly conducted, then it is necessary that an investigation should be made in order that we may learn how, to correct it.  How is it possible that any honest, patriotic citizen should consent to stop an investigation and thereby conceal such conditions as those intimated by the Wall Street emissary ?

The Rules Committee continued to hold its hearings.  It was sought to influence its chairman and members, but they refused to allow politics to enter.  When that method did not succeed the next step was to threaten some of the leaders of the House with a panic before election, unless the investigation should be prevented, but in the meantime the public was making such demand that it became dangerous to the political interests to do otherwise than to at least give the appearance of making an investigation.  The members of the Banking and Currency Committee were secured to conjure up in their minds a jealousy, lest their privileges should be invaded, and to demand that they should be given the privilege of making the investigation.

As long as these investigations were upon matters that did not vitally concern the special interests, the members of the committees were not so jealous of their privileges, and the less important investigations were therefore referred to special committees without the least compunction.  This method for the evasion of responsibility by the representatives of the people is one of the mockeries of representative government.  Wall Streeters simply entered Washington and scared the politicians into subservience.  It is a matter of common knowledge among many of the Members that its emissaries have been here lobbying in opposition to this investigation.  Finally, it was seen that the public demand was so great that the investigation had to come and since it was too late to have it absolutely muffled, the only thing for them to do was to refer it to a standing committee.

Now that the public is being heard from, there is some chance of awakening the standing, committee to its responsibility, and force it to act with diligence.

I do not impugn the honesty of the membership of the Banking and Currency Committee, but in view of the apparent wrongs in our present system, openly demonstrated, I do, and the country must naturally, feel that the members of that committee are not over-diligent, nor even diligent, in discharging the great duty that rests upon them.  They have the ability if they will apply it, but the nature of the education of most of the members of the committee has taught them to permit the very things of which the public complains.

The chairman of the committee has proposed, and there is now before us for consideration, his resolution, instead of the ones introduced by me in July and December, 1911, and on January 3rd, 1912, and one introduced by the gentleman from Texas (Mr. Henry) on January 29th, 1912.  The resolutions introduced by Mr. Henry and myself would have permitted a committee to go to the bottom of the subject and treat this important matter with the respect it merits.  The substance of my resolution and the one Mr. Henry introduced is the same.

The very absurdity of the phraseology of the Pujo resolution stamps upon those who are responsible for it a weakness that ought never to be shown in this House.  The lack of force on the part of those composing the membership of the Banking and Currency Committee, which has charge of the investigation, is suggested in the resolution proposed by its chairman.

On June 30th, 1908, a law was passed directing the appointment of the National Monetary Commission, and that committee was appointed and authorized by law to make a thorough investigation of this problem.  Mr. Pujo was one of the members of the commission.  He signed its report.  There is in the report a proposed bill,—the Aldrich Plan.  He stands committed in its favor by having signed the report.  By Section 56 of that bill it is proposed the Government of the United States shall give, absolutely free, to the proposed association approximately $220,000,000.

That is not all.  In that same bill it is provided by other sections that the association may issue any amount of its notes without paying any tax whatever if the amount issued is covered by lawful money held by it.  There are provisions in the bill by which the United States is to turn over its general funds, and still other provisions by which the association can secure the reserves of the banks throughout the country.  These reserves which the association secures from the banks and the Government deposits will at one and the same time act as reserves for the banks and as lawful money to cover association note issues to save it from taxes.  Within one year after the association would begin business it would have from the Government, and as reserve agent for the banks, lawful money, on which it could, if it chose, issue more than a billion dollars to lend to its subscribing banks—a gift, pure if simple, to the great moneyed interests.  Why not, if such a gift is to be made, let the people have the advantage instead of the association ?

That, with almost innumerable other special privileges, was the report signed by Mr. Pujo.  The gentleman, no doubt, is sincere, but he has not entered into a study of these problems in such a manner or to be able to promote the general welfare as a result of his work.  He has been willing to and has signed the report by which the people of this country would grant to a private monopoly, the privilege of issuing money, free of charge, and giving it legal tender.  Several other of the members of the Banking and Currency Committee served on the National Monetary Commission and signed the same report.  Are we going to turn over the investigation of the Money Trust to be made by them ?  If we do, we must expect it to be conducted from the viewpoint and in the interests of the bankers, so far as they dare to, whereas it is the wish of the country that it should be made for the good of all business, and of the people in general.

The purpose of this investigation was to get such information as would enable Congress to pass proper laws on the subject of banking and currency.  We are asked to turn the whole matter over to the bankers and the attorneys of bankers.  We would be acting according to the same principle if we were to appoint J. Pierpont Morgan, John D. Rockefeller and Andrew Carnegie, and a few more of the same school, to investigate the trust problems and report their investigations and recommendations to Congress.



CONTROL OF MONEY AND CREDITS.

Committee on Rules,
House of representatives,
Friday, December 15, 1911.

The committee met at 10:30 o’clock a.m., Hon. Robert L. Henry (chairman) presiding.

The Chairman.  Gentlemen, the committee has been called to hear Mr. Lindbergh in reference to House resolution 314, in regard to the Money Trust.  If you are ready, Mr. Lindbergh, you may proceed.

Mr. Lindbergh.  Of course, I expect the committee, or any of its members, to ask any questions they see fit as I proceed.  There are some parts of my brief that I shall pass over because, as you already have copies, it will save time if I pass along to the most material parts.

I have assumed and I believe that there is very little doubt among those who have studied the subject closely that there is a Money Trust, but that its form and the nature of its operations are not generally understood.

Credits and debits, balanced by a small fraction of honest money, might be used as an equitable measure by which producers could be paid and consumers charged for the products and services of commerce.  Unfortunately, however, a few speculators have wedged in between the producers and consumers, and they operate and now principally control the system of credits and debits, and through it enough of the money so that they control the commodities by paying the producers the least and charging the consumers the highest price they can stand.  Under that arrangement present property and financial management conflicts with human rights and hinder general success.

Our financial system is a false one and a huge burden on the people.  The money kings know that the people are bending under it, and since there are some rather loose points about it, the money kings wish, through the medium of a demand made by the people to secure a change, to manage it in the interest of Wall Street.  They have proposed the Aldrich plan.

I have alleged that there is a Money Trust.  The proposed Aldrich plan is a scheme plainly in the interest of the trust.  There is a Money Trust, but it is not in the form of the steel, the oil, the tobacco, the railway, and the other common trusts.  It is maintained and governed by an entirely different method.  It is father of the others, but unlike.  The Government prosecutes other trusts, and it specifically and systematically supports the Money and Credit Trust.  The Government creates by indirection what it seeks to destroy by direction.

The district I represent is agricultural, and its bankers are mostly conservative and free from speculation.  But, notwithstanding, they have had to follow the law of necessity created by our banking system.  And to show what I mean by that statement I shall insert in my remarks three letters from banks as examples of the units from which the Money Trust gets its support, and that though the banks do not intend or desire to support the trust :

Letter No. 1.
(Capital, $50,000.)
German-American National Bank
Little Falls, Minn., November 17, 1911. Hon.

Hon C.A. Lindbergh,
House of Representatives, Washington, D.C.

Dear Sir :  Replying to your letter of the 11th instant, asking some facts regarding our loans, in our report to the comptroller, under date of June 7, 1911, we reported :


June 7, 1911 ... Sept. 1, 1911.
Loans and discounts ... $401,643 ........ $421,679
Lawful money reserve ... 44,090 ............ 39,420
With approved reserve agents ... 103,020 ............ 48,208
Other national banks ... 2,154 ................ 643


Of the $400,000 loans, $300,000 is an average amount of outside paper, commonly known as commercial paper, and $100,000 is local paper.  We have never been able to loan more than this locally for commercial purposes, but we could put out, say, $100,000 to $200,000 on good real-estate loans—farm loans—if we were permitted.

We have at present over $300,000 in savings deposits and $275,000 in time deposits in this bank, which amounts do not fluctuate very much from month to month the year round, and in my opinion 50 per cent of this could be safely invested in farm loans and be a great benefit to this county at large, and neighboring counties also.

In a recent report to the comptroller we recommended that national banks be permitted to use 25 per cent of commercial deposits and 50 per cent of time deposits for farm loans.

In times of panic it is almost impossible to realize quickly on commercial paper, especially the large amounts, but a good farm loan can always be disposed of either for cash or in exchange for credit.  A bank holding good farm loans could, in case of a panic, turn over any of them to depositors in lieu of cash wanted and the party who receives it would be perfectly satisfied provided he knew there was good land back of it.  I have heard of several instances of this being done, and I myself have heard people give excuses for taking out money in the bank in times of panic “to buy land where it is safe.”

We therefore are very much in favor of a law permitting national banks to loan on farm property, and you are at liberty to use this letter in any way you see fit to further this end.


Yours, respectfully,
E.J. Ritchie, Cashier,
John Wetzel, Vice President.

I saw published for the same bank a statement, and the amount due from approved reserve agents to that bank on December 5 was $103,171.04.  That fact applying to that and all other banks is an important consideration in connection with this whole question, because I expect to show that it is the reserves that accumulate as a result of this banking system that give the Money Trust the control of the finances of this country, and the secret of their control rests principally in that the most of the reserves and a large part of the deposits are kept in the big banks that the trust controls.  You will notice by the bank’s statement in letter No. 1 that they have loaned out in the community from which they receive their deposits about $100,000;  they have loaned out to parties who are non-residents, and live in distant places, and with whom they have no direct business, about $300,000;  or, in other words, three-fourths of the deposits in that bank.  There is another item about which the public in general knows little, namely, that these country banks are obliged to take the deposits that are placed with them by the people who reside in the community in which they are doing business, and loan them to distant borrowers, which results in the money being of no service to the community in which it was presumably earned.

Mr. Garrett.  Why is that ?  Why are they compelled to do that ?

Mr. LINDBERGH.  Because our national banking laws, and our banking laws in general, do not give the country banks an opportunity to invest in those enterprises that are going on in their own midst.  They can not loan to a farmer because farmers usually require long-time loans, and yet those banks are taking time deposits.  The time deposits of this bank referred to in letter No. 1 amount, I believe, to about $300,000.  That bank should be given the opportunity of loaning on securities part of its deposits which are made on time.  The deposits which are there for checking m the usual way should be liquid, liquid all the time, so as to carry on the commerce of the country.  There is a distinction between the two that we shall have to keep in mind.

Mr. Lenroot.  Are not time deposits subject to call at any time ?

Mr. LINDBERGH.  They are subject to call in general because if a bank refuse to pay a time deposit its credit would suffer.

Mr. FOSTER.  The same as any other deposits;  and they simply lose the interest ;  that is all.

Mr. LINDBERGH.  Yes ;  they simply lose the interest in practice.

Mr. WILSON.  Is there any bank that, if all the depositors made a demand for their deposits at the same time, could pay up ?

Mr. LINDBERGH.  There is not.  It would be a bad bank for the community to keep its condition such that it could pay up instantly, unless it got help from the outside.

Mr. WILSON.  I know ;  but they have only received the deposit, have they not, of these particular depositors ?

Mr. LINDBERGH.  Yes.  They received them to be handled in the usual safe way.  A bank that would receive deposits and leave them in the vaults would be a detriment to the community in which it did business.

Mr. WILSON.  There is no question about that.

Mr. Foster.  You understand that these foreign loans you speak of are many times commercial paper, sent out by large corporations that float paper at certain times.  Is that what you mean by that—foreign loans ?

Mr. LINDBERGH.  Yes, that is what I mean by foreign loans.

Mr. Foster.  You speak, for instance, of farmers.  Is it your idea, then, that there ought to be a change in the national banking law permitting them to loan on long-time paper ?

Mr. LINDBERGH.  Yes, a certain amount of their time deposits.

Mr. Foster.  How long a time ?

Mr. LINDBERGH.  At least a year.

Mr. DENVER.  Do you mean that they should be allowed to take mortgage loans ?

Mr. LINDBERGH.  Mortgage loans.  Of course, the time is a mere matter of detail.  I would not have it drawn for too long a time, understand.

Mr. Foster.  What is your idea, that the amount of loans they could make is to be governed not in limited amount ?

Mr. LINDBERGH.  In that way ?  Yes ;  limited to a certain per cent of their deposits.

Mr. Foster.  Yes.

Mr. LINDBERGH.  There should be a limit to it, such as experience shows would be safe.  I have letters from probably 100 bankers, and they to a unit agree that it would be better for the banking business, and better for the communities in which they are doing business, if they were permitted to use a certain per cent of time deposits to make loans on securities and for reasonable length of time on farms.

Mr. Foster.  You confuse time deposits there, I think, because they are all deposits subject to call.

Mr. LINDBERGH.  I understand ;  but the practical effect is time, and it is its practical effect that I consider in these matters.

Mr. Foster.  They are all subject to be withdrawn at any time.

Mr. LINDBERGH.  They are all subject to be withdrawn at any time, and this bank letter No. 1 that I have in the notes particularly defines the conditions with reference to those.  The bankers generally, who have written to me, say that they can convert their mortgage loans into cash quicker than they can convert the commercial paper ;  and that is my experience, too, in what I have observed.  I have observed the operation of that business to a considerable extent.  Depositors not needing to use their money would be glad in times of panics to get safely secured paper.

Mr. LENROOT.  The claim has been made a great many times that independent organizations have been able to do business independently only because of the opportunity to float their commercial loans through these banks outside of the great money centers ;  that if it was not for them the trusts and combinations, the New York financiers, would be able to bring them to time.  I would like to hear what you have to say on that.

Mr. LINDBERGH.  The first consideration of a bank, in the beginning of its business and throughout its continuance, should be to take care of the community from which it receives its deposits.  I do not think anybody will question that.  The people who are there doing business, whether it is farming or what-not, should be taken care of by the natural business of that community.  I think the banks should have the right, when they have taken care of their local demands, to go outside and buy commercial paper.  I do not question that, and I think there is big force in the point that Mr. Lenroot makes, and they should have the opportunity when the circumstances of their own localities favor it or justify the investment of deposits in other localities.

All the banks that reported to me desire the privilege of loaning on real estate, and firmly believe that proper realestate loans can be realized on more readily and are better in times of panic than commercial paper, and decidedly better than that taken from speculators and others from the cities.

It is well to bear in mind a distinction between money that is used as property, that is, a commodity, and money used as an agent of exchange.  Money used as a commodity, like that deposited by wage earners, farmers, professional men, and others, who do not use the deposits in commercial transactions, should be treated in a different way in regard to its investment than commercial deposits that are subject to check in the ordinary way.  The true purpose of money is its commercial use and all notes and accounts used in commerce should be liquid and kept so at all times.  The deposits made on time certificates should be loaned principally on securities, while deposits subject to the ordinary checking system, for commercial purposes, should only be loaned on short-time commercial paper.  The accounts of the two classes of deposits should be separated in so far as it is practical.  Notice the statement in letter No. 1.  You will see that the savings deposits and time certificates combined are a little in excess of paper held by the bank against makers from other localities.  The deposits used to carry the $300,000 paper taken from remote districts should be loaned to farmers and others in the locality where the deposits originate.  That would also give confidence to the savings and time depositors.  The bank making that statement shows that the officers fully appreciate the justice of responding to the legitimate demands of the locality from which it gets deposits, and that is true of all banks doing business independent of the Money Trust.

I commend for the study of Members letter No. 1 as giving a true state of conditions in the country, districts.  The other letters are as good on the facts they cover, and the study of the three is the A, B, C on which we can, in one respect, base an amendment to the banking laws that will save the country districts especially from some of the evil effects of panics, and it would lessen speculation in the cities.

The deposits of banks in other banks—that is, with each other—is the first start for the Money Trust.

Probably no banker in my district has the slightest idea that he furnishes the seed from which the Money Trust has grown, but I shall prove that they and their fellow-bankers there and elsewhere are doing that very thing.

The CHAIRMAN.  On that point, then, you do not contend that the bankers throughout the country in the respective States, and the bankers in these money centers, are in agreement, and have organized a Money Trust ?

Mr. LINDBERGH.  No ;  they have not.  There are as many honest men among the bankers as there are in any other business.

The CHAIRMAN.  In other words, you do not think there is any conspiracy.

Mr. LINDBERGH.  I do not think there is a conspiracy on the part of the banks in general.  I believe that a few hanks in New York form the backbone of the real Money Trust.

The CHAIRMAN.  I understand.  I mean in general.

Mr. LINDBERGH.  Oh, no ;  not in the least can the bankers in general be charged with deliberately maintaining a Money Trust.

Deposits are substantially the assets of the banks.  They term them liabilities, but it is from these principally that the bankers make their loans and also their profits.  The accounts are due to the depositors, but the banks use the deposits for making loans.  Consistently, the most of them prefer to loan in the locality from which they get their deposits.  That would bring local repetition of deposits.

Bankers generally are fair and accommodating in their business, as that business is conducted.  But the banking laws make it impracticable for them to loan all of their deposits in the localities of their origin.  It can be done in large cities, where the money kings, gamblers, and speculators reside (all of whom are heavy borrowers from the banks and take all that they can get).

Mr. Lenroot.  Right there, for information.  Are what are termed as commercial loans loans of this character, commercial paper by stock gamblers, and so on ?

Mr. LINDBERGH.  The country banks figure all short-time paper that they buy as commercial paper.

Mr. LENROOT.  I mean, as a matter of practice, are they that character of paper, or are they the paper of the large business houses, like Wanamaker and Marshall Field ?

Mr. LINDBERGH.  That is the real, true commercial paper.

Mr. Lenroot.  What is the fact ?  That is what I am asking for.

Mr. LINDBERGH.  The fact is, they use all kinds of paper they buy as commercial paper, or short-time paper.

Mr. Lenroot.  I mean, what do they buy ?  What is the character of the paper they do actually buy ?

Mr. LINDBERGH.  They actually buy paper of the character of Wanamaker & Co. and other companies like that.  A large part of the paper is made by companies of that character.  But they get paper that is made by speculators, men of means, you know, who buy for a rise in the market.  They are satisfied if they get good paper.

Mr. Garrett.  In regard to reserves, your country bank is required to retain 15 per cent ?

Mr. Lindbergh.  Six per cent in its vaults.

Mr. Garrett.  Six per cent in its vaults and 9 per cent of it they put in a reserve.  Then the bank in which it places that reserve is required to retain only 25 per cent of that 9 per cent ?

Mr. LINDBERGH.  And if it is a reserve bank it may redeposit it in another reserve or central reserve bank.

Mr. Garrett.  And so on ;  so that eventually it really works out to where there is almost only the 6 per cent that is really held ?

Mr. Lindbergh.  Not very much more ;  not any more in the bank of original deposit.  Certainly not.  Farmers and wage earners can borrow but little from the banks, and especially from national banks, because they are not allowed to loan on real estate nor make long-time loans.  Some of the national banks in the country violate the law and do make loans on real estate.  They can better justify that than the New York banks can justify their continuous violation of the banking laws in other respects.

Another practice of most banks outside of the speculative centers and of which little is known by the public or depositors is the buying of notes from brokers.  These are the notes of speculators and others in the large centers, and this is another form of diverting moneys from the country to the speculating and banking centers.  There is no record of the sums so diverted.  The bank statements include these in the item, “Loans and discounts,” which item covers all loans, and there is no way to separate them.  The notes, as a rule, are purchased by the hanks that carry large deposits in reserve bank cities.  It is simply an additional way of employing the deposits that can not be used in the locality of their origin because the banking laws are made for Wall Street.  Bankers are not to blame for this.  It is simply a condition to which they are compelled to adjust, and the amount of the funds thus diverted from the channels of their origin is a large one.

It will be seen in letter No. 1 that this small country bank alone loaned $300,000 to parties outside of its banking district.  Most country banks have such loans.  In my home county, covered by letter No. 1, there is now and has been at all times a demand within the county by borrowers who had first-class security to give, for more than the amount of all the bank deposits in the county.  These borrowers secure their loans through local agents, who charge them a commission for getting money from mortgage companies and individuals in other and usually distant places.

The farmers, wage earners, and others who save and deposit money in the local banks would be benefited if their money were loaned in the localities in which they live, and the borrowers would secure the same at less cost, but “No” has to be said to them, because, under our banking laws, speculators are given the preference.  There is no objection to banks making safe loans in localities other than that in which they do business, when the local demands are not sufficient for safe loans.  But the law should not obstruct loaning in a way most natural and desirable to those needing to borrow in the localities where deposits originate.  That would encourage local enterprise, be a saving in addition, and a mutual advantage to bankers and borrowers, and not a breeder of panics.

If banks were permitted to accommodate the community in which they do business it would make a home outlet far their deposits, and then the payment of interest by banks to other banks could he prohibited, for that would make it practicable to reduce the deposits of banks with each other to the amount required for exchange purposes.  It would remove some elements of danger in panics and reduce the power of the Money Trust.  An act to accomplish that should postpone the taking effect until there could be a natural adjustment.

Mr. FOSTER.  You treat that there as if they are loaning as speculators ?

Mr. Lindbergh.  To speculators.

Mr. FOSTER.  That most banks are speculative centers.  As was said by Mr. Lenroot, these commercial houses handle paper—that is, their brokers—and send out these notes, or a description of them, and the banks buy them, as I understand ?

Mr. LINDBERGH.  Yes, Sir.

Mr. FOSTER.  You do not treat them as speculative notes, do you ?

Mr. LINDBERGH.  Sometimes they are ;  not as a general rule. There is another class of loans that banks make in which I include the term “broker.”  For instance, a good many of the banks in Minnesota loan to parties in Dakota, or some other State, through other banks out there.  I consider those bankers, through whom they get such paper, when they act in that respect, as brokers.

Mr. DENVER.  Is that for the purpose of stock speculation ?

Mr. Lindbergh.  Oh, no ;  it is not.

Mr. FOSTER.  They are not speculators ?

Mr. Lindbergh.  No ;  they are not speculators in the sense of bonding stocks.

Mr. Lenroot.  Do you think, Mr. Lindbergh, there is any substantial percentage of loans made by banks on speculators’ paper ?

Mr. Lindbergh.  Yes ;  there is.

Mr. Lenroot.  I mean made direct by the banks ?

Mr. Lindbergh.  Not a large per cent of their deposits are made direct to speculators, except in the large cities.

Mr. Lenroot.  But a large percentage of what are known as commercial loans ?

Mr. Lindbergh.  Yes ;  there is a considerable per cent of that.

Mr. Lenroot.  It would not be considered very safe banking, would it, in any community where a bank did that ?

Mr. Lindbergh.  Perhaps I should give an explanation there.  I consider a person who is buying a large quantity of timber out in Oregon, or any other State, a speculator in that timber.  I do not mean that I confine the term “speculator” to persons who deal in bonds and stocks, but any person who uses the money that he obtains to invest in property on which he expects to receive a profit by a resale of it is a speculator.

Mr. Lenroot.  Through its raising value ?

Mr. Lindbergh.  Yes.  He is a speculator.

Mr. WILSON.  Then you would consider a man trying to corner the wheat market a speculator ?

Mr. LINDBERGH.  I certainly would.

Mr. Lenroot.  Most anybody would.

Mr. WILSON.  Is it not true there in Chicago that the board of trade men borrow great sums of money from the Chicago banks on their notes ?

Mr. Lenroot.  I think they put up collateral for everything they get.

Mr. LINDBERGH.  Most of those people put up collateral.

Mr. WILSON.  Not all of them.  I think the character of the man has a great deal to do with that.  I think many of the men there can borrow great sums of money.

Mr. Lindbergh.  The creation of the National Monetary Commission was a very clever move.

It was in 1907 that nature had responded so beautifully to the farmer’s touch and gave this country the most bountiful crop it ever had.  Other industries were busy, too, and from a natural standpoint all the conditions were right for a most prosperous year.

If the Government and business had been properly managed, the resulting condition should have been one of happiness and prosperity, and it would have been a year to make us all happy.  Instead, a panic entailed enormous losses on us.  Not many of us knew the cause.  Wall Street was wise, and it knew that we were demanding a remedy against a recurrence of such a ridiculously unnatural condition.

Most of the Senators and Members then fell into Wall Street’s trap and passed the Aldrich-Vreeland emergency currency bill.  Its ostensible purpose was to provide an emergency-currency, but the real purpose was to get a monetary commission which would ultimately frame a proposition for amendments to our currency and banking laws which would suit the Money Trust.

All banks except those in control of the money kings were scared.  These money kings, in so far as it seemed necessary to them, took everything in hand, including the funds of the Government.  They managed that panic The Government was helpless in their hands and did nothing except to aid them.

The New York Clearing House is an institution in the control of the Money Trust.  Its certificates were issued to pay depositors instead of money.  The New York banks refused to pay the country banks the reserves due them.  Some of these had been deposited directly by the country banks and others indirectly through the reserve banks.  The New York banks simply defied and violated the law.

If a country bank had done that, it would have been closed by a bank examiner.  If a group of country banks had attempted it.  they would all have been closed.  But the New York Clearing House issued clearing-house certificates and forced us to accept them as money.  If the United States had issued certificates to help the people in that time of stress, the Wall Street Money Trust would have vetoed it.  It would even have dared to veto such an action by the Government.  But the Government did not dare to veto the New York banks’ clearing-house system.

The Money Trust did other things.  It intimidated some of the country banks for which it acted as reserve agent from paying cash to depositors.  It ordered them to pay in clearinghouse certificates.  Through the guardianship of the Morgan-Rockefeller regime some of the more influential of the cities did resort to the New York Clearing House system to pay deposits.

The Money Trust at different times has sent notices to certain of its agents and those in community of interest to tighten up the money market and raise the rates of interest.

Merely as a suggestion of one of the methods, I quote from another letter such parts as seem to the point.  I omit all parts that would identity the parties, for the reason that it seems best to do so if their testimony is later to be secured.  The original is in my office, and it can be seen by any member of the Rules Committee.  It is as follows :

North Dakota, July 29, 1911.

Hon. C.A. LINDBERGH, Washington, D.C.

Dear Sir :  In the investigation of the Money Trust you can get valuable information from * * *.

He has a personal knowledge that the * * * was invited to join in tying up money more than a year and a half ago to raise interest rates, and the rates were raised, as you know, * * * refused to go in, but had to follow suit in raising the rates after that was accomplished.  Some one should interview * * * without his knowing beforehand for what purpose, and he will give them a lead that can be followed up and which will open up a great many facts of value for the investigating committee.  Of course my name must not be mentioned in any way, either publicly or to * * *, but this letter may, if you deem it proper, be shown to the committee, and afterwards you had better retain it yourself.

* * * * * * *

Respectfully.
_____________

The first relief must be provided through the country hanks.  It is our duty to amend the banking laws in such a manner as will provide an outlet for their deposits without sending them into the speculative centers, where they are used to corner the staples and services needed by the people and to bring on panics.  A few simple amendments to the banking laws will relieve the country bankers of the necessity of sending their depositors’ money to the speculative centers.  No report from the National Monetary Commission is necessary for that.

We need an entirely new money and banking system.  But first we must know some things concerning the financial situation that the Monetary Commission has failed to furnish.  We need some additional information, and we can then build a permanent, honest money and banking system.

The people must know the ins and outs of the treatment they have received at the hands of the Money Trust, in order to avoid its pitfalls.  After that they can not be bluffed out of an honest money just because of the Money Trust challenge.

Why does the Money Trust press so hard for the Aldrich plan now, before the people know what the Money Trust has been doing ?  Has it not got the Aldrich-Vreeland emergency law, an act of its own concoction, that does not expire until 1914 ?  It said, when it fooled Congress to pass that act, that it was a sure remedy for panics.  It knew we were scared of panics then.  We had just been pinched by one.

We should stand ready to pass honest money and banking laws as soon as we can secure such facts as will safely guide us.

I have already discussed the use that the Wall Street Money Trust makes of the so-called depositors’ “sacred reserves.”  The present fixed bank reserves is the rock on which prosperity may run at any time and produce a panic.  Prosperity ran onto that rock in 1907.

The fixed reserves are the practical holdings of the Money Trust and they want to make them larger by the rules of the proposed National Reserve Association, for it is provided by that plan that all subscribing banks must conform to the requirements in so far as reserves are to be held against deposits of various classes, and that there shall be no change in the percentage required by the law to be held against demand deposits by national banks in the different localities, and that hereafter the same percentages of reserve shall be required of all subscribing banks—meaning the National Reserve Association—in the same localities.

That is intended to comprehend State banks and trust companies, which under the latest Aldrich plan are eligible to subscribe to the National Reserve Association.

No, the Wall Street Money Trust can not let go of the “sacred reserves.”  “There shall be no change,” but on the contrary it wants to increase them by adding more banks to follow the same rule.  They always have had the use of the reserves.  They never have been used for the depositors except after actual insolvency, and the insolvency of a bank brings loss to depositors, so the “sacred reserves” are most sacred to the Wall Street Money Trust.

A proper investigation of the trust will show the wrong that has been perpetrated on the people by this false fixed reserve—fixed—fixed—why, of course the Money Trust wants fixed reserves so that it can absolutely depend on having them.  The penalty visited on depositors, if they insist on taking them away from the trust, is insolvency of the banks that would have them to pay their depositors.

The Money Trust for many years has had practically a billion dollars of fixed reserves—“sacred reserves”—to use in speculation and to manipulate, secure corners in stocks, capture and control railways and industrial companies, and to buy and own the Nation’s enterprises and its natural resources, making them vested rights in the trust, on which they may fix fabulous values on which to issue bonds and watered stocks and annually compound interest as a fixed charge on this and future generations.  That is what the “sacred fixed reserves” have done for the Money Trust.

We still have with us a few veterans of the Civil War, some who fought far the emancipation of slavery and others who fought against it.  On both sides there is now a common agreement that right prevailed, and personal and sectional prejudice has ceased.  It is now our duty to show by our actions and appreciation of the victory that came to the Union soldiers at enormous sacrifice, that we still stand for freedom, and if we preserve it their sacrifice was not in vain.  This appreciation surely is seconded by those who fought in the other battle lines in the first great struggle and they now recognize the justice of the maintenance of the principles settled in that struggle.  We all join now in seeking to make those principles practical.  We are of one heart and one soul, an inseparable national brotherhood, and unite in the acknowledgment of the wisdom and prophetic foresight of the immortal Abraham Lincoln when, near the close of the war, he gave utterance to the following :

“Yes ;  we may all congratulate ourselves that this cruel war is nearing its close.  It has cost a vast amount of treasure and blood.  The best blood of the flower of American youth has been freely offered upon our country’s altar that the Nation might live.  It has been, indeed, a trying hour for the Republic ;  but I see in the future a crisis approaching that unnerves me and causes me to tremble for the safety of my country.  As a result of the war, corporations have been enthroned and an era of corruption in high places will follow, and the money power of the country will endeavor to prolong its reign by working upon the prejudices of the people until wealth is aggregated in a few hands and the Republic is destroyed.  I feel at this moment more anxiety for the safety of my country than ever before, even in the midst of war.”