Banking progress

Preface

The story of growth, a progress from a lower to a higher plane, is always of absorbing interest in any field. In the evolution of our thinking on banking we have the complement to the history of our monetary development out of the greenback and silver stages. Although the two phases of progress are more or less related, the main significance of our banking progress is to be found in the gradual understanding of the workings of credit, and the emphasis which has inevitably been placed on the organization and flexibility of credit as a part of our industrial growth. Even though the meaning of separate events was not clear at the time of their occurrence, a glance backward from our present position shows very distinctly the country through which the road has been winding.

Having been myself in close touch with the movements which from time to time marched with our monetary and banking progress, it has been inevitable that my presentation should have the marks of the period in which the questions at issue were fought out. Indeed much of the material in this volume came forth as a part of the effort to aid in directing public opinion to an intelligent solution of difficult questions. Perhaps, for this reason, if for no other, they should have some historical value. But, in college courses on banking it may be worth while to have in compact form the sequence of vi PREFACE

events which led finally to the possibility of the Federal Reserve Act.

Inasmuch as active charge of the educative campaign leading up to the enactment of the Federal Reserve system was laid upon me, I have been repeatedly urged to set down the inside history of the movement. It is too soon, however, to publish any such account. But it has seemed justifiable to give to the public the exact bill with its commentary (Chapter IX) which was in 1912-1913 offered by me to the framers of the bill. That it was misrepresented at the time goes without saying. Its perusal will show that its recommendations regarding the note-issues were not followed. One reason, to my mind, why its appearance now may be timely is the acute condition to-day of the note-issues and reserves, resulting from our war financing, which suggests that important changes may be ahead of us in order better to protect our note-issues from undue expansion, and better to separate our issue from our discount and deposit functions of banking. It seems strange that in the most important banking enactment of our history we should have gone back in effect to the practice of the old United States Bank wherein one cash reserve was kept for both demand-liabilities, notes and deposits. The account of the working of the Federal Reserve Act for the five years since its enactment (Chapter XI) shows some shortcomings both in policy and structure which demand attention, especially in view of the responsible position that we have assumed in the world of credit.

J. Laurence Laughun.

Boston, March, 1920.