THE ROLL CALL
The Roll Call ON MEN AND MEASURES "A Little Bunco Game" YOU, MR. PUBLIC SPIRITED CITIZEN, have for a long time wanted to see a system of postal savings banks established by the federal...
...The System managers were beaten...
...But Standard Oil knows...
...You have read much of postal banks and heard the subject discussed for years, but this is a new mystery...
...It announces...
...We should be grateful for this little bulletin from Standard Oil, for it answers all these vexing "whys...
...But it is something that is to happen hereafter, we are informed by Standard Oil, that will work losses to the holders of these bonds—the establishment of a central bank...
...Your interest in behalf of this undertaking has become a "public sentiment...
...Perhaps he had been told that these bonds were "liable to be on the market," and that "we have to take care of them in some way," and had not been told why...
...Senator Root's chief defense was that the postal bank legislation was unconstitutional...
...Out of thtse fortunate circumstances, in this case, came the adoption of the Borah amendment to the postal bank bill, which, for the present, defeats the System scheme of saddling upon the postal bank the soon-to-be-despised 2 per cent, bonds...
...You find that the President said: "You know we have issued upward of $700,000,060 of 2 per cent, bonds of the United States, and we have prided ourselves and our heads have been a little bit swelled on the theory that we could float bonds at 2 per cent, and no other country could...
...The bonds yield about one and a half per cent, net, and as the national banks are getting the interest on over seven hundred millions of bonds which cost the banks nothing (or a negligible amount,) they have abused the confidence of their friends in claiming to be buncoed...
...You studied postal savings banks as they have existed in nearly all civilized countries of the globe except our own...
...This ended the real controversy over the bill in the Senate...
...It is an exchange...
...Still, it would take cake of the System and THE "TWO per cents" ! The Wall Street Journal is authority for the statement that the two per cents., shorn of their circulation privileges to banks, "should sell at anything from 66 to 70...
...We have to take care of them in some way...
...And this "serious and vexing situation," it is demanded, shall be relieved by shouldering upon the government postal banks the burden of this prospective loss to be occasioned by the establishment of the central bank of issue which Standard Oil knows will be recommended by Aldeich's Monetary Commission...
...What plan of "currency reform" could that be...
...In 1900 the House of Representatives passed a short bill, fixing the gold standard...
...Why, to Standard Oil...
...The old bonds were redeemed by the treasury at such prices as the banks were willing to take...
...Can anyone doubt that the spectacle of the bonds of this glorious Republic selling "at anything from 66 to 70" cents on the dollar would "in the judgment of the President" constitute "an exigency involving the credit of the government," requiring him to authorize the purchase of these bonds with postal savings bank deposits...
...Two years ago both of the great political parties adopted the postal savings bank into their party platforms upon which they appealed for your vote...
...We fear that "the man who works with his hands" will lack in appreciation of the efforts of the learned Senator to enable him to have his "little stake" in "the securities issued by his government," if they are the kind of securities which the President says we buncoed the banks into buying and must therefore "take care of in some way...
...So it was abandoned, and another presented by Senator Smoot...
...The President spoke for a postal savings bank, and you were glad of that...
...A measure that had become fixed in the public mind as a boon to the common people should be allowed to pass, but only if it could be perverted to the sordid schemes of Big Business...
...Among those so recorded are the following : Aldrich Elkins Penrose Depew Heyburn Perkins Hale Lorimer Sutherland...
...What a fine thing it would be, you thought, to have a place where anybody, anywhere, could deposit conveniently for safekeeping a little of his earnings—even if only a dollar to begin with,—and could add to that sum from time to time any little amount—even a dime—which he might have above his current needs, and have always the assurance of the government that this little savings fund would be absolutely safe, and that the owner of it would always be able, no matter what happened, to withdraw at pleasure all or any part of his deposit—with perhaps a little added to it in the way of interest...
...He advocated such an amendment most strongly as a means of bringing the postal bank bill—dragging it in by the heels, as it were—within the constitutional limitations...
...Why should Congress and the people of the United States have to search the literature of Standard Oil for a frank explanation of the reason for legislation which it is sought to force through the Senate under a false cry of "bunco," and without official explanation of any sort...
...What, you ask...
...Al-drich...
...It is calculated to bring tears to anybody's eyes after he thoroughly understands it...
...That it would promote the industrial independence and well-being of the people...
...The Act was passed accordingly...
...This, then, is the "little bunco game" that was played—not on the banks, but on the people of the United States—because the people it is who pay this $12,000,000 annually of interest on no investment...
...Mr, Dolliver...
...Why should "we have to take care of them in some way...
...Most important among them was that by the security of such a government depository the hoarded treasure—perhaps an enormous sum in the aggregate—would be drawn forth into trade and industry...
...PUBLIC SPIRITED CITIZEN, have for a long time wanted to see a system of postal savings banks established by the federal government...
...Not yet...
...This, too, is made plain in the Standard Oil announcement...
...He even sought to have it understood that his amendment, although it would make possible, did not contemplate, investment in the 2 per cent, bonds which were giving the President so much anxiety...
...We telegraphed our correspondent, just after that act was passed, purchasing $250,-000 of these bonds...
...For this reason, Mr...
...Now they are liable to be on the market...
...In justification of the amendment, the Senator from New York said he wanted to enable "the man who works with his hands on the farm or in the factory to have his little stake in the government of the United States by the investment of his earnings through a postal savings bank in the securities issued by his government...
...And at last the friends of a postal savings bank for the people seemed to have won their point...
...It cuts out the much-mooted "two per cents...
...Gallinger Piles Clark, Wyo...
...And did they think that the absence of such an avowal would conceal from the public and from Congress the real purpose of their amendment to the postal bank bill...
...Indeed Aldeich has professed within a short time not to have reached a decision as to what the Monetary Commission will report...
...If we have the postal savings banks, if we have a large fund of $500,000,000 or $600,000,000 or $700,000,000, as we may expect to have in view of what has happened in Great Britain, we can use that fund to put in government bonds and take care of that issue...
...He said: "Mr...
...As trained, public spirited minds, one after another, have come to consider the problem and to study it, the benefits to the public generally to be afforded by a postal savings bank system have come to be more and more appreciated...
...Public Spirited Citizen, you should watch the postal bank bill in the House and in the conference between the two houses, and keep your congressmen and Senators advised of your interest therein...
...The currency against these bonds, issued as the currency of this particular bank, was used to pay for the purchase of the bonds, less a small item of premium...
...This, then, is the "serious and vexing situation," revealed in all its awfulness...
...Is it any .wonder that Senator Dolliver, in spite of his well known regard for proper amenities and the deference due to the Chief Executive of the nation, was moved, in the face of these facts, to declare, of the President's statement that the government had buncoed the banks, "My friends, we are come upon a time of amateurs in our national affairs...
...After the amendment of Senator Cummins, about which we told in last week's Roll Call, to limit bond-buying to times of war was defeated by System votes, and in the last stages of the consideration of the Smoot amendment of the bill, Senator Borah offered his amendment, which allows the investment of postal bank deposits only in bonds bearing at least 2 1/4 per cent...
...On March 3d Senator Dolliver disclosed in the Senate this "little bunco game" by reading the law in which these 2 per cent, bonds originated and stating the facts connected therewith...
...These government bonds are owned to the extent of $700,000,-000 by national banks—mostly by Standard Oil-System financial institutions—bought by them at par or above, "under special inducements as to circulation privileges," which special inducements would be taken away by the establishment of a central bank of issue, resulting in a loss to the holders of these bonds of what they paid for them over and above their value as mere safe, interest-bearing securities...
...can be this "serious and vexing situation" which so inexorably links the purchase of government bonds with the passage of a postal bank bill...
...Despite the painstaking preliminaries that had gone before, and the innocent character sought to be attached to it by its author, it became at once apparent that the Root amendment was too obvious—that it would not do...
...So, we still have in the Smoot amendment the embodiment of the scheme to pave the way for the central bank by providing for the purchase with the postal bank funds of the 2 per cent, bonds...
...Nor has anything happened as yet to make their investments in these government bonds materially less attractive today than on the day that they eagerly bought them ten years ago...
...It is a very convenient and comfortable transaction, and is all right from the standpoint of the banker...
...The premiums were paid in cash...
...Public Spirited Citizen, who have been anxiously following this movement, faint recollections of a speech in which the subject was mentioned some time ago...
...As the bill passed, it provided for the establishment of postal savings depositories which may be regarded fairly as a redemption of the party pledge in this respect...
...The Smoot amendment is in the bill limited in its original scope and purpose by the Borah proviso, to eliminate which will be hereafter the chief concern of the System management...
...This Smoot amendment was designed to accomplish the same ends, so far as the System was concerned, but it was sugar-coated by a proviso that would authorize bond buying only "when in the judgment of the President, war or any other exigency involving the credit of the government so requires...
...If the Borah proviso is eliminated, it will mean that the System has again perfected its control in legislation and the public will be forced to assume upwards of $200,000,000 of depreciation in government two per cent, bonds resulting from the establishment of the central bank, whether the central bank confers any compensating benefits upon the public or not...
...that is all...
...But only by inference did he contend that even a bond-buying provision so broad in scope as he proposed would, in his judgment, bring the bill within the scope of congressional power under the constitution...
...Not if we read aright the utterances of the President upon this subject...
...You dismissed the rest...
...Those who have demanded the establishment of a postal savings bank in the public interest have long recognized that the disposal of funds deposited in such an institution presented a grave problem, and that problem also they have consistently demanded should be solved in the public interest and according to the dictates of right and justice...
...They chose to allow the Borah amendment to pass—trusting, perhaps, to future stages of the legislation to afford them an opportunity to get rid of it...
...But the President did not explain how the banks had been buncoed...
...The president was less tactful in his New York speech...
...That such an institution in this country would tend in a very practical way to counteract those seemingly overwhelming forces which constantly widen the disparity between the wealth of the few and the poverty of the many...
...Fortunately, there are some Senators in the upper House of Congress who, when they have "a little more sea room," fight to safeguard the interests of the people...
...The banks took the new bonds freely, paying for them with their own notes which they were thereby enabled to issue...
...The banks have not been buncoed...
...Not at all...
...The President said something about taking care of these government bonds...
...Why were these bonds, which would seem to be a very good thing for the banks, "liable to be on the market...
...And you, Mr...
...and, second, that the deposited funds of this bank should be managed for the benefit of the people and should be redeposited, without favoritism, in the banks that supply the commercial needs of the communities where the funds are owned...
...It provides that postal savings deposits shall be redeposited, without favoritism, in banks and trust companies in the locality where they are owned, in proportion to the eapital and surplus of the banks...
...When that bill," said Senator Dolliver, "came to the Senate, it became a mere nucleus around which was assembled all the fruitage of the financial wisdom which had ripened in this body up to that time...
...Almost simultaneously, the head of Standard Oil finance announced that the adoption of an amendment to the postal bank bill providing for the investment of the postal savings deposits in government bonds "would solve in great part a serious and vexing situation," and Senator Root of New York, introduced in the Senate such an amendment...
...They can stand the game if the American people can...
...The Root amendment was designed to pave the way for the central bank...
...We did float these at par at 2" per cent.—I do not know but that it was a little more—but we did it by getting the banks into a corner so that they had to have under the law some government security, and so they were obliged to buy those 2 per cent, bonds...
...If so, then verily, in the words of Senator Dolliver, "We are come upon a time of amateurs in our national affairs...
...The statesmen of the Senate saw that either these bonds mast be kept out as a basis for circulating notes, at these high rates of interest, or other bonds issued in their stead at such a rate as would induce the banks to take them, so that the currency circulation might be maintained...
...and thereafter and since that time this bank has been receiving 2 per cent, on the bonds substantially without any investment whatever...
...Gamble Root Voting against the Borah Amendment...
...Opposition to this amendment could only be explained by making a clean breast of the whole conspiracy, by an open avowal of the purpose of the Smoot amendment to "take care of the two per cents" against the coming of the Central bank...
...Already the government was redeeming millions of them...
...Clearly, then, this central bank scheme is the real "bunco game" of which the holders of these bonds have to complain...
...There were outstanding many hundreds of millions of government bonds on which the government was paying .high rates of interest...
...It is even fortunate that there are some other Senators who recognize that there is a limit of public suffrance beyond which it is not well to go, just before a Congressional election, in their efforts to serve the System...
...IT IS KNOWN," says Standard Oil...
...But now you look it up...
...When the pending postal savings bank bill was ready for consideration in the Senate, it seemed to be finally conceded, first, that a postal bank for the people should be established...
...None other than a central bank of issue...
...Learned jurist as the President is, this had apparently not occurred to him when he spoke at Milwaukee in September, and at that time he based the necessity for a bond-buying provision only upon our moral obligation to the "banking fraternity" upon whom the government had played a "little bunco game...
...Beveridge Burkett Brown Davis Curtis Cummins Guggenheim Hughes Johnston Scott Shively Simmons Bradley Cullom Jones Smoot Borah Dick La Follette Stephenson Clapp Dillingham Lodge Stone Chamberlain Dixon McCumber Taliaferro Carter Dolliver Oliver Taylor Burrows du Pont Overman Warner Crawford Flint Owen Warren Crane Frye Page Clarke, Ark...
...During Senator Dolliver's discussion, Senator Owen, of Oklahoma, as a banker who participated in it, explained precisely how this "little game of bunco" worked...
...They are at present, and were then, practically all on deposit in the federal treasury, and paying interest to the banks that own them, mainly as security for circulating notes issued by the banks but partly also as collateral to secure government money which the treasury deposits with the banks— much to their profit, and they are not due or payable for twenty years to come...
...The Secretary of the Treasury had suggested 2 per cent, as the rate...
...This amendment practically abandoned the constitutional argument based upon the financial needs of the government, by making such use of the postal bank fund, on the face of the measure, only a remote and incidental contingency...
...That they were these securities Senator Root did not state...
...They were due to mature within a few years...
...It was a speech by President Taft...
...Public Spirited Citizen—and it is the salvation of this Republic that your name is legion—you learned these things from your own experience and from your observation on all sides...
...But the President said that the Government had played "a little bunco game" on the banks...
...Are we to accept the necessary inference that those responsible for this undertaking recognized that such a frank avowal of their real object would defeat their plans...
...It is known thai the Monetary Commission will in the course of a year or two and perhaps earlier be prepared to report some plan of currency reform which may involve the note issuing power of the national banks...
...Perhaps Standard Oil has not yet informed Mr...
...President, I was connected with one of these banks, and am still, and I have a great interest in it...
...For Standard Oil knows, even though the President and Aldrich did not and, what is most satisfactory, Standard Oil tells us...
...You found that they promoted thrift and good citizenship...
...This would defeat the Smoot amendment entirely...
...Then came a denouement...
...But it is not clear yet, you say, why a provision for the purchase of government bonds as a part of the postal bank legislation is necessary, even if Standard Oil does know that the Monetary Commission is going to report a central bank plan of "currency reform...
...You studied the question...
...To be sure, no official announcement to that effect has yet been made by Aldeich or by any of his "associates" on the Monetary Commission...
...It seemed that Congress would be obliged finally to yield unconditionally this much to the people...
...Must it be accepted that they believed that Congress would not dare openly and avowedly to foist upon the public these losses which the establishment of a central bank might bring to the bondholders by providing for the purchase of the bonds with the postal bank deposits...
...It was just a little bunco game which the Government played, and it is necessary that in any legislation which comes along we should take care of that issue of 2 per cent," The President said that these bonds "are liable to be sn the market...
...The President did not say why...
...Why did not the President and the statesmen of the Senate so announce it in the beginning...
...That they gave to millions a new interest in and a new loyalty to the governments under which they live...
...The System asserted its control of Congress...
...Bankhead Kean Money Smith, S C. Brandegee Burton Paynter Bulkeley Burnham Ravner Not the least significant fact in this RoM Call upon this amendment is that most of the System leaders of the Senate are recorded as "not voting...
...The substantial fact is that from twelve to fourteen millions per annum are paid to the banks without consideration, as interest on hese bonds bought by the banks with their own notes...
...The Standard Oil bulletin makes it very plain...
...Known to whom...
...The Treasury at that time was receiving a great surplus of revenue...
...Owen...
...When the Boot amendment to provide for the investment of the postal savings deposits in government bonds was announced it awakened in you, Mr...
...But these bonds were the basis of the bank-note currency of the country...
...The vote on the Borah amendment was as follows: Voting for the Borah Amendment...
Vol. 2 • March 1910 • No. 11
