operation at its financial centre a clearing house where all the bank
notes, checks, drafts, bills of exchange, and other instruments of
credit, drawn upon any bank located in the zone, may be cleared, and
for any other purpose that may come within the purview of this Act;
and all such instruments of credit shall be accepted and settled for
at par at such clearing house, under and in accordance with such rules
and regulations as may be established from time to time by the board of
directors of the American Reserve Bank.
COMMENT:--MR. MANUFACTURER: You have now completed the functions of
the zone, it seems to me; and everything that you have proposed is
based upon the approved practices of the American Clearing House.
The free check zone, provided for in this last section, is identical
with that at Boston, where, ever since 1899, every New England bank
check has been at par at the centre.
Atlanta, Nashville, Kansas City and several other cities are working
out the same plan. This plan is also identical with the plan that New
England worked out before the war, with respect to the redemption of
bank notes, when bank notes were the chief form of bank credit then
used.
From 1818 to 1865, you will remember, the Suffolk Bank acted as a
clearing house for all New England bank notes which were par at
Boston, precisely as checks are today.
Here we are getting back to the simple fundamental principle of
current redemption of bank credit without charge to commerce in
whatever form the people may choose to use it.
It is bank notes and checks in France, Scotland, Ireland and all over
Canada. Why should it not be bank notes and checks all over the United
States just as well, in order that the people may have bank credit in
the most convenient and cheapest form possible?
Then, you have extended to every commercial zone the same organization
for supervision and administration that the most advanced clearing
houses have; the Board of Control to examine them and the Bankers'
Council as a court of appeal to settle all difficulties that may arise.
MR. MERCHANT: Is it practical to have the zones conform to State lines?
MR. BANKER: Such a thing should not be thought of. Economic laws do
not follow State lines. There is not a single State in the Union that
is a natural economic zone. Some States should have several financial
centres; some none. To attempt to make a commercial zone conform to
State lines would be absurd. Bank credit flows to centres as water
rushes to the ocean, and we should not violate a great economic law
to the irreparable injury of commerce. Sense and not sentiment should
control our action.
St. Louis and Kansas City are natural financial centres, but Jefferson
City is not. St. Louis draws its bank credits from eastern Missouri,
southeastern Iowa, northeastern Arkansas and southern Illinois.
Kansas City draws its bank credits from western Missouri, southwestern
Iowa, southeastern Nebraska, all of Kansas and some of Oklahoma. These
cities illustrate the principle that must not be violated or we may do
more harm than good.
Vermont has no economic centre, and it would do violence to trade and
commerce to make one arbitrarily.
Tennessee has three such centres. Indiana and several other States
have but one.