The last provision largely increased the number of banks, and appreciably augmented the capital and is sues. The actual result was an enormous stimulation to bank note issue. The increase in circulation dur ing 1899 was less than $4,000,000. During 1900 it was over $85,000,000; and the following year saw an increase of over $107,000,000.
6. Secretary Shaw's wave of prosperity which followed 1900 dulled the conscious ness of any need for banking reform. The National Monetary Commission and Lyman J. Gage, who was Secretary of the Treasury under President McKin ley, continued to urge reform, but their warnings fell upon ears attuned only to the whir of prosperity and the clink of inflowing gold. The estimated stock of gold in the country rose from $597,927,254 in 1895 to $1,419,943,194 in 1905, an increase of over 137 per cent in ten years.
A certain amount of pressure continued to be felt every autumn but Mr. Shaw, who became Secretary of the Treasury in 1902, devised many unique tho utterly unscientific ways of meeting the situation. His paternalistic dabbling in the currency and credit affairs of the country started a policy of Fed eral interference which is sometimes called the "grandfatherly attitude of the Secretary." A previ ous chapter referred to some of the expedients which secretaries of the Treasury are accustomed to prac tise. An illustration of Secretary Shaw's peculiar gifts in this field is his action on an occasion when gold was being imported. He concluded that the inflow was not proceeding with sufficient rapidity. Ac cordingly, he arranged privately with two New York banks that, if they would undertake to accelerate the movement, he would deposit as much gold as they imported as soon as arrangements were com pleted for importation, so that they would not lose interest on the amount while the gold was in transit. A few days later he announced that he would do the same for other banks which were depositories of gov ernment funds. The result was a speeding up of im portation, altho probably not an increase in the total amount which would have come in finally. Of course, government depositories had an unfair ad vantage over other gold importers in that they were saved interest on amounts in transit.
7. New York Chamber of Commerce Committee. —All the various expedients adopted in the adminis tration of the law convinced certain thinking men that the law was not what it should be. Each suc cessive autumn brought a worse strain on the finan cial °system. Finally, a committee was appointed by the New York Chamber of Commerce to frame a measure for banking and currency reform. A report of the committee was adopted by the Chamber on November 1, 1906. It advocated the establishment of a central bank which should be under the control of a Board of Governors appointed in part by the President of the United States. The bank was to take over certain functions from the office of the Sec retary of the Treasury. The following is a brief re sume of the argument advanced for the central bank idea: The operations of central banks in Europe, especially in France, Germany, Austria-Hungary and the Netherlands, make it impossible to doubt that the existence of such a bank in this country would be of incalculable benefit to our finan cial and business interests. Such a bank in times of stress or emergency would be able by regulation of its note issues to prevent those sudden and great fluctuations in rates of interest which have in the past proved so disastrous. Fur thermore, it would have the power to curb dangerous tendencies to speculation and undue expansion, for by the control of its rate of interest and of its issues of notes it would be able to exert great influence on the money market and on public opinion. .Such power is not now possessed by any institution in the United States. Under our pres ent system of independent banks, there is no centralization of financial responsibility, so that in times of dangerous over-expansion no united effort can be made to impose a check which will prevent reaction and depression. This is what a large central bank would be in a position to do most effectively. A central note-issuing bank would supply an elastic currency varying automatically with the needs of the country. This currency could never be in excess, for notes not needed by the country would be presented for deposit or redemption.