and abnormally high until the production is again adjusted to the consumption or demand.

Another significant feature in our industrial condition to-day is the extraordinary reorganization of capital that has taken place during this period of high-water prosperity. This too is slackening now, but these large concerns which are settling down to steady business have not become quite economically normal. Some of them have unquestionably been over-capitalized; they have been capitalized on the earnings of high-water mark prosperity, rather than normal or low-water mark conditions. A few years of continued prosperity will put these concerns on a practically sound, economic basis, and thus the reorganization of industry in this transition period will have become permanent and normal. From these facts, it is manifest that a disturbance of the tariff policy might easily create a disastrous chaos. Much of this reorganization has taken place in industries directly or indirectly affected by the tariff. The amount of credit and commercial confidence that is necessarily used in this whole labyrinth of independent organizations is such that any change of policy affecting their possible prosperity would destroy the public confidence in the securities representing these enterprises.

There is no risk whatever in predicting that an agitatation to revise the tariff, which always means to lower it, nobody knows how much, would cause a business disturbance, and probably a panic, in less than three months. Of course, the disturbance would be in proportion to the probability of the performance. The democratic campaign for the revision of the tariff and the crippling of corporations might not seriously affect business, because in the present state of that party there is no real probability that it could control the national policy. The senate, the house, and the executive are controlled by the republicans, and all these branches of government favor maintaining the protection to our domestic industries. So long, therefore, as they present a united front against any radical change of policy, business confidence will remain practically unchanged. But

if the administration party weakens on this point, and acquiesces in the demand of the anti-protection people for a revision, the bottom will necessarily fall out of the confidence in the protective policy.

Herein lies our present danger. When Mr. Roosevelt acceded to the presidency, he said privately and publicly, with all the emphasis of which he is such a master, that nothing should be done to disturb business confidence, and he emphatically said any tinkering with the tariff would meet his resistance. From his known courage, honesty of purpose and decision of character, that was accepted as a rock upon which all might safely build.

The people had faith that the president would stand firmly by his convictions; that no mere party expediency, boss influence, or political ambition could change his purpose. If he adheres to this determination, no business disturbance from political causes will be possible; but if he recedes from this position, and aids, encourages, or even acquiesces, in raising a tariff-disturbing issue, the worst may be expected. With the influence of the administration on the side of tariff agitation, the basis for tariff stability will be gone, and fear will take the place of business confidence throughout the country.

The notion seems to prevail throughout certain quarters that a revision of the tariff will not disturb business if it is done by the republicans. There is even danger that the president is lending himself to that delusion. The Iowa republicans have sounded that note, and administration influences and certain recent utterances of the president himself seem to favor it. Even the secretary of the Home Market Club, the great protection institution of Massachusetts, in a recent interview, favored revision “if the republicans do the revising." All this is dangerously weakening; it is not the result of sound opinion, but rather a yielding to the pressure of the enemies of protection.

Every business man knows that if the subject is once opened in congress, especially with the support of the administration and the clamor of the opposition, that no mor

tal can tell how deep the knife will be inserted; and it is this very fear that will create the havoc.

Even such a pronounced advocate of tariff revision as the Boston Herald says:

"It is inevitably the case that uncertainty as to future conditions of a trade tends to make those in it much more cautious and conservative in the manner in which they carry it on, and an excessive caution is a deterrent rather than a stimulant to business activity; even a republican tariff revision would tend to temporarily, at least, depress business activity. . . . If by a removal of these duties these artificial conditions are changed to natural ones, the enormous profits upon operations thus far secured will no longer be obtained. The shares and bonds will immediately depreciate in value, and, as they are now largely carried upon margin or used in borrowing money as collateral, a panic in the stock and money markets will occur which will force all prices down, and for a time will lessen and possibly destroy that confidence which is the most pronounced ingredient of business prosperity. Business confidence is an exceedingly sensitive plant, and if it were known at the present time that the republican majority in congress were next winter to act upon the tariff law, we believe a sensible depression in business activity and prosperity would almost instantly be experienced. . . . But to those who have at heart the best interests of the American people, both now and hereafter, the fact that the taking of a necessary dose of medicine for a really serious disease produces a temporary nausea, furnishes not the least reason for refusing to take it."

This suggests the idea of the boy who liked the toothache because it was so nice when it stopped. The Boston Herald and its like are not to be criticised for holding this view, because they think our whole system of industrial policy is wrong, no matter if it does give prosperity and increase American wealth and progress out of all comparison with the rest of the world, and make our country the richest among the nations. Since in their view this came in the wrong way, it must be bad, and a little nausea like an industrial depression would be a good thing if it would only put our industries on a competitive level with Europe, even though it transferred a third of our business to foreign countries. All who want a business disturbance, and think we need to repeat the nauseating dose of 1893, should follow the

lead of the Boston Herald. But when the American people elected the present administration, they did not believe this theory. They believed in the policy of protection, and elected this administration in good faith, to stand by that doctrine.

In the absence of political disturbances, there are no economic reasons why we should have an industrial depression at this time, nor, indeed, why the present prosperity should not continue for many years to come. The disappearance of the abnormal demand arising from foreign wars, SO far as this country is concerned, will be largely offset this year by the immense wheat and corn crops, which, according to government forecasts, will be among the largest ever known. This will have the effect in the first place of giving a large amount of business to the railroads and kindred industries, in itself one of the great forces in maintaining business stability. Again, the abundant corn crop will make corn cheap without impoverishing the farmers, and thus reduce materially the cost of fattening cattle, and so tend to lower the price of beef. This, together with the enormous crop of wheat, will enable the farmers to pay off a large number of mortgages and increase their expenditures for implements and farm improvements, and so stimulate domestic consumption.

If the political conditions can be kept free from disturbance, there is every reason to believe that the present prosperity will continue, and every year of its continuance will do much to strengthen the financial basis of all the newly-organized enterprises. But let the administration, with the aid of the opposition, enter upon a tariff revision agitation, and send distrust home to every enterprise that needs or anticipates expansion, and the bottom will fall out of our prosperity, and all the conditions of a first-class panic and industrial depression will be at hand. The responsibility is with the administration.

ECONOMIES OF BRANCH BANKING *

HORACE WHITE

There is a wide diversity of opinion in this country as to the advisability of branch banking, and this diversity exists largely among bankers themselves. . . . Nevertheless, I believe that it will come, because I believe that it will be economical and profitable to all banks in both city and country, and that it will extend and enlarge instead of crippling their business, and that after trying it they will wonder why they were ever opposed to it. It is a matter of history that when the country banks of New England were asked to redeem their notes at the Suffolk Bank in Boston, and to pay the Suffolk a small compensation for its trouble, they declared and sincerely believed that such a policy would ruin them. Yet, after a trial of the system, they found their credit so much improved and their circulation so much extended that nothing could have induced them to abandon it. So, too, I think that it would have been impossible for anybody to have told beforehand what would be the consequences and effect of branch banking. For my part, I know of no way to judge the future but by the past. I feel sure, however, that what has happened before will happen again under like conditions, and that what branch banking does in other civilized countries it will do here if the opportunity is offered. We had several examples of branch banking 'in our own country before the civil war."

[Mr. White here briefly describes the branch systems of the First and Second Banks of the United States, and of the State Banks of Indiana, Ohio and Iowa.]

The five groups of banks here enumerated had one hundred and one branches. They existed at various times from the foundation of the government to the end of the

*An address before the joint convention of the bankers' associations of Missouri, Kansas, Oklahoma and Indian Territory, May, 1902.