Address at the State Fair Grounds in Milwaukee, Wisconsin
Mr. President, Governor, Senators, Ladies and Gentlemen, and Citizens of Wisconsin:
I am only too conscious of my lack of experience and knowledge in the presence of farmers. You have a Governor who is a farmer. You have Senators who are farmers. I think all your business men must be farmers if I can judge by the crowd that greets me here. I must admit that I am a city-bred man, and while the spirit would be willing I am afraid I could not milk a cow. Nevertheless, he must be blind indeed to the interests of his country, he must be lacking indeed in acquaintance with the progress of the world who does not realize what, in the fifty years since that noble patriot, Abraham Lincoln, stood here, has been accomplished in the way of improvement of agriculture and scientific investigation into the methods of breeding and into the methods of treating the soil. But I do not intend to occupy your time in discussing something that you know a great deal better than I do. I want to get on to something that perhaps we are both equally ignorant of, but which it will help us to discuss.
Something was said about a man's being a ruler and a servant of the people. I have had occasion to say a number of times that it is perhaps true that the President of the United States has a great deal of power, but while he is in office the thing that strikes him is the limitations and the difficulties of exercising that power. The real power is in the House of Representatives and in the Senate. But the man who gets the blame for everything is the fellow at the top. Now, parties make platforms. They are said to be, in the language of the cynical, something to get in on but not to stand on. Our party, if I may make a partisan reference when I am here only in a non-partisan capacity—the Republican party agreed that we ought to have an institution, the benefit and virtue of which I wish to discuss this morning, in the shape of postal-savings banks. We heard discussed in the Senate last winter the question of how planks were introduced into a party platform, and when they grew a little burdensome to carry out, it was said that they were put in at three o'clock in the morning when more than half the convention were asleep, and when the minority was awake enough to push them in. I don't mean to say that the question of postal-savings banks binds every one who calls himself a Republican—I don't mean that a plank binds every one who calls himself a Republican—because that is not the kind of people the Americans are. If they do not like a plank in a platform, or if they do not like the platform, they cease to be Republicans, or they are Republicans with an exception, and that indicates a free, enlightened and discriminating people. But I am here to uphold the doctrine of postal-savings banks, because I believe that they will fill in this country a long-felt want.
In the first place I want to describe a little bit what it was proposed to put into the savings-bank law, in order that you may understand something about which we are speaking. It was proposed to make every money-order office in the United States, of which there are 40,000, and such other post offices as the Postmaster General might think fit, postal-savings banks. It was proposed to allow anybody to deposit there a dollar or anything more than a dollar, in multiples of ten cents. It was proposed to limit the amount of the deposit in any one month to $200, and to limit the amount of total deposits to $1,000, and to agree to pay interest at the rate of 2 per cent. on not more than $500. The money thus accumulated was to be invested by a committee consisting of the Postmaster-General, the Attorney-General and the Secretary of the Treasury, either in the neighboring national bank in the county, or if there was no such bank, in the nearest national bank, or if that was impracticable, in State, county or Federal bonds. They were required to secure in everything but Federal bonds 2 ¼ per cent. annually. Now, our friends the bankers—and they are friends; I am not attacking them. It is not wise to attack bankers either, for really we have a right to be proud of our banking fraternity.—But there are a good many who object to the postal-savings banks on a number of grounds, and I wish to take up those objections.
In the first place it is said that the postal-savings bank is a very paternal institution; that it has a leaning toward State socialism, and that it proposes to take the banking business out of the hands of private persons and put it in those of the Government. Now I am not a paternalist, and I am not a socialist, and I am not in favor of having the Government do anything that private citizens can do as well, or better. We have passed beyond the time of what they call the laisser-faire school which believes that the Government ought to do nothing but Yun a police force. We do recognize the interference of the government because it has great capital and great resources behind it, and because sometimes it can stand the lack of an immediate return on capital and help out. We did it in our Pacific roads. We have done it in a great many different ways, and this particular postal-savings banks business is a business which the government is especially fitted to do, and which no system of private banks can do. In the first place they have this great organization of the post office, with skilled employees sprinkled all over this country in every nook and cranny of it. Whether there are many people or few, the post offices have to be maintained. Therefore it will be a most economic means of establishing a system of savings banks merely to add one function to the duty of the postmasters all through this country. It can be done most cheaply. The Government can afford it and nobody else could do it. It is said that we have enough banking in this country and therefore we ought not to put the Government into it. It is said, moreover, that if we did put the Government into it, it would not be very long before the Government would do all the banking, discounting and everything else, and the bankers would be driven out of business. I don't think that that argument amounts to much. It is to say that the American people have not sense enough to discriminate between what is a right use of the post office and what is a right thing to do with reference to savings banks and the going into the general business of discounting and banking which the government has no business to do. I believe in the discriminating sense of the American people to know the degree to which they ought to go in a good thing and then to know that when they get beyond it, it becomes a bad thing. To say that if the people go into one good thing, they are necessarily going to get into something which is not good, is to question the intelligence and the discrimination of our people, and I don't propose to do it.
Let us see about banking and the amount that the people of the United States have in the way of opportunities to deposit money. In 14 States the deposits of savings banks amount to $3,600,000,000. I won't say that in those States there was a crushing demand for postal-savings banks, although even there they would discharge a certain function, but when you come to consider the other 32 States and territories, the deposits are only $70,000,000. In other words, 98 per cent. of all the deposits in the savings banks in the country are in 14 States, which tends to show conclusively that in the 32 States the banking facilities—at least the savings-bank facilities—for the deposit of funds to encourage thrift on the part of the people are very inadequate, and it is in those States that we expect, if the postal-savings bank system is put in, that the people will be induced to save more money instead of spending it, or instead of putting it into the sock where it does not do much good until it is withdrawn. Now, in New England in the savings banks there are two citizens to one savings-bank account. In every other part of the United States the savings-bank accounts are one to every 157 people, which tends to show the concentration of savings-bank deposits in the East. Another fact showing the need for such a system is that to-day in the distant States to which I have referred there are $8,000,000 deposited by men who take out money orders and just leave the money in the money-order office of the post office without drawing any interest at all. They just put it there because they don't know where else to put it, which is an indication that they ought to have some place where they can put it and draw some interest. Our new citizens send abroad every year over $90,000,000, and a very large proportion of that goes into the savings banks abroad. Our new immigrants when they come here are distrustful of the local banks, they are distrustful of the private savings-deposit banks, and what they want is a government guaranty in order to secure to them the certainty that when they want their money, they can get it. They are not so insistent on the rate of interest as they are on the certainty of getting their money back, and if they have the government guaranty that they will get it, they can be counted upon rather to deposit their money than to waste it. The great usefulness of the postal-savings bank is an encouragement of thrift on the part of those who are just wavering in the balance whether they shall save the money or spend it, because they do not know where they can put it safely. It is said that this will interfere with the system of savings banks and other banks. I most urgently deny that, because we only propose to pay 2 per cent. and every savings bank that you know pays at least three and sometimes three and one-half or four. Therefore, those who put their money in a postal-savings bank at 2 per cent. are not those who would be likely to put the money in a savings bank at three. Instead of that it will furnish more money to the savings banks, and I will tell you how, and I will tell you this in confidence, because this is the way it is worked in other countries. You stir up a lot of people to begin to save money and put it in at 2 per cent. and they put it in there because they know they can get the money back. That is the whole idea they have at first, but after they begin to calculate what a low rate two per cent, is they begin to look around; they learn for themselves; they acquire some discrimination, and they understand that in the neighboring bank they can get 8 or 3½ per cent. They acquire more intelligence and more knowledge in respect to the matter and then they begin to estimate the security of the private or State savings bank. Under these conditions this fund, which never would have come at all, will be available for the savings banks as the intelligence of the depositor grows greater and as his willingness to risk a little more in order to get a little more interest becomes more acute. We are not usually backward in adopting new and proper assistance to our people and to the government, but we may look abroad frequently to learn lessons in the matter of finance, and even in the matter of some departments of the Government. I want to read you a list of the countries that have postal-savings banks. Let me first say, in Italy there are $273,000,000 deposited in the postal-savings banks of the country. In Russia $130,000,000; in Great Britain and Ireland $766,000,000; in Canada $47,000,000; in Japan $47,000,000. Now, I want to refer to Canada. Canada has postal-savings banks and what is the result along the border up in the Northwest? You find Americans going over the border and making deposits in those savings banks. Why? Because they have the guarantee of the Canadian Government. Now, it is right that when the Government takes custody of money it should agree to return it. It is upon the agreement to return that the basis of the postal-savings bank may be put. There are postal-savings banks in Austria, Belgium, Japan, France, Hungary, Italy, Holland, Russia, Sweden, Great Britain and Ireland, Bahamas, Canada, India, Ceylon, Straits Settlements, Cape Colony, Tasmania, Western Australia, New Zealand and the Gold Coast, and I may add in the Philippines, because I had something to do with putting them there. In Germany they do not have them, but they have a system of town and provincial banks which fills the measure of the demand.
You know we have issued upward of $700,000,000 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 percent, and no other country could. We did float those at par at 2 per cent.—I don't 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. Now they are liable to be on the market. We have to take care of them in some way. We have got to prevent their going down below par because the normal interest rate that a government can get is quite above 2 per cent.—somewhere between 2 and 3 per cent., and if we have the postal-savings banks, if we have a large fund of $500,000,000 to $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, which is our child and which after all we ought not to be so proud of, because we fooled the world into thinking that we were getting something at 2 per cent. and that our credit was worth that, when as a matter of fact we were forcing the banking fraternity into taking them because of certain other advantages which they had to have. It was just a little sharp 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. before issuing any more bonds at a higher rate.
I observed yesterday in the convention of bankers the proposition was urgently and ably fought. Nevertheless, it seems to me, looking at it from a larger field of view possibly than bankers can have, because we are all subject to the prejudices of our profession—I am a lawyer, and I know I am prejudiced as a lawyer, and I think bankers are likely to be prejudiced as bankers; nevertheless, I believe that the arguments in favor of instituting such a system, backed up by the experience of so many other nations as those I have named to you, justify our going into the business of encouraging our people by something that will be inexpensive to the Government, encouraging our people, those of them who have not the sense of security in private banks, encouraging them to a thrift and furnishing the means by which they shall save on small interest. We are looking forward, I hope, with confidence, to a readjustment of our whole financial and banking system. Certainly it needs it, and it has been suggested that the postal-savings bank might well await that. I am bound to say that I do not see the necessity for uniting them. It seems to me that one system can stand by itself, and if we adopt the postal-savings bank it would be easily worked into a general system of banking because those savings banks will furnish us $500,000,000 or $600,000,000, and that is a very tidy pile to have around for the Government to use legitimately in order to carry on any financial operations.
William Howard Taft, Address at the State Fair Grounds in Milwaukee, Wisconsin Online by Gerhard Peters and John T. Woolley, The American Presidency Project https://www.presidency.ucsb.edu/node/365235