rins 
 
 WILLIAM GIBBS McADOO 
 The second liberty loan 
 
 
 WM 

 
 6")TH CONGRESS I 
 
 1st Session i 
 
 SENATE 
 
 IRS'T 
 
 LOS ANGEUE9^- 112 
 
 STATE NO R MAL SCHOOL 
 
 THE SECOND LIBERTY LOAN 
 
 AND THE CAUSES OF OUR WAR WITH GERMANY 
 
 ADDRESS 
 
 OK 
 
 ■ 
 
 Hon. W. G. McADOO 
 
 SECRETARY OF THE TREASURY 
 
 DELIVERED AT THE ANNUAL CONVENTION OF THE 
 
 AMERICAN BANKERS' ASSOCIATION, 
 
 AT ATLANTIC CITY, N. J. 
 
 September 28, 1917 
 
 G# 
 
 
 PRESENTED BY MR. SHAFROTH 
 SEPTEMBER 29, 1917.— Ordered to be printed 
 
 WASHINGTON 
 
 GOVERNMENT PRINTING OFFICE 
 
 1917
 
 
 THE SECOND LIBERTY LOAN AND THE CAUSES OF OUR 
 WAR WITH GERMANY. 
 
 Mr. GOEBEL AND GSNTLEKEN 01 Mil AMERICAN Mam. JOCIATION ! It 
 
 would be difficult for me to express adequately to yon my gratitude tor the 
 pouh introduction of your president and Cor the cordiality of this reception. 
 
 i should like to repeal here whal r said In Kansas <'ity, Cans., Mr. Goebel's 
 honte tov n, when I bad the pleasure of speaking then on the Qrsl Liberty Loan. 
 I should like to testit % \ here, as I did there, to my admiration of the sturdy and 
 virile patriotism <>f tliis adopted citizen of the Onited States. He Is a man 
 whose unswerving Integrity of character, unbending courage, and love for 
 America bave sel an example t<> men even of native birth. 1 would that some 
 men who claim to have been born American citizens could be infected with bis 
 splendid qualities <>i' patriotism. 
 
 It is a ureal pleasure, gentlemen, to ineel you here in this convention, and 
 to thank you in person, and to express to you mj deep appreciation of the 
 lance that the American bankers bave given to the Treasury Department 
 during ibis last year of stress and trial. The responsibilities of that depart 
 men( ran not in discharged, my friends, without your support ami without the 
 sin. jioii o! every American citizen. We lace a time in the history of America 
 when, with the cooperation of everyone, the humbles) as well as the highest, 
 we can do the impossible. Hut without that kind of support, without seeminglj 
 
 alted patriotism animating at all times the people, and animi 
 particularly men of your stamp and character, who must he load"i-s in the 
 business life of your respective communities, these great tasks can nol be per- 
 formed. 1 know, however, that the American people will respond to the 
 of their country, that they intend to make America more than she lias ■ 
 been in her history — regnant for right, for justice, for democracy throughout 
 the world. 
 
 1 would also take advantage of this occasion to express my appreciation of 
 the splendid work the American bankers did in helping to provide that monu- 
 mental fund of mercy, the Med Cross war fund. You not only contributed your 
 money, but your services, and you had the opportunity — and you discharged 
 it well of rendering another great and creditable service to' your country. 
 
 The credit of the Federal r.overuinent throughout its history has been main- 
 tained inviolate: its obligations bave always been scrupulously observed 
 engagements have always been honorably fulfilled. The national credit is the 
 fir>t bulwark of defense of the Nation's rights. If that credit be impaired, the 
 whole economic and financial structure of the country is imperiled. Finance 
 is so fundamental to war that the first duty of every nation upon the outbreak 
 of hostilities is to conserve its financial resources and to make the national 
 credit Impregnable and sufficient for all the purposes of the war. 
 
 In all of the great financial operations in which the Cxovornmont has been 
 engaged in the past, and in all of those in which it must engage in the future 
 the American banker must because of his knowledge, experience, ability, and 
 influence, become the first line of defense and offense. His thorough coopera- 
 tion with the Government relieves the task, however stupendous, of any doubt. 
 To you. the patriotic bankers of America, has conie a great responsibility am! 
 a great opportunity — the responsibility of helping your Government solve it< 
 huge financial problems sine;, study and the opportunity to serve your country 
 in ways peculiarly useful and effective at this time. 
 
 THE CAUSES 01 rHE WAS. 
 
 It is perhaps important that the reasons why we are at war with Germany 
 
 should be restated as often as possible. There are some noisy agitators and 
 
 disloyal writers in this country who have persistently endeavored to confuse 
 
 the issue and to carry on a seditious and subtle propaganda for the purpose of 
 
 88293"— 17 3 
 
 
 45i.(»
 
 4 THE SECOND LIBERTY LOAN. 
 
 producing discontent among the people and of giving aid and encouragement to 
 the enemies of the United States. A large part of this propaganda was un- 
 doubtedly financed by the German Government directly, from the outbreak of 
 the European war, August, 1914, until America entered the war, April 6, 1917. 
 Much of this same propaganda has probably been carried forward since America 
 entered the war by German money left in the United States for that purpose 
 by Von Bernstorff, the adroit and malevolent German ambassador, before he 
 was dismissed. With that money and with money provided by German sym- 
 pathizers and certain disloyal elements in the United States the propaganda 
 has continued, but in a modified form. It would be difficult to ascertain ex- 
 actly how much money has been expended for this purpose, but some of the 
 recent disclosures by the State Department indicate bow active were Germany's 
 own representatives while in this country. It is well for the American people 
 to realize the hypocrisy and disloyalty of all these efforts, and to determine to 
 stamp them out relentlessly and remorselessly, because the interests of the Na- 
 tion must at no time be imperiled more by the traitors within our walls than by 
 the enemies without. 
 
 It has been repeatedly stated that America entered this war to make liberty 
 and democracy secure throughout the world. While that is true, it must always 
 be remembered that America entered the war for a more immediate reason. 
 Noble and idealistic as is her championship of universal democracy, she entered 
 this war primarily because of the persistent insults and aggressions of Germany, 
 the wanton disregard of American rights within our own borders as well as upon 
 the high seas, the contemptuous violation of international law, and the ruthless 
 destruction of American life and property. 
 
 WANTON MI'EDEK AND DESTITUCTION ON THE HIGH SEAS. 
 
 Before this war broke out, every civilized nation accepted and honored the 
 rule that in time of war a merchant vessel, neutral or belligerent, should not be 
 sunk by an enemy war vessel unless the lives of the passengers and crew were 
 first made safe. Under this long-observed law an American citizen had the right 
 to travel upon a British or a French merchant ship with the full knowledge that 
 that ship would not be sunk by a German war vessel until the passengers and 
 crew were taken from the ship and their safety secured. Civilized warfare has 
 always respected the lives of noncombatants. 
 
 If a German regiment should capture a French town or city, and, while 
 marching through the streets, should fire upon a crowd of unarmed and helpless 
 men, women, and children, killing a great number of them, crippling and wound- 
 ing others, the whole world would gasp with horror ; and yet this would be far 
 less inhuman than to sink a ship at sea containing noncombatant men, women, 
 and children, because on land those who are wounded may be rescued, taken to 
 the hospitals, and saved, while many who are not hit by bullets may actually 
 escape. The reason the rule of the sea has always been rigidly enforced by 
 every civilized nation is that if you sink an unarmed ship without giving the 
 noncombatants a chance to escape, they are thrown into the water and all must 
 perish. There is no chance for the wounded or the uninjured to escape. The 
 remorseless sea engulfs them all and obliterates life " without a trace." What, 
 therefore, would be a crime of the first order in the killing of noncombatants on 
 land is a crime of colossal and inexcusable proportions when it is committed 
 upon the high seas. 
 
 Yet this is exactly what Germany has done consistently since the outbreak of 
 the war. She has destroyed merchant vessels on the high seas without warning, 
 killing noncombatant men, women, and children without mercy and in the most 
 brutal and ruthless fashion, in defiance of all international law and every ac- 
 cepted rule of humanity and civilization. 
 
 The rights of Americans upon the high seas have been wantonly disregarded. 
 It is not an answer to say that Americans should not have sailed on merchant 
 ships bearing the British or the French flag. They had a right to sail on those 
 vessels, and were compelled to sail on them because there were not enough mer- 
 chant ships under the American flag to furnish transportation for American busi • 
 ness men, American consular and diplomatic officers, and others engaged in peace- 
 ful and rightful pursuits to go upon their legitimate errands. They were forced 
 to sail under foreign Hags and were entitled to the protection accorded by univer- 
 sally accepted international law and the mandates of civilization and humanity, 
 viz. that the ships would not be sunk by an enemy vessel until the safety of 
 passengers and crew was first assured.
 
 THE SECOND LIBEBTY LOAN. 
 
 PIJSDGES iln! ITEU VVI1 il IMPUNITY. 
 
 On September I, L915, the German Government gave the following assurance 
 to the United States : 
 
 "Liners will not be Mink by submarines without warning and with. nit gafetj 
 of the lives of Doncombatants, provided thai the liners do aol try to escape or 
 offer resistance." 
 
 Tiiis promise was promptly violated. <>n October 15, six weeks thereafter, 
 the British steamship Irabie wafl Mink and three American i lost 
 
 The German Government said to the United States: 
 
 "The Imperial German Government regrets and disavows the act and bus 
 aotlfled Commandei Schneider accordingly." 
 
 Scarcelj bad this assurance i>< en received before the Italian steamer Atu 
 was torpedoed without warning and seven American lives were destroyed 
 the L".ith of November, 1915, the American vessel William I'. Frye was 
 in violation of Internationa] law. Following that, attacks were made upon 
 era] American vessels In gross violation of these promises, and on Decembi 
 the British liner Persia was sunk In the Mediterranean without warning and 
 more than .'Iiki passengers and members of the crew were lost, among them 
 being an American consul traveling to ids post This American consul was 
 obliged to sail on this British vessel because there was do American vessel upon 
 which be could travel, and he was killed while In the line of duly, tx aring upon 
 bis person the Hau r of the American Republic. He was entitled to pr< 
 under international law, as well as under the repeated assurances of the 
 Government. 
 
 On January 7. 1016. the German Government again assured the United SI 
 that German submarines in the Mediterranean would not sink em hant 
 
 vessels, except In accordance with the general principles of Internationa] law, 
 and "only after passengers and crews had been accorded safety." 
 ary it'.. 1916, the German Government said to the United Stab 
 
 "Germany has limited her submarine warfare because of her long-standing 
 friendship with the United Stales, and because by the sinking of the i 
 which caused the death of citizens of the United States, the Gei oan r 
 affected neutrals, which was not the intention, as retaliation should be confined 
 to enemy subjects." 
 
 The German Government promptly proceeded to disregard aces, 
 
 sinking numerous ships without warning, injuring a number of A citi- 
 
 and Imperiling the lives of many more. Whereupon the Ami . 
 tuetit notified the German Government on the 18th of April, 1911 onths 
 
 the; ■•■ tei", t ll.'U — 
 
 "If it is still (he purpose of the Imperial German Government to prosecute 
 relentless and indiscriminate warfare against vessels of commerce by thi 
 of submarines, without regard to what the Government of the 
 must consider the sacred and indisputable rules of interna': id the 
 
 universal 1 tized dictates of humanity, the Government of the United 
 
 States is at last forced to the conclusion that there is but one course I 
 pursue I uless the Imperial Government should new immediately declare and 
 effeel an abandonment of its present methods of submarine warfare against 
 passenger and freight carrying vessels, the Government of the United States can 
 have do choice but to sever diplomatic relations with the German Em 
 altogt i her." 
 
 Whereupon the German Government, on the 4th of .May, 1916, about two 
 weeks thereafter, gave definite assurances to this Government that 
 orders had been issued h> German naval officers "in accordance with the 
 era! principles of visit and search in the destruction of merchan 
 sized by international law." 
 
 in. and in spite of these repeated assurances, the German < lovernment pro- 
 ceeded to sink merchant vessels without warning and without securing the 
 of the lives of passengers and, crew. One American was killed on the 
 h steamer CabOskO; on October _'<i. 1916, 8 Americans were killed on the 
 British steamer Marina, October 28, 1916, IT Americans were killed on the 
 British steamship Russia, December l I 1916. 
 
 DIPLOMATIC RELATIONS SEVERED. 
 
 On January 31, 1917, the German Government gave this notice to take effect 
 the following day : 
 
 41 Germany will meet the Illegal measures of her enemies by forcibly prevent- 
 ing in a zone around Great Britain, France. Italy, and In the eastern Mediter-
 
 6 THE SECOND LIBERTY LOAN. 
 
 ranean, all navigation, thai of neutrals included, from and to England, from and 
 to France, etc. All ships mel within that zone will be sunk." 
 
 Whereupon the United States on February 3, three days afterwards, severed 
 diplomatic relations with the German Government in the following statement: 
 
 "In view of this declaration which withdraws suddenly and without prior inti- 
 mation the solemn assurance given in the Imperial Government's note of -May 4, 
 1916, this Government has no alternative consistent with the dignity and honor 
 of the United States but to take the course which it explicitly announced in 
 its note of April 18, 1916, that it would take in the event that the Imperial Gov- 
 ernment did not declare and effect an abandonment of the methods of submarine 
 warfare then employed and to which the Imperial Government now purposes 
 again to resort." 
 
 All diplomatic relations between the United States and the German Empire 
 were thereupon severed, the American ambassador at Berlin was immediately 
 withdrawn, and the German ambassador, Von Bernstorff, was given his- pass- 
 ports. 
 
 Between February 3 and April 1, 1917, almost two months, 1 American was 
 killed on the British steamship Eavston, 10 Americans were killed on the Brit- 
 ish steamer Yedamore, 1 American was killed on the British steamship Torino, 
 1 American was killed on the French steamer Athas, 8 Americans were killed 
 on the British steamship Laconia, 1 American was killed on the Norwegian 
 steamship Sjostad, 5 Americans were killed on the American steamship Vigi- 
 landa, 7 Americans were killed on the American steamship Healdton, and 19 
 Americans were killed or missing from the British steamship Crispin. Besides 
 this, seven American steamships were sunk by German submarines in these two 
 months, but no Americans, except live on the Yinihnuio. were killed. 
 
 Moreover, the British steamer Yarrotvdale was captured by a German aux- 
 iliary cruiser prior to our entry into the war, and 72 American citizens were 
 taken as prisoners of war by Germany, which was a clear violation of American 
 rights. They were maltreated and abused and subsequently released. 
 
 The crowming act of infamy in Germany's ruthless policy, however — and I 
 mention it last, although it was the first in occurrence — was the sinking on May 
 7. 1915, of the British steamship Lusitania, an unarmed passenger vessel, and 
 the killing of 114 American citizens — men, women, and children. 
 
 Each and every American life and each and every American vessel destroyed 
 by Germany during these two years was an act of war upon the American peo- 
 ple, the consequences of Which were avoided from time to time by the plausible 
 assurances and excuses of the German Government, each and every one of which 
 was perfidiously and insincerely made, and each and every one of which was 
 deliberately disregarded. 
 
 GERMAN INTBIGTTE AND PERFIDT. 
 
 But this is not all. Germany,, while professing friendship for America, and 
 while her ambassador, her representatives, and her citizens were enjoying our 
 hospitality and receiving our protection, was plotting against the domestic 
 security of the United States by blowing up munitions plants, fomenting 
 strikes and disturbances in the labor world, disseminating false information 
 arid poisoning the minds of the American people against their own Govern- 
 ment, plotting its downfall, and seeking to influence our Congress, as evidenced 
 by Von Bernstorff's dispatch of January 22, 19L7, to the Berlin foreign office, 
 in which he said : " I request authority to pay up to $50,000 in order, as on 
 former occasions, to influence Congress through the organization you know of, 
 which can perhaps prevent war." And while Von Bernstorff was busy upon 
 our own shores with intrigue through his spy system and through the corrupt 
 use of money to influence public opinion and the national policies of the 
 American people, Zimmermann, the foreign secretary in Berlin, had sent a dis- 
 patch to Mexico urging her to make war upon the United States and begging 
 Mexico to invite Japan to join her in this dastardly work, promising Mexico 
 that California, Arizona, New Mexico, and Texas would be restored to Mexico 
 in the event of success. What more perfidious conduct could have character- 
 ized the government of any nation with wmich we were at peace? What must 
 be the judgment upon a government capable of such infamies? And yet there 
 are those who undertake to defend Germany and to say that the American 
 people did not have sufficient grounds upon which to enter this war. 
 
 Why. my friends, if there is an American who. knowing this record, says 
 deliberately that America did not have ample provocation or justification for
 
 1 J) l. BE< "M> i iiu.i; l J loan. 7 
 
 .his war, that it was aot essential to protect America's Integrity and honor, 
 then yellow blood runs in ids reins; there la not a drop of the red blood ol our 
 ancestors in 1dm. 
 
 ii' there be a man, woman, or child In America who has the slightest doubt 
 about the rectitude of your Government, I wanl them to know this record, to 
 realize the patience and forbearance under the mosl extreme provocation of 
 your noble President—] wanl them to know thai record, because, knowing it, 
 they <-;m look any man In the face, thej can face their God, with the i i u 
 that America went to the utmost Hunt in it> endeavor to preserve an bono 
 peace. 
 
 The outrages committed upon American rights through ■ 
 structlon of American life and propertj during the years 1915, 1916, an< 
 were provocation enough, i>ui when the German Government under 
 Its em , i 1917, to mark off hundreds of miles of the higl 
 
 surrounding Great Britain, France, and Italy, and to declare that ll ■■ 
 on sight every American vessel which entered these prohibited waters, 
 in pursuance of lawful commerce and of International right, and actui 
 ceeded to carry out the threat, there wa left for Amerl* 
 
 M or else submit to this tyrannical and tnonstrou 
 military despot. 
 
 ! POSSIBLE. 
 
 We chose to fight— and why? Because, first, national honor and self- 
 Imperatively demanded it, and. second, because we can never concede the 
 of any nation, however powerful, to order American vessel and 
 citizens to keep off the high seas and prevent America from selling her 
 products of the farm, the factory, and the mine to other nations 
 
 If we had tamely submitted to thai order it would have brou 
 and ruin to the American people. Not only would it have '■•■ ■ 
 
 to their honor, self-respect, and standing as a nation, but it would hav( ■ 
 irreparable injury, loss, and suffering to our people. If an. 
 this war could with impunity order vessels of the United 
 of any portion of the high seas, which are the common property o 
 nations of the earth, and if we had submitted, we would have i 
 fateful precedent In a future war some other nation might concl idi 
 American vessels carrying American citizens and American commerce Should 
 be Ordered Off Of some other portion of the high seas, and we v 
 obliged to submit or to fight under all of the disadvantages of havinj 
 in the first instance. If we had been submissive, it would not b 
 next step for the nation which ordered us off of 500 mil< - of the Atlai 
 io order OS to Keep off the entire Atlantic Ocean except that part withit 
 from our own shores, over which we have acknowledged jurisdlcti 
 could never submil t" such a destruction of our vital rights. 
 
 AGKIcn.Tfct, AND OTHEB [NDUSTBIE8 THKEATENED. 
 
 On the material side the disaster of submission is most striking. Th< 
 order forbade our ships from carrying our people and our commerce t- • 
 Britain, France, and Italy. Our prosperity and our welfare as 
 Inseparably connected with our right of free and unmolested intercourse with 
 those nations. In the fiscal year 1917 our total exports to G lain. 
 
 France, Belgium, and Italy were s:'..4.".T.000.000, in round numbers; in 1916 they 
 
 $2,247,000,000, in round numbers. Our exports to those countries con- 
 stltute more than one-half of our expert trade with the entire world. Tl 
 exports represent the surplus products of our farms, of our mines, of oui 
 tories. If we are denied a market for them, these farm products would ro 
 
 waste upon our own soil, the production of our mines and factories w 
 he greatly reduced, labor would be thrown out of employment, stagnation of In- 
 dustry would result, and suffering and want would stalk in the land. Our pro- 
 duction always has exceeded the home demand, and if we are denied foi 
 markets and attempt to sell the whole of our products at home, the result 
 be demoralized prices, with returns far below (he cos' ,,f production, and c< 
 quent injury to every man. woman, anil child in America. No one more than 
 our farmers, the grain growers and the cotton growers particularly, would ' 
 injured by obedience to the Kaiser's order. While our export trade would be 
 destroyed, our import trade would disappear. Certain imports are essential to 
 our national life ami existence. "We must have them, and we can never submit 
 to any tyrant who forbids us to sail the hi^h seas in the peaceful pursuit of our
 
 8 THE SECOND LIBERTY LOAN. 
 
 legitimate Interests and In the unmolested enjoyment of the rights we won by 
 the blood and courage of our ancestors: 
 
 If we bad yielded to this insolent order signed by the Kaiser in his palace 
 in Berlin, he would have destroyed by one stroke of his pen more than $3,400,- 
 000,000 of our commerce, and American vessels and American citizens would 
 have been excluded from all intercourse with the great and friendly nations 
 Of Great Britain. France, and Italy. By one stroke of the Kaiser's pen he 
 would have accomplished more destruction on our farms, in our factories, and 
 in our mines than he could achieve with all the armies and navies of the German 
 Empire. It is a monstrous edict, and it would be a monstrous thing for 
 America to submit to it. 
 
 And so we had to fight for our rights, and so it is that we are engaged in a 
 righteous war — a war which we intend to bring to a successful Issue by the 
 organized might of this Nation. We intend to match organization against 
 organization, science against science, American skill against German si ill, 
 American valor against German valor, and I have not the shadow of a doubt 
 thai the victory will be complete, that America's honor will be vindicated, 
 thai America's vital rights will be preserved, that peace upon a stable and just 
 basis will he reestablished, and that democratic institutions will be extended 
 throughout the earth. 
 
 MONEY THE FIRST ESSENTIAL. 
 
 When war comes to a nation the first essential is money. We must keep our 
 soldiers and sailors armed and equipped with the best that money can buy 
 and American skill devise. We must constantly provide them with necessary 
 clothing and food; we must pay their wages; we must, as a humane and just 
 Nation, support their dependent families while they are risking and giving 
 their very lives for us; we must supply them with a reasonable amount of life 
 insurance. 
 
 The first duty of the Nation to its gallant sons who go forth to die upon the 
 field of battle to protect your lives, your property, and your honor is that it 
 shall restitute to them what it destroys when it drafts them into the service 
 of their country or when they volunteer to go into the service of their country. 
 Do you realize that when the Government reaches out its hand and takes the 
 young man who is earning $1,200, $1,500. $2,400, $5,000 a year, more or less, 
 it not only says, "You must put your. life in the balance and give it, if need 
 be," but it conscripts that man's income and earning power down to $396 a 
 year, because that is all it pays to a soldier? Not only that, but if he has 
 loved ones at home whom he must support, can you imagine his emotions when 
 he is taken out, to die perhaps, knowing that his wife and his babies may 
 starve behind him or be dependent upon charity? The Nation also destroys 
 the insurability of that man. He finds instantly that no matter how healthy 
 his sinews, nor how strong his heart, no matter how good a risk he would be 
 in peace time, he can get no insurance. With his earning power reduced, he 
 is at the same time unable to make any sort of insurance provision for those 
 dependent upon him. Is it asking too much of the generous, just, and humane 
 people of America to restitute also the insurability of that soldier, to give him 
 the opportunity of buying insurance from his own Government at reasonable 
 rates, so that he may make the last loving provision that every man should 
 make for his family if he has to face death? The House of Representatives 
 has answered that question by passing the war insurance bill by a unanimous 
 vote, and the Senate, I am satisfied, will soon follow suit; so that our brave 
 defenders will go forth with the knowledge that everything that the love, 
 affection, and sense of justice of a great people can do for them has been done. 
 
 We must Increase, strengthen, and maintain our Navy; we must provide a 
 predominant fleet of aeroplanes and air fighters; we must build a great mer- 
 chant fleet, so that our long line of communication with our gallant soldiers in 
 France may be maintained and our commerce carried across the high seas in 
 defiance of the German Kaiser and his submarines; we must succor our noble 
 compatriots in arms — the British, the French, the Italians, the Belgians, and 
 the Russians — by lending them money with which they can buy arms and food 
 and other supplies in our markets. All these things must be done and done 
 quickly. 
 
 The money that We are raising by taxation and by bond issues is being de- 
 voted to these purposes, and to no other purposes. More than $1,000,000,000 of 
 the money that you are going to provide this fiscal year is being expended or 
 Will be expended upon your Army, upon from 1,800,000 to 2,500,000 of the
 
 THE SECOND LIBERTY LOAN. 9 
 
 bravest and the most gallant soldiers thai ever donned the uniform. And four 
 
 Navy, recruited i<» the lull with brave tars under whose uniforms beat the true 
 hearts of American freemen, is being built up, equipped, and manned with this 
 
 money. 
 
 After this war is over all of these expenditures will not be lost, because the 
 greal fleet of merchant ships we are now going to construe! at last and put Into 
 operation will give American commerce the one thing thai it lias needed all 
 
 these years. We shall spend more than $1,000,000,000 tor merchant ships. 
 
 It is a most unhappy fad -and I allude to it not as criticism but simply 
 
 to show thai 11 Is not always wise to form hasty judgments upon measures that 
 seem at the moment radical it Is a most unhappy fad thai when we endeavored 
 in September, 19] l, one month after this war in Europe broke out, to make 
 the beginnings of a Governmenl merchanl marine t<» proted our conm 
 and our people, 11 was filibustered to death, and thai it was only after the 
 
 lapse of two years of hard struggle that a bill was finally passed. Bui ve have 
 gOl the MM now. and we have go1 the Shipping Board, and we have gol in" 
 money. American skill and Ingenuity are giving an example to the world of 
 what an aroused nation can do. We are going to turn out ships and more 
 ships, standardized and perfected, and put them on the high sea- with more 
 rapidity than has ever been done before in the history of the world. 
 
 It is upon the Treasury of *he United States that every demand in time 
 of war focuses, because everything goes back to the gold pile. I should like 
 you to realize that every dollar that is paid to a soldier, every pair of Bhoes 
 he puts on his feet, every piece of clothing he wears, every gun he carries, 
 every cartridge he tires, every 18-inch shell that is hurled from the monster 
 guns of our battleships, and every shovelful of coal that is consumed iii their 
 boilers, everything that touches this war and involves a Government expendi- 
 ture, depends Upon the money in the United States Treasury. 
 
 When you turn on the electric light in tins building, and turn it on in 
 other buildings miles from here, it must come from the power plant. The 
 strain is there, and unless that power plant is constantly supplied with fuel 
 with which to keep those lights burning, you have darkness. And so, in the 
 same way, unless you keep the gold pile in the Treasury of the United States 
 sufficient for the demand, unless you keep it so large and so ample that what- 
 ever strain your Government puts upon it for the purposes of tins war will 
 find a ready response, then the light of liberty goes out in the world and 
 where is America? 
 
 The problem of the American Treasury is the problem of the American 
 banker and the problem of the American people; it is the problem of keeping 
 the Treasury supplied with the means to carry forward these great objects 
 under the direction of the Commander in Chief of the Army and Navy of 
 the United States, your President, whose glorious stand for America's honor 
 and America's rights, for justice, civilization, and democracy have made him 
 one of the greatest of the world's outstanding figure-. 
 
 The problem is twofold: To supply essential credits to the allied Govern- 
 ments, because it is vital to the cause that their strength and credit shall be 
 sustained; and, secondly, to meet our own requirements. 
 
 BETWEEN $13,000,000,000 AND $14,000,000,000 IN BONDS. 
 
 Roughly speaking, and after allowing for the amount of revenue to be raised 
 by taxation for the fiscal year ending June 30. ibis, we shall have to raise by 
 additional bond issues between thirteen and fourteen billions of dollars. Ir is 
 estimated that .$5,000,000,000 will represent additional loans to the allied Gov- 
 ernments, which, in turn, will give us their obligations hearing interest. This 
 $5,000,000,000 will not, therefore, represent expenditures ; it will represent 
 loans based upon the good faitli and honor of these foreign Governments— loans 
 which will ultimately he repaid to the American people. Bui as we must 
 finance these loans, they are an integral part of our general financial opera- 
 tions. To raise thirteen to fourteen billions of dollars on or before the 30th 
 June, 1918, by the sale of bonds in recurring installments seems to some people 
 an impossible task. It is a stupendous undertaking, hut it is not impossible for 
 America. It is not easy, but it can be done. Our resources are adequate; our 
 will is perfect; our spirit is Indomitable; and our success is certain. We have 
 only to pull together — bankers, lawyers, doctors, manufacturers, farmers, wage 
 earners, laborers, men and women alike, Girl Scouts and I'.oy Scouts, and every 
 Other classes of our people- and we can do the Job. Already we have demon- 
 strated what a united people can do when partisanship is subordinated to
 
 10 THE SECOND LIBERTY LOAN. 
 
 patriotism; when love of country becomes supreme. I look forward, therefore, 
 with confidence to the success of the recurring campaigns we must make for the 
 s.-ileof Liberty Bonds, and I am comforted by the reflection that the Government 
 lias the solid and unswerving support of the patriotic men who compose the 
 American Bankers' Association. 
 
 THE BONDS OF THE SECOND LIBERTY LOAN. 
 
 'I'lic new bonds bear 4 per cent interest and are exempt from all State, 
 municipal, and local taxation, except estate and inheritance taxes, and all 
 federal taxes except superincome taxes, excess-profits taxes, and inheritance 
 taxes. They are convertible into another issue of bonds, if authorized by the 
 Congress, bearing a higher rate of interest than 4 per cent. 1 shall not enter 
 into the details, because Treasury circulars and regulations will explain them 
 fully. 1 do desire, however, to advert briefly to the taxation feature of I 
 bonds. 
 
 The first Liberty Bonds bore 3£ per cent interest and were exempt also from 
 supertaxes. These bonds did not make the widest appeal. To be successful 
 with recurring issues of Liberty Bonds, it is necessary that they should appeal 
 to i he masses of the people. In order to give the exemption from supertaxes 
 on the first Liberty Bonds, it was necessary to make the rate of interest corre- 
 spondingly Low. 'die returns show that of the 4,000,000 subscribers to the first 
 Liberty loan 3,960,000 subscribed in amounts of $10,000 and less. The aggregate 
 of such subscriptions was approximately $1,300,000,000, or 62^ per cent of the 
 first offering. To most of these subscribers exemption from the supertaxes was 
 of no value, or in any case of little value, whereas to the 40,000 subscribers who 
 bought large blocks of Liberty Bonds the exemption from the supertaxes gave 
 an undue advantage. In order that they might have this advantage, the small 
 holder was obliged to receive a lower rate of interest. L was estimated that 
 under the pending House bill the exemption from supertaxes would make a 3£ 
 per cent Liberty Bond in the hands of a man with a Large Income equivalent 
 to a taxable bend bearing 9& per cent interest per annum for that part of his 
 income in excess of $::, 000,000. The inequality of this plan is obvious. L 
 at naught the principle now firmly grounded in our national policy, that gradu- 
 ated taxes shall be laid upon wealth in order that the burden of taxation may 
 be equitably distributed and made to bear more heavily upon the rich than upon 
 the poor. No one now challenges the correctness of this principle. It is, there- 
 fore, essential that Government bonds should be issued upon a basis which will 
 be equally just to the poor man and the rich man, so that each may pur- 
 chase these bonds upon practically the same interest basis after allowing for 
 the different scales of taxation. The present law accomplishes that object. 
 
 It should be borne in mind, moreover, that if the Government should con- 
 i ue to exempt from supertaxes bonds issued during this war. tlie time would 
 come when there would be created in this country a class of people of great 
 wealth, enjoying great incomes wholly free from tax burden. A grave risk 
 would be invoLed in such a policy. It would be fraught wuth great danger to 
 the State and would be well calculated to produce disconte;it with tax burdens 
 falling thus heavily on the many to the exclusion of the few. 
 
 For the purpose of illustration, let us suppose that the war continues so 
 long that $20,000,000,000 of bonds, bearing 4 per cent interest, should be out- 
 tding, and that they were exempt from all taxation, including supertaxation. 
 Tl interest charge on these bonds would be $800,000,000 per annum, almost 
 as much as the entire expenses of the Government at the outbreak of this 
 v. ;. . Let us suppose that half, or $400,000,000, represented the exemption from 
 ill] ertaxes which was accorded to people of great wealth. Bear in mind that 
 
 am taking arbitrary figures merely for the purpose of illustration. This 
 .<XX),000 would have to be raised by taxation upon the masses of the people; 
 ■ her words, they would have to be taxed directly in order that the $400,- 
 000,000 of lax exemption could be accorded to the people of great wealth who 
 bought the Liberty bonds. This is manifestly unfair, because, although the 
 total exemption affects more or less the price for which the bonds may be sold 
 for the United States, yet no adequate return can be had for it. We can not 
 sell bonds in billions on the basis of what they may be worth to the very rich. 
 They must be offered to all the people alike at one price, aud should appeal to 
 all alike and upon equal terms. The result of selling a bond which bears a low 
 rate of interest and carries exemption from graduated aud superincome taxes 
 will be this : The poor and the people of modest means will buy them for 
 patriotic reasons, but will be unable to hold them, because the return is too
 
 THE SECOND LIBERTY LOAN. H 
 
 mall, it will be loss Own they eon get from bunks of deposit or savines 
 banks, :iini the tendency will be ;iii the time tor these bonds in be pure! 
 from iiioni and accumulated bj the very rich without ans adequate considera- 
 tion moving from them either to the United States or to the original sub- 
 scriber, in these circumstances the ralue of the tax exemption depend! 
 upon the bonds themselves, btri upon :i wholly extraneous fad tin 
 the wealth of the holder. 
 
 Much might be said for subjecting the bonds to norma] Income taxes as well 
 ;is io supertaxes. Practical considerations, however, make such a . 
 academic, [f the bonds were not exempt from normal taxes it would prob- 
 ably be necessary to offer a bigher rate of interest than i per cent. To do that 
 would involve too sudden an adjustment in the markets for other securities 
 ' be healthy, it is important that the United stales, iii becoming 
 borrower of money, should adjust the terms of Issues in such a wav 
 avoid, as far as practicable, any break in the general market for secur 
 ' : apparent thai the reasons 1 have given, which are COntTOlliD 
 
 exemption from supertaxes, apply, if at all. only to a rerj limited extent to 
 
 exemption from Btamp taxes and normal income taxes. These taxes are | 
 upon all wealth at a level rate, and the exemption carries approximately i 
 value to every bondholder, rich and poor alike. There is a very natural f< 
 that the holder of a United, states bond ought not to be harassed by little 
 taxes and returns incidental to iis ownership. The United Stales ought I 
 able to get lull value tor exemption from such normal and Btamp taxes in the 
 price and interest rate at which it will be able to sell its bombs. The bonds will, 
 of course, continue to be exempt from all State and local taxes throughout 
 the United Slates. 
 
 CON VEB SION PRl vi leg i :. 
 
 If a subsequent series of bonds bearing interest at a higher rate than 4 per 
 cent per annum should be issued by the United Stat ihe end of the 
 
 then the holders of these bonds will have the privilege, at their option, at 
 time within six months after such issue is made, of converting their boi 
 par into bonds bearing the higher rate of interest at the price, not less than par. 
 at Which the bonds bearing interest at the higher rate shall be offered for 
 subscription to the public. Of course, bonds bearing interest at a higher rate 
 than 4 per cent can not be issued without further legislation by Congress, and 
 if such an issue should be authorized, not only the interest rate but also the 
 general character of the bonds will be determined by Congress or by the 
 retary of the Treasury under the authority of an act of I 
 holders of the 4 per cent bonds will be entitled, if they wish to do so, to re 
 bonds of the character so determined, except that the bonds issued to them, if 
 they exercise the privilege of conversion, will have the same date of maturity. 
 the same interest dates, and the same date for redemption before maturity as 
 the 4 per cent bonds now offered. If this new conversion right arises it must 
 be exercised within the period prescribed by the Secretary of the Treasury or ii 
 will come to an end. The object of this privilege of conversion is to place the 
 investor in 4 per cent Liberty bonds in a position of substantial equality with 
 the purchaser of bonds of the next issue at a higher rate, if any be made — 
 not to give hint a position of superiority from which he might pick and choose 
 between various bargains which from time to time might be offered by the 
 United States during the course of the war. If the new bonds Into which con- 
 version is made carry also a conversion privilege, then that privilege may be 
 exercised with respect to a Subsequent issue at Ihe holder's option. 
 
 These provisions for conversion are substantially determined by the act of 
 Congress recently approved by the President, and under which the bonds 
 offered for subscription, of course, this act of Congress does aol affect in 
 any way the rights of the holders of the 34 per cent Liberty bonds of the first 
 issue. Their rights were fixed by the previous act, and by ihe terms of the 
 circular offering these bonds for subscription, and by the terms of the bonds 
 themselves. They may convert their bonds Into new 4 per cent bonds just like 
 tho.e now being Offered for Subscription, except that the bonds issued upon 
 such conversion will have the same maturity of principal and interest and 
 redemption date as ihe old 3£ per cent bonds, or they may keep their :u per 
 cent bonds if they prefer. 
 
 The old law under which the 3* per cent Liberty bonds are issued differs 
 in one respect from the new law under which tin- I per oenl bonds are issued. 
 The holders or the 3* per cent bonds, while they musl exercise me privilege of 
 conversbm into the 4 per cent bonds within the period of aix months beginning
 
 12 THE SECOND LIBERT V LOAN. 
 
 November L5, If they desire to exercise it al all, would have the right, if sub- 
 sequently bonds should be issued at a still higher rate, say 4* per cent, again 
 for a period of six months beginning at the date of the issue of those bonds, to 
 convert their bonds into 4% per cent bonds, even though they had not made an 
 intermediate conversion into the 4 per cent bonds. This arrangement, resulting 
 from the language of the old law, seemed to Congress and to the Treasury 
 Department to be rather more than fair to the old bondholders and to carry 
 with it burdens Of administration and difficulties in connection with the future 
 financing of the United States which ought not to be repeated. 
 
 AN INVESTMENT OF MATCHLESS CHARACTER. 
 
 Tt has been urged upon me that many men of wealth will refuse to buy the 
 4 per cent bond with liability to superincome taxation. I should be loath to 
 believe this; but if it is true, the position of the Government must always lie to 
 offer a bond upon terms fair and equitable to all alike and which will make the 
 widest possible appeal to all the people without regard to the extraneous fact 
 that a man may be poor or rich. The Government can not finance tins war by 
 making an appeal alone to the rich, nor to the man of moderate means, nor to 
 tin- poor. Its appeal must be to all the people, and all the people must respond 
 to that appeal and by united effort sustain the Government in these great 
 credit operations. It has been suggested to me that patriotism should play no 
 pari in the sale of Government bonds. I do not concede this, although I believe 
 that the American people will buy these 4 per cent Government bonds on their 
 merits. Patriotism is, first, love of country above everything — above life itstdf ; 
 se<- nid. love of country combined with that vital interest in the Nation's w< 
 and safety which will make secure the material interests of each individual and 
 promote his happiness and prosperity. 
 
 If this is true, the man of wealth, with patriotism or with modified patriot- 
 ism or without patriotism, has a greater stake in the security of Oovernment 
 than any other class, because if the Government's credit is destroyed and dis- 
 aster comes upon the country, as it inevitably will if the Government's credit 
 fails, what is property worth to the rich man, what is life worth to the free 
 man? By buying Government bonds the rich man obtains the safest investment 
 in the world and, at the same time, by helping to sustain the national credit, 
 promotes the national safety and makes property secure. 
 
 But upon the merits of the investment the man of wealth secures in a Gov- 
 ernment bond, subject even to the supertaxes, an investment of matchless 
 character. His principal is safe beyond peradventure. Neither storm nor 
 stress can shake it. Its market value is the same in every State in the Union ; 
 it is exempt from taxation in every State in the Union and not, as in the case 
 of State, mi ncipal, or local bonds, only in the State of issue; it pays an 
 adequate return; it is convertible into another bond bearing a higher rate of 
 interest during the war with Germany. What could be more liberal to the 
 investor? I know of no instance where a bond has been issued by a State, or 
 ar.y political subdivision thereof in the United States, or by any private cor- 
 poration, which gave to the investor the opportunity of converting that bond 
 into a subsequent issue of bonds at a higher rate of interest. There may be, 
 but I am not aware of it. 
 
 The question naturally presents itself as to how these great operations of 
 the Govemmt tt are to be financed. They can be financed only through the 
 united support of all the people of the United States. The kind of support I 
 mean is that every individual, every partnership, every corporation, shall 
 invest nor o 1I3 their available means from time to time in Government bonds, 
 but that they shall make sacrifices of comfort and convenience; that they shall 
 economize; th t they shall avoid waste; that they shall save in every 
 iible direction in order that they may increase their available resources 
 for the purpose of assisting the Government in these prodigious opera 
 upon which the national security absolutely depends. We must encourage 
 thrift and industry throughout the land, and we must make everybody under- 
 stand that the first duty of the hour in this critical time is to place all their 
 available resources at the disposal of the Government. 
 
 THE RESOURCES OF AMERICA. 
 
 Fortunately the resources of America were never so ample for ourselves and 
 so formidable for our enemies as now. The value of our farming and agri- 
 cultural products for the year 1917 is the greatest ever recorded. In a state-
 
 THE SECOND LIBERTY LOAN. 13 
 
 merit I have just received from the Secretary of Agriculture he estimates the 
 value to i»" $17,000,000,000. The combined resources of the National and - 
 banks (including trusl companies) of the United States are now $37,000,000 
 At the outbreak of the <"i\ii War the * •< • 1 1 1 1 > i 1 1* -< I resources of the banks were 
 estimated to be $1,500,000,000 I with these limited banking resources the 
 
 Union Government raised $3,000,000,000 by bond sale-, or twice the amount 
 of the banking resources of the country. Upon the same basis we Bhould now 
 be able to raise $74,000,000,000 through Government loans. J am i 
 that this may be <l"iic; i am only drawing a comparison. 
 
 in < D.ection with the resources of the Dnlted States and the sale of 
 
 bonds, I wish to say that the money derived from the sale of these secur 
 the money derived from taxation. Including even the money we lend t<> for 
 Governments, Is largely, If not wholly, spent within the limits of the United 
 states; only a small fraction of it Is expended iii any other direction. T 
 operations involve in very considerable measure merely transfers of cr< 
 and the proceeds of these bonds are rapidly being sent back Into the channels 
 of business for the purpose of promoting and enhancing the prosperity of the 
 people of the United states. 
 
 There lias been much speculation as to what are the annual savings In the 
 United states, as to whether or not they are large enough to lands 
 
 Of the Government In this war, and as to how much will he left after the D 
 of the Government are satisfied, t have myself been greatly confused by the 
 many conflicting estimates and theoretical observations with which I . 
 been favored. Recently there was placed in my hands an Interesting and illumi- 
 nating paper on this subject by Col. M. W. Thompson, now in charge of 
 Finance Division of the Signal Corps of the United States Army. The argu- 
 ment and the figures arrayed hi this statement are impressive. I quote two 
 I i-aphs therefrom : 
 
 "Careful Investigation of the present available supply of capital suggests the 
 conclusion that the present needs of the Government may be adequately met. 
 and that the entrance of the Government into the market as a competitor for 
 capital need not prevent necessary expansion. The needs of the country must 
 be and will be first served, but there will be sufficient capital left for industrial 
 purposes. Patriotic response to the needs of the country need not force bankers 
 into a policy of retrenchment. Those conclusions are striking. Indeed, they 
 are at variance with the general attitude of financiers, but they are soundly 
 based upon accurate statistical information. 
 
 "In a normal year, savings from all sources in the United States, from 
 corporations, business men, farmers, and investors generally, amount to from 
 $5,< 1(10,000,000 to $6,000,000,000. In 1916 the supply of capital in the United 
 States was about two and a half times the normal amount. In thai year sav- 
 ings in this country, Including those reinvested by corporations in their own 
 enterprises, amounted to $15,000,000,000. Conservative estimates for the cur- 
 rent year indicate that the aggregate for 1917 available for the use of the 
 Covernment in prosecuting the war and for the general purposes of financing 
 industry may reach $18,000,000,000." 
 
 I have not had opportunity yet to study the elaborate tables and the argument 
 which have been submitted to me in support of these conclusions, but I have 
 examined them sufficiently to convince me that they are worthy of deep study. 
 I am greatly indebted to Col. Thompson for the service he has rendered in mak- 
 ing this analysis, and for the privilege he has given me of making use of it. I 
 hope to be able to publish Col. Thompson's statement in the near future. 
 
 Whatever differences of view there may he about the annual savings of the 
 American people, it is undoubtedly true that they are so large that with the 
 other resources of the country upon which we may draw, there can be no doubt 
 whatever of the ability of the people of the United Slates to finance every de- 
 mand which the Government may make upon them for the purposes of this war. 
 If the ordinary savings which have been made heretofore voluntarily are now 
 augmented by the savings which can be effected under the pressure of patri- 
 otism and necessity, by prevention of waste, the practice Of genuine economy. 
 the cutting off of luxuries during the period Of this war. what may not the 
 American people bo able to do? No one can gauge the latent power Of the peo- 
 ple <>f the United States in that respect. Already the country is aroused to the 
 importance of the situation, and there is a spirit of determination and co- 
 operation throughout the land which augurs well for the success of every 
 financial undertaking of the Government, and for the continued maintenance of 
 our industrial and commercial situation unharmed and unimpeded by the essen- 
 
 451U
 
 14 THE SECOND LIBERTY LOAN. 
 
 tial financial operations of the Government. This sounds at variance with 
 what I am going to say subsequently about the necessity of stopping unnecessary 
 
 i apital expenditures during the war, but it is not. That action is none the less 
 desirable, because, as ;i matter of prudence and Of wisdom, we should conserve 
 the resources of the Nation in every possible direction. 
 
 WAR SAVINGS CERTIFICATES. 
 
 In the matter of savings, which are of such prime importance, the Treasury 
 proposes to issue in the near future and to sell to the people war savings 
 certificates in as .small denominations as $5, maturing in five years, and upon 
 such a reasonable plan that the humblest person in the land may be encouraged 
 to save all that he can and to invest in an absolutely safe security bearing 
 interest, while at the same time doing his part to sustain the Government aud 
 help win the war. I have appointed a War Savings Committee to take charge, 
 under the direction of the Secretary of the Treasury, of this important branch 
 of the work. This committee consists of Messrs. Frank A. Vanderlip, chair- 
 man ; Frederick A. Delano, of the Federal Reserve Board; Henry Ford, of 
 Detroit; Charles L. Baine, of Boston; Eugene Meyer, of New York; and Mrs. 
 Elizabeth Bass, of Chicago. It will not be possible to offer the war savings 
 certificates during the forthcoming liberty loan campaign, but as quickly as 
 certificates will be made available for the people of the country 
 through the post offices, internal-revenue offices, customs offices, the banks, 
 ■iicies that may be designated by the Government. 
 
 The value of this campaign for war savings certificates is nol alone in the 
 amount of money that may be saved, but in teaching the people of the United 
 States on a nation-wide scale and through an intelligent presentation of the 
 tacts, the value of thrift and saving. Its beneficial effects ought to survive 
 the war and have a permanent influence upon the future economy of the 
 country. 
 
 Upon the bankers rests a peculiar duty and responsibility at this time. 
 They can render inestimable service, not alone in promoting savings, but also 
 in exercising a wise discrimination as to loans involving new capital expendi- 
 tures and in discouraging every unnecessary undertaking involving fixed in- 
 vestments until after the close of this war. We must realize, my fellow country- 
 men, that the gravity of the situation for the Nation and for the entire world 
 is so impressive that the Government must preempt and occupy exclusively, 
 if necessary, until this war is over the entire investment field in the United 
 States. 
 
 THE CONSERVATION OF FINANCIAL RESOURCES. 
 
 It should be the first duty of every citizen to invest gladly his available 
 means in Government bonds, and it should be the duty of the patriotic governors 
 of oar States, the mayo s of our cities, and the controlling authorities in every 
 political subdivision in the country to discontinue unnecessary public works 
 and improvements until this war is over. Private enterprise should be governed 
 by the same principle. I do not mean to have you infer that this is a de 
 suggestion that an immediate attempt be made upon any organized scale to 
 discourage unnecessary capital expenditures ; but I do wish to urge that you, 
 the bankers of America, make a deep study of this question so that if the time 
 comes when it is desirable to take action, you will be prepared to cooperate 
 quickly with the Governi snt 
 
 It should be remembere that the National Government has no power, through 
 legislation, to regulate or control capital expenditures of States, municipalities, 
 or political subdivisions of Slates, nor has it the power to legislate with regard 
 to such investments by private corporations, except those engaged in interstate 
 commerce. Through the • ooperation of the States, effective measures could in 
 time be concerted, no doubt, to meet this question if the necessity arises. But 
 that would take time. In the absence of State action it is possible, however. 
 for the bankers of the country to discourage, to a very great extent, unnecessary 
 or unwise investment of capital in private and public enterprise? during the 
 period of this war. I hope that this association will appoint a committee to 
 study this problem and be prepared to act as the public interest may require. 
 
 It* is also a matter of great importance that the bankers of America shall 
 conserve their own resources, having always in mind the supreme necessities 
 of the State, so that they may be able, as the first bulwark of the Government'.". 
 credit, to respond quickly and effectively to any calls the Government may make 
 upon them. In this connection it is most important, gentlemen, that interest
 
 STATE NORMAL SCHOOl 
 
 rilF. SECOND LIBERTY LOAN. 15 
 
 ratal should be kept at ;i reasonable level throughout the country, that suffi- 
 cienl expansion of credll should be bad to carry on the great commercial 
 industrial operations of the Nation and to assist in the flotation of suece 
 Issues of Government bonds. Proper credit expansion at this 
 tremely essential to the Government in this war — and 1 emphasize 
 and y.ui men of knowledge, ability, and experience are the best Judge* of tiiar. 
 Proper credit expansion la Jusl as essential to carrying these greal opei 
 forward as food is oecessary for human life. Von nnisi not be afraid o 
 oust not be afraid to break old dogmas; we must nol i><- afraid I i 
 9 that arc manifestly Bound things; we must not, gentlemen— if you will 
 permit me to assume for a moment that I am a banker— we must not hug this 
 poor dogma of do! rediscountlng when it is essential that banks should r< 
 count to carry forward the legitimate operations of the war. \ 
 
 er wanl to keep himself in a vise when your Government and yon have 
 framed the law which gives you the opportunity of making disaster impos 
 
 TBEAsiky ( } i: oi INDEBTEDNESS. 
 
 I should like to Impress upon you the Importance of a prompt and wide- 
 spread response on the pari of the bankers of the United states to the i 
 imrs of short-time Treasury certificates which will be made from time to time. 
 e certificates, as you know, have maturities of from thirty days to four 
 months, and are sold in anticipation of bond offerings and the paymen 
 Through their use, the necessities of the Government during the intervi 
 tween recurring bond issues arc met, and the process of financing these bond 
 issues is not only eased but simplified. Undue strain upon the credi 
 sources of the country is avoided because payments are spread over a period 
 and adjusted in such a way as to prevent disturbance and inconvenience. The 
 banks can render highly valuable and patriotic service to the Government by 
 purchasing promptly, and to the extent required, these Treasury certifl 
 as offered. 
 
 THE GREAT VALUE OF THE FEDERAL RESERVE SYSTEM. 
 
 We are fortunate in having the Federal Reserve System, whose usefulness 
 is now becoming increasingly manifest. This system is demonstrating every 
 day its tremendous importance and value to the banks and to the American 
 e. It not only gives strength and security to our financial structure, but 
 it offers the essential means of legitimate credit expansion and flexible note 
 issues, for which the country has so long stood in dire need. This system has 
 already won the approval of the bankers and people Of the United States. I 
 wish that the State banks would realize I opportunity they now have 
 
 of promoting their own interests by joining the Federal Reserve System, and 
 by doing so to make that great system more impregnable for their I and 
 
 ommon interest of the country. It would consolidate the linancial strength 
 of the Nation in such a way that the operations of the Government in this war 
 could not be put in question. It is a commanding duty of self-interest and 
 patriotic service to the country. 
 
 The next offering of the Liberty loan has just been announced. The amount 
 000,000,00< ». With the right reserved to allot 50 per cent of the oven 
 scription. 1 should like you to understand, gentlemen, thai in the determina- 
 tion of the amount of these offerings I am controlled by Inexorable facts. 
 These facts are the actual necessities of your Government. I do not determine 
 these questions arbitrarily. We are face to face with a situation where the 
 needs of the < lovernmenl must be met. When I announce the amount of an 
 offering of Liberty bonds, please remember that it is the minimum with which 
 the Government's business can be carried on and the war effectually conducted. 
 
 It is the first duty of patriotism, gentlemen, that the needs of your Govern- 
 ment for this war shall always he met. because it' you fail once, disaster will 
 Overcome the entire Nation, and we can not contemplate that. I should 
 happier if the loan were larger, but I have endeavored to make it as small as 
 possihle in order that the least possible strain may lie put upon the country's 
 resources during the crop-moving season. 
 
 Tilt: SECOND I D3ERTV LOAN MUST BE A - 
 
 We must make this loan a success. We can make it a success. The failure 
 of a Single issue of Government bonds would be worse for America than a dis- 
 aster upon the field of battle. We must never let that happen.
 
 16 THE SECOND LIBERTY LOAN. 
 
 A few days ago T read the following manifesto issued in Berlin by the League 
 
 of German .Municipalities: 
 
 "If money talks, the President of tlic United States may learn by October 18, 
 when the subscription lists close, thai the echo of the new war fund given by 
 the German people will have drowned out completely the clamor of unending 
 protests to which his reply to the Tope has given stimulus." 
 
 Let us meet that challenge by a subscription to our Second Liberty Loan on 
 the 27th day of October, nine days after the close of the German loan, which 
 will make clear to the German military despotism that America marshals not 
 alone her brave soldiers upon the held, her invincible Navy upon the high seas. 
 her industries throughout the length and breadth of this land, but, as well, 
 her financial resources, and that she is determined to use them all without 
 stint and regardless of sacrifice to vindicate American rights, outraged too fre- 
 quently by German infamies. Let us answer this challenge by making Hear 
 to the world that the American people, with transcendent love of justice and of 
 country, stand solidly behind their great President and support unequivocally 
 the purposes of this war. 
 
 America's responsibility. 
 
 Fellow countrymen, we are at one of those great points in the progress of 
 civilization where pregnant issues for the whole human race are to be deter- 
 mined. It is an inspiring thought that noble, free, peaceful, and liberty-loving 
 America has been called by God to powerfully influence, if not to determine, 
 the course of future events. We have a grave responsibility, and I know 
 that we shall discharge it worthily, of American patriotism and American ideal- 
 ism. These problems are of unparalleled novelty and magnitude. The means 
 of determining action must frequently be more instinctive than logical. We are 
 traversing unknown and uncharted seas. Our compass must be the steadfast 
 cooperation of the best wisdom and intelligence of the country, inspired by a 
 lofty patriotism which neither obstacles can discourage nor death defeat. Amer- 
 ica's sacred rights must be vindicated ; a just and lasting peace must be es 
 lished ; democracy must be triumphant; despotism must be destroyed; and, 
 when these great things have been accomplished, everywhere throughout 
 length and breadth of the civilized world men shall proclaim noble America 
 as the valiant knight who came upon the scene in the blackness of the night 
 and rescued civilization. 
 
 o 
 
 UNIVERSITY ot CALIFORNIA 
 AT 
 
 - ANGELES 
 LIBRARY
 
 This book is DUE on the last 
 date stamped below 
 
 JUN2 5 1951 
 DCTgO
 
 ■■■