Among senators a bad argument is as effective as a good one, so that Mr. Aldrich's stand on the Banking Bill need not be too carefully analyzed. But from the point of view of the general public, Mr. Aldrich should have clarified the issue more carefully and consistently than he did. After all, the senators are a select group who can be fooled most of the time; the public must be dealt with more carefully.
Most of Mr. Aldrich's criticism was directed against the very principle of the banking measure. He called it "despotic." Unfortunately, that is no criticism at all. A centrally controlled bank, to realize its advantages, must be despotic. A centrally controlled bank, to realize its advantages, must be despotic. If only there had been an intelligent, central despotism of bank-credit during the boom, part of the present depression might have been avoided.
The trouble with the present banking act is the provision for who will be despotic. The bill provides, under Title Two, a plan which places the whole system under political control. In future years, perhaps, if the party to which the President belongs should change, a balance will be set up which will save the country from extreme policies but in the meanwhile, President Roosevelt will have dictatorial powers, over the whole banking system of the land. And there is no reason to believe that future presidents, through their powers of appointment, should not weight the Board in their own interests, and thus also achieve the same power.
This means political control of the banking system in the worse sense. It ensures the very inconsistencies in policy which the Act is supposed to eliminate. It means that pork barrel policies will decide questions of international exchange rates. This is the great danger of the bill.
Mr. Aldrich, in his criticism, was perfectly aware of this. But by confusing the issue of central bank vs. the old type of Federal Reserve System, with the issue of political control, he weakened his case. A new method of choosing the members of the Federal Reserve Board, and the assurance of their political independence, such as is suggested by Walter Lippmann, would make the present bill extremely good. Certainly we do not want to repeat the experiences in the Reserve System during the recent boom and present depression.