New-York daily tribune. [volume] (New-York [N.Y.]) 1842-1866, 1857-09-18

We observe that some of our contemporaries
call attention to the fac! that the deposits in our
city banks have declined simultaneously with the
loans, vhereat they conclude that the decline Of
the deposits was caused by the reduction Of losns
and that tie mercantile community has been dis
tressed without making the banks any stronger.
The fact is certainly exactly the other way. II
is not the refusal Of loans that has caused the
dimruton of deposits, bu! the dimnuton of the
deposits which has caused the contraction of loans
All that our city banks lend beyond their capital
is lent out Of their deposits. Their circulation
never amounts to so much by two or three millions
or more as the specie reserve they keep on hand.
Whether their loans can be increased or diminished,
or kept as they are depends therefore entirely on the
state Of their deposit account Now on what does
this state Of that deposit account depend The
extent Of the mercantile transactions going en-, of
which this City is the center, and the amount Of
sAsb needed here to conduct those transactions,
is the main circumstance which determines the
amount of the deposits in bank; and this is the
reason Why the deposits in our banks are so much'
greater than in the banks of any other city in the
Union. A secondary circumstance which inhu-
euces the amour; of the deposits, is, whether our
merchants are paying out faster than they receive
or are receiving faster than they pay OUT Hence
it always happens that in proportion as money is
easy the deposits in the banks increase.
Now, the very first effect of pinch 10 the money
market is TO lead to general drawing down OF the
deposits. Each merchant, before borrowing, espe-
cialIy at extra interest, uses the amount standing
idle 70 bis credit OF course, only small part OF
the deposits in our New-York banks can ever be
drawn out in this way, because enough must always
remain theIe-they being the repositories of the
cash Of the city-to meet the necessities Of daily
transactions. Bot, although the amount thus drawn
out is limited, it is at once felt BY the banks: They
can no longer continue their loans at the old figure.
TIE money that comes in is needed to meet the de-
mands of depositors, and of course it csnnot
be lent out sgain. Hence, the late contrac-
ton Of our banks is not thing for which
tie Directors can BE- praised or blamed. 1t
was not a matter Of deliberation or choice
on their part; it was thing Of pure aud newt ,be
necessity. The same money which they paid back
to their depostors they could not, at the same
time lend out to their customers The limit to
which the deposits can be reduced by drawing out
money lying idle, is soon reached; but as the
pressure continues, new cause sets in to diminish
the loaniDg power of the banks. Pressure con.
tracts business. The fall Of prices dminishes the
amount of cash needed to buy aud sell the same ar.
tcles At the present prices Of ,tocks for instance
the Stock Exchange needs a much less amount
Of cash to buy and sell the same number of
shares than was needed q month ago. But,
as the amount of cash needed for the
daily transactions Of the city dminishes, the
total amount on deposit, which is but another name
for the same thing, will also diminish; and hence
new decline in the power of banks to make loans.
1t is in vain to call upon the banks under such cir
cumstances to Keep up their loans to the former
amount aid It'll vainer to ask for an increase II
is an mpos.ibiity in the pature of things. Except
their cspta the banks have no money of their
ow n to lend nor 10 it possible for them 10 make
loans till somebody else puts money into their
hands; nor will any put that money into their
bands till an extension of the circle Of business and
he necessity Of daily transactions calls for such
procedure.
But at present the tendency is, both by fall of
prices and greater caution, to contraction rather
than expansion. This process is likely to go on
for some time. The decline for instance in the
price of grain will in all probability overbalauce
the in creased quantity so that the whole may be
moved with a less amount of money than was
needed last ear with smaller crop. We there
fore conclude that the amount of deposits in the
banks is mole likely to decrease than to increase,
ard Of course that the banks will be more likely to
diminish III an to increase their loans That diminu-
ton, however, may be expected, now that the first
inch il over, to take place very gradually. Any
thing Ike continuance in equal ratio Of the con-
traction Of the last few wteis 10 not to be antic,
vai,d; ard, hot gh such diminati'n should ocolr,
vet as the scuau BIZ fer money dimin!shes VIII. tue
d.nnu,icn Of he eIteut Of daily transactions, the