Weekly standard. [volume] (Raleigh, N.C.) 1858-1865, 1859-04-13

ScorcH BASKING-Thc latest lesson in Scotch
banking is not very favorable to that system. but
taking it in its workings Of $50 years. it shows less
i;lctuation and loss than have prevailed in England
and the United States. The following isan extract
from a report made to the Glasgow Chamber Of
Commerce, upon the subject of commercial crisis
We commend the remarks to the careful considera-
ton Of our banking readers
"rhe best security against commercial convulsion
is to limit credit. The nearer We come to a cash
business the soundcr will be our trade The COM
parative security of French commerce during the
late crisis was, doubt greatly owing to the mod
lied nature of its credits; and on the other hand
the disasters which overwhelmed the commerce Of
America were as certainly the result of exaggcr
ated credit system. Everywhere the stability of
commerce is in an inverse ratio to the development
of credit But the abuse of mercantile credit could
not exist to any great extent were it not ostered by
the abuse of banking credit
In our commercial system the credit given by one
trader to another, depends mainly on the credit
given by bankers to traders Traders could not
give excessive credits unless bankers supplied them
with the means. lmprudent banking is at the root
of all unsound trading The great fault of modern
banking is the nsutfciency of reserves Bankers,
like traders are bound to provide for their solvency
they must reserve ample means to meet obligations,
and in their any departure from this rule is the
more inexcusabe that the proper amount of reserve
mathematical precision. But the desire of profit or
the urgency of their customers induces bankers, in
too many instances, to invest their deposits more
closely than prudence warrants safety is sacrificed
for All additional per centage of profit the reserve
is allowed to fall dangerously low, and when time
of pressure comes the bank has nothing to fall back
upon This insufiicency of banking reserves is the
immediate cause of our pancs. When pressure &C.
ours our great money lenders are the first to take
alarm; with enormous liabilities and inadequate re-
serves of Immediately available resources, they feel
that their solvency is endangered, and their violent
efforts to regain position of safety are the chief
cause of disturbance in the money market. Instead
of lending to Others they become themselves the
most importunate of borrowers. They who should
sustain credit are the chief authors of discredt;
they who should inspire confdene themselves
panic-strcken. 1t is not the needy depositor or g-
norant notcholder of the provinces who causes our
panics; it is the millionaire money lender OF our
great centres Of commerce. One great cause of in
sufficient reserves is undoubtedly the high rate of
interest allowed upon deposits Such rates only
be paid and profit realized, by close investment
Of deposits. Our trading credits rest mainly on ac
coinmodation from the banks. The provincial banks
dcposit great part of their reserves with London
blnkers on call. The London bankers again invest
their deposits closely and trust mainly to advances
from the Bank of England IN case of need while
the Bank of England Itself allows its reserve in
times of pressure fall to triing fraction of its
deposits. Thus the vast superstructure of British
commerce rests ultimately on a mere triiie of re-
served capital. Our whole credit system is an in
verified pyramid Your committee does not look for
ony legislative remedy for the abuse of credit The
cure must be found in the more honest and intel-
gent appreciation of their duties by all who either
give or take credit"